Government Intervention in a Market Economy

“For example, the federal government regulates the quality of food and water, the safety of workplaces and airspaces, and the integrity of the banking and finance system.” (Bianco, Canon 2011, p 582) Regulations find out if the product is a market failure. There are two types of regulations, which are economic and social. “Economic regulations sets prices or conditions on entry of firms into an industry, where as social regulation address issues of quality and safety.” (Bianco, Canon 2011, p 582) Economic regulations are concerned with the price regulation of monopolies.

Regulating a variety of aspects of business and society is an old and often controversial aspect of government, particularly at the national level. Much of what the national government does, or fails to do, has an impact on individual citizens, private corporations and other business enterprises, agricultural producers and marketers, foreign governments, labor unions, and state and local governments.

The scope of this paper is to break down and define social regulation, industrial regulation, and natural monopolies by explaining how they have impacted society and why they exist. It is also the intent to summarize the Antitrust Laws, explain the major functions of the five primary federal regulatory commissions that govern social regulation, and identify three main regulatory commissions of industrial regulation.

There are two types of regulations: economic and social. An Economic regulation is the prescription of price and output for a specific industry, as Social regulation is the prescription of health, safety, performance, and environmental standards that apply across several industries. Most economic regulations happened after the Great Depression, under the leadership of President Franklin D. Roosevelt, in which a natural monopoly, like utilities, railroads, and communication would match that of a competitive market, thus setting a market-price cap. Understanding that in some aspects the government cannot stop a monopoly without causing market harm in some cases, so they attempt to rectify it. The government gives companies fair rates of returns, which is a price that allows a monopoly firm to earn a normal profit, similar to one gained when a companies marginal cost matches their marginal revenue. This is especially important, because when the government calls for the deregulation of a company, it leaves behind stranded assets, properties that lose values after the intervention. Other ways government can aid in the deregulation of a business is through privatization and contracting out; the government can either enlist a private firm to do a service on their behalf, or even transferring the public enterprise to private

The first board of Federal regulation was established in 1887” congress created the Interstate Commerce Commision to resolve increasing controversies between the railroads and shippers”. The government must make sure that there is enough competition to keep prices low the quality products high.The role is to maintain efficiencies with natural monopoly and helps avoid market failures. It regulates activity by insuring that companies have healthy competion and no one company holds a monopoly in the market place. Some of the things that the government regulates are the banking industry, transportation. Communications and the airline indusrties. The government used to regulate the air traffic controlers making it safer for pilots and consumers. When the air traffic controlers were deregulated it became evident that it is less safe for pilots and consumers to fly. The air traffic controlers work longer

The United States government has passed 81,883 rules over a nine year span according to audiotech.com. All the regulation passed the last nine years cost the average business owner with about twenty employees over 212,000 dollars extra per year. In total American business owners had to pay over $1.75 trillion to comply with government regulation. The involvement of government in business operations is becoming counteractive. It should be up to the business owner on how he would like to promote his business because it’s his investment that is being but at risk. The government has increasingly been interfering and passing laws on how businesses should operate, from smoking bans, medical coverage too how a business can hire or fire people. The government shouldn’t be so involved on how business operate to include the processes of hiring and firing employees.

The government does not necessarily need to intervene how the marker goes. Therefore, the competition is a significant factor of the free marker economy.Active but limited government is another main part of the free market economy. This means that the government undertakes a significant, active role in the market, but at the same time the government’s role is ver limited because all the investments and decisions in the economy are controlled by the market than by the government. An invisible hand will control the market. Limited government is a type of government in which there is a minimum intervention in personal properties. Overall, the government tries to keep the economy in a law and let it free by limiting itself. Hence, the limited government is an essential factor of the free market economy.Last, self-interest is a significant part of the free market economy. Self-interest refers to one’s desire to buy something. The market will be generally controlled by people’s interest; the companies will compete with one another to fit the best taste. This is because the people’s interest will be the main trend in the market and it will control what should be made in the market. Consequently, the market will be self-regulated according to the theory of a free market. Therefore, the self-interest is another significant factor of the free market economy.Therefore, the competition, the

The author of the article, Over-regulated America, displays the burden over-regulation can have on a country’s free-market economy. For example, one of the downfalls of over regulation is these new rules, or laws, are too complex. With complexity, comes high costs and deception, as mentioned earlier. The “Sarbanes-Oxley law made it so difficult to list shares on an American stock market that firms increasingly look elsewhere” and these regulations, in general, added a “cost of $10,585 per employee” (The Economist). As a result, this took away from a corporation’s right to gain financial support from investors, as well as causing unemployment due to the high per-employee costs of the act. I agree with this in the sense that regulation laws must have a greater simplicity to them so that they can be understood by a majority, while still allowing the perks of a free-market economy to run their course. Additionally, if a law is too complex, this can lead to deception if it can only be comprehended by a handful of individuals, when the law may affect everyone within the economy. The key here is to find a balance, between governmental regulation and promoting a capitalistic

The United States has a long history of ensuring fair and balanced business practices through legislation. The Interstate Commerce Act of 1887, began a shift in the economy from state commerce regulation to a

Free markets have often been idealized in the US, and have become a dominant tool for trade and distribution of goods and services. There have been multiple waves of government regulation and deregulation of the market in US history. Each of these trends have been grappling with the central question of how sufficient markets are at satisfying our goals. In theory, free markets are fair and efficient at distributing goods and services. In reality, however, government must intervene in the marketplace for two overarching reasons. First, because in practice free markets left to themselves are not always fair and efficient. And second, because fairness and efficiency are not our only goals and

Role of the US Constitution and Legal System in Business RegulationThe Constitution of the United States and their legal system have an impact on the guidance and operation of companies in any industry. In case a person breaks a law, for example, he or she may be obliged to pay a fine or even imprisoned in the US. It works the same way with companies: if a business is found responsible for allowing its employees to violate regulations this company is subject to a fine and even closedown. For instance, companies are responsible to guarantee that all employees are legally authorized to work in the United States. Occasionally employees without proper documentation are able to get a job. The law enforcement agencies perform raids on business

The appropriate role of government in the economy consists of six major functions of interventions in the markets economy. Governments provide the legal and social framework, maintain competition, provide public goods and services, national defense, income and social welfare, correct for externalities, and stabilize the economy. The government also provides polices that help support the functioning of markets and policies to correct situations when the market fails. As well as, guiding the overall pace of economic activity, attempting to maintain steady growth, high levels of employment, and price stability. By applying the fiscal policy which adjusts spending and tax rates or monetary policy which manage the money supply and control the

There is much debate on whether the government should have a big or lesser role in regulating the economy. Many people think that the government should be more involved, but I believe that the government should receive a lesser role in regulating the economy because of how it affects individuals in global trade and corporations. Less government regulation in global trade will be a better decision and create lesser problems. The purpose of the government in a global trade is to make sure that the transaction between consumers and producers is not interrupted. They must make sure that goods being sent into the United States are safe and the right products. If they are not safe, it puts citizens in

The government should oversee the economic system by intervening with business that hurt consumers, and drive smaller businesses to the ground. It should provide a fair system where everyone has equal economic opportunity. During the time of the Gilded Age and Progressive Era, which took place during the turn of the twentieth century, the power of the executive branch was ineffective. Business

It is not only unnecessary for the government to intervene to maintain a free market, it is extremely wrong. Intervention by any outside party in corporate matters is inappropriate and basically contradicts the meaning of a free market.