Theories on the Economics of Regulation: A Survey of the Literature from a European Perspective

This article is, on one hand, a survey of the core theoretical literature on the economics of public regulation; and, on the other hand, a cohesive discussion about how the literature has matured and how recent contributions on political and regulatory institutions—US and European—are related to, and affect the results of, former lines of research. We conclude that the traditional distinction between public interest theories and special interest theories has lost validity due to the entry of game theory and institutional research. The evolving institutional analysis provides a sophisticated interpretation of possible corrective rationales inherent in regulatory restrictions, and is as such an important complement to the still vigorous special interest literature focusing on the redistributive rationales and their effects.