The Institutions of Regulation: An Application to Public Utilities

Pablo Spiller and Mariano Tommasi

Chapter 20 in Handbook of New Institutional Economics, 2008, pp 515-543 from Springer

Abstract: Regulation is part of the complex web of a nation’s public policy. To understand regulatory design, then, it is imperative to understand the general determinants of public policy. The purpose of this essay is to highlight the usefulness of a transactional approach to public policy determination in understanding the origins, nature and the evolution of the institutions of regulation. As it merits an essay in a volume on the New Institutional Economics, we approach public policy as a (complex and often intertemporal) transaction among policy makers. As such, the nature and features of public policies are impacted by the type of contracts facilitated by the institutions—i.e., the rules of the political game—of the country in question. Here, then, we analyze the institutional determinants of regulatory policy making by looking at regulation as the outcome of complex intertemporal exchanges among policy makers. As in normal economic transactions, efficient intertemporal exchanges require safeguarding institutions. In their absence, we will observe the development of non-cooperative and shortterm behavior, inflexible rules to avoid political opportunism, and in general low quality regulatory policies.

Keywords: Institutional Environment; Regulatory Policy; Public Utility; Regulatory Institution; Judicial Review (search for similar items in EconPapers)
Date: 2008
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DOI: 10.1007/978-3-540-69305-5_21

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