Independent Regulatory Agencies (IRAs) in Mixed Market Economies (MMEs) are ranked among the most independent across advanced industrialized countries. Economic Theory of Regulation provides the rationale why. IRAs are functional remedies to coordination problems. The literature on Varieties of Capitalism (VoC) portrays two ideal typical models of coordination with institutional complementarities producing superior economic performance. Coordinated Market Economies (CMEs) premise on negotiated wage moderation, centralized bargaining among employers and employees and moderate inter-firm competition. Likewise, Liberal Market Economies (LMEs) rest on competitive labor markets, efficient and effective capital markets and high levels of inter-firm competition. In contrast to these models, MMEs are less coherent models with heterogeneous combinations of two VoC traits. They are, thus, deprived of the comparative institutional advantages CMEs and LMEs enjoy. IRAs, as the Economic Theory of Regulation expected, are quick fixes to remedy these coordination problems. Confirming theoretical expectations, the empirical literature shows that MMEs, among all varieties of capitalism, do grant their IRAs highest levels of independence. This literature bases its claims almost exclusively by conceptualizing independence as formal parchment rules. We explore the validity of these claims by focusing instead on de facto independence of IRAs in the Mediterranean MMEs, including Turkey. Our point of departure is an empirical puzzle that coordination problems still abound in MMEs despite their IRAs’ highest levels of independence. First, we generate index values for IRAs in Turkey following Gilardi (2002) and Maggetti (2007). In constructing these values, we rely on in-depth interviews with officials working with the IRAs and on programming documents including regular and ad hoc reports in addition to formal rules and regulations. Second, we carry out a cross-national comparative analysis of index values of IRAs in MMEs for mapping the institutional features of IRAs across different sectors in MMEs. We demonstrate that there remain significant gaps between formal and de facto independence of IRAs in MMEs. Third, we carry out an in-depth case study of IRAs in Turkey to unpack the black box of coordination problems in the sectors IRAs govern well as within the overall political economy. We argue that actual levels independence of IRAs (operationalized and measured in terms of their de facto independence) in MMEs are lower than the literature suggests and hence they are far from remedying coordination problems. What is more significant is that under the cloak of formal independence, IRAs exacerbate coordination dysfunctions by diverting attention away from the regulatory capture, creating gaps in the policy cycle, and inhibiting innovation-inducing regulation due to lack of accountability and low performance. The paper concludes by emphasizing the perils of exclusively focusing on the formal aspects of institutional design and the life of IRAs at the expense of probing into substantive, de facto aspects of regulatory powers.
