Regulation consists of both formulating policies and designing mechanisms to implement those policies. Much attention has been focused on the desirability and formulation of socially efficient policies. However, proposals for regulatory reform often assume that policies, once designed, will function faultlessly. In fact, there are often significant obstacles to efficiency in implementing public policy, because government agencies charged with policy implementation do not have the correct economic incentives. Although the social costs and benefits of government programs are greatly affected by the set of rules used to implement them, little attention has been devoted to designing mechanisms to efficiently implement these programs.

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