Download This PaperNO PERFECTSOLUTIONS FORMARKET IMPERFECTIONS
Law & Economics Center at George Mason University Scalia Law School Research Paper Series No. 22-027
68 Pages Posted: 24 Oct 2022 Last revised: 2 Mar 2023
Date Written: October 21, 2022
Abstract
Marketsa re imperfect, andt he suboptimal resultsa re frequently used to justifyg overnment regulation. Government regulation, however, is also imperfect,a nd thes uboptimal results are, less-frequently,u sedt oj ustify deregulatoryefforts.Located betweenthosepoles is industryself-regulation, in whicht he industry is tasked with effectuatingr egulatoryg oals. Unfortunately,b ut perhapsn ot surprisingly, industrys elf-regulationi sa lso imperfect.I ndustrym embers,w henc alledo nt oe ngage in self-regulation, will face what Austrian economists call 'the knowledgep roblem,' but at lesserseverity than full government regulation. Industrymembers will also face avariety of public choice pressures, andthosepressuresmay be more disruptivet hanu nderf ullg overnment regulation. Therea re,t herefore,n o perfect solutions to market imperfections,a nd policym akerss eeking solutions must weight he relativet radeoffs on ac ase-specificb asis,i ft hey wish to obtainoptimal outcomes.
Keywords: Self-regulation, rent-seeking, knowledge problem, public choice, regulatory capture
JEL Classification: B53, D02, D43, D72, D73, D82, K23,
Suggested Citation: Suggested Citation