Regulatory Theory

Abstract

This chapter reviews a range of topics connected to the justification of government regulation, including: the definition of “regulation�?; welfarism, Kaldor-Hicks efficiency, and the Pareto principles; the fundamental theorems of welfare economics and the “market failure�? framework for justifying regulation, which identifies different ways in which the conditions for those theorems may fail to hold true (such as externalities, public goods, monopoly power, and imperfect information); the Coase theorem; and the different forms of regulation.