Chapter 2: The Rationale For Regulaiton

Four analytical perspectives have dominated out understanding of the place of regulation in the relationship between government and economy (business):

1. The Economic-libertarian perspective - (sometimes known also as the private interest perspective). This perspective tends to see the market as the best mechanism for maximizing social and economic welfare, to treat with suspect the motives politicians and bureaucrats and to be skeptical as to their capabilities even in those cases that politicians and bureaucrats really are pursing the public interest. The preferences for markets (even imperfect one) is accompanied by a strong argument that regulation is unnecessary and/or useless in most cases. Read more on this perspective

2. The Normative-positive perspective - tends to see regulation as an outcome of sustained political effort to overcome market failures. Read more on market-failures and the regulation as problem-solving mechanism

3. The Radical/Marxist anti-capitalist perspective - tends to see regulation as one of the systems of control that attest to the defects of markets (as capitalism invention) and capitalist governments (which are highly depends on capitalists). Read more on Marxist conceptions of the state (and regulation)

4. Pragmatic-administrative perspective - tends to see both markets and governments as the best of all possible options. Instead of dealing with the normative and philosophical questions that are involved in regulation, the proponents of this perspective are concentrating on the study of the empirical, day-to-day problems of regulation as a system of governance. Read more on the pragmatic-administrative perspective

The conduct of regulation
government agencies use two methods to carry out laws: rule making and adjudication.

Rule making
Rules, or regulations, are agency statements that implement, interpret, or prescrible a law of policy.

Adjudication
Adjudication is regulatory agency's process for formulation an order. An order is any final dispositiion other than rule making.

Social regulation is characterizaed by the use of agencies organized along funcitional or issue lines rather than industry categories.

Source: Business and government in the global marketplace (seventh edition, Murrat L. Weidenbaum)