Is regulation good for an economy?
Is regulation good for an economy?
The short answer is yes.
Balancing of interests
Regulation is unfortunately often portrayed as red tape, bureaucracy or an unreasonable cost imposed on business by people who know nothing about doing business. And yes, sometimes this can be true. However, it must always be remembered that regulations are balancing of interests within a society. This balancing act is not always an equal 50/50 split but a weighing and measuring of interests some of which may take presidents over another in a given situation. No reasonable person would argue, I would think, that making profits – a very important interest in most societies – should or ought to take presidents over safe baby formula or clean drinking water in our homes.
Additionally, this balancing is dynamic and not a static process. This has become all the more evident and important as we develop the fourth industrial revolution.
3 ways that regulation benefits economies
In a very though revoking article on the World Economic Forum‘s website: 3 ways that regulation benefits economies the benefits of regulation, well three of them at least, is outlined.
Below I capture a few highlights that serve as a brief summary:
1. Market-creating and market-growing – “When the standard is set by regulation in a large market like the EU, the United States, or China, economies of scale kick in quickly. The virtuous circle of falling prices, quality improvements, and growing demand is thereby established.”
2. Enabling competition “– regulation facilitates a level playing field between large incumbents and new entrants, enabling innovation to take root. And by providing assurances about the safety or effectiveness of new products and services, and setting minimum mandated standards, regulation gives consumers the confidence to try something new.”
3. Protection of consumers – “A society’s welfare is not identical with the profitability of its businesses, or with the growth rate of GDP.”
