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Allocating Law-Making Powers: Self-Regulation vs. Government Regulation

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  • Peter Grajzl

    ()
    (Department of Economics, Central European University)

  • Peter Murrell

    ()
    (Department of Economics, University of Maryland)

Abstract

Although a common institutional arrangement, self-regulation as an alternative to direct government regulation has received relatively little attention from economists. This paper uses a framework inspired by property rights theory to analyze the allocation of regulatory authority. In a model of a regulatory process with bargaining, the authority to amend enabling legislation can be either consolidated within the government or extended to producers in a self-regulatory regime. The paper delineates the welfare implications of regulatory regime choice, identifies the conditions that lead a government to delegate or to centralize regulatory authority, and examines whether the government's institutional choice is efficient. Self-regulation is efficient when there is much uncertainty about the results of institutional implementation, when the government is populist, or when society is not polarized. Inefficient use of central regulation is more likely than inefficient use of self-regulation. A range of examples illustrates the model, identifying those features of legal traditions that explain cross-country variation in regulatory regime choice, illuminating the contrast in regulatory practice between the progressive era and the New Deal, and characterizing the mechanisms of intervention used under fascism.

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Bibliographic Info

Paper provided by University of Maryland, Department of Economics in its series Electronic Working Papers with number 05-002.

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Length: 39 pages
Date of creation: Dec 2005
Date of revision:
Handle: RePEc:umd:umdeco:05-002

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Postal: Department of Economics, University of Maryland, Tydings Hall, College Park, MD 20742
Web page: http://www.econ.umd.edu/

Order Information:
Postal: Ms. Elizabeth Martinez, Department of Economics, University of Maryland, Tydings Hall, College Park, MD 20742
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Related research

Keywords: Self-regulation; government regulation; incomplete contracts; progressive era; New Deal; fascist economic systems; common law; civil law;

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References

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Cited by:
  1. Grajzl, Peter & Baniak, Andrzej, 2009. "Industry self-regulation, subversion of public institutions, and social control of torts," International Review of Law and Economics, Elsevier, vol. 29(4), pages 360-374, December.
  2. Camille Chaserant & Sophie Harnay, 2013. "The regulation of quality in the market for legal services: Taking the heterogeneity of legal services seriously," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 10(2), pages 267-291, August.

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