Policy Mandates

My essay,  “Separating Policy Mandates from Cost Consequences:  Will the Public Lose Trust?” produced the following articulate response from a long-time telecomm attorney:

Historically, the public interest has been best served by competition, which induces investors to commit capital to producing goods and services based upon business and finance risks and rewards.  There have been, however, situations in which an activity utilizes a scarce resource, e.g., public rights-of-way or spectrum, or requires such great amounts of capital that competition would be highly wasteful, viz., having three companies digging up the streets of Brooklyn to compete for gas customers.  In such situations, these activities are said to be “affected” with the public interest, in which case the government has inherent power to control market entry and exit and set parameters for service and rates.  This governmental activity is “quasi-legislative,” so yes it may be political.  It is also subject to the requirements of the 5th and 14th Amendments inasmuch as the regulation may not result in a confiscation of the useful value of property devoted to the regulated activities.  (Of course, where market forces, such as innovation, diminish the value of such property, government is not required to compensate the property owners.)  Ideally, regulation should attempt to simulate the outcome of effective competition – rates which produce a risk-appropriate return on capital and service quality which would be normative in a competitive market -- recognizing that regulation cannot actually anticipate all of the factors that influence markets. 

As you note, governments have occasionally used their power over regulated firms to mandate actions that competitive firms would not necessarily undertake, such as “cross-subsidized” discounted local residential calling rates and home winterization programs, or which prudent business policies would not permit, such as offering low-down-payment mortgages (Federal agencies have advocated such programs from time-to-time as far back as the mid-20th Century).  As you further point out, however, when a government-mandated program goes wrong, government officials are not held to account, in stark contrast to business owners and managers, who subject to the discipline of market forces.  

And this response from another reader:

No rational decision of any kind can be rationally made without weighing the cost consequences. (e.g., Bentham -- Pleasure/Pain)

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