Regulating business with competition

Generally we try to protect ourselves from the excesses of capitalism with regulations.  An alternative method may be to increase competition.

Capitalism is known for its disregard for health and safety concerns and for its excessive profits.  To deal with these problems we impose regulations on firms.  As people are good at getting around regulations the natural reaction is to increase the regulations.

An alternative approach would be to increase competition.

One of the myths of our economy is to equate competition and capitalism.  The reality is that capitalism depends upon governments passing legislation which limits competition.  Most economic legislation, while labeled as consumer protection, works to restrict competition.  For example, many manufactured items are subject to strict regulations as a safety thing. .  But these regulations tend to be set so that only large producers can comply.  This means that specialty manufacturers cannot afford to get started as the extra costs have to charged to a small production run.

Health and safety regulations, copyright and patent legislation and licensing requirements all work to limit competition.

Here in Canada we have a strong commitment to separation of church and state.  The result is that the provision of spiritual and religious services comes closer than anything else to the perfect competition model.  When people move into a new area they often go church shopping, even among churches of the same denomination. 

Churches are also the least regulated institutions in the country as their members look after that either by asking their ministers to leave or by leaving themselves.  (Ministers get fired for one of two reasons – they get into relationships their congregations consider inappropriate or they over stay their welcome.)    When the United Church of Canada decided to ordain and marry gays and lesbians a lot of people switched denominations.

This blogger figures  increasing competition in most if not all industries would do a lot to resolve the excesses of capitalism and reduce the need for regulations.

One of the requirements of perfect competition is that all participants have perfect knowledge.  Therefore the only regulation needed is that firms be required to publish all the information customers need to make good decisions.  This would require us to take responsibility for our own lives rather than expecting the government to look after us.

I realize this suggestion is a political can of worms as people don’t like to reveal secrets.  However with internet and smart phone technology more and more information will be easily available.  Rather than trying to increase regulations we should demand that this information be made generally available so that we as consumers can become the regulators – just like church goers.

 

If you liked this post your are invited to comment, press the like button and/or click  one of the share buttons. If you disagree you are invited to say why in a comment.  While I like the idea of sharing this platform, my personality is such that I don’t reply to many comments.

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