THE EVOLUTION OF THE ECONOMIC ANALYSIS AND ITS INFLUENCE ON THE THEORY OF ECONOMIC REGULATION

Abstract

The economic analysis of law transformed legal scholarship by applying price theory and rational choice assumptions to the analisys of legal rules and institutions. This methodological innovation fundamentally reshaped the theory of economic regulation, moving it from normative public interest models toward positive explanations of regulatory outcomes. The primary aim of instituting economic regulation is to safeguard the efficient functioning of the market, prevent deceptive practices and negative spill over effects, while ensuring level playing field and consumer rights. However, economic regulation and market operations are not without flaws, often resulting in a mix of positive outcomes and unintended burdens, including implementation costs and potentially detrimental repercussions. This paper endeavours to revisit the foundational concepts of the theory of economic regulation, which originated from the economic analysis of legal frameworks. The theory emerged from the necessity to conduct empirical evaluations of the costs and benefits associated with specific legislative measures. Furthermore, it operates within the broader economic and social contexts that are not only dynamic but also exhibit cyclical patterns. The purpose of this paper is twofold, firstly, to analyse the pivotal thinkers who have significantly influenced the formation of this scholarly theory and to scrutinize their contributions to the advancement of economic regulation theory; and secondly, to extract insights and offer guidance that are applicable to contemporary economic regulatory practices.