Why Does Regulation Work? ANS

Here is a very short article, and some comments, on why regulation works better than "tort" (that means suing them after they have injured you).  It could go deeper, but it's a start. 
Find it here:  http://www.nonesoblind.org/blog/?p=6782
--Kim


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Regulation Beats Lawsuits: Krugman Counters the Libertarian Argument

Why Does Regulation Work?

Paul Krugman's blog

In the various responses to my posts on libertarianism… some commenters have made a point that sounds reasonable, but actually isn't. I pointed out that the libertarian alternative to regulation ­ just use tort law to make people pay for the damage they cause ­ doesn't work in practice, because when push comes to shove politicians will shield the rich and powerful from paying the real cost. Commenters say, but isn't that an equally strong reason to believe that regulation won't work either?

Well, here's the thing: regulation demonstrably does work where tort law doesn't. Consider the environmental issue: in reality, the perpetrators of oil spills never pay most of the cost; but in reality, environmental regulation has led to much cleaner air and water. (Look up the history of Los Angeles smog or the fate of Lake Erie if you don't believe me.)

So why does regulation work? If polluters can buy off the system ex post, after a disaster, why don't they manage to totally corrupt regulation ex ante? There's a lot to say about that, and I'm sure there's a literature I haven't read. But one thing we tend to forget in this age of Reagan is the importance and virtues of a dedicated bureaucracy: when you have professional government agencies with a job to do, and treat them with respect, that job often gets done.

On the other hand, if you degrade and devalue that bureaucracy, it will do a heckuva job. But that's not the way it has to be.

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3 Responses to "Regulation Beats Lawsuits: Krugman Counters the Libertarian Argument"

1. Jim Z. Says:
2. June 22nd, 2010 at 3:22 pm
   
3. It has always been interesting to me that "regulatory capture" has been used in arguments by both proponents and opponents of governmental intervention in markets.
4. ToddR Says:
5. June 22nd, 2010 at 5:07 pm
   
6. I can imagine someone intent on regulatory capture arguing for government regulation without mentioning regulatory capture, but it is hard for me to imagine an argument in favor of regulation explicitly marshalling regulatory capture as part of the explicit argument. Jim Z, can you summarize?
   The other case, arguing against regulation and citing regulatory capture, is pretty easy for me to imagine.
7. Masked Marauder Says:
8. June 23rd, 2010 at 5:28 pm
   
9. This is the subject of Thomas Geoghegan's "The Law in Shambles." Its a short pamphlet outlining his perception that US law is evolving from traditional contract law, to one governed by tort. Its one of my favorite books and its well worth reading.
   From an interview ( http://tinyurl.com/2ad7fy4):
   Q: As you describe it, the way this rending of the civic fabric plays out in the legal field is that now everything is tort. What does tort mean?
   A: Tort law characterizes the citizen as a victim­the injured party has had some random thing happen beyond his control and goes to court looking for remedy. When I was in law school, tort law was mostly about the car wreck at North and Clark Street. The classic trial practice example is: "The car was driving on North Avenue and it runs on to Clark Avenue, etc." I thought, "Who cares about this? I didn't go to law school for this." I just thought tort law was for goof-balls.
   I was much more interested in contract law because it has such an elegant structure. The way most people used to experience the law was contract. Contract law protected our expectations to be treated equally, fairly, rationally, justly. Our job tenure depended upon our performance in some way or another that was predictable. Contract collapsed as the way working people experience the law because we don't have collective bargaining. Then there was also trust law, which you experienced when you got your job and had a pension. But trust law has also collapsed. Now, you're out of pension plans; there are no trustees to take care of you, or if there are, they screw you. The charitable institutions now prey on you. The student loan companies and hospitals chase people into court to collect debts. …