Should Industry Regulators Come From The Industry?

[jyl]

I think this is not a PARF topic.

The question is, should government regulators of an industry be recruited from the industry itself?

(The immediate context is the brewing fight between Warren and Clinton on who is appointed to the various financial and economic positions in a Clinton administration. But this is an issue that comes up in every administration, and will come up in a Trump administration if there is one.)

To be concrete, should Wall Streeters be appointed to regulate Wall Street?

On the one hand, some industries are extremely complex and there's probably a good chance that no one outside of the industry actually understands the ins and outs well enough to intelligently regulate it. The derivatives market is not well understood by anyone who has never worked in it, etc.

One the other hand, the "revolving door" between industry and government creates a a lot of conflicts and coziness. I think particularly of generals awarding major contracts and then getting lucrative jobs with the contracting companies.

I remember well the events in 2007/08. I think part of the reason why the Bush administration was able to take very fast and decisive action to prevent our financial system from a massive meltdown was because in Paulson and Rubin were from Goldman Sachs, they were extremely aware of what was going on and why, and they had both the stature and the connections to get the government and the financial industry turned away from the abyss. If, let's say, Elizabeth Warren had had Paulson's job and Bernie Sander had had Rubin's job, I think we'd have all been burning our furniture for heat.

[Gogar]

I was thinking about this the other day re: "citizens review" of Police Departments. Different than your question, but related.

[KFC911]

I think both of you are absolutely correct....different scenarios, different solutions.

[rwest]

Experience in the field is probably very important, so the next step is to make sure the appointed person has the ethics to do the task and not get into "bed" with those they are supposed to be regulating.

[jwasbury]

People who have regulatory oversight need to have appropriate education and experience to apply that oversight. They have the power to make or break peoples' lives and livelihoods. When we put people without the necessary qualifications and experience, bad things happen.

A specific experience with an IRS examiner comes to my mind. This person had been promoted up from a individual tax return (1040) review position into one where she was reviewing business returns. No accounting background, zero knowledge of balance sheets, double entry bookkeeping, etc. Not qualified to render an opinion on my client's business and personal tax situation (multiple S-Corps all flowing into the client's 1040). No amount of factual arguments could stop her from writing the poor guy up for a huge and unjustified tax bill.

Our laws are extremely complex. You shouldn't have simpletons given carte blanche to interpret these laws at their dimwitted whim...but we do.

[widebody911]

https://en.m.wikipedia.org/wiki/Regulatory_capture

[legion]

The root of the problem is that regulations are numerous and complex. The rules shouldn't be so complicated that they require an insider to understand.

I personally hate the concept of administrative law. It is essentially Congress abdicating its ability to pass laws to executive departments. Administrative rules can be changed at any time. Worst of all, they encourage an industry to "get into bed" with its regulators and vice-versa. The real purpose of most administrative rules is to raise the cost of business to drive smaller competitors from the market, thus ensuring more market share for the bigger firms that can absorb the additional costs. Exactly this is going on with electronic logs in the trucking industry right now.

[sammyg2]

Too often we end up with elected or appointed bureaucrats who don't know their ass from third base. Professional gubmint workers who are near worthless.
The only thing they know or understand is gubmint bureaucracy and reds tape mumbo jumbo. They are a cancer.

They don't know jack so their only source of info is lobbyists who are more than willing to shed light on the subject.
But obviously their advice is biased one way or the other.
Either in favor of the industry, or more likely in favor of vocal special interest wacko groups like enviro-turds.

The end result is that the decisions made are extreme to one side or the other, but rarely logical or efficient or good for the economy or country.

So in summary, Hell yes the regulators should at least know and understand the industry, they need to be subject matter experts on it!!!!!!!!!!!

[ossiblue]

Originally Posted by sammyg2

Too often we end up with elected or appointed bureaucrats who don't know their ass from third base. Professional gubmint workers who are near worthless.
The only thing they know or understand is gubmint bureaucracy and reds tape mumbo jumbo. They are a cancer.

They don't know jack so their only source of info is lobbyists who are more than willing to shed light on the subject.
But obviously their advice is biased one way or the other.
Either in favor of the industry, or more likely in favor of vocal special interest wacko groups like enviro-turds.

The end result is that the decisions made are extreme to one side or the other, but rarely logical or efficient or good for the economy or country.

So in summary, Hell yes the regulators should at least know and understand the industry, they need to be subject matter experts on it!!!!!!!!!!!

I've agreed with Sammy before on minor points, but this is the first time I've agreed with his entire post. His summary is spot on and I would add the appointees, mentioned by the OP, should actively oversee their bureaucratic minions so the field workers/investigators who rise to power through civil service regulations rather than work competency make decisions based on knowledge and circumstances rather than on blind regulatory rules, ala the IRS post, above.

[Aerkuld]

Originally Posted by rwest

Experience in the field is probably very important, so the next step is to make sure the appointed person has the ethics to do the task and not get into "bed" with those they are supposed to be regulating.

^^This.

However, a problem arises because very few people want to be put in the position where they have to mediate between the relevant parties. Basically, you're constantly fighting and always wrong. Generally, the only people who will do this are the ones who see the potential for personal gain from the position.

Go ahead and think of some examples and see if that fits.

[kach22i]

You are going to make enemies of your life long associates in the industry once you start holding them to the law.

A chance to burn bridges though enforcement or become corrupt.

Originally Posted by widebody911

https://en.m.wikipedia.org/wiki/Regulatory_capture

Regulatory capture, nice link....................of course there is a word for it, the problem is as old as government it's self.

[RKDinOKC]

Should be like F1 stewards. There those that aren't racers, BUT they also appoint a former driver to be part of the decision making. And that appointee is not the same person for every event.