Regulation v. Deregulation Chapter 15 EF5.b. Government Regulatory Agencies- The Alphabet Groups Give examples of government regulation and deregulation and their effects on consumers and producers.

Regulation It is a legal restriction by the government on something. Regulation refers to governmental administration of market constraints developed by written law and judicial decisions

Purpose of Regulations Price regulation through rent control Wage regulation through minimum wages Monopoly regulation through antitrust laws Pollution and emissions regulation through the Environmental Protection Agency (EPA) standards etc. It was used to stop too much market power concentration in a few hands.

Samples or Examples Consumer Product Safety Commission (CPSC): enforces federal safety standards Environmental Protection Agency (EPA): establishes and enforces pollution standards Equal Employment Opportunity Commission (EEOC): administers and enforces Title VIII or the Civil Rights Act of 1964 (fair employment) Federal Aviation Administration (FAA): regulates and promotes air transportation safety, including airports and pilot licensing Federal Communications Commission (FCC): regulates interstate and foreign communication by radio, telephone, telegraph, and television

Samples or Examples Federal Deposit Insurance Corporation (FDIC): insures bank deposits, approves mergers, and audits banking practices Federal Reserve System (the FED): regulates banking; manages the money supply Federal Trade Commission (FTC): ensures free and fair competition and protects consumers from unfair or deceptive practices Food and Drug Administration (FDA): administers federal food purity laws, drug testing and safety, and cosmetics Interstate Commerce Commission (ICC): enforces federal laws concerning transportation that crosses state lines

Samples or Examples National Labor Relations Board (NLRB): prevents or corrects unfair labor practices by either employers or unions Nuclear Regulatory Commission (NRC): licenses and regulates non-military nuclear facilities Occupational Safety and Health Administration (OSHA): develops and enforces federal standards and regulations ensuring working conditions Securities and Exchange Commission (SEC): administers federal laws concerning the buying and selling of securities

Deregulation Is the reduction by a government of its interventional role in the functioning of the economy. In the USA, deregulation gained momentum in the 1970s

Purpose of Deregulation This allows greater freedom to all the players in the marketplace to operate. The rationale for deregulation is that fewer and simpler rules will raise the level of competition, generate higher productivity, more efficiency and lower prices. The first comprehensive deregulation proposal dealt with rail and road (truck) transportation. These acts lessened barriers to entry in transport markets and promoted competitive market forces

The Problem with Deregulation Ideological opposition to deregulation involves the proper control of negative externalities like environmental pollution and disposal of hazardous materials. Too much deregulation could lead to compromising quality standards, financial uncertainty, and the creation of monopolies.

Other Benefits of Deregulation Classic modern Day example: Todays rapid development of computer, wireless and internet technology, with their openness and world wide reach favor deregulation of prices and entry into markets. How many wireless companies could you do business with today if you were not happy with your cell phone or internet provider? I currently use Verizon but could go to ATT…

The Politics of all of this? Many conservatives or Republicans believe supply side economic views can not nor do not support government regulation. On the other hand, Demand side economists believe government should regulate business for the well being of consumers or prevent monopoly powers from dominating the market. In a nutshell- Some believe regulation is for the good while others believe that this policy of deregulation has contributed to the current U.S. financial crisis.