Week 1B: Public and Private Interest Theories of Regulation

Question 1

What public interests did the Dieselgate scandal concern

Answer 1

• environ. protect.
  -consumer protection
  -Well-functioning markets for consumer goods

Question 2

What private interests did the Dieselgate scandal involve

Answer 2

• Individual consumer protection

Question 3

What public interests did the Theranos scandal involve

Answer 3

-pub. health
-protection of public health
-fostering inno. in markets for medi. products
-well-functioning VENT. capital markets

Question 4

What private interests did the theranos scandal involve

Answer 4

-Business profits vs. individual consumer protection
Patient protection

Question 5

What public interests did the FTX collapse scandal involve

Answer 5

Investor protection
-Functioning of the crypto. markets

Question 6

What private interests did the FTX Collapse scandal involve

Answer 6

-business profits vs individual investor protection

Question 7

Explain how regulation emerges throught Political Public Interest Theories of Regulation?

Answer 7

-2 reach collecti. goals
-increase welfare of the community
-outisde of eco. goals
-e.g: social justice

Question 8

Why does regulation emerge according to private interest theory?

Answer 8

1. 2 further the priv. int. of certain indivdu. or groups
   -agai. the idea that reg.(and thus the state) int. pro. pub. int.

Question 9

TRUE or FALSE: Public interest theory strongly emphasises regulatory failure and regulatory capturee

Answer 9

FALSE

Question 10

TRUE or FALSE: The economic version of public interest theory can additionally mention politcal influences

Answer 10

FALSE

Question 11

Name the two subcategories of public interest theory

Answer 11

1. Economic version
2. Political version

Question 12

Explain the economic version of PIT

Answer 12

-Public Interest goal—> econo. efficiency
-eff. allocation of resources

Question 13

TRUE or FALSE: according public interest theory, regulation of market is justified because of market failures

Answer 13

TRUE- under economic public interest theory

Question 14

Explain what a market failure is

Answer 14

-imp. in the market, when markets don’t alloc. resources efficiently

Question 15

TRUE or FLASE: National defence is a public good and is thus a market failure

Answer 15

TRUE

Question 16

Explain what the concept of information deficits mean

Answer 16

• Not enough information to make capable decisions

Question 17

Why does the economic version of PIT believes that the correction of market failures is in the public interest?

Answer 17

• because allowing for the efficient alloc. of resources is good for public welfare
• (economic health as public “health”)

Question 18

TRUE or FALSE: bounded rationality is when you are misled by another person to make a poor financial decisions

Answer 18

-FALSE
bounded rationality is more general
- we have LIMITED RAT. as individuals
-we make satisfactory, not opt. decisions

Question 19

How does regulation emerge according to the economic version of public interest theory?

Answer 19

-In resp. 2 market failures.

Question 20

Explain what public interest theories overarchingly believe about the emergence of market regulation?

Answer 20

• emerges in the pursuit of collective GOALS

Question 21

List categories of market failures

Answer 21

-Monopolies and anti-competitive practices
-Public goods
-Information deficits and bounded rationality
- spec.: BB, Un. opt. , myopia, self-control problems, cum. cost neglect, ignor. complex.
-NB: don’t forget to list in exam

Question 22

List specific examples of information deficits and bounded rationality

Answer 22

-NB: don’t forget to list in exam
-Behavioural biases
-Unrealistic optimism
-Myopia
-Self-control problems
-cum. cost neg.
-ig. complex.

Question 23

Define and explain hard/strong paternalism

Answer 23

-forcing of individuals to do/ not do certain things
-2 avoid risks
-NO CHOICE
-e.g: when you have to wear a bicycle helmet while biking

Question 24

Define and explain soft/ weak paternalism

Answer 24

-Nudging of individuals away from certain risk
-FREE. OF CHOICE
-NO coercion

Question 25

TRUE or FALSE: Law plays an instrumental role in public interest theories

Answer 25

-TRUE

Question 26

Explain the dieselgate scandal

Answer 26

- software which tainted air pollution tests in vehicles

Question 27

Exaplain the theranos scandal

Answer 27

-faulty tests sold to clients

Question 28

Explain the FTX collapse

Answer 28

- frauding of investors

Question 29

Explain how regulatory failure may emerge according to private interest theories

Answer 29

reg. failure(no achieve goal) emerges because of poor -management of -core tasks of regulation -regulation -the costs of reg itself outweights its benefits

Question 30

TRUE or FALSE: private interest theory does sometimes acknowledge that regulation promote sthe public interest

Answer 30

- it can, but merely coincidental

Question 31

List types of regulatory failure

Answer 31

-regulatory capture

Question 32

Explain what reg. capture is

Answer 32

* --DEV. close rel. with regulatees * --> promote private business interests of the regul. instead

Question 33

Explain the Critiques of Private Interest Theories of Regulation

Answer 33

-Ins. disti. from Pub. Int. theories -they still believe that reg. should be direct. towars pub int. (eventhough cynical) -En. weight attached to legislators' need to stay in office (elect. goals) - Political interest theory: -j because want to stay in office doesn't mean will dec. a certain way

Question 34

Explain the public interests at risk in the AirBNB case?

Answer 34

-Pub. safety -affordability of housing -Livability of neighbourhoods

Question 35

Explain the private interests at risk in the Air BNB Case.

Answer 35

-Profit for the platform + leasures -privacy of tenants

Question 36

What is the point of view of public interest theory in how the government should regulate air bnb?

Answer 36

-require authorisation for airbnb --> treat like hotel

Question 37

What is the point of view of private interest theory in how the government should regulate air bnb?

Answer 37

-air bnb is not a hotel but a different, inno. service all together -no regulate like that cus need to ensure priv. int. should be maint.

Question 38

List the 3 Principle Issues associated with the Logic of Market Regulation

Answer 38

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 impt. 2 ensure compliance?

Question 39

When does regulatory failure occur

Answer 39

-poor performace in discharging tasks -coll. cost of regulation < costs of not regulation