Is less regulation supposed to always be the answer?

**The Dude** · January 22, 2009, 01:45 AM

In light the economical crisis and the election of Obama that got some radical capitalists fearful of seeing the US turn into a socialist state (which I still can't get my head around), I would like to pose the following question that I found yesterday in one of the history books I study for college:

Is freedom the catalyst for economic growth?
Modern day economic science teaches us that freedom - free trade, a free market - is the fastest route to prosperity. Yet still, looking at history, we see a large supply of examples that indicate the opposite: severe regulation leading to success. Regulation performed not only by the government, but also by the companies themselves:

- Medieval European cities regulated their trade with others.
- Guilds obtained monopoly in their respective cities by making sure the competition couldn't afford to establish itself and had to keep to its trade elsewhere.
- The Dutch East Indian Company was founded as a union of several different trading companies to prevent rampant prices as a result of unnecessary competition.
- From the 20th century we can clearly see the forming of cartels: companies who agree with one another to not lower their prices beyond a certain point.

So if we consider economic prosperity in the past, it is quite clear that the businessmen who lived then would disagree with our current stance that freedom is the way forward. Indeed, they would rather argue that regulation is the key to success.

So what -is- the engine behind economic growth? Is it freedom, which offers opportunities and brings out the best in people's competitive spirits? Or is it regulation which, alongside limited freedom, does offer a sense of protection to companies, keeping the economy from turning into a continuous game of corporate knock-out.

I just thought it would be an interesting perspective for those people who are convinced that regulation is an economic sin. Interested in hearing your opinion on this.

**Big War Bird** · January 22, 2009, 07:39 AM

Regulation does not necessarily mean a command economy. Regulation can be as mundane as fixed weights and measures or forcing discolsure of financial information to investors.

Talking about regulation in gernal isn't particularly useful. We have to have specifics.

As far Obama making the US into a socialist state, we are half way there already, it is based on his dishonesty in calling a welfare payments tax cuts and his general repeated desire to take from those that earn more and give it to those that earn less.

**The Dude** · January 22, 2009, 11:54 AM

Originally Posted by Big War Bird

Regulation does not necessarily mean a command economy. Regulation can be as mundane as fixed weights and measures or forcing discolsure of financial information to investors.

Talking about regulation in gernal isn't particularly useful. We have to have specifics.

As far Obama making the US into a socialist state, we are half way there already, it is based on his dishonesty in calling a welfare payments tax cuts and his general repeated desire to take from those that earn more and give it to those that earn less.

Well, doesn't every action that makes the economy less... spontaneous, somehow equal regulation? It's just that there's varying degrees of it.

I may be wrong here (someone with an economic degree may correct me), but isn't it so that there "socialist" and "capitalist" politics are not at all mutually exclusive? There always has to be a bit of social fairness in capitalism or it becomes a blatant powertool for the wealth. At the same time there always has to be a bit of economic freedom in any socialist or communist system or the economy will die and the nation will grow stale. Prime example: North Korea.

So the way I see it you can't, as a nation, be fully "red" or "blue". You always have to mix and match a bit, with varying degrees yielding varying results. Each economic doctrine holds a bit of wisdom compatible with the opposing doctrine.

That's why (I think), it's such an easy mistake to make, to say that Obama is going to turn things socialist just because he's taking some bits of red to mix em with your american blue. More government, beyond a certain threshold, does indeed produce socialism. Before that treshold, it seems to me that it's just smart application of economic policies that might very well yield worthwhile results.

If I'm misunderstanding things here, someone please do let me know. The economy is hardly my field of experience, it's just something I seek to learn more about via threads like these.

**Kiljan Arslan** · January 22, 2009, 08:33 AM

yes welfare is "dishonest" the poor are a hateful people!

**Big War Bird** · January 22, 2009, 10:42 AM

Originally Posted by Kiljan Arslan

yes welfare is "dishonest" the poor are a hateful people!

Do you even know what I'm talking about?

**Panzerbear** · January 22, 2009, 10:49 AM

if less regulation = less bureaucracy and govt restrictions involved in business decisions - then HELL YES.

if less regulation = no rule of law - then of course no, its not the answer.

**conon394** · January 22, 2009, 10:58 AM

if less regulation = less bureaucracy and govt restrictions involved in business decisions - then HELL YES.

Why?

What makes business bureaucracy and its decisions any better than government bureaucracy and its choices.

More generally I would say no – since the fallacy of less regulation is predicated on ‘free markets’ when if fact many if not most exist in some state of oligarchy.

In addition regulations allow a mechanism for people to force so called externalities into the calculations of the market.

**Panzerbear** · January 22, 2009, 11:41 AM

Originally Posted by conon394

What makes business bureaucracy and its decisions any better than government bureaucracy and its choices.

here is an extreme example - how is command planned economy different from free market capitalist one?

the first is being much less efficient that the second.

govt does not act like a private enterprise. it cannot possibly fail, it does not have any competitors, thus it does not have the competitive free-market inheretent features and discipline, i.e. strive to cut costs, lower prices, maximize efficiencies, increase returns on investemnt, seek innovative solutions and so on and so forth.

in other words, big govt is much less efficient than a bunch of private enterpizes. its obvious to anyone who knows anything about economics. and surely as hell a bunch of overzealous bureaucrat paper pushers are much more dangerous to free market than a bunch of professional business managers who always seek more profit and create more jobs.

you dont like monopolies? yes, I dont like them also, because they distort free markets and restrict barriers to entry of the competition. hence the anti-trust laws. doh!

**Pickle_mole** · January 22, 2009, 11:12 AM

because a business can fail, governments just get a new "CEO" with the same problems.

**conon394** · January 22, 2009, 11:23 AM

because a business can fail, governments just get a new "CEO" with the same problems.

Maybe…

But in a significant state of oligarchy or near monopoly that failure may be long in coming and it still does not change that fact that they may make choices that impact a society negatively for a long period of time. For markets to work effectively you need to have perfect information and rational actors and limited if any market power – almost none of those conditions tend to exist in most markets. Did you for example have any means of judging if lead or melamine was in Chinese products?

Again when exactly was Standard Oil going to fail?