Allocating Lawmaking Powers: Self-Regulation vs. Government Regulation

Abstract

Self-regulation is common, but comparative analysis of self-regulation and government regulation is rare. This paper identifies conditions determining whether regulation is delegated or centralized, analyzing the welfare implications of regulatory regime choice. Because regulatory authority determines who controls residual lawmaking, property rights theory provides the natural analytical framework, leading to a focus on trade-offs between efficient lawmaking by regulators and government-producer bargaining. Self-regulation's relative efficiency increases with uncertainty over institutional implementation, populism, and political polarization. Inefficient regulation occurs more frequently than inefficient self-regulation. Case studies examine legal origin's effect on regime choice and compare Progressive regulation to New Deal self-regulation.

Keywords: self-regulation, government regulation, property rights theory, legal origins, Progressive Era, New Deal

JEL Classification: D7, H1, K0, L5, P5