The Visible Hand : Coordination Functions of the Regulatory State

We live in a coordination economy. As one surveys the myriad challenges of modern social and economic life, an ever increasing proportion is defined not by the need to reconcile competing interests, but by the challenge of getting everyone on the same page. Conflict is not absent in these settings. It is not, however, the determinative factor in shaping our behaviors and resulting interactions. That essential ingredient, instead, is coordination. Such coordination is commonly understood as the function of the market. As it turns out, however, optimal coordination will not always emerge, as if led “by an invisible hand.” Even in settings where coordination is essential, it may fail to materialize, may emerge in a form that could have been improved upon, or may not be amenable to displacement despite the world changing around it. There consequently may be a role for regulation in encouraging, fostering, and facilitating efficient coordination in the financial markets, on the Internet, and in technological innovation. It is telling, thus, that optimal outcomes have not always been forthcoming in these areas. Even as the reach of the Internet has extended dramatically, questions about the appropriate scope and nature of its regulation have largely paralyzed public efforts to foster its growth and development. As the pace of innovation in the pharmaceutical industry and other sectors has fallen off, we have likewise struggled with how best to “promote the Progress of Science and useful Arts.” Policymakers have also sat back as the U.S. electricity grid has fallen out-of-date, and the country has fallen well behind its peers in the construction of high-speed rail lines. Perhaps most striking was the halting — even fumbling — response to the financial crisis at its earliest stages. At first glance, our ambivalence, inertia, and confusion in the regulation of these varied arenas might seem unrelated. At least in part, however, the challenge in each area can be traced to a failure to engage with the role of regulation in facilitating coordination. This Article seeks to address that gap