Oversight in Hindsight : Assessing the U.S. Regulatory System in the Wake of Calamity

Has the United States suffered a regulatory breakdown? The answer to this question might appear to be an obvious “yes.” Over the past several years, the nation has suffered not only a sustained economic downturn triggered by a cataclysmic financial crisis but also one of the worst environmental disasters in American history as well as numerous other industrial accidents and explosions. Following each calamity, regulation takes the blame. The regulatory system is too slow or too lax. Or, on another account, it is excessively costly, killing jobs and hampering economic recovery. No one lauds the regulatory system today – but in truth, regulation is far less clearly to blame for the nation's problems than most of us think. In this paper, we explain how psychological and political factors have contributed to the current crisis of confidence over regulation, as politicians and the public inevitably seek something to blame when calamities occur. Yet regulation manages risk; it does not eliminate it altogether, at least not if it does not ban a risky business activity outright. When a disaster does occur it may not necessarily reflect the failure of regulation but may instead simply be the expected but rare and tragic consequence of a regulatory policy that responds to and makes tradeoffs in society's competing values. For these reasons, we caution against leaping to the conclusion that regulation has failed whenever disaster occurs