An economic analysis of soft law as a regulatory tool

There is a large variety of instruments that can be used to reach certain policy goals, ranging from legal rules on one end of the spectrum to social norms on the other. Law and economics scholars have often pointed out that also ‘soft’ instruments (such as guidelines, self-regulation, and social norms) can be powerful devices to steer people’s behaviour. That is, compliance with particular norms may sometimes be achieved without any intervention of the state, neither in setting the standards, nor in the enforcement. The goal of this chapter is to sketch how law and economics scholars view soft law. From a positive perspective, we aim to explain why in particular situations stakeholders may prefer soft law and why in particular domains hard law does not emerge. From a normative perspective, we indicate under which conditions soft law can contribute to the correction of market failure.