Bureaucratic Discretion or Congressional Control? Regulatory Policymaking by the Federal Trade Commission.

This paper extends Stigler and Pehzman's approach to regulation by incorporating a legislature. The model yields comparative statics results and hence testable implications. The paper then tests between two opposing approaches about regulatory agency behavior. The first assumes agencies operate independently of the legislature and hence exercise discretion; the second assumes that Congress controls agency decisions. The recent behavior of the Federal Trade Commission provides the empirical setting. Substantial evidence is found for the specific predictions of the model, including the hypothesis of systematic congressional influence over FTC decisions. In this paper, we develop a model of agency decision making based on the premise that agencies are controlled by the legislature. We argue, therefore, that to understand the genesis of agencies, as well as the stability and change in agency policy, we must understand the underlying legislative politics. With this in mind, we develop a model of legislative choice. The model characterizes the nature of policy equilibrium and, perhaps more important, it yields comparative statics results that lead to predictions about policy change. Following the theoretical development of the model, we turn to an empirical application that tests the specific assertions of our model as well as the hypothesis of legislative control. The recent changes occurring at the FTC and the relation of these changes to Congress provide the setting for our tests. We find substantial evidence for both the hypothesis of legislative control and the predictions of our specific model of Congress. [ABSTRACT FROM AUTHOR]