Public and private interests in regulation : essays in the law and economics of regulation

Abstract

The six chapters in this thesis all focus on regulation. Public and private interest theories of regulation are used as a viewpoint and as an instrument to analyse and evaluate particular regulations and policy developments. Furthermore, in the literature there is a debate about the explanatory power and scientific status of public and private interest theories of regulation. This thesis evaluates this debates and draws a number of conclusions on the merits and possible applications of the public and private interest theories of regulation. Chapter one presents a review and synthesis of the literature on the economic theories of regulation. Chapter two applies the different theories of regulation to explain deregulation in the Netherlands. Why was deregulation unsuccessful until the mid 1990s and why has the partial or full deregulation of economic sectors become more common? Chapter three analysis the regulation and self-regulation of physicians in the Netherlands in order to determine which of the competing theories of regulation has the greatest explanatory power. Chapter four uses public and private interest theories to explain reversed solidarity in pension plans in the Netherlands and other countries. Why do blue-collar workers and women contribute to the pension provisions for persons with a career path or white-collar workers, who are mostly men? Chapter five analysis noncompetition clauses which are part of the labour contract for one in every five employees in the Netherlands. After an evaluation of five theories explaining noncompetition clauses, the conclusion is drawn that these clauses appear to prevent hold-up problems and protect the creation and distribution of the surplus of the employment relationship. Appraisals of public and private interest theories of regulation require criteria with which to judge these theories. The criteria may be inferred from the methodology that is regarded appropriate when conducting economic research. Basically, these criteria emanate from the demands of logical and empirical consistency and the plausibility of theories. The evaluation of public and private interest theories of regulation has made clear that an unambiguous ranking of these theories in terms of the best in explaining regulations is (as yet) impossible. Much theoretical and empirical work still needs to be done to understand how and why regulations are chosen as the preferred instrument and why it takes one particular legal form or another. The strength of the public and private interest theories of regulation lies more in their use as juxtaposing and opposing frameworks of economic analysis rather than in being corroborated theories. Furthermore, these theories may be useful not only for new theoretical developments but also for their application to practical problems. As such they may be interpreted as a box of tools in policy-making. More generally, the public interest theories may be applied to identify possible causes of market failures and to summarize possible regulatory solutions, while the private interest theories of regulation may be applied to do discover where proposed or existing regulations are vulnerable to rent-seeking behaviour and may consequently display possible unexpected side effects or inefficiencies.