The Political Foundations of Regulatory Policy

The purpose of this paper is to contribute to the political economic theory of regulatory policy in two ways. One is to examine regulation in relation to other policies that might be seen as alternatives to it. Existing theory argues that regulation is likely to be too particularistic and cumbersome to serve the efficiency objectives that constitute its justifications in welfare economics; however the relative performance of regulation in comparison with other approaches to the same types of problems has not been extensively explored. The second aspect of this paper is that it examines the relationship of the performance of regulation to the basic political structure of a country: whether legislatures are elected on the basis of proportional representation or from single-representative constituencies, and whether a country has a parliamentary system or separate, autonomous legislative and executive branches. By broadening the range of policies analyzed and the political institutions in which it operates, the possibility is created tor making useful international comparisons of the performance of alternative approaches to the market-failure problems that are associated with regulatory policies