Edited by Michael A. Crew and David Parker
Chapter 1: Development in the Theory and Practice of Regulatory Economics
Michael A. Crew and David Parker Introduction1 This book reflects some of the major developments in the applications of regulatory economics to network industries over the past 20 years or so. This chapter gives a commentary on these developments to provide context and motivation for the chapters that follow. The first part of the chapter reviews the background in which regulatory change has taken place and provides the motivation for the book. This is followed by a brief evaluation of theoretical developments over the period2 and later by an examination of some of the major events that have occurred in practice in the wave of restructuring and ‘deregulation’ undertaken in the network industries over the past two decades. While our approach is intended to be general, it is focused, as is most of the content of this book, mainly on the United Kingdom and the United States because of the wealth of experience of economic regulation in these countries, although the theoretical developments reflect contributions from economists around the world. We provide a brief summary and comments in a later part of the chapter. Finally, we conclude by providing some implications for the future of regulation and regulated industries. The background to regulatory reform The regulatory scene in the early 1980s differed significantly from what we see today. The change that has taken place in the last 20 years is ostensibly greater than that of the previous 80 years. In the UK during the 1980s and early 1990s the network...
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