Download the article below:

1971 Stigler - The Theory of Economic Regulation

Link:

https://edisciplinas.usp.br/pluginfile.php/4866368/mod_folder/content/0/Aula%201.%20STIGLER%2C%20George%20J.%20The%20Theory%20of%20Economic%20Regulation.%20In%20Bell%20Jo.._.pdf?forcedownload=1

Then answer the questions:

1. Concisely describe the viewpoint that Stigler is responding to with this article.
2. What specifically does Stigler mean by the "demand" and "supply" of regulation, as used in the abstract on page 1?
3. Stigler argues that "an industry with power to obtain governmental favors usually does not use this power to get money". Why? Describe the specific problem that, according to Stigler, direct subsidies to an industry create for the businesses that lobby for them.
4. Expand on your previous answer in this way: Compare and contrast the use of political power to get a direct subsidy of money for a firm with the use of that power to get a tariff against foreign imports that compete with what a firm produces. In other words, in what way does a tariff suffer from the same problems as a direct cash subsidy? Under what circumstances is this similarity mitigated such that lobbying for a tariff becomes a good idea? Finally, summarize this insight in one sentence that gives us a testable hypothesis about the pattern of tariff laws. (I.e. if Stigler is correct, what kinds of firms should we predict will successfully lobby for tariff protection? What kinds of firms should we predict will not successfully lobby for tariff protection?)
5. On page 8 Stigler writes: "Sometimes the participation of railroads in the regulatory process was incontrovertible: Texas and Louisiana placed a 7000-pound payload limit on trucks serving (and hence competing with) two or more railroad stations, and a 14,000-pound limit on trucks serving only one station (hence, not competing with it)." Explain what Stigler means in this passage.
6. On page 16 Stigler writes: "Veterinarians are the only occupation in this sample who have a well-defined set of customers, namely livestock farmers, and licensing was later in those states with large numbers of livestock relative to rural population." Explain what Stigler means in this passage.
7. In his conclusion, Stigler criticizes economists of his time for their criticism of the ICC. According to Stigler, what mistake are they making?
8. Use Stigler's theory to explain laws that prohibit alcohol sales on Sundays.

Answer rating: 100% (QA)

1 Viewpoint Stigler is Responding to George Stiglers The Theory of Economic Regulation responds to the traditional viewpoint that regulation is primarily pursued for the public interest aimed at corre... View the full answer