Role of Government Economic Regulation Term Paper

All it is really accomplishes is forcibly transferring wealth from one party to another.

These transfers can actually create new market failures by forming barriers to market entry, and creating unfair competitive advantages through subsidies, tariffs, tax-breaks and regulations that favor one party over another.

Fundamental to the notion of government regulation is that its purpose is to eliminate unfairness in competition. However, powerful businesses have huge influences on policy making in the United States that make this an ideal rather than a reality. They hire lobbyists, create ad campaigns, and court politicians to gain influence. Companies compete for bureaucratic power just as much as they do for market power.

Because of the advantages government regulation can offer, firms try to out-regulate each other rather than to just out-compete each other in the market. Government regulation has invited businesses to become involved in government and the best way to put an end to this is to get government out of business.

6.0 Conclusion

Government regulation isn't working, but it's not because of evil people or because issues are too complex and having too many competing objectives to resolve. Adam Smith was right when he coined the metaphor of the invisible hand to illustrate how those who seek wealth by following their individual self-interest, inadvertently stimulate the economy and assist society as a whole. Markety dyanamics, by their very nature, are more efficient because all factors possible are considered and because the consumer is the better regulator as the laws of supply and demand eventually take hold. In the interim, there are market failures, but government regulation doesn't fix them.

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