Regulations include courts.

During the past century, substantial resources have been invested in the politics and scholarship of regulation (see Figure 1).4 Nonetheless, the term “regulation” appears to escape a clear definition. 5 Although regulation has been one of the most controversial topics in law and politics, it has also been one of the most misunderstood concepts in modern legal thinking. The evasive nature of the term “regulation” is largely a product of confusion between two unrelated matters—the abstract concept of regulation and opinions about the desirable scope of regulatory powers or desirable regulatory policies. People intuitively understand the word “regulation” to mean government intervention in liberty and choices—through legal rules that define the legally available options and through legal rules that manipulate incentives. But too often, ideologies and preexisting beliefs dictate perceptions as to what intervention means and whether intervention is needed. This pattern results in inconsistent preferences for regulation and obscures the understanding of the term. It is not uncommon that individuals who express contempt of government regulation are proponents of intrusive regulation that serves their values,8 while individuals who advocate for government regulation reject notions of regulatory tradeoffs.9 The Supreme Court’s debate over the meaning of the phrase “to regulate” in NFIB illuminates the phenomenon.10 Scholars who grappled with the meaning of the term “regulation” produced various definitions for the meaning of intervention or followed the path of using their own personal beliefs to explain the concept, indirectly creating informal definitions. A few examples of the confusion between perceptions of regulation and the understanding of the concept as government intervention may be helpful. The legal concept of “regulation” is often perceived as control or constraint. For example, the definitive legal dictionary, Black’s Law Dictionary, defines “regulation” as “the act or process of controlling by rule or restriction.”11 Similarly, The Oxford English Dictionary defines “regulation” as “the action or fact of regulating,” and “to regulate” as “to control, govern, or direct.”12 To many people, “control” connotes “restrictions,” although control may have other meanings. Regulation often imposes no restrictions, but enables, facilitates, or adjusts activities, with no restrictions. Examples of such regulations include the supply of roads, health and emergency services, public education and public libraries, welfare benefits, reliefs to victims of natural disasters and bailouts to failed institutions. Such services directly influence (or “adjust”) conduct of individuals and firms. In the abstract, all government actions supposedly influence conduct of individuals and firms, but not necessarily directly. For example, activities related to national defense and foreign policy tend to have only indirect influence on conduct of individuals and firms.13 Lawyers frequently use the word “regulation” in reference to rules of administrative agencies. This habit tracks the executive branch’s terminology.14 For example, Executive Order 12,866, which requires federal agencies to engage in cost-benefit analysis when “deciding whether and how to regulate,” defines “regulation” as “an agency statement of general applicability and future effect, which the agency intends to have the force and effect of law, that is designed to implement, interpret, or prescribe law or policy or to describe the procedure or practice requirements of an agency.”15 This meaning of the word mirrors another common perception of the term “regulation,” but surely does not capture the entire spectrum of regulatory instruments. Much of our regulatory landscape does not originate in administrative agencies.16 Another common perception of “regulation,” or at least a popular reference to regulation, equates the concept with laws that serve interest groups.17 Economist George Stigler popularized this view, arguing that “regulation is acquired by the industry and is designed and operated primarily for its benefit.”18 Richard Posner offered a more refined version of this perception: “[R]egulation [is] a product allocated in accordance with basic principles of supply and demand . . . [and] we can expect a product to be supplied to those who value it the most.”19 But, of course, not all regulations serve industries.20 Even when the regulator is captured by industries, it is far from clear that lack of regulation would be better for the public.21 So what does regulation mean? We return to the starting point—the intuitive understanding of the word “regulation”: government intervention in the private domain or a legal rule that implements such intervention. The implementing rule is a binding legal norm created by a state organ that intends to shape the conduct of individuals and firms.22 The state organ, the regulator, may be any legislative, executive, administrative, or judicial body that has the legal power to create a binding legal norm. This general definition is broader than “restrictions,” “rules promulgated by administrative agencies,” “laws that serve interest groups,” and related common perceptions of the word “regulation.” [FOOTNOTE] For example, law made by courts—common law—is a traditional form of regulation. See Andrew P. Morrisss et al., Regulation by Litigation (2008); Regulation Through Litigation (W. Kip Viscusi ed., 2002); Richard A. Posner, Regulation (Agencies) Versus Litigation (Courts): An Analytical Framework, in Regulation vs. Litigation 11 (Daniel P. Kessler ed., 2010); see also Freedom Holdings, Inc. v. Spitzer, 358 F.3d 205 (2d Cir. 2004); Sanders v. Brown, 504 F.3d 904 (9th Cir. 2007); The T.J. Hooper v. Northern Barge, 60 F.2d 737 (2d Cir. 1932). See also Barak Orbach, Invisible Lawmaking, 79 Uni. Chi. L. Rev. Dialogues 1 (2012).