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The Positive Theory of Regulation

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Network Economics

Part of the book series: Springer Texts in Business and Economics ((STBE))

Abstract

The positive theory of regulation studies the emergence, the transformation, and the abolishment, as well as the institutional implementation of sector-specific regulation. Thus the central question is how network industries actually are regulated. In examining this question, the influence exercised by firms, consumer interests, and the bureaucratic self-interest of the regulatory agency must be taken into account in order to explain the behaviour of regulators. The various interest groups of consumers and producers as well as other related interest groups (pursuing e.g. environmental, health, climate, landscape conservation interests) compete with each other in their quest for political influence. The influence exerted by the interest groups involved is fundamentally dependent on the institutional framework.

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Notes

  1. 1.

    An overview of positive theories of regulation can be found in Joskow and Noll (1981), Owen and Braeutigam (1978), Spulber (1989), Vogelsang (1988).

  2. 2.

    The increasing debate on the role of consumer empowerment programs in order to enhance the capacity of consumer representatives to become active during the regulatory proceedings in the US (cf. Schwarcz, 2012) indicates the conflicts of interest of different interest groups involved.

  3. 3.

    The crucial contribution of the Stigler/Peltzman model is the explicit identification of the role played by interest groups in the regulatory process. The institutional process itself, however, is not examined in detail; in particular, no distinction is made between legislative institutions and regulatory agencies (cf. Weingast & Moran, 1983, p. 768).

  4. 4.

    On the concept of the production possibilities frontier, cf. e.g. Varian (2010, pp. 629f.).

  5. 5.

    The extent of influence exercised is determined by “dollar votes ”, i.e. the acceptance of a suggested change depends primarily on the intensity of the influence exerted and not on the number of participants.

  6. 6.

    It is interesting to note that landmark decisions of courts (e.g. the European Court of Justice as well as National High Courts) also played an important role in getting the process of regulatory reform running (cf. Knieps, 2014).

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Authors and Affiliations

  1. Institute for Transport Economics and Regional Policy, University of Freiburg, Freiburg, Germany

    Günter Knieps

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  1. Günter Knieps
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Knieps, G. (2015). The Positive Theory of Regulation. In: Network Economics. Springer Texts in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-319-11695-2_9

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