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The Rise of the Regulatory State

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  • Edward L. Glaeser
  • Andrei Shleifer

Abstract

During the Progressive Era at the beginning of the 20th century, the United States replaced litigation by regulation as the principal mechanism of social control of business. To explain why this happened, we present a model of choice of law enforcement strategy between litigation and regulation based on the idea that justice can be subverted with sufficient expenditure of resources. The model suggests that courts are more vulnerable to subversion than regulators, especially in an environment of significant inequality of wealth and political power. The switch to regulation can then be seen as an efficient response to the subversion of justice by robber barons during the Gilded Age. The model makes sense of the progressive reform agenda, and of the successes and failures of alternative law enforcement strategies in different countries.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8650.

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Date of creation: Dec 2001
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Publication status: published as Edward L. Glaeser & Andrei Shleifer, 2003. "The Rise of the Regulatory State," Journal of Economic Literature, American Economic Association, vol. 41(2), pages 401-425, June.
Handle: RePEc:nbr:nberwo:8650

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  1. Djankov, Simeon & La Porta, Rafael & Shleifer, Andrei & Lopez de Silanes, Florencio, 2001. "The regulation of entry," Policy Research Working Paper Series 2661, The World Bank.
  2. Steven Shavell, 2003. "Economic Analysis of Accident Law," NBER Working Papers 9483, National Bureau of Economic Research, Inc.
  3. Maxim Boycko & Andrei Shleifer & Robert W. Vishny, 1993. "Privatizing Russia," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(2), pages 139-192.
  4. Edward Glaeser & Simon Johnson & Andrei Shleifer, 2001. "Coase Versus The Coasians," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 116(3), pages 853-899, August.
  5. Gilligan, Thomas W & Marshall, William J & Weingast, Barry R, 1989. "Regulation and the Theory of Legislative Choice: The Interstate Commerce Act of 1887," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 32(1), pages 35-61, April.
  6. Polinsky, Mitchell & Shavell, Steven, 1979. "The Optimal Tradeoff between the Probability and Magnitude of Fines," American Economic Review, American Economic Association, American Economic Association, vol. 69(5), pages 880-91, December.
  7. Joseph E. Stiglitz, 1996. "Whither Socialism?," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262691825, December.
  8. Edward L. Glaeser, 2001. "Public Ownership in the American City," NBER Working Papers 8613, National Bureau of Economic Research, Inc.
  9. Edward L. Glaeser & Andrei Shleifer, 2001. "Legal Origins," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1920, Harvard - Institute of Economic Research.
  10. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters, in: Essays in the Economics of Crime and Punishment, pages 1-54 National Bureau of Economic Research, Inc.
  11. Edward L. Glaeser & Andrei Shleifer, 2001. "A Reason for Quantity Regulation," American Economic Review, American Economic Association, American Economic Association, vol. 91(2), pages 431-435, May.
  12. Gary S. Becker & George J. Stigler, 1974. "Law Enforcement, Malfeasance, and Compensation of Enforcers," The Journal of Legal Studies, University of Chicago Press, University of Chicago Press, vol. 3(1), pages 1-18, January.
  13. Steven Shavell, 1983. "Liability for Harm Versus Regulation of Safety," NBER Working Papers 1218, National Bureau of Economic Research, Inc.
  14. Edward L. Glaeser, 2001. "Public Ownership in the American City," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1930, Harvard - Institute of Economic Research.
  15. Price V. Fishback & Shawn Everett Kantor, 2000. "A Prelude to the Welfare State: The Origins of Workers' Compensation," NBER Books, National Bureau of Economic Research, Inc, number fish00-1.
  16. Dickens, William T, et al, 1989. "Employee Crime and the Monitoring Puzzle," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 7(3), pages 331-47, July.
  17. Steven Shavell, 1984. "A Model of the Optimal Use of Liability and Safety Regulation," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 271-280, Summer.
  18. Louis Kaplow & Steven Shavell, 1999. "Economic Analysis of Law," NBER Working Papers 6960, National Bureau of Economic Research, Inc.
  19. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
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