The Machinery of Government by Joseph Heath

Author:Joseph Heath
Language: eng
Format: epub
Publisher: Oxford University Press
Published: 2020-05-15T00:00:00+00:00

Figure 5.4 The decision to regulate.

So, despite appearances, the state is not doing anything very different when it imposes a regulation from what it does when it decides to build a park. In both cases, it is trying to bring about an outcome that would have been brought about had there not been transaction costs and incompleteness in the system of property rights. Provision of public goods is a response to the market’s underproduction of positive externalities; regulation is typically a response to the market’s overproduction of negative externalities.

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