Van den Bergh, Roger --- "Regulatory competition or harmonization of laws? Guidelines for the European regulator" [2002] ELECD 8; in Marciano, Alain; Josselin, Jean-Michel (eds), "The Economics of Harmonizing European Law" (Edward Elgar Publishing, 2002)

Book Title: The Economics of Harmonizing European Law

Editor(s): Marciano, Alain; Josselin, Jean-Michel

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781840646085

Section: Chapter 1

Section Title: Regulatory competition or harmonization of laws? Guidelines for the European regulator

Author(s): Van den Bergh, Roger

Number of pages: 23

Extract:

1. Regulatory competition or
harmonization of laws? Guidelines
for the European regulator
Roger Van den Bergh

INTRODUCTION
The academic debate on the merits of `regulatory competition' versus `harmo-
nization of laws' offers useful guidance when decisions with respect to the
appropriate level of government for particular legislative actions must be
taken. Insights from this debate seem to have penetrated policy discussions to
a greater extent in the United States than in the European Union. The regula-
tory competition-based argument for decentralized governance has been
applied by its American proponents to diverse regulatory areas, such as corpo-
rate law (Winter, 1985), securities (Romano, 1998), antitrust (Easterbrook,
1983), and environmental law (Revesz, 1992). In Europe, regulatory competi-
tion theorists have argued that economic analysis may clarify the obscure prin-
ciple of subsidiarity (Van den Bergh, 1994). If one takes the latter principle
seriously, there should be a presumption in favour of decentralized regulation
and powers should be granted to the institutions of the European Community,
only when it has been established that they cannot be satisfactorily exercised
by member states (Art. 5 EC Treaty).1 The subsidiarity principle thus makes
competition between legislators the rule and centralized governance (unifica-
tion, harmonization) the exception.
Neoclassical welfare economics offers efficiency criteria supporting
centralized law making: the need to internalize externalities across jurisdic-
tions, the danger of a `race to the bottom', the achievement of scale economies
and the reduction of transaction costs. Economic distortions in the form of
market imperfections on the European ...