Regulation magazine

CAFE and the Tension Between Optimization and Competition in Rulemaking

December 14, 2015

By Brian Mannix
Choosing regulatory options that maximize net benefits is a sound principle, but it needs to be applied with an appropriate measure of humility. Regulators may be tempted to think that they can use benefit-cost analysis to determine what is “best” for the economy, and then simply mandate it. The collateral damage to competition and innovation can easily turn an otherwise well-intentioned rule into an economic disaster. Regulatory specification of a particular technology can be especially damaging when the technology is proprietary, because then the law may simultaneously lock out competitors and lock in customers.

Literature

Regulation, Innovation, & Entrepreneurship: A Review of the Literature

December 08, 2015

By Ana Maria Zárate Moreno
The regulatory environment in which firms interact can hinder or contribute to the creation and early stage growth of new businesses as well as to the innovation process within a market. This document reviews the literature that explores the empirical relationship between regulation and innovation and regulation and entrepreneurship, focusing on the effects of regulatory quality across countries. The thematic analysis conducted in this literature review indicates that institutions matter for economic activities and that regulation, as an important part of the institutional environment, is a central aspect of the ecosystem for innovation and entrepreneurial engagement.