Policy: Barkow on institutional design to avoid agency capture

There is an interesting preprint on Texas Law Review's See Also blog, "Insulating Agencies: Avoiding Capture Through Institutional Design" by Rachel E. Barkow (NYU), to appear at 89 TEXAS L. REV. 15.

In this Article, Prof. Barkow explores the issue of insulating agencies from capture. Rather than continuing to focus on the traditional hallmarks of agency independence, she identifies elements of agency design, or “equalizing factors,” that have received minimal attention in the academic literature but that might prove useful in preventing capture. Among others, the traditional hallmark of an independent agency is that its head can only be removed for good cause, not at the President’s will. Yet, insulation from the President is generally not the reason for creating independent agencies; instead, it is to prevent the agency from being captured by the regulated entity.

The equalizing factors that the author identifies are an agency’s source of funding; qualifications for appointment and post-employment restrictions for agency officials; the agency’s relationship with other federal agencies; the agency’s relationship with state-level actors; and various political tools including the agency’s ability to generate politically powerful information, its ability to recruit political benefactors, and the potential for public advocates to become part of the agency structure.

After detailing these factors, the author compares them with the traditional elements of agency independence in an effort to demonstrate the limits of the traditional approach and the promise of the equalizing factors. To do so, she explores the comparison in the context of consumer protection, an area highly prone to capture.

As part of this discussion, the author focuses on the recently created Bureau of Consumer Financial Protection (CFPB) to illustrate the ongoing risk of capture and the importance of institutional design in guarding against it. The author highlights that the success of the CFPB will likely depend on how well its structure insulates it from capture. As a powerful example of the limitations of the traditional hallmarks of agency independence, the author considers how agency design affected the Consumer Products Safety Commission, and in light of the its fate, how agency design might affect the CFPB. As such, this article is one of the first detailed studies of the CFPB.

There is also a response from Nicholas Bagley (Michigan), "Agency Hygiene". EMM