From Economic to Social Regulation: How the Deregulatory Moment Strengthened Economists’ Policy Position

The deregulatory moment of the late 1970s increased the policy influence of economics in the United States by linking the efforts of two distinct communities of economists: a systems analytic group and an industrial organization (I/O) group. The systems analytic group, which used cost-benefit analysis to improve government decision making, had considerable success in the 1960s and helped create offices of economists throughout the executive branch, but was losing momentum by 1970. The I/O group was, by the mid-1970s, working from the White House to reduce economic regulation—eliminating price and entry controls across a range of industries—but its ability to act was limited. After 1975 the I/O group increasingly focused on social regulation—rules meant to improve health, environmental, or safety conditions—and pushed for cost-benefit/cost-effectiveness analysis of such regulations. In the process, its efforts became linked with the legacy of systems analysis, leading to legal requirements for cost-benefit analysis of regulation and the expansion of executive-branch offices oriented toward economics—changes that opened doors to the future exchange of ideas between academe and the policy domain.