In Praise of (Some) Ex Post Regulation: A Response to Professor Galle

Abstract

Professor Brian Galle recently argued that the growing consensus that ex post regulation is superior to ex ante regulation on efficiency grounds has been overstated by scholars, including me, and that ex ante regulation has advantages that have been ignored or underemphasized. In this Response, I explain that ex post regulation does have advantages in certain settings and that the optimal regulatory response to many market failures will entail the use of both ex post and ex ante policy instruments. I also explain how an ex post incentive-based regulation, such as tort law or workers' compensation law, gets converted into a form of ex ante regulation through liability insurance and how liability insurance premiums produce a sort of "clustered" externality pricing that Galle suggests might be superior to both unitary Pigovian taxes or individualized tort sanctions.