ABSTRACT
Although the effects of industry-specific regulation are well understood, economists and other students of public policy have reached no consensus on how regulatory agencies make rules. Specifically, which factors are important in determining regulatory decisions, and how do agencies trade these factors off against each other in setting their rules? Stated another way, why do regulatory agencies regularly issue standards and other decisions that vary significantly from one regulated party to another? Do distinct factors, such as compliance costs and the quality of information supporting regulatory decisions, systematically explain this variation? Why did the U.S. Environmental Protection Agency (EPA), for instance, set discharge standards for a subcategory of the leather industry that require firms to remove 96 percent of the organic materials in their discharges, whereas the analogous discharge standards for a subcategory of the textile industry mandated only 75 percent removal?
