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Noll: Economics perspectives on the politics of regulation

Disclaimer. Don't rely on these old notes in lieu of reading the literature, but they can jog your memory. As a grad student long ago, my peers and I collaborated to write and exchange summaries of political science research. I posted them to a wiki-style website. "Wikisum" is now dead but archived here. I cannot vouch for these notes' accuracy, nor can I say who wrote them.

Noll. 1989. Economics perspectives on the politics of regulation. In Handbook of Industrial Organization, eds. RD Willig and R Schmalensee. Vol 2: 1254-1287.

In Brief

Noll evaluates two theories concerning the politics of regulation.

The "Public Interest" Theory

"Fixing" market failures involves significant transaction costs. In such a situation, the transaction costs for negotiation might be so high that regulation is the better alternative.

The "Interest Group" Theory

The interest group theory focuses on the principal-agent relationship between citizens (esp. interest groups) and government officials.

In an Olsonian perspective: Interest groups help overcome problems of one vote not making a difference (powerlessness) and information problems. Organized groups help solve these problems.


Noll claims that both approaches are off; ideology and party voting explain more about regulatory issues than interests do. This is similar to the "capture" theory reviewed in Viscusi. If some groups are dominant, they will capture the state and extract rents.

Research by the same authors

Research on similar subjects


Noll, Roger (author)EconomicsRegulationRentsInterest Groups

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