Regulatory Competition and Regulatory Jurisdiction

Abstract

This article seeks to assess the limits of competition, and the need for regulation of competition, among regulatory jurisdictions. The market for regulation involves competition among states, and may be regulated by supra-state law including international law generated by international institutions, such as the WTO or the EU. The question of how competition among states should be regulated is analogous to the question asked often in domestic policy debates: how should competition among firms be regulated? This article looks to the theory of property law and, to a lesser extent, competition law, as well as to the Tiebout model, to suggest answers. This article argues that it is impossible to generalize about the benefits of competition in regulation, and that a number of factors must be considered. These factors cannot be simply totted up by a researcher who then provides definitive policy advice. First, the regulatory competition model, like all models, has particular parameters that must be met in order for it to apply. These parameters cannot be assumed, but must be evaluated in particular cases. Second, the parameters are never completely met, placing us in the realm of the theory of the second best. The realm of the theory of the second best calls for legislative deliberation rather than judicial or scholarly determination. Third, these factors are incommensurable and involve interpersonal comparison of utility. Therefore, again, the design of regulatory competition, like other decisions about regulation, is best left for political determination, informed by scholarly analyses of these factors.