Introducton to the Markets, Institutions, and Regulation Working Group of the IAPR

The "invisible hand" insight of Adam Smith is that when individuals seek only to maximize their own welfare, an efficient outcome will be obtained, one where it is not possible to make one person better off without making someone else worse off. However, this central principle of economics only holds when markets are complete and when they are competitive. These conditions often do not hold: instead we observe incomplete or missing markets, and a few or a single seller with market power. The research organized by this working group will explore the institutional and public policy implications of markets characterized by these imperfections, especially the problems created by market power.

Concerns over market power provide the intellectual foundations for competition policy, regulation of public utilities, and intellectual property rights. Competition policy is intended to deter behaviour that creates, maintains, or enhances market power, including mergers, monopolization, and price fixing. The study of public utilities regulation identifies when state control, or limits, on market power are appropriate, the nature and characteristics of regulatory institutions and processes, and the effectiveness of regulatory policies and institutions. Intellectual property rights involve the creation and enforcement of property rights by the state that restrict competition in order to promote innovation. The study of intellectual property rights encompasses determining when such rights are beneficial, the nature and limits of those rights, and the institutions involved in their creation and enforcement. In all three cases, there are considerable gains to a multidisciplinary approach, especially involving law and economics. The reason is clear: all three policy areas involve legislation and enforcement institutions, yet the law has economic foundations.

For more on the MIR group see the IAPR website.