Journal of Law, Economics, and Organization Advance Access originally published online on December 8, 2005
Journal of Law, Economics, and Organization 2006 22(2):459-489; doi:10.1093/jleo/ewj014
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How do Regulators Regulate? Enforcement of the Pure Food and Drugs Act, 1907–38
University of Vermont
* University of Vermont, Department of Economics, 94 University Place, Burlington, VT 05405-0114. Email: Marc.Law{at}uvm.edu.
Economists have devoted relatively little attention to analyzing how government officials actually enforce regulation. This is a significant omission, since the efficacy of regulatory enforcement and the effects of regulation on economic outcomes may depend on how regulators regulate. This article sheds light on these issues by examining how the fledgling Food and Drug Administration (FDA) enforced the Pure Food and Drugs Act from 1907 to 1938. I argue that because the FDA's ability to enforce this law through deterrence was limited, effective enforcement could be obtained only in those instances where the agency had the capacity to offer benefits to compliant firms in the way of quality certification or direct assistance in improving product quality. The available evidence on the FDA's enforcement activities is consistent with this prediction. The analysis presented may help to explain why contemporary regulatory agencies spend considerable resources on advisory enforcement activities.