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date: 21 September 2021

Abstract and Keywords

The American states were involved in regulating business activity long before the federal government was, and they continue to play an important role in regulating the American economy today. In this chapter, we explore a number of important elements of state regulation. First, we explain the basic rationale for why states are involved in the regulation of business activity. Second, we explore the historical power relationships between the states and the federal government. Transaction cost economics can help explain why the federal government must frequently play a role of coordinator among the states, yet this power can also be used to pre-empt state authority and impose federal viewpoints on the states. Third, we examine the delegation of regulatory policy to state bureaucracies, a process that depends to a large extent on the salience and complexity of the policy issue, but also on the interplay of organized interests, legislators, and state attorneys general. Fourth, we discuss the policy diffusion and regulatory competition literatures and find that economic competition can affect the scope and intensity of state regulation, but some ambiguity remains as to how this effect is manifested. Finally, we make comparisons of the states to the European Union and its member states and finish with concluding thoughts.

Keywords: regulation, policymaking, federalism, intergovernmental relations, authority, pre-emption, bureaucracy, competition, transaction cost, economics, delegation, business, complexity, salience

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