Regulation: Protecting People from the Market
Introduction
There are advantages and disadvantages to government regulation on a local, state, or federal level. Read the content below to learn more about how government regulations can benefit groups such as consumers, while also creating challenges like barriers to entry in a market.
Antitrust policies are primarily concerned with limiting the accumulation and use of market power. Government regulation is used to control the choices of private firms or individuals. Regulation may constrain the freedom of firms to enter or exit markets, to establish prices, to determine product design and safety, and to make other business decisions. It may also limit the choices made by individuals.
In general terms, there are two types of regulatory agencies. One group attempts to protect consumers by limiting the possible abuse of market power by firms. The other attempts to influence business decisions that affect consumer and worker safety. Regulation is carried out by more than 50 federal agencies that interpret the applicable laws and apply them in the specific situations they find in real-world markets. Table 2.2 lists some of the major federal regulatory agencies, many of which are duplicated at the state level. The other person tries to change business decisions that affect the safety of customers and workers. More than 50 federal agencies are in charge of regulation. These agencies interpret the laws that apply and put them into practice in real-world markets. Some of the most important federal regulatory agencies are listed in Table 2.2. Many of these agencies also exist at the state level.
Table 2.2 Selected Federal Regulatory Agencies and Their Missions
Financial Markets
Federal Reserve Board
Regulates banks and other financial institutions
Federal Deposit Insurance Corporation
Regulates and insures banks and other financial institutions
Securities and Exchange Commission
Regulates and requires full disclosure in the securities (stock) markets
Commodity Futures Trading Commission
Regulates trading in future markets
Product Markets
Department of Justice, Antitrust Division
Enforces antitrust laws
Federal Communications Commission
Regulates broadcasting and telephone industries
Federal Maritime Commission
Regulates international shipping
Surface Transportation Board
Regulates railroads, trucking, and noncontiguous domestic water transportation
Federal Energy Regulatory Commission
Regulates pipelines
Health and Safety
Occupational Health and Safety Administration
Regulates health and safety in the workplace
National Highway Traffic Safety Administration
Regulates and sets standards for motor vehicles
Federal Aviation Administration
Regulates air and traffic aviation safety
Food and Drug Administration
Regulates food and drug producers; emphasis on purity, labeling, and product safety
Consumer Product Safety Commission
Regulates product design and labeling to reduce risk of consumer injury
Energy and the Environment
Environmental Protection Agency
Sets standards for air, water, toxic waste, and noise pollution
Department of Energy
Sets national energy policy
Nuclear Regulatory Commission
Regulates nuclear power plants
Corps of Engineers
Sets policies on construction near rivers, harbors, and waterways
Labor Markets
Equal Employment Opportunity Commission
Enforces anti-discrimination laws in the workplace
National Labor Relations Board
Enforces rules and regulations governing contract bargaining and labor relations between companies and unions
Note. Adapted from “Applications of the Production Possibilities Model,” by Rittenberg, 2011, Principles of Economics, Chapter 2, Section 3. Copyright 2010 Flat World Knowledge, Inc.
