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Handbook of New Institutional Economics pp 515–543Cite as

The Institutions of Regulation: An Application to Public Utilities

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Regulation is part of the complex web of a nation’s public policy. To understand regulatory design, then, it is imperative to understand the general determinants of public policy. The purpose of this essay is to highlight the usefulness of a transactional approach to public policy determination in understanding the origins, nature and the evolution of the institutions of regulation. As it merits an essay in a volume on the New Institutional Economics, we approach public policy as a (complex and often intertemporal) transaction among policy makers. As such, the nature and features of public policies are impacted by the type of contracts facilitated by the institutions—i.e., the rules of the political game—of the country in question. Here, then, we analyze the institutional determinants of regulatory policy making by looking at regulation as the outcome of complex intertemporal exchanges among policy makers. As in normal economic transactions, efficient intertemporal exchanges require safeguarding institutions. In their absence, we will observe the development of non-cooperative and shortterm behavior, inflexible rules to avoid political opportunism, and in general low quality regulatory policies.

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Author information

Authors and Affiliations

  1. Haas School of Business, University of California, Berkeley, CA, USA

    Pablo T. Spiller

  2. Center of Studies for Institutional Development, Universidad San Andrés, Buenos Aires, Argentina

    Mariano Tommasi

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  1. Pablo T. Spiller
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  2. Mariano Tommasi
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Editors and Affiliations

  1. Université de Paris, 106 Bd de l’Hôpital, 75647, Paris, France

    Claude Ménard

  2. The Ronald Coase Institute, 5610 Wisconsin Ave, 20815, Chevy Chase, MD, USA

    Mary M. Shirley

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Spiller, P.T., Tommasi, M. (2008). The Institutions of Regulation: An Application to Public Utilities. In: Ménard, C., Shirley, M.M. (eds) Handbook of New Institutional Economics. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-69305-5_21

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