This paper seeks to detail the process that culminated in the creation of the first regulatory agencies and analyzes it through the lens of Douglass North’s (1990) theory of institutional change. The first regulatory agency with power to regulate rates emerged in 1873 in the state of Illinois in the United States amid the conflict between farmers and railroads around rail fares. The analysis of this historical process indicates that North’s theory fits well to explaining the institutional change process that gave rise to the regulatory agencies model once the perception on relative prices was the major factor behind its emergence.
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