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Regulation: Protecting People from The Market

25 April, 2016 - 09:12

Learning Objectives

  • Compare the public interest and public choice theories of regulation.
  • Discuss the costs and benefits of consumer protection laws.
  • Discuss the pros and cons of the trend toward deregulation over the last quarter century.

Antitrust policies are primarily concerned with limiting the accumulation and use of market power. Government regulation is used to control the choices of private firms or individuals. Regulation may constrain the freedom of firms to enter or exit markets, to establish prices, to determine product design and safety, and to make other business decisions. It may also limit the choices made by individuals.

In general terms, there are two types of regulatory agencies. One group attempts to protect consumers by limiting the possible abuse of market power by firms. The other attempts to influence business decisions that affect consumer and worker safety. Regulation is carried out by more than 50 federal agencies that interpret the applicable laws and apply them in the specific situations they find in real world markets. The following Table 16.2 lists some of the major federal regulatory agencies, many of which are duplicated at the state level.

Table 16.2 Selected Federal Regulatory Agencies and Their Missions

Financial Markets

Federal Reserve Board

Regulate banks and other financial institutions

Federal Deposit Insurance Corporation

Regulate and insures banks and other financial institutions

Securities and Exchange Commission

Regulate trading in futures markets

Product Markets

Department of Justice, Antitrust Division

Enforces antitrust laws

Federal Communications Commission

Regulates broadcasting and telephone industries

Federal Trade Commission

Focuses efforts on consumer protection, false advertising, and unfair trade practice

Federal Maritime Commission

Regulates international shipping

Surface Transportation

Regulates railroads, trucking, and noncontiguous domestic water transportation

Federal Energy Regulatory Commission

Regulate pipelines

Health and Safety

Occupational Health and Safety Administration

Regulates health and safety in the workplace

National Highway Traffic Safety Administration

Regulates and sets standards for motor vehicles

Federal Aviation Administration

Regulates food and drug producers; emphasis on purity, labeling, and product

Consumer Product Safety Commission

Regulates product design and labeling to reduce risk of consumer injury

Energy and the Environment

Environmental Protection Agency

Sets standards for air, water, toxic water, and noise pollution

Department of Energy

Sets national energy policy

Nuclear Regulatory Commission

Regulates nuclear power plants

Corps of Engineers

Sets policies on construction near rivers, harbors and waterways

Labor Markets

Equal Employment Opportunity Commission

Enforces antidiscrimination laws in the workplace

National Labor Relations Board

Enforce rules and regulations governing contract bargaining and labor relation companies and unions