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A bureaucratic theory of regulation

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  • Richard McKenzie
  • Hugh Macaulay

Abstract

Not all modern regulation is explained by existing regulatory theories. A central purpose of this paper has been to demonstrate how and to what extent regulation of the private sector benefits advocates of growth in the public sector. A basic conclusion of the analysis has been that government-inspired private monopolies and the cost of regulation imposed on the private sector increase the price of goods and services in the private sector. However, at the same time prices of private goods and services go up, the relative prices of public goods and services go down, inducing political support for an expanded public sector. A secondary purpose of this paper has been to demonstrate that for the size maximizing bureaucracy which must incur cost in promulgating and enforcing private sector regulations, there is some optimum limit to the number of cartels that are formed and the amount of regulatory cost that is imposed on the private sector. The analysis may explain much of the adjustment in the extent of current regulation: that is, the bureaucracy, through the adjustment and re-adjustments of the scope and cost of regulation, is seeking out its maximum size. Copyright Martinus Nijhoff Publishers 1980

Suggested Citation

  • Richard McKenzie & Hugh Macaulay, 1980. "A bureaucratic theory of regulation," Public Choice, Springer, vol. 35(3), pages 297-313, January.
    • Handle: RePEc:kap:pubcho:v:35:y:1980:i:3:p:297-313
    DOI: 10.1007/BF00124443
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    References listed on IDEAS

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    1. Richard A. Posner, 1971. "Taxation by Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 22-50, Spring.
    2. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
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    Cited by:

    1. Richard Barke & William Riker, 1982. "A political theory of regulation with some observations on railway abandonments," Public Choice, Springer, vol. 39(1), pages 73-106, January.
    2. Dustin Chambers & Courtney A. Collins & Alan Krause, 2019. "How do federal regulations affect consumer prices? An analysis of the regressive effects of regulation," Public Choice, Springer, vol. 180(1), pages 57-90, July.
    3. Groenewald, J. A., 1991. "Viewpoint And Opinion: Scope For And Limitations To Deregulation And Privatisation Of South African Agricultural Services," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 30(2), June.

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