A Pedagogical Note on the Economic Theory of Regulation

Abstract

While scores of papers have drawn on the basic insights of the early founders of the economic theory of regulation, the ability to cogently present the general form of the theory in a readily accessible graphical format has only recently emerged. While providing a promising approach for illustrating and analyzing regulatory (and deregulatory) outcomes, however, the analysis presented to this point appears to require the derivation of several different graphs. The result is that, while stemming from a single paradigmatic framework, the graphical approach fails thus far to offer a single unified basis for illustrating the general economic theory of regulation. In this paper, we seek to fill this lacuna by providing a simple, yet powerful, unifying graphical construct for presenting the myriad implications of that theory.

JEL Classification: D72, L51