My new book, How to Regulate: A Guide for Policymakers, is now available on Amazon. Inform Santa!
The book, published by Cambridge University Press, attempts to fill what I think is a huge hole in legal education: It focuses on the substance of regulation and sets forth principles for designing regulatory approaches that will maximize social welfare.
Lawyers and law professors obsess over process. (If you doubt that, sit in on a law school faculty meeting sometime!) That obsession may be appropriate; process often determines substance. Rarely, though, do lawyers receive training in how to design the substance of a rule or standard to address some welfare-reducing defect in private ordering. That’s a shame, because lawyers frequently take the lead in crafting regulatory approaches. They need to understand (1) why the unfortunate situation is occurring, (2) what options are available for addressing it, and (3) what are the downsides to each of the options.
Economists, of course, study those things. But economists have their own blind spots. Being unfamiliar with legal and regulatory processes, they often fail to comprehend how (1) government officials’ informational constraints and (2) special interests’ tendency to manipulate government power for private ends can impair a regulatory approach’s success. (Economists affiliated with the Austrian and Public Choice schools are more attuned to those matters, but their insights are often ignored by the economists advising on regulatory approaches — see, e.g., the fine work of the Affordable Care Act architects.)
Enter How to Regulate. The book endeavors to provide economic training to the lawyers writing rules and a sense of the “limits of law” to the economists advising them.
The book begins by setting forth an overarching goal for regulation (minimize the sum of error and decision costs) and a general plan for achieving that goal (think like a physician–identify the adverse symptom, diagnose the disease, consider the range of available remedies, and assess the side effects of each). It then marches through six major bases for regulating: externalities, public goods, market power, information asymmetry, agency costs, and the cognitive and volitional quirks observed by behavioral economists. For each of those bases for regulation, the book considers the symptoms that might justify a regulatory approach, the disease causing those symptoms (i.e., the underlying economics), the range of available remedies (the policy tools available), and the side effects of each (e.g., public choice concerns, mistakes from knowledge limitations).
I have been teaching How to Regulate this semester, and it’s been a blast. Unfortunately, all of my students are in their last year of law school. The book would be most meaningful, I think, to an upcoming second-year student. It really lays out the basis for a number of areas of law beyond the common law: environmental law, antitrust, corporate law, securities regulation, food labeling laws, consumer protection statutes, etc.
I was heartened to receive endorsements from a couple of very fine thinkers on regulation, both of whom have headed the Office of Information and Regulatory Affairs (the White House’s chief regulatory review body). They also happen to occupy different spots on the ideological spectrum.
Judge Douglas Ginsburg of the D.C. Circuit wrote that the book “will be valuable for all policy wonks, not just policymakers. It provides an organized and rigorous framework for analyzing whether and how inevitably imperfect regulation is likely to improve upon inevitably imperfect market outcomes.”
Harvard Law School’s Cass Sunstein wrote: “This may well be the best guide, ever, to the regulatory state. It’s brilliant, sharp, witty, and even-handed — and it’s so full of insights that it counts as a major contribution to both theory and practice. Indispensable reading for policymakers all over the world, and also for teachers, students, and all those interested in what the shouting is really about.”
Bottom line: There’s something for everybody in this book. I wrote it because I think the ideas are important and under-studied. And I really tried to make it as accessible (and occasionally funny!) as possible.
If you’re a professor and would be interested in a review copy for potential use in a class, or if you’re a potential reviewer, shoot me an email and I’ll request a review copy for you.
As an added testimonial (since Thom didn’t get me included on the dust jacket…no, I’m not salty about it): Last spring I used the manuscript of Thom’s book for an undergrad capstone/MS-level course on economic analysis of policy and regulation. I found it to be an excellent resource.
The book provided a nice framework around which to hang various aspects of economic analysis in a variety of regulatory contexts. The material was very accessible in terms of the legal/regulatory perspective. On the economic side, Thom again strikes a nice balance of not being so remedial as to be uninteresting to students with a strong economics background while being accessible to students with less econ background. Moreover, the students very much enjoyed Thom’s style of writing, including the humor interlaced throughout.
The book follows a nice formula for thinking about policy issues: identify the symptoms of the problem, diagnose the cause of the symptoms, consider the available remedies, and assess the net benefits of each remedy. In this respect, the book follows in the intellectual heritage of Ronald Coase’s “The Problem of Social Cost.”
I’ll be using the book again next semester–except this time the students will have to pay for the pleasure. .