A State of Inaction: Regulatory Preferences, Rent, and Income Inequality
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Barak Orbach
Abstract
This Article explores several meanings of a regulatory preference for government inaction. It explains the rise to dominance of this inaction preference in the United States and its distorting influence on the perception and understanding of regulation. Specifically, the Article demonstrates how basic terms in regulation, such as “government failure,” “regulatory capture,” and “deregulation,” acquired misleading connotations suggesting that government inaction is always superior to government action. The Article further explains how, through government inaction, the U.S. legal system accommodates rent extraction - the profitable exploitation of market imperfections and favorable laws. Several developments in recent decades have considerably improved the capacity of very small groups in society to collect rents, namely, use talent and positional advantages to gain increasing levels of earnings. The Article argues that the parallel rise of the inaction preference has contributed to this trend, primarily because the availability of rent extraction opportunities draws talent that utilizes them with growing effectiveness. The purpose of the Article is to clarify several aspects of the relationships between regulation and rent extraction or, more precisely, to emphasize that government inaction may entail undesirable income effects.
© 2015 by Walter de Gruyter Berlin/Boston
Articles in the same Issue
- Frontmatter
- Contents
- Introduction
- The Corporate Governance Movement, Banks, and the Financial Crisis
- A State of Inaction: Regulatory Preferences, Rent, and Income Inequality
- Officers’ and Directors’ Liability Under German Law — A Potemkin Village
- Dividend Policy with Controlling Shareholders
- The Impact of the Financial Crisis on Nonfinancial Firms: The Case of Brazilian Corporations and the “Double Circularity” Problem in Transnational Securities Litigation
- Corporate Fiduciary Duties and Prudential Regulation of Financial Institutions
- Quack Corporate Governance, Round III? Bank Board Regulation Under the New European Capital Requirement Directive
- Brave New World: A Proposal for Institutional Investors
- The Vickrey-Clarke-Groves “Pivotal Mechanism” as an Alternative to Voting for Organizational Control
- Self-Selection and Heterogeneity in Firms’ Choice of Corporate Law
Articles in the same Issue
- Frontmatter
- Contents
- Introduction
- The Corporate Governance Movement, Banks, and the Financial Crisis
- A State of Inaction: Regulatory Preferences, Rent, and Income Inequality
- Officers’ and Directors’ Liability Under German Law — A Potemkin Village
- Dividend Policy with Controlling Shareholders
- The Impact of the Financial Crisis on Nonfinancial Firms: The Case of Brazilian Corporations and the “Double Circularity” Problem in Transnational Securities Litigation
- Corporate Fiduciary Duties and Prudential Regulation of Financial Institutions
- Quack Corporate Governance, Round III? Bank Board Regulation Under the New European Capital Requirement Directive
- Brave New World: A Proposal for Institutional Investors
- The Vickrey-Clarke-Groves “Pivotal Mechanism” as an Alternative to Voting for Organizational Control
- Self-Selection and Heterogeneity in Firms’ Choice of Corporate Law
