Where are the limits of regulation?
Regulation is an important part of government activity. Distinguishing between the intensity of regulation , and the range of regulation, it is possible to show that a utility maximizing government has an incentive to overregulate both in the short and long run, but that there are definite limits to regulatory intensity. Models of the limits of regulation and of the limits of taxation are special cases of a more general model in which government simultaneously uses the intensity of regulation and tax rates as instruments. In this case, it is possible that there is overregulation but no overtaxation.
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