Regulation and Regulatory Reform: Some Fundamental Conceptions

Abstract

The general perspective taken here can be briefly stated: regulation is a fundamental, not epiphenomenal, matter. It is part of larger social processes with respect to which it is both a determined and determining (dependent and independent) variable. Regulation has a dual nature: it both controls and protects, it both restricts and enhances opportunity sets, typically for different persons in each instance. Accordingly regulation is a relative, not absolute, phenomenon capable of being selectively perceived. It is deeply related to power structure: it governs and is governed by power. Power is at the centre of politics (law) and economics, and regulation is not sui generis in the legal-economic arena. The central problem is not whether or not there should be regulation or greater or lesser government. The juxtaposition of the market or competition to government or regulation typically if not inevitably involves one set of legal rights (regulation) being given a privileged position. The central problem is whose interests are to be promoted by regulation and how (insofar as interests conflict, some regulation receiving perhaps universal approval). Regulation functions to promote interests, in part by channelling radical indeterminacy, uncertainty and risk. The question is, who shall use government, including regulation, to advance their own interest. Finally, as will be seen below, regulation must be comprehended in the context of a general analysis of power and rights: private regulation is the alter ego of public regulation, the two are quite interdependent and regulation is a mode of, not antagonistic to, rights.

Written with A. Allan Schmid and James D. Shaffer; originally published in Law and Economics: An Institutional Perspective (Boston: Martinus Nijhoff, 1981).