The Economics of Single Market Regulation. Bruges European Economic Policy Briefing 25/2012

Pelkmans, Jacques (2012) The Economics of Single Market Regulation. Bruges European Economic Policy Briefing 25/2012. [Policy Paper]

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Abstract

In the vast domain of the internal market, ‘regulation’ is EU’s core business. Therefore, a good appreciation of European economic integration requires a sound analytical economic perspective of EU regulation. Since the Single European Act, economists have gradually improved the economic analysis of EU regulation. EU policy-makers began to accept cost/benefit analysis with the Maastricht treaty and nowadays the rigorous logic of Better Regulation and regulatory impact analysis has become routine in the EU circuit, although less with the EU legislator (EP and Council). The present BEEP Briefing provides an accessible survey of the state of the art of the evidence-based, economic approach to EU Single Market regulation. This approach puts the subsidiarity test, proportionality and necessity on a firmer analytical footing and offers a healthy discipline of the precautionary principle. The acceptance of economic, evidence-based regulatory logic has caused a change of mind-sets in the European Commission: EU regulation is now routinely discussed in terms of incentives, asymmetries of information, multiple policy options (instead of going for a single one only), market-based instruments, quantification of benefits and costs, red-tape alerts and cost-effectiveness. Last but not least, this also matters for national regulation. Given an ever deeper and wider internal market than two decades ago, not to speak of the Eurozone, the regulatory autonomy of Member States has to be balanced against the possible consequences of undermining or preventing the ‘proper functioning’ of the internal market. The key words here are pro-competitive reforms and ‘diversity’’, based on distinct national preferences, yet minimizing costly ‘regulatory heterogeneity’ arising from decentralized decision-making but without being rooted in genuine differences in preferences.

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