The Political Demand for and Supply of Deregulation

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Date

1990

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Abstract

"Over the past two decades, economists have challenged political scientists with a theory of government intervention into the economy in which concentrated producer interests 'demand' regulation that limits competitive entry, and willing politicians supply it in return for votes and campaign contributions. Ironically, while the use and refinement of this theory expanded, American governments led by both political parties started deregulating and reducing public sector involvement in a range of transportation, financial, and communications markets, opening the 'economic theory' to some questions. Political scientists have tried to explain how deregulation could occur in the absence of strong concentrated interest group demand or pressure for it. Both groups of scholars have not synthesized elements from each other to develop an adequate theoretical explanation. This article presents such a synthesis by taking into account important groups with interests often opposed to those of the incumbent regulated firms, especially 'downstream' business users of the regulated service, and governmental actors who can act independently from net interest group pressure; the full demand and supply sides, respectively."

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regulation, economic theory, telecommunications

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