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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.

Suggested Citation

  • Edward L. Glaeser & Andrei Shleifer, 2001. "The Rise of the Regulatory State," NBER Working Papers 8650, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:8650
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    References listed on IDEAS

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    2. Edward Glaeser & Simon Johnson & Andrei Shleifer, 2001. "Coase Versus the Coasians," The Quarterly Journal of Economics, Oxford University Press, vol. 116(3), pages 853-899.
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    6. Steven Shavell, 2003. "Economic Analysis of Accident Law," NBER Working Papers 9694, National Bureau of Economic Research, Inc.
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    14. 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.
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    More about this item

    JEL classification:

    • K2 - Law and Economics - - Regulation and Business Law
    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics

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