What is Regulation?

The economics literature contains no consistent, generally accepted definition of regulation. Some standard references define regulation as the control of prices, profits and entry in the utility sector, while others include in the definition literally every public policy that alters market outcomes, including tariffs, commodity-specific taxes, and import quotas. This paper argues that definitions should have a basis in theory, and that regulatory research suggests three levels of generality of public policy that correspond to coherent theoretical analysis: the previous two, plus an intermediate level that covers the use of administrative processes to control private market interactions. Regulation is argued to be most appropriately applied to this intermediate level, and examples are given to justify the usefulness of the proposed classification scheme.