Economic historians and students of regulation have found substantial evidence that the railroads supported the establishment of the Interstate Commerce Commission, that utility companies supported the establishment of state utility regulation, and that various occupational groups have usually been the main proponents of occupational licensure. Further, there have been a number of studies showing that occupational groups earn more in states in which they are regulated than in states in which they are not. Finally, those groups that are regulated often oppose most vigorously efforts to repeal regulation.
However, there are some regulations that have not been supported by those who are regulated. Regulations that affect many different industries--such as regulation intended to promote worker safety, equality of employment, and pollution cleanup--have not generally been sought by groups that are regulated. Nonetheless, there is considerable evidence that much regulation fits the private-interest hypothesis more closely than the public-interest hypothesis.
The private-interest theory of regulation suggests that much regulation will create economic inefficiency. A considerable amount of regulation involves industries that have a substantial amount of competition (such as agriculture, transportation, and oil and gas production), and both the theoretical and empirical evidence suggest that this regulation will lead to higher prices and lower quantities, which is economically inefficient. The adverse effects of regulation can be partially offset by competition in service if competition is not allowed in price. Thus, airlines, which could compete only to a limited extent on price during the years in which they were tightly regulated, could and did compete on the qu ...