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This chapter provides comments and suggestions to the lawmaker, and especially to economic policy-makers in the field of the optimal regulatory framework and implementation of sustainable practices. The main findings are as follows: (1) degradation of the rule of law in several European Union (EU) Member States and constant political undermining of the legal institutions represent the main threat for the implementation of sustainable practices and development; (2) the golden regulatory rule of thumb provides that regulatory intervention is suggested merely in cases of market failures under the condition that the costs of such intervention do not exceed the benefits; (3) over-regulation might impede implementation of sustainable practices, distort the operation of the market, undermine productivity, diminish growth and social wealth and consequently also sustainability; (4) efficiency and wealth maximization should be the lawmaker’s leading normative principle in designing the legal framework that will enable effective implementation of sustainable practices; (5) the efficient level of harmonization or subsidiarity of decision-making in the EU urges for a rigorous investigation of costs and benefits of the EU top-down harmonization policies which should lead to a better, efficient vertical allocation of sustainability agenda between EU and the Member States; and (6) The Reflection Paper on Sustainable Development Goals – “Towards a Sustainable Europe in 2030” – represents an effective institutional framework in pursue of the overall sustainability targets.

The concept of light-handed regulation, including light-handed approaches to the regulation of airport services, is discussed. The rationale for the economic regulation of airport services and the traditional approaches used for economic regulation of airport charges are summarized. The evolution of international practice of light-handed regulation is outlined, including the experience with minimal regulation across monopoly industries in New Zealand and the acceptance of “negotiated settlements” in utility industries in North America. General reasons for moving to light-handed regulation of airports include the disadvantages of the price cap approach in practice and the benefits of facilitating greater negotiation between airports and users. Comparisons are made between alternative approaches to light-handed regulation of airport services, including price and quality of service monitoring, information disclosure regulation and negotiate-arbitrate regulation, approaches that have been applied to airport services in Australia and New Zealand. The role and nature of the incentives under each approach are discussed. The chapter concludes that whether light-handed regulation provides a suitable alternative approach to direct regulation depends on the market circumstances and the design characteristics of the light-handed approach.

Neoliberal political leaders such as Prime Minister Margaret Thatcher (1979–1990) and President Ronald Reagan (1981–1989) heralded entrepreneurs as capitalist heroes, yet for the most part, the policies they enacted did not help real entrepreneurs. Their image of a self-made entrepreneur who thrives in the absence of government action was fundamentally flawed. Their ideology impaired their ability to promote entrepreneurship because they viewed support for entrepreneurs primarily in negative terms as the removal of government tax and regulatory burdens rather than in positive terms as the cultivation of a dynamic market infrastructure. This article presents this argument in four steps, focusing on the US case: (1) how neoliberal reforms embodied internal contradictions; (2) how reforms to market governance undermined entrepreneurship; (3) how other neoliberal policies also failed to support entrepreneurs; and (4) how policies that violated neoliberal principles, such as industry and technology policies, were actually more supportive of entrepreneurs.

This chapter aims to investigate the driving forces in the creation of knowledge and in the process of innovation and the relevance of the governance model with respect to the free market model or the government model in the regulation of the knowledge and innovation networks.

According to a cognitive approach, a conflict is the result of a closer spatial distance between two actors or firms, leading to a contact stimulus and a reciprocal stimulus, which is perceived as a threat for the respective security or identity. This occurs when the two considered parties are characterised by a too large cognitive distance or a too different mindset or culture, which hinders collaboration.

This chapter highlights that the fragmentation of a modern knowledge economy and the pervasive conflicts between various interest groups, conflicts of interests in the roles of the same actors, bottlenecks, rents and income and power disparity in society require a new form of regulation, that is, multi-level governance and new instruments in innovation policies.

The governance or partnership model is based on the principles of negotiation, exchange and consensus, which are different from the principle of authority as in the planning model and from the principle of competition and survival of the fittest as in the free market model. Governance is an approach to the industrial policy that is more suitable to steer or manage a modern capitalist system and the knowledge and innovation networks that characterise this system.

Mises (1949[1963], p. 692) explains that market-failure justifications for state actions, such as economic regulation “ascribe to the state not only the best intentions but also omniscience.” He then points out that neither assumption is valid: government is not benevolent since both, those who are employed by the state and those who demand state actions, have subjective self-interests, and it is not all knowing since knowledge is widely dispersed and the cost of coordination is infinitely high, particularly without market profits and prices as coordinating mechanisms. Furthermore, Mises suggests that dropping either assumption undermines the conclusions that state intervention is necessarily desirable even if some sort of market failure is actually identified. Austrian economists in the Mises tradition have tended to focus on the knowledge problem in their challenges to regulation, however. Many Austrians obviously recognize the interest problem, of course, but they often assume it away in order to illustrate that government interference with markets is not desirable even if it is well intended. In contrast, public-choice analysis tends to focus on the interest problem as source of government failure, although some public-choice analysts also obviously recognize the knowledge problem. Indeed, this difference in perspective is so pronounced that Ikeda (1997, p. 240) explicitly distinguishes between Public Choice and Austrian political economy by suggesting that the Austrian approach assumes benevolence on the part of government officials, while the public-choice approach assume narrow interests.¹ Ikeda (1997, p. 150) also suggests that the separation of these two approaches is justified because “Austrian political economy and public choice are each capable of standing on their own [so] public-theorists…find it optimal simply to continue to pursue their research along the line of either the former or the latter approaches.” The following presentation questions this assertion. Instead, both assumptions should be dropped, and the resulting integrated Austrian-public-choice model should be expanded to include assumptions about the relationships between regulations, property rights security, and both market and political behavior.²

Government agencies have endeavored, with limited success, to improve the methodological consistency of regulatory benefit–cost analysis (BCA). This paper recommends that an independent cohort of economists, policy analysts and legal scholars take on that task. Independently established “best practices” would have four positive effects: (1) they would render BCAs more regular in form and format and, thus, more readily assessable and replicable by social scientists; (2) improved consistency might marginally reduce political opposition to BCA as a policy tool; (3) politically-motivated, inter-agency methodological disputes might be avoided; and (4) an independent set of “best practices” would provide a sound, independent basis for judicial review of agency BCAs.

It is commonly believed that banks are in special need of regulation to prevent financial crises, and the recent sub-prime crisis would tend to support such views. Yet it is clear that a series of perverse incentives exist in the banking industry. Incentives for bankers to take on too much risk lead to financial crises, and then a lack of a bankruptcy process for large financial institutions lead to massive taxpayer bail-outs. This chapter canvasses the issues surrounding the sub-prime crisis and explores arguments relating to regulation and the political economy of the recent crisis. As long as the political cost-benefit of having inefficient banking regulation dominates an economic cost-benefit of having efficient regulation, we can expect that perverse incentives will remain and financial crises will be a regular feature of the economic landscape.

Many jurisdictions fine illegal cartels using penalty guidelines that presume an arbitrary 10% overcharge. This article surveys more than 700 published economic studies and judicial decisions that contain 2,041 quantitative estimates of overcharges of hard-core cartels. The primary findings are: (1) the median average long-run overcharge for all types of cartels over all time periods is 23.0%; (2) the mean average is at least 49%; (3) overcharges reached their zenith in 1891–1945 and have trended downward ever since; (4) 6% of the cartel episodes are zero; (5) median overcharges of international-membership cartels are 38% higher than those of domestic cartels; (6) convicted cartels are on average 19% more effective at raising prices as unpunished cartels; (7) bid-rigging conduct displays 25% lower markups than price-fixing cartels; (8) contemporary cartels targeted by class actions have higher overcharges; and (9) when cartels operate at peak effectiveness, price changes are 60–80% higher than the whole episode. Historical penalty guidelines aimed at optimally deterring cartels are likely to be too low.