Social and Behavioral Sciences Commons^™

Design, Trading, And Innovation, David M. Driesen

College of Law - Faculty Scholarship

This book chapter questions the conventional theory purporting to establish that environmental benefit trading encourages innovation better than comparable traditional regulation. It argues that the induced innovation hypothesis, that high costs encourage innovation, suggests that trading would lessen incentives for innovation by lowering the cost of complying with conventional approaches. The conventional theory relies upon the incentive emissions trading creates for polluters to make additional reductions in order to sell credits. But emissions trading also creates incentives for half of the pollution sources (the credit buyers) to make less reductions than they would under a traditional regulation. By focusing analysis …

The Functions Of Transaction Costs: Rethinking Transaction Cost Minimization In A World Of Friction, David M. Driesen, Shubha Ghosh

College of Law - Faculty Scholarship

This article critically examines the goal of minimizing transaction costs, including the costs of legal decision-making. This goal permeates the law and economics literature and has profoundly influenced public policy. While most transaction cost scholarship has focused upon private law, the minimization goal has strongly influenced public law, where it has contributed to a variety of legal changes aimed at reducing public transaction costs, often through privatization.

We argue that transaction costs purchase corollary benefits. They frequently enable those engaging in transactions to obtain information needed to correct for information asymmetries or inadequate information. They perform the functions of facilitating …