This paper explores the feasibility to extend the Standard Cost Model (SCM) for calculating the costs of government regulation by taking all transaction costs into account which stem from the principal/agent relationship between regulatory authorities and economic entities. From that perspective these transaction costs do not only relate to the bonding costs of the regulated entities – part of these costs can be regarded as the administrative burden of regulation for the private sector – but also to the monitoring costs of the regulators and to the residual loss. These latter costs can be regarded as cost to society due to e.g. miscommunication on the aims of regulation, and are, of course, hard to quantify. A cost calculation using the (extended) SCM presumes that the regulatory rules are given and set autonomously by the regulatory authorities. However, it may be welfare enhancing if regulations are fashioned in such a way that net benefits are optimized. From that perspective the paper looks at the possibility to select optimal regulation by means of a cost benefit analysis. A major argument is that the benefits of regulatory measures, e.g. to internalize external effects, comprise avoiding societal costs associated with no or less regulation.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Find related papers by JEL classification: D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy-Making and Implementation H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government H83 - Public Economics - - Miscellaneous Issues - - - Public Administration
This paper has been announced in the following NEP Reports: