George Stigler won a Nobel Prize for his work on the economics of regulation. He wrote extensively about regulatory capture, and in fact coined the term. He was one of only a few sane souls who stubbornly insisted that regulations be judged by their actual results, not their intended results. Good intentions, however noble, are not enough. Here’s an example of Stigler at his finest:
Regulation and competition are rhetorical friends and deadly enemies: over the doorway of every regulatory agency save two should be carved: “Competition Not Admitted.” The Federal Trade Commission’s doorway should announce , “Competition Admitted in Rear,” and that of the Antitrust Division, “Monopoly Only by Appointment.”
-George Stigler, “Can Regulatory Agencies Protect the Consumer?”, from The Citizen and the State: Essays on Regulation (1975), p. 183.
Posted in Economics, Great Thinkers, regulation
Tagged Antitrust, competition, economic regulation, economics nobel, ftc, george stigler, good intentions, nobel, regulation, regulations, results, stigler
James Buchanan was one of the founding fathers of public choice theory, along with Gordon Tullock and some others (Bill Niskanen, Mancur Olson, et al). Public choice, despite the obscure name, is quite simple. It says that market behavior does not end where government begins. Politicians and other government actors are not angels. They are just as self-interested as you or I. Public choices are subject to the same incentives as private choices.
Buchanan’s simple, powerful insight won him the economics Nobel in 1986. Don Boudreaux made some brief remarks at Buchanan’s recent 90th birthday celebration. They’re worth reading, especially if you aren’t familiar with Buchanan and his very distinguished place in the history of economic thought. Also worth reading is his Nobel lecture.
Congratulations to Elinor Ostrom and Oliver Williamson. Both are highly deserving.
Ostrom’s work shows that market behavior emerges in settings not usually thought of as markets (condo associations, within government etc.).
Williamson has made brilliant contributions to the New Institutional Economics (NIE), which says that changing the rules of the game (the existing institutions) will alter the behavior of the people affected. Williamson’s work applies the economic way of thinking to deduce exactly how, with an emphasis on how transaction costs affect the interplay between individuals and firms.