Review article. An economic analysis of regulation: one view of the cathedral

Abstract

Regulation is fast becoming, if it has not already become, an industry in its own right and the literature on regulation burgeons almost daily. This work tends to consist either of detailed empirical studies of particular areas of regulation or particular aspects of the regulatory function, for example, rule making, enforcement or compliance; or of studies which operate at a more general level and which are concerned to examine perceived trends of, for example, regulation, deregulation or reregulation; to explore and explain policy formation and policy reversals; or to assert and assess claims of regulatory success or failure. These studies take a range of perspectives, and academics interested in regulation can be found in university departments of law, politics, economics, geography and sociology. As a lawyer, Anthony Ogus's aim and focus in Regulation: Economic Theory and Legal Form (hereafter Regulation) is commendably inter-disciplinary: to bring to public law an economic approach to regulation in an attempt to release public lawyers from their traditional obsession with institutional design.' Such an obsession, Ogus argues, has led to public lawyers failing to address some of the key issues relating to regulation of industrial and commercial behaviour, namely: 'selecting legal forms which can best achieve the instrumental goals of collective choice'.2 Ogus therefore aims to relate the specific instruments of regulation to these general goals and to evaluate their appropriateness in achieving those goals in order to gain a more complete understanding of the advantages and disadvantages of these different legal forms. Regulation, Ogus reminds us, is essentially a politico-economic concept. He identifies regulation with a 'collectivist system of economic organisation',3 in which the role of law is directive, public and centralized; this contrasts with the unregulated market, in which law is facilitative, private and decentralized.4 However, he notes that regulatory strategies can adopt elements which are both public and centralized (statutory rules, governmental agency), or private and market based (self-regulation, taxes, franchises),5 and one of his concerns