Publication

Regulatory reformers in the United States call for decentralization in the name of 'federalism'. In Europe, a similar sentiment advances under the banner of 'subsidiarity'. One of the underlying and critical theoretical premises of these two movements is the suggestion that 'regulatory competition' among horizontally arrayed governments will generate pressures for improved governmental efficiency in the regulatory realm. Critics have suggested that rather than welfare-enhancing competitive pressures, divergent regulatory standards may instead trigger a welfare-reducing 'race toward the bottom'. In this article we argue that both race-toward-the-bottom and regulatory competition theories are overstated from a descriptive point of view and unsatisfactory from a normative perspective. Regulatory theory must reflect the diversity and complexity of the world. Optimal governance thus requires a flexible mix of competition and cooperation between government actors as well as between governmental and non-governmental actors, along both horizontal and vertical dimensions. This enriched model of 'regulatory coopetition' recognizes that sometimes regulatory competition will prove to be advantageous but in other cases some form of collaboration will produce superior results. In a world that is pluralistic, not simplistic, a combination of regulatory competition and cooperation will almost always be optimal.