When Agencies Go Nuclear: A Game Theoretical Approach to the Biggest Sticks in an Agency’s Arsenal
63 Pages Posted: 18 Aug 2010 Last revised: 1 Mar 2012
Date Written: April 15, 2011
A regulatory agency’s arsenal often contains multiple weapons. Occasionally, however, an agency has the power to completely obliterate its regulatory targets or to make major waves in society by using a “regulatory nuke.” A regulatory nuke is a tool with two primary characteristics. First, it packs power sufficient to profoundly impact individual regulatory targets or significantly affect important aspects of society or the economy. Second, from the perspective of the regulatory agency, it is politically unavailable in all but the most extreme situations. They are found in many corners of the federal bureaucracy. This Article illustrates that even when individual regulatory nukes get our attention, we often think about these weapons in unproductive ways. Typically, regulatory nukes are approached in a bipolar way. On the one hand, they may be seen as regulatory anomalies with little relevance to most regulated entities. On the other hand, particularly if an agency has launched its regulatory nuke, the launch becomes part of agency lore and the story is of the destruction left in its wake.
Drawing on the Nobel Prize–winning game theory developed by Thomas Schelling, this Article moves beyond the dud/mushroom cloud dichotomy and recasts the regulatory nuke as an important factor that influences the calculus of regulation. This analysis suggests that agencies often get mileage out of regulatory nukes by pointing their weapons rather than firing them: the power of the tool is often leverage in regulatory diplomacy — for threats, posturing, and coercion. Although this Article is based on game theory, it also provides a wealth of examples that work to illustrate the real-world importance of the theory to many aspects of the administrative state..
Keywords: regulatory nukes, administrative law, organizational politics, game theory, Thomas Schelling
JEL Classification: C72, K2, K23, K32, L5, D23, D73
Suggested Citation: Suggested Citation