Harvard Business School’s Karthik Ramanna develops the notion of “thin political markets” to describe a key problem facing technical rule-making in corporate accounting and beyond.
When standard-setting boards attempt to regulate the accounting practices of corporations, they must draw on a small pool of qualified experts–but those experts almost always have strong commercial interests in the outcome. Meanwhile, standard setting rarely enjoys much attention from the general public. The reliance on nonindependent experts and the absence of accountability, Ramanna argues, allows corporate managers to game the system.
What can be done to alleviate the situation?