“Traditional theories of regulatory capture cannot be used the same on agencies,” contends Shon R. Hiatt, an assistant professor at Harvard Business School. “There are a lot of checks and balances and firewalls in place.”
So how are these agencies influenced?
Hiatt, who grew up on a dairy farm in Idaho, began asking that question through research on the controversial issue of genetically modified organisms (GMOs), agricultural products that are genetically altered to increase yield, incorporate pesticide properties, or exhibit other beneficial qualities. (Calgene’s Flavr Savr tomato was the first genetically modified product to come to market, in 1992.) However, the organisms also potentially carry health and environmental risks. After reading about these dangers, Hiatt wondered how the US Department of Agriculture (USDA) decides which GMOs to approve—and how agribusiness influences the process.
Traditional theories break down
As Hiatt began investigating, he found that traditional theories of capture such as lobbying and campaign contributions had little effect on whether any particular GMO was approved. Even more direct means of influence such as scientific articles funded by industry or letters written by industry-friendly congresspeople were equally ineffective.
What did seem to affect the approval process, however, was the influence of third-party groups separate from Congress and industry, to which the department looked to justify its decisions.
We may think the primary goal of agencies such as the USDA is to protect public health and safety; based on previous economic theory, however, Hiatt started with a different assumption—the primary goal of an agency is really to protect its own legitimacy. After all, it’s the perception of an agency’s effectiveness by Congress and the White House that will determine its budget and the career trajectory of its top officials. Of course, there is an overlap between the appearance of doing a good job and actually doing one. “If the USDA weren’t doing its job, it would have very little legitimacy,” says Hiatt. But that subtle difference in perspective also has the potential to distort the agency’s reliance on pure science in its approval of GMOs.
In his working paper “Lords of the Harvest: Third-Party Signaling and Regulatory Approval of Genetically Modified Organisms”, written with Sangchan Park, an assistant professor at the National University of Singapore, Hiatt identifies two types of legitimacy important to the USDA. The first, “consequential” legitimacy, is the perception that the process produces effective results; the second, “procedural” legitimacy, is the perception that it is fairly following the rules of the process. Read The Full Article