The Economics of Politics and the Understanding of Public Law

The utilization of economic analysis in constitutional and administrative law and in the interpretation of statutes is hardly novel. The battles of the 1920s and 1930s over the constitutional legitimacy of state regulation are conventionally characterized as battles over economic substantive due process. The theoretical underpinning of traditional administrative regulation of rates and entry is borrowed from welfare economics and the economics of industrial organization, and the rationale for the new wave of health and safety regulation in the 1960s and 1970s comes primarily from the literature on the economics of public goods and externalities. It has become conventional to evaluate the performance of modern regulatory agencies in terms of their capacity to produce an excess of benefits over costs. Indeed, many public law statutes, such as the Sherman Antitrust Act can hardly be understood except in terms of basic economic categories like the relevant market, market share, market power and consumer surplus