Working Paper: NBER ID: w8650
Authors: Edward L. Glaeser; Andrei Shleifer
Abstract: During the Progressive Era at the beginning of the 20th century, the United States replaced litigation by regulation as the principal mechanism of social control of business. To explain why this happened, we present a model of choice of law enforcement strategy between litigation and regulation based on the idea that justice can be subverted with sufficient expenditure of resources. The model suggests that courts are more vulnerable to subversion than regulators, especially in an environment of significant inequality of wealth and political power. The switch to regulation can then be seen as an efficient response to the subversion of justice by robber barons during the Gilded Age. The model makes sense of the progressive reform agenda, and of the successes and failures of alternative law enforcement strategies in different countries.
Keywords: No keywords provided
JEL Codes: K2; K13; K42; L51; N41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| wealth inequality (D31) | subversion of justice (K42) |
| subversion of justice (K42) | shift from litigation to regulation (K23) |
| wealth inequality (D31) | shift from litigation to regulation (K23) |
| subversion of justice (K42) | effectiveness of regulatory agencies (L51) |
| commercialization and industrialization (O14) | wealth inequality (D31) |