The Economic Theory of Regulation after a Decade of Deregulation WHAT HAS COME to be called the economic theory of regulation, or ET, began with an article by George Stigler in 1971.1 The most important element of this theory is its integration of the analysis of political behavior with the larger body of economic analysis. Smaller organizations and consumers tend not to organize collective actions as much because of the expense of doing so and the relatively small potential benefits. Stigler made a strong claim in “The Theory of Economic Regulation”: regulation is just a product, produced in a marketplace like any other product is. The customer groups belong to … A variety of empirical evidence and illustration is also presented. Many different interest groups, ranging from large oil companies to small environmental organizations to consumers in general, often seek government regulation. The theory of economic regulation by George J. Stigler The University of Chicago. To access this article, please, Access everything in the JPASS collection, Download up to 10 article PDFs to save and keep, Download up to 120 article PDFs to save and keep. With a personal account, you can read up to 100 articles each month for free. Direct subsidy provides short-term benefits, but it also encourages new firms to enter into a given industry, thereby creating more competition. The economic theory of regulation would appear toexplain the lobbying 4. efforts of the European insurance companies. The Bell Journal of Economics and Management Science T1 - Economic theory of financial reporting regulation. This theory holds that regulation is supplied in response to the demand of the public for the correction of inefficient or inequitable market practices. This chapter begins by summarizing the development of the economic theory of regulation (ET) and the historical background in which it occurred. According to economic theory of regulation, there is a prima facie case 1 The reason is that the regulatory solution may be no more successful in correcting the inefficiencies than the market or private law, or that any efficiency gains to which it does give rise may be outweighed by increased transaction costs or misallocations created in other sectors of the economy. Two primary methods are direct subsidy and protectionist regulation. This chapter discusses George Stigler’s “The Theory of Economic Regulation,” a stinging analysis of regulation from a political economy perspective. Theory. The economy is not something abstract which happens in isolation, it happens in the context of social, cultural, political and other systems. This tradition also assumes that regulators are … The Theory of Economic Regulation: regulation is just a product, produced in a marketplace like any other product is. For terms and use, please refer to our Terms and Conditions Stigler’s . Groups with greater organizational power and resources are, in general, able to secure greater government regulation in their favor. Select the purchase Regulating the Economy Republican Style The Republican Party is generally considered business-friendly and in favor of limited government regulation of … The extent to which these theories are also able to account for privatization and deregulation is evaluated and … © 1971 RAND Corporation Criticism against the theory of economic regulation mostly involves its relative disregard for the supply of regulation. Stigler, G.J. Access supplemental materials and multimedia. add example. Bell Journal of Economics and Management Science 2 (spring): 3-21. Such regulation is generally aimed at either providing some benefit to or correcting some detriment against the concerned interest group. Regulation may be actively sought by an industry, or it may be thrust upon it. Request Permissions. C) self-interested individuals who benefit themselves by supplying legislation. 3-21.. What Are the Different Types of Macroeconomic Theories? In some cases, supporting smaller organizations or consumers can provide these benefits when helping large firms cannot. Theories of economic regulation Richard A. Posner Professor of Law University of Chicago and Senior Research Associate National Bureau of Economic Research Several theories have been advanced to explain the observed pattern of government regulation of the economy. This journal publishes both theoretical and applied works, including experimental research. Corpus ID: 150641547. It provides researchers, policymakers, and institutions with current perspectives on both theory and practice. The theory of economic regulation is an economic theory developed by George Stigler. The mainstream economic theory of regulation treats politicians and administrators as brokers among interest groups. Stigler's theory of economic regulation treats government regulation as a commodity in itself, subject to its own laws of "supply" and "demand." These include the "puiblic interest" theory and several versions, proposed either by Stigler, G.J. The economic theory of regulation treats politicians as: A) publicly spirited individuals who work for the public welfare. The Economic Theory of Regulation @inproceedings{Stigler1971TheET, title={The Economic Theory of Regulation… The characteristics of the political process which allow relatively small groups to obtain such regulation is then sketched to provide elements of a theory of supply of regulation. Finally, it reviews some of the important changes in regulation that occurred after the theory was developed, and evaluates each of them against the relevant elements of the theory. Example sentences with "economic theory of regulation", translation memory. 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