Question

A. Argue for one side of the continuum between Laissez Faire and Regulation. In your essay, discuss at least 2 systems/theories that belong to each side (2 for one side and 2 for the other) and critique or defend them according to which side you think is the ‘most fitting’ for businesses to follow. In your essay, you must touch upon (make a comment, even if just a minor point) at least two of the following case studies: Ford and the Exploding Pintos, Walmart’s Predatory Pricing, The Trolly Problem, The Dr. and the Five Vials, Microsoft’s Word Monopoly, or Drug Testing on the Homeless Alcoholics (or any other case study that you wish to use).

Answer 1

LAISSEZ FAIRE Vs REGULATION

LAISSEZ FAIRE- it is a system that supports free trade with minimum government regulations. It explains 'let you do' it promotes competition and reduces Monopoly. The two theories which support this are given by Adam Smith in wealth of nation , where it allow the natural law of market demand and supply and theory of invisible hands, in other words it was a form of capitalism. Another proponent was David Ricardo who explains and advocate free international trade,

Regulation- it is a system in which all the resources of an Economy are owned and managed and regulated by government not by market forces of demand and supply, the prices are determined government.this theory support less competition and promote equality.

Two theories- public interest theory of regulation and theory of value by Karl Marx as well as theory of bureaucracy also support this regulation.

On the basis of above analysis, LAISSEZ faire is more prominent and is applied in many Developed countries like USA , Western Europe. whereas regulation was found in USSR but later it was disintegrated. Another aspect to advocate LAISSEZ faire is that it leads to market competition and help in improving marker efficiency and growth and development of the economy.thus LAISSEZ faire is the best suited policy for business.

Two cases

1. Walmart predatory pricing- predatory pricing is a policy in which a firm reduce the price so low that competitors are not able to survive in the market. Walmart was sued by Target and Minnesota state law as Walmart offered some proscription drugs at a price lower than price floor which lead to unfair market advantage, later state forbid the sake of drugs below there stated price and limiting the discount and put an end to price war , this helps in maintaining competition and reduce Monopoly.

2. Microsoft word Monopoly- Microsoft was declared as a monopoly as it hurts competition. The department of Justice files antitrust charges against the company for bundling of additional program that constitutes Monopoly action and led to the collapse of it's competitors Netscap. The presiding judge Jackson ruled that Microsoft violated the Sherman Antitrust act , 1890, that outlaw Monopoly and cartels, it was argued that Microsoft position constitutes Monopoly and threatene competition and reduces innovation in a country.