Question

Explain Industrial Regulation (purpose, problems, and economic impacts

Answer 1

Regulations are enforced usually by a regulatory agency formed or mandated to carry out the purpose or provisions of a legislation. Also called regulatory requirement.Regulations, also called administrative laws or rules, are the primary vehicles by which the federal government implements laws and agency objectives. They are specific standards or instructions concerning what individuals, businesses, and other organizations can or cannot do.

Regulations are indispensable to the proper function of economies and societies. They create the “rules of the game” for citizens, business, government and civil society. They underpin markets, protect the rights and safety of citizens and ensure the delivery of public goods and services. At the same time, regulations are not cost less. Businesses complain that red tape holds back competitiveness while citizens complain about the time that it takes to fill out government paperwork. Moreover, designing and enforcing regulations also requires resources for government and public administrations. Regulations can also have unintended costs, when they become outdated or inconsistent with the achievement of policy objectives. The 2008 financial crisis which resulted in part from poorly designed regulatory regimes and the uneven enforcement of existing regulations and the ensuing and ongoing economic downturn starkly illustrate the potential consequences of regulatory failure.

Economic impacts were:

• Allocative or economic efficiency across sectors of the economy: How our nation’s resources (labor, capital, natural) are used in the production of different goods and services, and whether those inputs are distributed to their truly highest-valued uses;
• Vibrancy and competitiveness within industries: How easy it is for new businesses to form and for the most successful businesses to grow and thrive; and (less often recognized) how easy it is for unsuccessful firms to leave or close down;
• Costs vs. benefits in promoting the public interest, public goods: For regulations justified by a public good, social benefit perspective, whether those regulations consider the benefits achieved versus the economic costs, or the cost-effectiveness of alternative approaches;
• Macroeconomic and employment effects: The effects on both the short-term, cyclical movements of the economy (such as on employment during a recession) and the longer-term growth of the economy (such as via investment and innovation); and
• Distributional effects