Regulation (Economics)

The oversight and control of economic activities by government or its agents to ensure safety and health, efficiency, transparency, and equity. The desire to maximize profit without adequate consideration of social responsibility has prompted governments to regulate the activities of businesses.

Today, regulation can be found in almost all facets of business undertakings because of the potential of external effects and inequity. Regulations cover industrial activity and pollution, worker safety and compensation, consumer protection laws (including the rights to know and product safety), the requirement to disclose material information in securities markets and in banking and investment, and business organization (to ensure competition).

Combination laws or antitrust laws regulate business collusion and illegal pricing activities. Such regulation goes back to the 19th century during the era of big business, when trusts mushroomed to take advantage of monopolies and unfair prices. The U.S. Justice Department oversees mergers by evaluating law and industry concentration.

In the United States, Congress may enact regulatory laws or delegate the promulgation of rules and enforce ment to specialized agencies such as the Securities and Exchange Commission, the Federal Reserve, NASDAQ (National Association of Securities Dealers Automated Quotation [system]), and NASA (National Aeronautics and Space Administration).

In the 1930s and 1980s, there was a strong desire to regulate markets after the Great Depression and the mortgage crises, respectively. In a similar vein, the stock and housing irregularities of major energy and invest ment companies in the first decade of the 21st century brought into focus the need for stringent regulation or enforcement. Regulation may not always provide the best results for market operations; as a result of which deregulation may be effected to remove bad or ineffective laws. The late 1970s and early 1980s saw a wave of deregulation in the United States to remove or amend old banking and investment laws.