Industry Self-Regulation, Subversion of Justice, and Social Control of Torts

42 Pages Posted: 20 Nov 2007 Last revised: 13 Aug 2009

See all articles by Peter Grajzl

Peter Grajzl

Washington and Lee University - Department of Economics; CESifo

Andrzej Baniak

Central European University (CEU) - Department of Economics

Date Written: September 3, 2008

Abstract

We characterize the comparative efficiency of industry self-regulation as means of social control of torts. Industry self-regulation is, unlike liability, which is imposed by courts ex post, similar to government regulation in that self-regulation acts before the harm is done. However, the industry, as compared to government regulators, possesses better information about the regulatory issue at stake. Furthermore, a pro-industry bias inherent to self-regulation will also arise under alternative legal arrangements when adjudicators are vulnerable to pressure by industry members. We show how social desirability of delegating regulatory authority to the industry varies with ease of subversion of courts and regulators, tightness of extralegal constraints under self-regulation, status quo legal regime, and industry hazardness. Our findings clarify when industry self-regulation could be an attractive institutional arrangement for developing and transition countries.

Keywords: industry self-regulation, social control of torts, subversion of justice, strict liability, government regulation, industry hazardness

JEL Classification: K13, K23, K42, L50, P50

Suggested Citation

Grajzl, Peter and Baniak, Andrzej, Industry Self-Regulation, Subversion of Justice, and Social Control of Torts (September 3, 2008). Available at SSRN: https://ssrn.com/abstract=1031324 or http://dx.doi.org/10.2139/ssrn.1031324

Peter Grajzl (Contact Author)

Washington and Lee University - Department of Economics ( email )

Lexington, VA 24450
United States

HOME PAGE: http://home.wlu.edu/~grajzlp/

CESifo ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Andrzej Baniak

Central European University (CEU) - Department of Economics ( email )

Nador u. 9.
Budapest H-1051
Hungary
(36) 1 327-3231 (Phone)
(36) 1 327-3232 (Fax)

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