The Regulatory Imagination

Gordon Smith has a nice post up on the ideological divide among biz org scholars, noting the way that the law professoriate is divided between free-marketeers and progressives, neither of whom seem to be doing a particularly good job at talking with one another. (Larry Ribstein has a similar lament here) In the comments, Scott Moss captures some of my feelings, saying:

I don’t always buy the free-marketeer argument that private institutions are always superior to government institutions — in part because when a private institution gets big enough, it can suffer from the same diseconomies of scale that we see in government institutions. But I certainly don’t agree with their [i.e. the progressives] unstated reverse assumption that government institutions surely will be effective at redressing the problems of private institutions.

Of course, there is a similar debate in contract law, with some insisting that contractual relations and the marketplace are inherently unaccountable, while government intervention represents a kind of deliberative empowerment.


I don’t really buy it. I can understand why a person contracting with ACME Inc. could feel powerless. After all ACME Inc. is big, the contract is offered on a take-it-or-leave-it basis, and arguments about markets and competition seem hopelessly abstracted and divorced from one’s actual experience. My problem is that I don’t see democratic action as being free of the same phenomenological critique. Sure, I understand the abstract arguments about participation, deliberation, and the will of the people. The problem is that when I enter the voting booth, I don’t feel especially powerful. Rather, given the size of the modern state, democratic arguments about deliberation and self-determination seem at least as divorced from experience as economic arguments about competition and markets. Why then the persistent willingness by some to romanticize the democratic experience but not the market experience?

I don’t really have the answer, but my working theory for now is that it has to do with imagination. Even if one does not experience democratic participation as any sort of meaningful control of the government, it is easily possible to imagine the government as an instrument of reasonable decision making. Whatever the reality on the ground, government seems like it is the sort of thing that one could use to make deliberate choices about collective and individual outcomes. The market process, on the other hand, has no imaginative center. Even in its idealized form it is disaggregated and immune from centralized and deliberative decision making. I think that it is this imaginative sense of powerlessness — rather than any actual experience — that makes the market seem so threatening for some and the government seem so benign.

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2 Responses

  1. dml says:

    perhaps also because the well-functioning market is a zero-sum game, with profit maximizing as its only guiding prinicple, whereas well-functioning government attempts to guarantee rights and liberties for all citizens.

  2. Nate Oman says:

    dml: Ummm…I would have thought that one of the basic insights of microeconomic theory was that a well-functioning market is NOT a zero sum game. That is the whole point of gains from trade and the like. Now one can argue that as an emperical matter the conditions of such exchange do not in fact obtain, but it seems to me that you are mistaken as to the implications of the theory.