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ECONOMIC THEORIES OF REGULATION AND ELECTRICITY RESTRUCTURING

I. INTRODUCTION

The regulation of American industry has fascinated social scientists for many years. There was a time when political scientists and economists presumed regulation beneficial in remedying market failures. That view began to change in the 1960s when empirical studies suggeste d regulation often did more harm than good, creating producer rents rather than efficiency. According to one of the most influential thinkers of this period, Nobel laureate economist George Stigler, the reason was that regulation was a public good being allocated by politicians to the highest bidder, and producers were more likely than not to prevail over consumers in that political marketplace.1 Many ...

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