Regulatory competition, economic regulation, and law

One often meets the view that economic regulation should be understood in terms of Pareto efficiency. Economic theories of law have traditionally focused on concepts such as market failure, efficiency, and inefficiency. Proponents assume that under the conditions of perfect competition, rational economic actors will enact courses of action that tend to induce Pareto outcomes. The idea of perfect competition means that markets which are competitive will induce efficient outcomes. The perfect competition approach has focused on the conception of market failure as the foundation for designing regulatory policy. Until recently, lawyers overwhelmingly relied upon a model of economic contract, developed over the last two decades in law and economics, as a normative structure to guide efficient decision-making