Blackwell Reference Online

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As defined in the classic treatise of Alfred Kahn (1970: 3) , “regulation is the explicit replacement of competition with governmental orders as the principal institutional device for assuring good performance” from an industry. Several aspects of this definition are important. First, systems of regulation are imposed by law through the political‐choice process because some segments of the population prefer the outcomes that emerge from an administrative process to those resulting from the operation of unfettered markets. These groups may also prefer some aspects of the regulatory process itself, such as their sense of its fairness, to the market process of resource allocation. Second, industries, and the businesses and consumers who comprise those industries, are regulated in order to improve upon the performance of the industries, at least as measured or perceived by some segments of the population. Welfare economics focuses on policies for maximizing social efficiency, defined as the sum of the benefits to consumers and companies from markets, whereas political economists tend to stress the distributional gains and losses resulting from regulation. Third, regulation operates through agencies who act as the agents of the administrative and legislative branches of the government in carrying out laws. Regulatory agencies are constrained by their enabling statutes, by procedural ... log in or subscribe to read full text