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Tuesday, January 23, 2018
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The Power to Regulate
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The Power to Regulate

21 pages · 5.44 EUR
(December 2007)

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Thirty years ago, one of us was involved in an attempt to explore the analytic dimensions of “the power to tax” [beginning with Brennan and Buchanan (1977)]. Because Cay Folkers did much to promote and refine this work in the German context, and in particular was the translator and editor of the German edition of the English book-length treatment [Brennan and Buchanan (1980)/Folkers (1988)] it seems appropriate in the current setting to revisit issues raised in that work and to test out the approach by application to an extended domain. The specific application we have in mind here deals, as the title suggests, with the issue of ‘regulation’. Moreover, the particular issue that originally motivated our thinking about the matters canvassed here arose in the context of discussions about the proposed EU Constitution1, and its implications for member States’ public finances – topics in which Folkers has had an ongoing professional interest. The paper naturally divides itself into three parts. The first involves a (brief) restatement of what we will call the “Leviathan approach” to policy issues, and of the considerations that motivate that approach. Though we do not intend here to respond to the extensive array of criticisms that have been levelled at the approach, it will be useful to direct attention to one particular line of critique in order to support the regulatory focus of the present enquiry (section 2). The second part of the paper involves focusing specifically on regulation as a technology of policy delivery, and in particular on the comparison with ‘fiscal alternatives’. Here, we shall be interested not just in the ‘economics’ of that comparison, but also in the comparative ‘politics’ – and with the politics treated in broadly ‘rational actor’ terms (section 3). In the next section (4) we shall direct attention to certain slightly puzzling results from the literature on “freedom indexes” that bear on the tax/regulation comparison. We will offer our own resolution of those puzzles and spell out the implications of that for a ‘fiscal constitution’ when governments possess, as they must, a power to regulate. Finally we will return full circle to some structural features of the proposed (and any likely amended) EU Constitution – which originally raised our interest in “the power to regulate”. The logic of the argument set out here exposes what we see as one major inadequacy in the envisaged EU fiscal structure. We hope that this particular EU application will represent a neat way of drawing the various ends of the discussion together. The range of issues we shall touch on in this paper is broad and many of these issues deserve much more detailed treatment – certainly more detailed than the cursory discussion we can offer here. Our general aim, however, is to point up connections between various different (and apparently distantly related) issues and to suggest the usefulness of the “Leviathan approach” as an organising principle in dealing with the relations between them.

quotable essay from ...
Ordnungspolitik für den öffentlichen Sektor
Bernhard Neumärker, Claus Schnabel (Hg.):
Ordnungspolitik für den öffentlichen Sektor
the authors
Prof. Dr. Hartmut Kliemt
Hartmut Kliemt

geb. 1949, seit 2006 Professor für Philosophie und Ökonomik an der Frankfurt School of Finance and Management.

[more titles]
Prof. Dr. Geoffrey Brennan

Ph.D., Australian National University, Canberra