Tim Lee and Monica Prasad on the Changing Meaning of Deregulation

by Reihan Salam

As Tim Lee makes clear, the meaning of deregulation has changed in recent years:


This consensus—repeal anticompetitive laws while actively protecting new entrants from the incumbents—survived the AT&T breakup. Indeed, the 1996 Telecommunications Act, which was passed by the conservative Gingrich Congress, is based on the same basic intellectual framework. It relaxed various restrictions on telephone and cable companies entering new markets, while simultaneously instituting an “unbundling” regime that forced incumbent telephone carriers to lease parts of their networks to competitors at regulated rates.

This might look like a philosophically confused mixture of deregulation and re-regulation, but I don’t think that’s how the legislation’s authors saw it. Rather, the unifying theme of the act was competition. Both the regulatory and deregulatory provisions of the bill were designed to increase the number of firms in various telecommunications markets.

That consensus has evaporated over the last 15 years, replaced by the pro- and anti-regulatory camps that are so familiar today. My sympathies are generally with the anti-regulatory camp, but I’m starting to think we’ve lost some important insights from that earlier consensus.

Monica Prasad’s The Politics of Free Markets is illuminating on this subject:

To call Breyer and Kennedy’s participation in deregulation an indication of their underlying conservatism or eclecticism is a misreading of history, in light of what deregulation became. In the early to mid 1970s, deregulation was not a conservative idea, but a liberal populist one, against big business and in the interest of consumers. That Breyer himself saw the issue in these terms — and not in conservative terms of getting the government out of industry — is apparent in two memos that he wrote for Kennedy in 1974, urging Kennedy to push deregulation of the airlines. …

Although it has emerged on the Left as a pro-consumer issue, by the end of the 1970s deregulation had become a free-market issue pushed most heavily by the Right. In particular, the meaning of deregulation had changed: instead of economic deregulation (deregulation involving agencies that regulate one industry in the interest of preventing monopoly but have become “captured” and are giving unfair advantages to that industry) deregulation now referred to social deregulation (deregulation involving agencies such as the EPA and OSHA that regulate all industries in the interest of consumers, workers, and the environment). 

I am a believer in the social deregulation Prasad describes, as I think social regulation creates barriers to new business practices that regulators can’t anticipate. But it is perfectly consistent to be more favorably disposed towards one form of deregulation and not the other. I don’t like OSHA or the Civil Aeronautics Board, but the latter is unambiguously worse than the former. 

The Agenda

NRO’s domestic-policy blog, by Reihan Salam.