The Rise of the Regulatory State

41 Pages Posted: 13 Nov 2001

See all articles by Edward L. Glaeser

Edward L. Glaeser

Harvard University - Department of Economics; Brookings Institution; National Bureau of Economic Research (NBER)

Andrei Shleifer

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: October 2001

Abstract

During the Progressive Era at the beginning of the 20th century, the United States replaced litigation by regulation as the principal mechanism of social control of business. To explain why this happened, we present a model of choice of law enforcement strategy between litigation and regulation based on the idea that justice can be subverted with sufficient expenditure of resources. The model suggests that courts are more vulnerable to subversion than regulators, especially in an environment of significant inequality of wealth and political power. The switch to regulation can then be seen as an efficient response to the subversion of justice by robber barons during the Gilded Age. The model makes sense of the progressive reform agenda, and of the successes and failures of alternative law enforcement strategies in different countries.

Keywords: Law and Economics

JEL Classification: K2, K13, K42, L51, N41

Suggested Citation

Glaeser, Edward L. and Shleifer, Andrei, The Rise of the Regulatory State (October 2001). HIER Discussion Paper No. 1934. Available at SSRN: https://ssrn.com/abstract=290287 or http://dx.doi.org/10.2139/ssrn.290287

Edward L. Glaeser

Harvard University - Department of Economics ( email )

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Brookings Institution

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National Bureau of Economic Research (NBER)

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Andrei Shleifer (Contact Author)

Harvard University - Department of Economics ( email )

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HOME PAGE: http://www.economics.harvard.edu/~ashleife/

National Bureau of Economic Research (NBER)

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European Corporate Governance Institute (ECGI)

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