Regulatory Economics

Regulatory economics is generally an application of public choice theory to markets and market interventions.

Descriptions

This field studies the markets in the context of regulations, taxes, and other interventions by the legitimate political state or by an international order.

The most common justification for this branch of economic study is to correct market failures. There are more normative studies as well, which blur the line between regulatory economics and welfare economics.

A key concept is regulatory capture. Depending on perspective, this is either:

• a business strategy to 'get ahead' of regulations (i.e., self-regulate then campaign for government agencies to adopt those regulations) and grow strategic advantages over competitors
• a condition affecting government agencies whereby their public stewardship is subverted

Reading Notes

• Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States, Albert O. Hirschman, 1970

• Entrepreneurship: Productive, Unproductive, and Destructive, William J. Baumol, 1990

• The Sanctions Paradox, Daniel W. Drezner, 1999

• An Economic Theory of GATT, Kyle Bagwell and Robert W. Staiger, 1999

• Hospital-Physician Relations: Cooperation, Competition, Or Separation?; Robert A. Berenson, Paul B. Ginsburg, and Jessica H. May; 2006

• Good Capitalism, Bad Capitalism, and the Economics of Growth and Prosperity; William J. Baumol, Robert E. Litan, and Carl J. Schramm; 2007

• The Effects of the 1.03 Million Yen Ceiling in a Dynamic Labor Supply Model, Yukiko Abe, 2009

• Consumers’ Perceptions and Misperceptions of Energy Costs, Hunt Allcott, 2011

• Renegotiation Policies in Sovereign Defaults, Cristina Arellano and Yan Bai, 2014

• Economic Sanctions as a Foreign Policy Tool, Michael Klein and Daniel W. Drezner, 2024

• The Increasing Cost of Buying American; Matilde Bombardini, Andres Gonzalez-Lira, Bingjing Li, and Chiara Motta; 2024

• Why Has Inflation Been Higher in Chicago Than in the U.S. Overall Recently?, Leslie McGranahan, 2025

• Britain’s Debt Restructuring, 1717-22, François Velde, 2025

• The Politics of Small Business Owners; Neil Malhotra, Yotam Margalit, and Saikun Shi; 2025

• What One Mineral Reveals About the U.S.-China Trade War, Miles Kellerman, 2025

• The Sanctions Paradox in 2025, Daniel W. Drezner, 2025

• Los Angeles Shows That the Private Sector Can Develop Affordable Housing, Zachary Steinert-Threlkeld, 2025

• How to dismantle a reserve currency, Daniel McDowell, 2025

• The Political Power of Firms, Matilde Bombardini and Francesco Trebbi, 2025

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