Week 1B: Public and Private Interest Theories of Regulation Flashcards
What public interests did the Dieselgate scandal concern
- environ. protect.
-consumer protection
-Well-functioning markets for consumer goods
What private interests did the Dieselgate scandal involve
- Individual consumer protection
What public interests did the Theranos scandal involve
-pub. health
-protection of public health
-fostering inno. in markets for medi. products
-well-functioning VENT. capital markets
What private interests did the theranos scandal involve
-Business profits vs. individual consumer protection
Patient protection
What public interests did the FTX collapse scandal involve
Investor protection
-Functioning of the crypto. markets
What private interests did the FTX Collapse scandal involve
-business profits vs individual investor protection
Explain how regulation emerges throught Political Public Interest Theories of Regulation?
-2 reach collecti. goals
-increase welfare of the community
-outisde of eco. goals
-e.g: social justice
Why does regulation emerge according to private interest theory?
- 2 further the priv. int. of certain indivdu. or groups
-agai. the idea that reg.(and thus the state) int. pro. pub. int.
TRUE or FALSE: Public interest theory strongly emphasises regulatory failure and regulatory capturee
FALSE
TRUE or FALSE: The economic version of public interest theory can additionally mention politcal influences
FALSE
Name the two subcategories of public interest theory
- Economic version
- Political version
Explain the economic version of PIT
-Public Interest goal—> econo. efficiency
-eff. allocation of resources
TRUE or FALSE: according public interest theory, regulation of market is justified because of market failures
TRUE- under economic public interest theory
Explain what a market failure is
-imp. in the market, when markets don’t alloc. resources efficiently
TRUE or FLASE: National defence is a public good and is thus a market failure
TRUE
Explain what the concept of information deficits mean
- Not enough information to make capable decisions
Why does the economic version of PIT believes that the correction of market failures is in the public interest?
- because allowing for the efficient alloc. of resources is good for public welfare
- (economic health as public “health”)
TRUE or FALSE: bounded rationality is when you are misled by another person to make a poor financial decisions
-FALSE
bounded rationality is more general
- we have LIMITED RAT. as individuals
-we make satisfactory, not opt. decisions
How does regulation emerge according to the economic version of public interest theory?
-In resp. 2 market failures.
Explain what public interest theories overarchingly believe about the emergence of market regulation?
- emerges in the pursuit of collective GOALS
List categories of market failures
-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
List specific examples of information deficits and bounded rationality
-NB: don’t forget to list in exam
-Behavioural biases
-Unrealistic optimism
-Myopia
-Self-control problems
-cum. cost neg.
-ig. complex.
Define and explain hard/strong paternalism
-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
Define and explain soft/ weak paternalism
-Nudging of individuals away from certain risk
-FREE. OF CHOICE
-NO coercion
TRUE or FALSE: Law plays an instrumental role in public interest theories
-TRUE
Explain the dieselgate scandal
- software which tainted air pollution tests in vehicles
Exaplain the theranos scandal
-faulty tests sold to clients
Explain the FTX collapse
- frauding of investors
Explain how regulatory failure may emerge according to private interest theories
reg. failure(no achieve goal) emerges because of poor
-management of
-core tasks of regulation
-regulation
-the costs of reg itself outweights its benefits
TRUE or FALSE: private interest theory does sometimes acknowledge that regulation promote sthe public interest
- it can, but merely coincidental
List types of regulatory failure
-regulatory capture
Explain what reg. capture is
- –DEV. close rel. with regulatees
- –> promote private business interests of the regul. instead
Explain the Critiques of Private Interest Theories of Regulation
-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
Explain the public interests at risk in the AirBNB case?
-Pub. safety
-affordability of housing
-Livability of neighbourhoods
Explain the private interests at risk in the Air BNB Case.
-Profit for the platform + leasures
-privacy of tenants
What is the point of view of public interest theory in how the government should regulate air bnb?
-require authorisation for airbnb
–> treat like hotel
What is the point of view of private interest theory in how the government should regulate air bnb?
-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.
List the 3 Principle Issues associated with the Logic of Market Regulation
- What is the goal or outcome to be achieved?
2.What standard of conduct is required from market participants? - What enforcement techniques are impt. 2 ensure compliance?
When does regulatory failure occur
-poor performace in discharging tasks
-coll. cost of regulation < costs of not regulation
