WEEK 1: Introduction
Concept I: Two perspectives on Market Regulation
1. Functional Perspective:
○ A control system containing 3 components:
■ Capacity for standard setting:
● To allow for a distinction to be made between preferred states of the
system.
■ Capacity for information gathering
● To produce knowledge about current or changing states of the system.
■ Capacity for behavior modification
● To change the state of the system by e.g:
○ Enforcing regulatory standards to modify behavior.
○ Sanctions
Other notes:
● Functional Perspective of regulation is the approach that is widely accepted & used.
2. Scope Perspective (2 types):
○ Narrow sense:
■ Attempts by the state to influence socially valuable behavior which may have
adverse side-effects by establishing, monitoring and enforcing legal rules.
● Mentions the 3 core functions but also places emphasis on the state as the
main sources of regulatory norms.
○ Broad sense:
■ Encompassess all forms of social control, whether intentional or not and whether
imposed by the state or other social institutions.
● Regulation can not only be adopted by the state but also private actors
that can influence socially valuable behavior.
insum:
● Narrow sense = actions by state to influence behavior
● Broad sense = state actions + non state (such as private actors) actions to influence behavior.
Other notes:
● Attempts to define scope → led to several disagreements due to political/ideological battles.
● Lawyers tend to focus on narrower definitions, due to the state's coercive power.
Concept II: The Logic of Market Regulation - Three Principal Issues
1. What is the goal or outcome to be achieved?
2. What standard of conduct is required from market participants?
3. What enforcement techniques are appropriate to ensure compliance?
,Concept III: Roles of Law in Market Reg
1. Law’s Facilitative Role:
○ Law seen as a regulatory instrument:
■ To shape behavior in order to facilitate transactions in the market.
○ E.g. Conduct of business rules.
2. Law’s Expressive Role:
○ Law is seen as giving expression to certain values that shape & constrain the power of
institutions, notably government institutions.
○ i.e. law as a constraint in market regulation.
○ e.g. The rule of law, principles of good administration.
insum:
● Law’s Facilitative Role: A reg instrument that shapes behavior in order to facilitate market
transaction.
● Law’s Expressive Role: Does more than just shaping behavior, it can provide a framework &
values for institutions.
Concept IV: Relationship between Public & Private law
The Division:
Public Law Private Law
Vertical relationship - citizens & state Horizontal relationship between private parties
Private parties - Public authorities Private parties - Private parties
Public authorities must pursue public interests Private parties normally pursue private interests
Public enforcement: Private enforcement:
● Constitutional law ● By aggrieved parties through private law
● Administrative law means means:
○ Fines ○ Civil courts
○ Registration of business ○ ADR
○ etc ○ Contract & tort law
● Private parties take action themselves.
Ex ante compliance & deterrence Ex post compensation
● I.e. after damage has been suffered.
Blurred Lines:
● As a result of increasing use of both public & private law as a regulatory instrument.
, Concept V: Public & Private Interests
Public Interest Theories:
● Why does regulation emerge?
○ To pursue collective goals with the aim of promoting the general welfare of the
community.
● 2 subcategories of public interest theory:
○ Economic version:
■ Regulatory goals in terms of economic efficiency:
● Market regulation should pursue the public interest in an efficient
allocation of resources.
■ Regulation is a response to market failures:
● Correction of market failures increases community welfare.
■ Types of market failures:
● Monopolies & anti-competitive practices.
● Public goods (i.e. commodities shared by the public as a whole e.g.
education) require regulation for well functioning.
● Information deficits + bounded rationality
○ Consumers may not make rational decisions with regard to the
market - not in favor of the public interest.
○ Behavioral biases: unrealistic optimism, self-control problems,
cumulative cost neglect, ignoring complexity.
○ Political version:
■ The collective welfare should not be defined exclusively by efficient resource use
- the pursuit of other interests can also justify regulation e.g:
● Social justice
● Preventing harm to future gen
■ Paternalism:
● Hard (strong) paternalism:
○ Law deprives individuals of choice.
○ Law forces individuals to avoid certain risks.
● Soft (weak) paternalism:
○ Freedom of choice is preserved.
○ The law, without coercion, nudges individuals away from certain
risks towards what is generally considered to be a preferable
source of conduct.
○ Law’s Role in Public Interest Theories of Regulation?
■ Law plays a largely facilitative role.
insum:
● Goal is to pursue collective goals + general welfare of the community as a whole.
● Economic version of PIT:
○ Pursuit of goals in terms of economic efficiency for collective welfare.
○ By responding to market failures
Concept I: Two perspectives on Market Regulation
1. Functional Perspective:
○ A control system containing 3 components:
■ Capacity for standard setting:
● To allow for a distinction to be made between preferred states of the
system.
■ Capacity for information gathering
● To produce knowledge about current or changing states of the system.
■ Capacity for behavior modification
● To change the state of the system by e.g:
○ Enforcing regulatory standards to modify behavior.
○ Sanctions
Other notes:
● Functional Perspective of regulation is the approach that is widely accepted & used.
2. Scope Perspective (2 types):
○ Narrow sense:
■ Attempts by the state to influence socially valuable behavior which may have
adverse side-effects by establishing, monitoring and enforcing legal rules.
● Mentions the 3 core functions but also places emphasis on the state as the
main sources of regulatory norms.
○ Broad sense:
■ Encompassess all forms of social control, whether intentional or not and whether
imposed by the state or other social institutions.
● Regulation can not only be adopted by the state but also private actors
that can influence socially valuable behavior.
insum:
● Narrow sense = actions by state to influence behavior
● Broad sense = state actions + non state (such as private actors) actions to influence behavior.
Other notes:
● Attempts to define scope → led to several disagreements due to political/ideological battles.
● Lawyers tend to focus on narrower definitions, due to the state's coercive power.
Concept II: The Logic of Market Regulation - Three Principal Issues
1. What is the goal or outcome to be achieved?
2. What standard of conduct is required from market participants?
3. What enforcement techniques are appropriate to ensure compliance?
,Concept III: Roles of Law in Market Reg
1. Law’s Facilitative Role:
○ Law seen as a regulatory instrument:
■ To shape behavior in order to facilitate transactions in the market.
○ E.g. Conduct of business rules.
2. Law’s Expressive Role:
○ Law is seen as giving expression to certain values that shape & constrain the power of
institutions, notably government institutions.
○ i.e. law as a constraint in market regulation.
○ e.g. The rule of law, principles of good administration.
insum:
● Law’s Facilitative Role: A reg instrument that shapes behavior in order to facilitate market
transaction.
● Law’s Expressive Role: Does more than just shaping behavior, it can provide a framework &
values for institutions.
Concept IV: Relationship between Public & Private law
The Division:
Public Law Private Law
Vertical relationship - citizens & state Horizontal relationship between private parties
Private parties - Public authorities Private parties - Private parties
Public authorities must pursue public interests Private parties normally pursue private interests
Public enforcement: Private enforcement:
● Constitutional law ● By aggrieved parties through private law
● Administrative law means means:
○ Fines ○ Civil courts
○ Registration of business ○ ADR
○ etc ○ Contract & tort law
● Private parties take action themselves.
Ex ante compliance & deterrence Ex post compensation
● I.e. after damage has been suffered.
Blurred Lines:
● As a result of increasing use of both public & private law as a regulatory instrument.
, Concept V: Public & Private Interests
Public Interest Theories:
● Why does regulation emerge?
○ To pursue collective goals with the aim of promoting the general welfare of the
community.
● 2 subcategories of public interest theory:
○ Economic version:
■ Regulatory goals in terms of economic efficiency:
● Market regulation should pursue the public interest in an efficient
allocation of resources.
■ Regulation is a response to market failures:
● Correction of market failures increases community welfare.
■ Types of market failures:
● Monopolies & anti-competitive practices.
● Public goods (i.e. commodities shared by the public as a whole e.g.
education) require regulation for well functioning.
● Information deficits + bounded rationality
○ Consumers may not make rational decisions with regard to the
market - not in favor of the public interest.
○ Behavioral biases: unrealistic optimism, self-control problems,
cumulative cost neglect, ignoring complexity.
○ Political version:
■ The collective welfare should not be defined exclusively by efficient resource use
- the pursuit of other interests can also justify regulation e.g:
● Social justice
● Preventing harm to future gen
■ Paternalism:
● Hard (strong) paternalism:
○ Law deprives individuals of choice.
○ Law forces individuals to avoid certain risks.
● Soft (weak) paternalism:
○ Freedom of choice is preserved.
○ The law, without coercion, nudges individuals away from certain
risks towards what is generally considered to be a preferable
source of conduct.
○ Law’s Role in Public Interest Theories of Regulation?
■ Law plays a largely facilitative role.
insum:
● Goal is to pursue collective goals + general welfare of the community as a whole.
● Economic version of PIT:
○ Pursuit of goals in terms of economic efficiency for collective welfare.
○ By responding to market failures
