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From Wikipedia, the free encyclopedia

Regulation is "controlling human or societal behavior by rules or restrictions."[1] Regulation can take many forms: legal restrictions promulgated by a government authority, self-regulation by an industry such as through a trade association, social regulation (e.g. norms), co-regulation and market regulation. One can consider regulation as actions of conduct imposing sanctions (such as a fine). This action of administrative law, or implementing regulatory law, may be contrasted with statutory or case law.

Regulation mandated by a state attempts to produce outcomes which might not otherwise occur, produce or prevent outcomes in different places to what might otherwise occur, or produce or prevent outcomes in different timescales than would otherwise occur. In this way, regulations can be seen as implementation artifacts of policy statements. Common examples of regulation include controls on market entries, prices, wages, Development approvals, pollution effects, employment for certain people in certain industries, standards of production for certain goods, the military forces and services. The economics of imposing or removing regulations relating to markets is analysed in regulatory economics.


Types of regulation

Regulations, like any other form of coercive action, have costs for some and benefits for others. Efficient regulations are defined as those where the total benefits to some people exceed the total costs to others.

Regulations are justified using a variety of reasons and therefore can be classified in several broad categories:

  • Market failures - regulation due to inefficiency. Intervention due to a classical economics argument to market failure.
  • Collective desires - regulation about collective desires or considered judgements on the part of a significant segments of society
  • Diverse experiences - regulation with a view of eliminating or enhancing opportunities for the formation of diverse preferences and beliefs
  • Social subordination - regulation aimed to increase or reduce social subordination of various social groups
  • Endogenous preferences - regulation's purpose is to affect the development of certain preferences on an aggregate level
  • Irreversibility - regulation that deals with the problem of irreversibility – the problem in which a certain type of conduct from current generations results in outcomes from which future generations may not recover from at all.
  • Interest group transfers - regulation that results from efforts by self-interest groups to redistribute wealth in their favor, which may disguise itself as one or more of the justifications above.


Regulation of businesses existed in the ancient early Egyptian, Indian, Greek, and Roman civilizations. Standardized weights and measures existed to an extent in the ancient world, and gold may have operated to some degree as an international currency. In China, a national currency system existed and paper currency was invented. Sophisticated law existed in Ancient Rome. In the European Early Middle Ages, law, standardization, and the power of the state languished after the decline of Rome, but regulation existed in the form of norms, customs, and privileges; this regulation was aided by the unified Christian identity and a sense of honor in regard to contracts.[2]:5

Beginning in the late 19th and 20th century, much of regulation in the United States was administered and enforced by regulatory agencies which produced their own administrative law and procedures under the authority of statutes. Legislators created these agencies to allow experts in the industry to focus their attention on the issue. At the federal level, one the earliest institutions was the Interstate Commerce Commission which had its roots in earlier state-based regulatory commissions and agencies. Later agencies include the Federal Trade Commission, Securities and Exchange Commission, Civil Aeronautics Board, and various other institutions. These institutions vary from industry to industry and at the federal and state level. Individual agencies do not necessarily have a clear life-cycle and patterns of behavior, and are influenced heavily by their leadership and staff as well as the organic law creating the agency. In the 1930s, lawmakers believed that unregulated business often led to injustice and inefficiency; in the 1960s and 1970s, concern shifted to regulatory capture, which led to extremely detailed laws creating the Environmental Protection Administration and Occupational Safety and Health Administration. Agencies and regulatory laws have slowed the growth of business and granted protection to businesses, although this is not always inappropriate given the potentially destabalizing effects of rapid change.[3]:300-309

Deregulation, regulatory reform and liberalization

The second half of the 20th century saw a wave of attempts to modify some existing regulatory structures and systematize the creation and review of new ones. A part of this was the deregulation movement.

A parallel development with 'deregulation' has been organized, ongoing programs to review regulatory initiatives with a view to minimizing, simplifying, and making more cost effective regulations. Such efforts, given impetus by the Regulatory Flexibility Act of 1980 in the United States, are embodied in the United States Office of Management and Budget's Office of Information and Regulatory Affairs, and the United Kingdom's Better Regulation Commission. Cost-benefit analysis is frequently used in such reviews. In addition, there have been regulatory innovations, usually suggested by economists, such as emissions trading. Academic research on wedding economic theory with regulatory activity continues. Ironically, the deregulation movement is sometimes driven through the creation of deregulatory bodies that are themselves based in regulation.

From other point of view, liberalization does not always imply deregulation, but more players in the Market (desoligolipolization).

See also


  1. ^ Bert-Jaap Koops et al. Starting Points for ICT Regulations, Deconstructing Prevalent Policy One-liners, Cambridge University Press, Cambridge: 2006, p. 81
  2. ^ John Braithwaite, Péter Drahos. (2000). Global Business Regulation. Cambridge University Press.
  3. ^ MMcCraw T. (1984). Prophets of Regulation. The Belknap Press.

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