Games and Public Administration - The Law and Economics of Regulation and Licensing

Despite the increasing trend towards deregulation, the public regulation of private activities remains a common phenomenon in industrialized countries. However, it is frequently claimed that slow and costly regulatory licensing procedures impede economic growth. This book investigates the strategic and adaptive interaction between citizen-applicants and administrators in regulatory licensing bodies, and studies the effects of policies to accelerate and simplify these processes. Based on a variation and extension of the enforcement game, the author demonstrates that amendments to procedural rules which aim to speed-up and improve licensing procedures may have the effect of reducing social welfare. He illustrates that the failure of a policy to increase the number of applications implies a failure to increase the number of licenses granted. This in turn causes a reduction of social welfare. Importantly, he shows that the reverse implications are not true and that despite an increase in the number of applications or licenses granted, social welfare may still decline. Therefore, he argues that any evaluation of procedural reforms on purely theoretical grounds is impossible. Only the measurement of real improvements in social welfare will verify the success of a policy. To establish failure, however, it is simply necessary to observe a decrease in the number of applications or licenses granted. This book is a rare combination of game theoretic modeling and microeconomic analysis on the effects of variations in the procedural rules of licensing. The conclusions drawn will interest and inform a wide variety of academics and researchers working in the fields of law and economics, regulation, administrative law and game theory.