Federalism and Regulation: An Overview

7 Pages Posted: 24 Feb 2004

See all articles by Robert W. Hahn

Robert W. Hahn

Technology Policy Institute; University of Oxford, Smith School

Anne Layne-Farrar

Charles River Associates; Northwestern University

Peter Passell

Milken Institute


This paper examines arguments for and against the centralization of regulation,using the wireless communications industry as a case study. Several factors suggest that the burden increasingly ought to fall on proponents of decentralization. Scale, scope and network efficiencies are growing in many markets, raising the potential costs of balkanization. And rapid technological change strains the expertise of under-funded, under-skilled local regulators. At the same time, one must be careful not to assume that skilled regulators will necessarily do the right thing. The political context in which regulators operate is often decisive. With wireless we expect that more efficient outcomes are far more likely with federal than state regulation. We do not believe, however, there is a simple way to generalize about the level of government best suited to regulating from an economic efficiency standpoint. The most that theory can offer here is a disciplined way of thinking about the issue.

Keywords: Federalism, regulation, free market, Commerce Clause, economic efficiency, market failures, decentralization, market incentives, social cost

JEL Classification: L5, D7, D73, D78, H1, H4

Suggested Citation

Hahn, Robert W. and Layne-Farrar, Anne and Passell, Peter, Federalism and Regulation: An Overview. Regulation, Vol. 26, No. 4, pp. 46-50, Winter 2003-2004, AEI-Brookings Joint Center Working Paper No. 03-14, Available at SSRN: https://ssrn.com/abstract=506062

Robert W. Hahn (Contact Author)

Technology Policy Institute ( email )

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University of Oxford, Smith School ( email )

United Kingdom

Anne Layne-Farrar

Charles River Associates ( email )

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Suite 3400
Chicago, IL 60606
United States
312-377-9238 (Phone)

HOME PAGE: http://www.crai.com

Northwestern University ( email )

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Peter Passell

Milken Institute ( email )

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Santa Monica, CA 90401
United States

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