liberal market theory, according to which private agreement is the optimal means of allocating resources, in the absence of market failure or social costs, by empowering ind ividuals to act in their self-interest. markets deliver efficient satisfaction of diverse personal preferences. 26 Public regulation becomes necessary, on the other hand, in the presence of externalities. The normative implications of this basic distinction for the regulation of international markets may look, in many ways, like old wine in new bottles Cross-border transactions raise conflicts of laws or in terms more familiar to law and economics scholarship, require an allocation of regulatory jurisdiction. 28 Market theory considers party choice of law as the optimal means of allocating such authority, 29 unless there is a risk that private choice and public interest do not coincide. In such a case, when cross border externalities exist in an international context, legislative competition will be superseded by some form of mandatory allocation of decision-making authority. Most Western systems of private intemational law project this model into the field of market transactions; these are generally left to party autonomy, which is, however, restricted in the name of state interests or public policy 30 So where, then, is the new wine? 4. Unilateralism and global welfare. The change is not merely in vocabulary. I Firstly, rephrasing choice of law in terms of market theory draws attention to issues of global welfare raised by the unilateralism inherent in current approaches to prescriptive jurisdiction in the international arena. 32 In the absence of a central authority, the extent to which public interest concerns interfere with party choice is left to the unilateral decision of each state, which then defines independently the scope of its own legislation and pursues its own conception of the est way of dealing with social international setting. Risks of und regulation are thus endemic to the global market and surely unconducive to general well being, which would seem to require, at the very least, a coherent allocation of regulatory Hugh Collins, Regulating Contracts, 70 Ibid. Thus appears a traditional division of functions between private law, which supports self- interested action, and public law, which compels market participants to take social costs into account and thus protects preferences which are not adequately protected through the market. However, not only do labels shift (private law may appears a regulatory tool), but incentives to internalise social costs may be achieved through an allocation of property rights or liability rules, which are traditionally private law. For an interesting analogy between property rights and regulatory jurisdiction, see Joel P Trachtman, Econom ic Analysis of Prescriptive Jurisdiction See again Joel P Trachtman, " Economic Analy sis of Prescriptive Jurisdiction Market theory views regulation itself as a public good, subject to inter-jurisdictional competition. On the theory of inter-jurisdictional competition, developed in the context of the economics of federa lism, see below in 39 41 See, for example, articles 3, 5-6, 7 and 16 of the 1980 Rome Convention on the Law Applicable Contractual obligations The European reader who wonders how fareconom ic concepts are merely a change in la wyers conversationalrepertoire should read Bruce Ackerman, Law, Economics and the Problem of Legal Culture Duke Law Journal929(1986) 32 Concluding, similarly, that ana lysis of choice of law in efficiency terms draws attention to concerns of global welfare, see Paul B Stephan, The Political Economy of Choice of layliberal market theory, according to which private agreement is the optimal means of allocating resources, in the absence of market failure or social costs; by empowering individuals to act in their self-interest, markets deliver efficient satisfaction of diverse personal preferences.26 Public regulation becomes necessary, on the other hand, in the presence of externalities.27 The normative implications of this basic distinction for the regulation of international markets may look, in many ways, like old wine in new bottles. Cross-border transactions raise conflicts of laws, or, in terms more familiar to law and economics scholarship, require an allocation of regulatory jurisdiction.28 Market theory considers party choice of law as the optimal means of allocating such authority,29 unless there is a risk that private choice and public interest do not coincide. In such a case, when cross￾border externalities exist in an international context, legislative competition will be superseded by some form of mandatory allocation of decision-making authority. Most Western systems of private international law project this model into the field of market transactions; these are generally left to party autonomy, which is, however, restricted in the name of state interests or public policy.30 So where, then, is the new wine? 4. Unilateralism and global welfare. The change is not merely in vocabulary.31 Firstly, rephrasing choice of law in terms of market theory draws attention to issues of global welfare raised by the unilateralism inherent in current approaches to prescriptive jurisdiction in the international arena.32 In the absence of a central authority, the extent to which public interest concerns interfere with party choice is left to the unilateral decision of each state, which then defines independently the scope of its own legislation and pursues its own conception of the best way of dealing with social costs in an international setting. Risks of under- or over￾regulation are thus endemic to the global market and surely unconducive to general well￾being, which would seem to require, at the very least, a coherent allocation of regulatory 26 Hugh Collins, Regulating Contracts, 70. 27 Ibid. Thus appears a traditional division of functions between private law, which supports self￾interested action, and public law, which compels market participants to take social costs into account and thus protects preferences which are not adequately protected through the market. However, not only do labels shift (private law may appear as a regulatory tool), but incentives to internalise social costs may be achieved through an allocation of property rights or liability rules, which are traditionally private law. For an interesting analogy between property rights and regulatory jurisdiction, see Joel P Trachtman, ‘Economic Analysis of Prescriptive Jurisdiction’. 28 See again Joel P Trachtman, ‘Economic Analysis of Prescriptive Jurisdiction’. 29 Market theory views regulation itself as a public good, subject to inter-jurisdictional competition. On the theory of inter-jurisdictional competition, developed in the context of the economics of federalism, see below fn 39, 41. 30 See, for example, articles 3, 5-6, 7 and 16 of the 1980 Rome Convention on the Law Applicable to Contractual Obligations. 31 The European reader who wonders how far economic concepts are merely a change in lawyers’ conversational repertoire should read Bruce Ackerman, ‘Law, Economics and the Problem of Legal Culture’, Duke Law Journal 929 (1986). 32 Concluding, similarly, that analysis of choice of law in efficiency terms draws attention to concerns of global welfare, see Paul B Stephan, ‘The Political Economy of Choice of Law’