Top-Down or Bottom-Up?Richard Warner

Top-Down and Bottom-Up “Top-down” refers to central planning through

legislation and court decisions. Top-down planning regulates commerce directly by defining what, when, how, and/or with whom market participants may buy and sell

“Bottom-up” refers to ordering via property rights and non-legal norms.

Bottom-up planning tends to leave decisions about what, when, how, and with whom to buy and sell far more in the hands of market participants than in the case of central planning.

A Matter of Degree The top-down/bottom-up distinction is a

matter of degree. The more an approach leaves decisions in the

hands of market participants the more bottom-up it is; the more it takes those decisions out of their hands, the more top-down it is.

Top-Down Worries Inefficiencies of bureaucracy.

Detection Enforcement Slow to change

Both statutes and the common law

Group decision-making defects Condorcet Jury Theorem

Where group members do no better than random at making the right choice, the larger the group the less likely the right decision.

Hard to get right in the first place.

The Common Law Common law rules consist in (1) shared conception of paradigm cases, plus

(2) a pattern of judgments of relevant similarity and dissimilarity to such cases, and (3) a commitment to extend this pattern in future judgments.

The paradigms and patterns change slowly.

The 1990’s Debate Other things being equal, bottom-up planning is

more efficient. Top-down planning is necessary when “other things”

are not “equal” or when we want to impose values that bottom-up planning will not realize.

The 1990s saw a vigorous debate about which model was best for the Internet.

The conclusion was that a mix of both models is required to regulate e-commerce–just as it is in the case of commerce generally.

The Question of the Mix The question of the right mix arises in various

contexts, privacy being one. The US and the EU differ with the US taking

a bottom-up approach and the EU a top-down approach.