Economics is a central science to the understanding of regulation. Regulatory economics focuses on economic concepts that are relevant in regulatory contexts. Chapter 1 introduces key concepts of economics and regulatory economics, referring to a branch of social sciences concerned with how society chooses to employ its scarce resources to produce goods and services. This chapter offers a brief discussion of economic concepts that have shaped regulation (e.g., monopoly, market failures). It also discusses behavioral economics, the commons, and principal-agent theory.

This chapter marks the starting point of our investigation of actual policy solutions to tackle armed conflict. When a doctor has reached her diagnosis, she must then decide on the right medication to administer. Similarly, while economists started by studying the drivers of political violence, in recent years increasing efforts have been made to understand how to cut the Gordian knot of conflict. As argued in this chapter, a first-order factor is the institutional environment, and in particular the need to give a voice to all citizens and groups in society. Democracy is desirable, but without proper safeguards it can have a dark side and result in blood being spilt. Furthermore, the type of democracy and the provisions of sharing power between groups matter. Closer inspection of local-level power-sharing in Northern Ireland, the building of modern Switzerland after its civil war in 1847, the difficulties for current democratization in Iraq and the franchise extension during the British Age of Reform drive this discussion forward.

This chapter explores the terms of letters patent for early colonies, particularly in their economic dimensions. It shows the textual basis for colonial autonomy in these patents as grants from the crown. In particular, patents granted long-term control of colonies to private actors, protected their control over colonial economic operations, and obliged minimal sharing of their economic output with the crown. The chapter presents the theory of contractual imperialism to explain why these contract terms solved an important incentive problem: To induce colonial agents to identify profitable resource endowments, despite great cost and risk, and to exploit them fully.

This chapter starts with the central puzzle of this book: Why do governments choose blunt force regulation to control pollution when more reasonable, sustainable solutions are possible? It proposes that governments choose this suboptimal approach because they seek, first and foremost, to overcome principal–agent problems within the state apparatus. Drawing on case research and interviews with government officials around China, this chapter illustrates how blunt force regulation creates shortcuts that allow political leaders to increase the credible threat of punishment towards noncompliant bureaucrats. These measures temporarily scare local authorities into enforcing policies as ordered, even after prolonged periods of noncompliance. Finally, this chapter offers some observable implications for this theory, which will be tested in ensuing chapters.

This chapter defines green buildings as a holistic concept and as promoted by the Green Building Movement. It reviewa the theory and empirical evidence of market failures and various barriers that have shaped the Green Building Movement, which aims to improve environmental footprints in a way that is profitable to participants. It draws upon the market for lemons and signaling theory to explain the role of ecolabeled buildings in overcoming information barriers. To the scholar, this mission seeks to align public and private benefits through reduction of information asymmetries and externalities of building practices. It then characterizes the scope of green building policy initiatives across the United States and across the globe. It also shows the prevalence of the Green Building Movement around the globe.

This chapter offers a theoretical framework to understand the variation of ecolabel design based on the content, governance, and context of the label.Drawing upon green clubs and signaling theories, we suggest that ecolabels vary based on the stringency of the certification program, measured by the number and criticality of required standards, and the extent to which the requirements of these certifications incentivize the provision of public goods. We characterize important dimensions of ecolabels such as their impact, the value of the signal, and the extent to which they address externalities and information asymmetries. To illustrate these concepts, we take a closer look at GreenCo, a business sustainability rating system in India, and a sample of over 50 different agricultural ecolabels. This examination shows the important variation in factors like types of requirements, stringency, and institutional processes that govern the labels. Perhaps unsurprisingly, broader stakeholder engagement is associated with more emphasis on public benefits, while more surprisingly industry sponsorship does not tend to be found among the more lax labels with less public benefit.