Question

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

Laissez-faire is an economic theory which was implemented in 18th century that minimise the interferenceof government in the business activities.It also was against any government intervention in business affairs. The principle behind laissez-faire, a French is that if the government is less involved in the economy, the business will be more better and also, society as a whole.

The two models of laissez-faire policy are Capitalism and Socialism

1.Capitalism

By capitalism we mean that economic system under which all forms,factories and other means of production are property of private individuals and firms.It is the oldest in the world and countries like Britain,France,USA,Germany have this system from the very old past.It is the economic system which is inspired by the spirit of enterprise and is guided by calculation of profit.The means of production as well as final products are basically owned by individuals under private ownership.

2.Socialism

Socialism is an economic system in which control over means of production and over production itself is vested with a central authority and economic affairs of society belong to the public and not to the private sphere.Under this system,the means of production are owned by the people collectively through their government.

Regulation

Regulation originates from a variety of sources and in a variety of areas. A framework that includes types of regulators and regulation as well as areas of regulation that may affect the entity of interest (including the economy as an entity) is useful. The framework will help in assessing possible effects of new regulation. It can also help in assessing the effects of regulation on various entities.

More than one regulator may develop regulations in response to a particular issue. Each of the relevant regulators may have different objectives and choose to address the issue using different regulatory tools.

The two different types of regulation are:

1.Economic regulation

Economic regulation is defined as a type of government regulation that sets prices or conditions on entry of firms into an industry. Economic regulation also includes the regulation of financial firms.

2.Social regulation

Social regulation includes environmental controls, health and safety regulations, and restrictions on labeling and advertising. Social regulation involves the correction of externalities. However, there is considerable disagreement about the exact economic rationale for much social regulation.

Most fitting for businesses to follow is the laissez faire policy taking into account the below informations:

Laissez faire works best for economic growth because it provides individuals with the greatest incentive to create wealth. Because you can't make money in laissez faire if, for example, you cheat customers, steal from your workers, or produce a shoddy product, it promotes excellence.

The main advantages of laissez-faire economy are:

1. Autonomy

A laissez-faire economy gives businesses more space and autonomy from government rules and regulations that would make business activities harder and more difficult to proceed. Such an environment makes it more viable for companies to take risks and invest in the economy. Moreover, it provides companies with a greater incentive to try and maximize profits.

2. Innovation

Driven by the need to provide their products with market advantage, companies are compelled to be more creative and innovative in their approach. The practice leads to technological advancement in addition to economic growth.

3. Absence of taxes

Lastly, the absence of taxes leaves companies and employees alike with greater spending power. It also discourages corruption that can arise as a result of bureaucrats with limited knowledge but immense decisive power.

Case studies

1.Ford and the exploding Pintos

Starting back in 1972, reports of explosions in low-speed collisions involving Pintos struck from behind began coming into the National Highway Safety and Transportation Administration.At first, a total of 11 crashes were conducted, and in 8 instances, the gas tanks ruptured and burst into flames.

2.The Trolley problem

The trolley problem is a question of human morality, and an example of a philosophical view called consequentialism. This view says that morality is defined by the consequences of an action, and that the consequences are all that matter.In the Trolley Problem, a train is hurtling down the tracks towards five men stuck in its path. The utilitarian answer is that the moral decision is to sacrifice the heavyweight man, because you'd still be killing one to save five.