Contents
Contents............................................................................................................
3. “Good regulation is the key to a successful economy.” Discuss.
Introduction
The aim of the use of effective regulation ...
are required in the regulation optimally in maximizing the social welfare, but the
outcomes of regulations in terms of pri...
the success in the market exchange and production. There are some of the relevant
conduct modes which the regulatory state...
the Asia economies is quite bad especially in those developing countries which are
financially weak and lacks that high cl...
the Asia economies is quite bad especially in those developing countries which are
financially weak and lacks that high cl...
of 6

Popp1405 politics in business

“Good regulation is the key to a successful economy.” Discussion.
Published on: Mar 4, 2016
Published in: Economy & Finance      Technology      
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Transcripts - Popp1405 politics in business

  • 1. Contents Contents.....................................................................................................................................................1 Introduction ...............................................................................................................................................2 Factors in the regulation of an economy....................................................................................................3 Conclusion .................................................................................................................................................4 References .................................................................................................................................................5
  • 2. 3. “Good regulation is the key to a successful economy.” Discuss. Introduction The aim of the use of effective regulation system can be really helpful in the promotion of an economic growth. There are many different forms of regulations which are being used and certain shifts which are also seen in the past few years in terms of different regulation policies which are being adopted by most of the developing countries. From 1960s-1980s the market failure factor was used in the legitimization of direct government involving in the productive areas in the developing countries by promotion of industrialization with the help of investments, import substitutions and through the extension of public ownerships of many enterprises. However because of the short term success and most of the factors which were handled by the state were not found to be successful, this regulation of the economic process was narrowed and redefined ensuring that there are different types of policies which are required to be used in which the markets can operate easily without facing any threats. The process of privatization and many processes of the economic liberalisation in the developing countries have created failures and problems which have led to the present focus on regulation. The regulation process involves giving more of the responsibilities to the private sector in order to handle the economic workings correctly. The markets can easily compete and consumers being provided with plenty of goods and services at prices which they are willing to purchase. The economic regulation theory was developed in the 19th century and this case for the regulation in the economy is premised on failure of significant markets which exists and this is normally the result of scope in production and the economies of scale, imperfections in the information in handling the market transactions and the existence of externalities and incomplete markets. In most of the developing countries the process of regulation is handled perfectly by the state. This has helped a great deal in the achievement of the sustainable and equitable expanding of the infrastructural services in those countries which are poor (KAHN, 1988). However, regulating the markets might not produce the welfare improvement results in comparison with the outcome in an economy under the market conditions which are imperfect. The information asymmetries might lead to the contribution of the imperfect regulation. There are various information levels expected about factors such as the demand, revenues and cost. The agent involved in regulating holds all the details about the regulator requirements in regulating optimally and here are certain incentives mechanisms and rules which the regulator must try to establish in coaxing this detail from private sector. Although there is a less chance of receiving all the details which
  • 3. are required in the regulation optimally in maximizing the social welfare, but the outcomes of regulations in terms of prices and outputs can still be the 2nd best as compared to the competitive markets which centres the focus on the entry barriers. The ownership of the state helps in providing with more details to the regulators as compared to private ownership. So this means that the contraction should not be that much problematic when the ownership and regulation process is in the hands of the state. However the ownership of the state is connected with the inadequate incentives in gathering and using the details in maximizing economic welfare. In other words it can be said that there is a trade off in between the state ownership which reduces the detailed asymmetries and the regulation transaction costs and the incentives which are under the state and private ownership for those agents who are maximizing the efficiency in an economy (SEABRIGHT, 2007). Factors in the regulation of an economy The regulation in the welfare improvement is assuming the actions of the regulatory authority are motivated through public interest. This is highly criticised by the theorists who raise an argument that the individuals are self interested out or in the public arena and therefore in analyzing the process of regulation as the relations product between various groups. The regulatory capture concept involves the process of regulation which becomes biased favouring the particular interests. In most of the extreme cases the regulatory capture says that the regulation can always lead to the sub optimal social outcomes as there is inefficient bargaining which takes place between the interest groups over the utility rents. The regulators can also favour the producer interests as the regulatory benefits concentration and regulatory costs diffusion enhances the lobby groups’ power such as the rent seekers (JOSKOW, 2000). Regulation also subjects to the political capture and it can be considered as more threat as compared to the producer groups’ capture outside the political system. Where there are political captures, the regulation is found to be becoming a self interest tool within the government or ruling elite. Generally there is an expectation that the outcomes and processes involved in regulatory regime is determined through the economy’s institutional context as reflected in the informal and formal rules of the transacting of economy. By setting some of the rules, the institutions bring an impact on the development of an economy. The development of economy is not simply seen as the amassing of economic resources in form of human and physical capital but as an institution building matter in reducing the information imperfections, maximizing the economic incentives and reducing the transaction costs. In the institution building there are laws and the social and political conventions and rules which are on the basis for
  • 4. the success in the market exchange and production. There are some of the relevant conduct modes which the regulatory state might look forward to include such as the probity in the administration in public, courts independence, cronyism and low corruption and the civic responsibility traditions. Institution building involves the building of a great regulation regime which might be a tough one for the developing countries and also the transition economies in this present era (KELSEY, 2002). The regulation system outcomes can be assessed with the help of factors such as the efficiency and effectiveness. The effective regulation helps in achieving the welfare goals which are set by the state for the authority involved in regulation. In most of the developing countries, the objectives of the regulation in the social welfare are not likely to be simple concerned with the economic pursuit efficiency but with broader goals in promoting the sustainable development and the reduction in poverty. The efficient regulation system can help in achieving the welfare goals at the economic costs which are very low. There are 2 forms of regulation in terms of economic costs. The first one is the direct cost of regulatory system administration which is reflected in the appropriations of the budget of regulatory bodies. The second one is the regulation compliance costs which are considered as external to those regulatory agencies and are found to be falling on the producers and the consumers in the economic costs terms of meeting the requirements with the regulations and evading them (BERNHOLZ, 2007). Conclusion Regulatory quality can also be achieved through great governance. The regulatory system which functions well balances the consistency, transparency and the accountability. Accountability needs the agencies involved in the regulatory processes to be responsible for their actions, in operating with the legal powers and observing the rules of processes which are due when reaching at final decisions. There should be consistency followed in the regulation of an economy. If there is inconsistency, the economy will be disturbed through the uncertainty which might be seen prevailing for the investors who might not be willing to invest because of the fear of rising cost of capital (NELSON, 1981). The state’s capacity in providing the strong institutions of regulations is considered as a vital determinant in how well the markets are performing. An economy which has an institutional capacity developed will be able to implement and design the effective regulation which should help in contributing to the improvement in the overall economic growth. If there are weaknesses which are found in the institutional capacity in delivering the good regulation, there are predictions which might affect the economic development quite badly. The regulation process in most of
  • 5. the Asia economies is quite bad especially in those developing countries which are financially weak and lacks that high class technology in measuring some of the areas where regulation is required. It can be therefore concluded that the good regulation can help in improving the overall economy and the government must play an active role in carrying out such processes from time to time. References JOSKOW, P. L. (2000). Economic regulation. Cheltenhan, UK, Edward Elgar. NELSON, J. R., (1981). Economic regulation: essays in honor of James R. Nelson. [East Lansing], Institute of Public Utilities, Division of Research, Graduate School of Business Administration, Michigan State University. KAHN, A. E. (1988). The economics of regulation: principles and institutions. Cambridge, Mass, MIT Press. SEABRIGHT, P. (2007). The economic regulation of broadcasting markets: evolving technology and challenges for policy. Cambridge, Cambridge Univ. Press. BERNHOLZ, P. (2007). Political competition and economic regulation. London [u.a.], Routledge. KELSEY, J. (2002). International economic regulation. Burlington, VT, Ashgate.
  • 6. the Asia economies is quite bad especially in those developing countries which are financially weak and lacks that high class technology in measuring some of the areas where regulation is required. It can be therefore concluded that the good regulation can help in improving the overall economy and the government must play an active role in carrying out such processes from time to time. References JOSKOW, P. L. (2000). Economic regulation. Cheltenhan, UK, Edward Elgar. NELSON, J. R., (1981). Economic regulation: essays in honor of James R. Nelson. [East Lansing], Institute of Public Utilities, Division of Research, Graduate School of Business Administration, Michigan State University. KAHN, A. E. (1988). The economics of regulation: principles and institutions. Cambridge, Mass, MIT Press. SEABRIGHT, P. (2007). The economic regulation of broadcasting markets: evolving technology and challenges for policy. Cambridge, Cambridge Univ. Press. BERNHOLZ, P. (2007). Political competition and economic regulation. London [u.a.], Routledge. KELSEY, J. (2002). International economic regulation. Burlington, VT, Ashgate.

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