The Political Economy of Regulatory Competition

Regulatory competition has been viewed either as a §scourge or as a blessing. Liberal authors warn §against the potential of a race to the bottom when §governments are played out by companies now §operating in a global market place, whereas §conservative authors point to the benefits of §experimentation resulting from a global market in §regulation. This book seeks to transcend that debate §by reframing traditional externality problems as §opportunities for government to shape the market in §new ways that fit better with basic democratic §values. It advances the concept of contextual §regulation by which government creates the §conditions that allow a market for collective goods §to function, even across borders. Contextual §regulation holds that it is possible and even §desirable for government to shape consumer §preferences using market strategies in ways that §regulate companies better than command and control §can. However, the implication is that the underlying §paradigm of regulation needs to shift from a §Machiavellian punishment and reward model to one §that promotes constant innovation to counteract the §traditional limitations of the market.