Research Handbook on Public Choice and Public Law

Research Handbook on Public Choice and Public Law

Research Handbooks in Law and Economics series

Edited by Daniel A. Farber and Anne Joseph O’Connell

Public choice theory sheds light on many aspects of legislation, regulation, and constitutional law and is critical to a sophisticated understanding of public policy. The editors of this landmark addition to the law and economics literature have organized the Handbook into four main areas of inquiry: foundations, constitutional law and democracy, administrative design and action, and specific statutory schemes. The original contributions, authored by top scholars in the field, provide helpful introductions to important topics in public choice and public law while also exploring the institutional complexity of American democracy.

Chapter 11: Mechanism Choice

Jonathan B. Wiener and Barak D. Richman

Subjects: economics and finance, public choice theory, politics and public policy, public choice


Jonathan B. Wiener1 and Barak D. Richman 2 I. Introduction Mechanism choice can generally be described as the selection of some way to structure rules for social behavior. Nobel Laureate Eric Maskin recently described a mechanism as ‘an institution, procedure, or game for determining outcomes’ (Maskin 2008, 568). In the realm of public law, mechanism choice is synonymous with ‘instrument choice’ or policy design. The selection of the policy instrument can be as important to success or failure as the intended policy outcome. Good intentions or objectives are not enough: the choice of tools matters. A large and growing literature in instrument choice and mechanism design examines both the normative criteria for correcting market failures, matching optimal instruments to different types of problems, minimizing costs, and overcoming incomplete information; and also the positive political factors that may influence the actual selection of instruments, and the pattern of such choices across issue areas, governance systems, and time. Public policy instruments are selected and designed by public bodies – legislatures, executive agencies, and courts – that are comprised of individuals with their own policy preferences, and that are subject to pressures from private interests through lobbying, campaign contributions, and elections. Thus, it is no surprise to the student of public law that the mechanisms actually selected to implement public policy are not necessarily the ones that best pursue the public interest. This chapter begins with a brief summary of normative mechanism choice, including the legal literature on instrument choice and the economics literature on...

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