Saturday, September 15, 2007

Pros and Cons of Regulation

Regulation is not a simple thing. Having seen it on the outside and inside in several industries, I know you cannot generalize. In most cases regulation of health and safety has been beneficial to consumers and employees. It has even been helpful to corporations as it shields them from lawsuits to a large extent.

On the other hand regulation of prices and capacity rarely benefits consumers. It transforms the regulators and legislators into the "target market" for the company. Price "collusion" becomes mandatory, and the law of unintended consequences leads companies to become inefficient as that is rewarded.

Each instance of regulation has to be evaluated and "quis custodiet custodies" will probably apply, in that regulators and legislators need to be supervised.

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