A State of Inaction: Regulatory Preferences, Rent, and Income Inequality

16 Theoretical Inquiries in Law 45 (2015)

Arizona Legal Studies Discussion Paper No. 14-31

24 Pages Posted: 5 Nov 2014 Last revised: 16 Jan 2015

Date Written: January 15, 2015

Abstract

This Article explores several meanings of a regulatory preference for government inaction. It explains the rise to dominance of this inaction preference in the United States and its distorting influence on the perception and understanding of regulation. Specifically, the Article demonstrates how basic terms in regulation, such as “government failure,” “regulatory capture,” and “deregulation,” acquired misleading connotations suggesting that government inaction is always superior to government action. The Article further explains how, through government inaction, the U.S. legal system accommodates rent extraction - the profitable exploitation of market imperfections and favorable laws. Several developments in recent decades have considerably improved the capacity of very small groups in society to collect rents, namely, use talent and positional advantages to gain increasing levels of earnings. The Article argues that the parallel rise of the inaction preference has contributed to this trend, primarily because the availability of rent extraction opportunities draws talent that utilizes them with growing effectiveness. The purpose of the Article is to clarify several aspects of the relationships between regulation and rent extraction or, more precisely, to emphasize that government inaction may entail undesirable income effects.

Keywords: regulation, income inequality, action, inaction

Suggested Citation

Orbach, Barak, A State of Inaction: Regulatory Preferences, Rent, and Income Inequality (January 15, 2015). 16 Theoretical Inquiries in Law 45 (2015); Arizona Legal Studies Discussion Paper No. 14-31. Available at SSRN: https://ssrn.com/abstract=2518626

Barak Orbach (Contact Author)

University of Arizona ( email )

1201 E. Speedway Blvd.
Tuscon, AZ 85721-0176
United States
520-626-7256 (Phone)
520.858.0025 (Fax)

HOME PAGE: http://www.orbach.org

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