Key Concepts in Economic Regulation and Motivation Theories

Monopoly

when a single firm dominates a market with no competition. They are problematic because they can set higher prices, limit choices for consumers, reduce innovation, and often exploit their market power.

Price Discrimination

when the same product or service is sold at different prices to different consumers, not based on cost differences. Examples include student discounts, senior citizen discounts, and airline ticket pricing based on booking time.

Economic Regulations

emerged in response to monopolies and trusts in the late 1800s, especially with firms like Standard Oil. Public outrage led to antitrust legislation such as the Sherman Act of 1890.

Sherman Anti-Trust Act

outlawed all contracts and conspiracies that restrained trade and banned monopolization. Recent uses include cases against AT&T (Bell System) and Microsoft for abusing monopoly power.

Social Regulation

addresses health, safety, and welfare. Examples include OSHA (workplace safety), EPA (environmental protection), and FDA (drug safety). Concerns include high compliance costs, slower innovation, and burdens on small businesses.

Cost-Benefit Analysis

involves listing, quantifying, and comparing all expected costs and benefits of a regulation. It helps agencies decide if a regulation's benefits (like lives saved) justify the costs.

Statistical Value of a Human Life

The two approaches are economic productivity (human capital) and willingness to pay. Federal agencies often use values ranging from $1 million to $10 million.

Administrative Rulemaking

how agencies create rules to implement legislation. These rules carry the same legal weight as laws from Congress and help fill in technical details.

Administrative Procedures Act of 1946

The major components include the establishment of the procedures for federal agencies to create regulations and ensure public participation in the rulemaking process.

Purpose of agency rulemaking

Agencies engage in rulemaking to fill in the details of laws passed by Congress, utilizing their specialization and expertise to implement and enforce laws effectively.

Seven steps of the rulemaking process under the APA

1) Initiation, 2) Analysis & Evaluation, 3) Notice of Proposed Rule, 4) Comment period, 5) Revision, 6) Promulgation of Final Rule, 7) Preparation for legal challenge.

Deck stacking

when Congress sets up advisory committees or influence structures that ensure certain interests have power in shaping draft rules, subtly steering the outcome.

Separation of powers violation in rulemaking

Agencies, part of the executive branch, create rules with the force of law (legislative function) and sometimes adjudicate violations (judicial function), blending all three powers.

Citizen feedback in rulemaking

Citizens can provide written or oral comments during the public notice and comment period, which agencies must consider before finalizing a rule.

Taylor's scientific management

viewed workers as machines optimized through time-motion studies and financial incentives, ignoring emotional and social factors.

Hawthorne effect

found that productivity increased simply because workers felt observed and valued, not because of physical changes like lighting.

Herzberg's two-factor theory

Hygiene factors (e.g., pay, conditions) prevent dissatisfaction, while motivators (e.g., achievement, recognition) drive satisfaction and performance.

Job enrichment

gives employees more responsibility and autonomy.

Job enlargement

adds variety and challenge to tasks to make jobs more engaging.

Equity Theory

says employees compare their input/output ratio to others. If they feel under-rewarded or over-rewarded, they adjust effort or attitudes.

Expectancy theory

belief effort leads to performance. Instrumentality: belief performance leads to rewards. Valence: value placed on the reward. Together, they shape motivation.

Teacher shortage case study

The case shows how lack of autonomy, low pay, and burnout reflect failures in hygiene, equity, and expectancy factors, explaining low motivation and high turnover.

Goal

a desired result or outcome that a person or a system envisions, plans, and commits to achieve.

Goal conflict

Multiple goals pulling in different directions.

Goal ambiguity

Unclear or vague goals.

SMART method

Specific, Measurable, Attainable, Relevant, and Timely. They improve clarity and success in planning.

Performance Management (PM)

using data (usually quantitative) to evaluate how well an organization, employee, or policy is achieving its goals.

4 Ps of performance management

Purposeful (using data to improve), Passive (complying but ignoring data), Political (spinning data), and Perverse (gaming or cheating the system).

Official goals

Broad mission statements used for external legitimacy.

Strategic goals

Long-term plans by top/mid-level managers.

Operational goals

Specific tasks handled by front-line employees.

Best practices for PM systems

Use clear, relevant metrics; avoid high-powered incentives that promote cheating; emphasize internal learning; and involve employees in data analysis for improvement.

Four main goals of PM

1) Allocative Efficiency, 2) Accountability to the Public, 3) Accountability to Elected Officials, 4) Technical Efficiency.

Plan

blueprint for allocating resources and organizing tasks to achieve goals. It reduces uncertainty, coordinates actions, and improves performance.

Strategy map

visually links goals to actions that contribute to an organization's mission, helping everyone see how daily tasks support long-term success.

Environmental (SWOT) Analysis

Strengths, Weaknesses, Opportunities, and Threats. It helps identify internal and external factors that impact strategy.

Mission statement

Mission statements define an organization's purpose, values, and goals. They're often broad, inspirational, and focused on legitimacy.

Rulemaking

Agencies use rulemaking to specify how laws are implemented. They're experts in their fields and fill in legal details Congress leaves vague.