mony and the like can be made on a timely basis. Activities of this type should not be confined to those occasions when views are solicited. Rather, ALMA should have the capability to identify on its own, and at an early stage, those legislative proposals that have significant procedural features, and to comment upon them.

6. Performing clearinghouse and educational services

The Administrative Conference is currently empowered, among other things, to "arrange for the interchange among administrative agencies of information potentially useful in improving administrative procedures" (5 USC 574 (2)). This function is an important one. There should be a continuing program to compile systematically, and in appropriate format, the pertinent experiences of particular agencies with respect to procedural issues of common interest, so that the cumulative experience of all agencies can be shared. Practical and authoriative manuals for dealing with common problems of administrative procedure should be formulated and published.

Such an activity would be especially useful where the common problems arise from statutes of general applicability, such as the Administrative Procedure Act, the Federal Advisory Committee Act, the Federal Register Act, the Freedom of Information Act, and the Privacy Act. A guide of this sort concerning the Government in the Sunshine Act has been published by the Administrative Conference. ACUS should also have a capability to conduct and participate in seminars and other training programs for agency personnel, both on an inter-agency and single agency basis. The programs would potentially concern the whole range of procedural and management issues confronting administrative agencies. At present, the Federal Register and the Civil Service Commission conduct training programs, such as, for example, how to write simple regulations and how to deal with Privacy Act or Freedom of Information Act requests. Some of these functions, especially if they coincide with the new agency's preparation of guidelines and manuals for particular statutes, might be assigned to the new agency.

7. Monitoring and participating in court proceedings

Court cases that raise important procedural issues should also be monitored. At a minimum, such monitoring should take place so that the attention of agencies can be called to procedural developments that may bear upon the manner in which they conduct their business. Beyond this, however, it may also serve to provide the basis for selective involvement by the organization in court cases involving significant procedural and management issues, by working with the Department of Justice and other agencies in developing views to be submitted to the courts. Also, since pertinent judicial developments sometimes occur outside the case context and in the deliberations of the Judicial Conference, regular liaison should be maintained with that organization.

C. SUMMARY

The Administrative Conference of the United States has made useful contributions, given the limitations of its structure and re

sources, over the past decade toward improving administrative practice and procedure. However, the Administrative Conference has contributed relatively little to solving the persistent regulatory management questions primarily because its history and its structure militate in favor of legalistic studies. The legislative structure of the Conference has proven to be cumbersome and unwieldly.

We recommend that the Administrative Conference be restructured and that it be charged with actively monitoring the way agencies plan and manage their regulatory responsibilities. We recommend that the Administrative Conference itself should be reduced in size and reconstituted as an advisory committee to the ACUS Administrator. We recommend that ACUS be headed by a single administrator, nominated by the President and confirmed by the Senate, to serve a four year term coincidental with that of the President.

This restructured and expanded agency should provide the present research, advisory, statistical, educational and coordinative responsibilities of the Administrative Conference. ACUS should also have the authority to issue guidelines for all Federal agencies, concerning certain laws of general application. These laws include Executive Order 12044 (or any statute with similar purpose), the Administrative Procedure Act, the Federal Advisory Committee Act, the Freedom of Information Act, the Privacy Act of 1974 and the Government in the Sunshine Act.

In addition, it should actively engage in oversight of planning, management and other agency activities designed to bring about greater efficiency and effectiveness of operations. This includes the reduction of paperwork, conducting procedural-management audits and implementation of procedures established to improve government regulations. It also includes the range of advisory and educational activities in which the Administrative Conference has been engaged.

CHAPTER EIGHT

CONCLUSIONS AND RECOMMENDATIONS: A FRAMEWORK FOR FEDERAL REGULATION

Our discussion of regulatory framework began by noting that both criticism of, and perceived needs for, regulation are stronger now than ever before. We reviewed the various stated rationales for regulation; discussed the ways in which changing circumstances have vitiated some of these objectives; considered the substantial and frequently hidden costs; and noted the array of possible alternatives to, and improvements in, regulation. Finally, we addressed the problems of transition which might accompany a change in regulatory approach, and the contribution that could be made by a centralized Administrative Conference. This chapter addresses the questions: What is the vitality of the numerous rationales for federal regulation? What alternatives appear most promising? How should the Congress evaluate proposals for regulatory change or for the extension of regulation to new areas? This review defines a substantive framework for federal regulation—in other words, states those conditions which may merit government intervention, and the types of intervention most appropriate to each.

A. THE INADEQUACIES OF BASIC REGULATORY DECISION-MAKING

Regulatory decisions, particularly on the implementation of new schemes and the continuation of existing schemes, all too often are based on insufficient analysis and consideration of alternatives. The clearest indication of the truth of this assertion is the fact that even the approximate total costs of Federal regulatory programs are not known, and as such are not subject to regular, periodic review and appraisal. The same is true of the benefits of regulatory activities.

In some cases alternatives to present regulation may be preferable. In part because costs are neither known nor required to be collected, alternatives often go unconsidered. There does appear to be resistance to considering alternatives, even when they might allow better achievement of regulatory goals at lower cost to society. Some regulatory objectives may be inappropriate, and the vitality of other goals may have been adversely affected by changing circumstances. Appraising the actual effects of regulation on various goals can only be achieved by making costs, benefits and other effects visible, and by experimenting with alternatives. This does not argue simply for benefit-cost analysis, but rather for broadly based impact evaluation performed on a regular basis.

In addition, regulation has in some instances failed to adapt to changing circumstances and thus has become inappropriate. For example, on most routes railroads are no longer natural monopolies, and

the same is true of some business uses of telephone long lines. Increased scale economies (and natural monopoly) in the transmission of electricity means that transmission lines might now be regulated as common carriers and that in some areas competition in electricity generation could be introduced. Yet, regulation in these areas has remained basically unchanged at least until recently with passage of the National Energy Act. Motor carrier regulation, the justification for which was dubious from the very start, was seen as a method of preventing excessive competition and protecting the railroads. Destructive competition is most unlikely in an unregulated trucking industry, and attempts to protect the railroads have failed. Yet regulation persists. The persistent nature of regulation is due in large part to interests vested against change. After all, regulation has had its beneficiaries. Trucking firms have made large investments in operating rights. Workers may have gained from controls, and firms are familiar with a regulated business environment. These groups will have clear interests in opposing changes in regulation. The costs of regulation may be diffused and not visible to the public, and, because of inadequate impact evaluation, obscure even to policy makers. So, too, the benefits from regulatory change may also be highly diffused, so change will attract little public support. Periodic appraisal of regulatory effectiveness and appropriateness could generate some movement.

B. REASONS FOR FEDERAL REGULATION: WHICH ONES HAVE

CONTINUING VALIDITY?

In Chapter 2, we reviewed potential various reasons for regulation. These rationales could justify continuation of regulation much as it is at present; or, they could continue to justify some type of federal intervention but not present regulation. Alternatively, the rationale itself may have been made obsolete by changing circumstances. Finally the rationale may have been without merit from the outset.

In general, we find that most of the proferred rationales have either at least some degree of continuing validity or provide potential justification for federal intervention. However, as justifications for present long-term regulation, a number are seriously flawed. In all cases alternatives are available which might promote better achievement of goals with lower costs or fewer adverse side effects.

Simply because a problem exists and, in theory, is remediable does not mean that regulation or other intervention is desirable, even on economic grounds. The potentially widespread indirect costs and consequences of regulation, subsidy, and other interventions are clear, and even direct costs are significant. In light of that burden, intervention should only be undertaken where there is a clearly identified problem, and where the potential achievements of Government action are substantial. The relevant benefits and consequences include effects on economic efficiency and the distribution of income as well as on such values as equal opportunity and equal protection.

The discussion below emphasizes economic effects. The general finding is that natural monopoly, external costs, imperfect information, and natural resources problems justify intervention in a number of areas. However, even in these areas, in certain situations alternatives would be preferable.

Other proferred justifications for present long-term regulation are much weaker. Either they inherently lack strong bases or alternatives appear preferable to present arrangements. These rationales include prevention of destructive competition, regulation of competing industries, promotion of key industries, cross subsidy in general and to small communities in particular, and preserving "property rights" in regulation. Present regulation has been somewhat effective in protecting consumers from oil and gas price increases by appropriating economic rents, but doing so by price controls without suitable taxation has distorted both consumption and production decisions. Some of these rationales may justify short-time regulation or some other form of government intervention but not long-term regulation. 1. Natural monopoly conditions as a justification

The existence of natural monopoly has been and continues to be a major justification for regulatory intervention. That is so because of the potentially damaging effects of output restrictions, monopoly profits and discrimination in price or quality. Monopoly power can cause social losses because of restricted output and elevated prices. Also monopoly profits can result, enriching producers at the expense of consumers. Finally, discrimination may be used to increase profits or deter competition.

Natural monopoly is only "natural" in a given technological or economic environment and, with market growth or technical advance, competition may automatically develop. That has happened in a number of areas. For example, the growth of efficient long distance trucking and the decline of railroads, in part because of regulation, has eroded most of the original rail monopoly power. So, too, increased telephonic communication, the development of microwave technology, and relatively permissive FCC rulings have made competition feasible for some business communications. Long distance individual message service probably remains a natural monopoly. Pipelines and electrical transmission are natural monopolies or tight oligopolies on many routes, and regulatory controls may be appropriate to prevent monopoly pricing.

The technical changes which have allowed transmission of ultrahigh voltage electricity have both enhanced potential transmission line monopoly power, by increasing scale economies, and increased economical transmission distances. This means that while the need for social control of transmission lines may have increased, some competition may be feasible in electricity generation. Increased natural monopoly in one area may in this way decrease monopoly in other areas. In the electricity case it may be appropriate to treat some transmission lines as common carriers, and require relatively open access.

However, some actually or potentially competitive industries have been regulated as natural monopolies with control of prices, entry and exit. These include airlines and trucking, neither of which appear ever to have enjoyed substantial enduring monopoly power.

Part of the problem, at least particularly in trucking and, until recently, in airlines-has been the failure to recognize the constraining effects of easy entry and mobility of capital. Regulation has fostered excess capacity, excessive nonprice competition, and inefficient investments in private trucking fleets by business firms. A similar situation