The framework of economic regulations governs the power relationships between individuals and economically active organisations.
Regulations affect the legitimacy of economic power and its efficiency. They are also a tool that governments can use to achieve political objectives.
The regulatory environment has an impact on the overall health of the economy. The UK Treasury called for a new approach to financial regulation in 2011, for example, to prevent the kind of economic instability which created a recession in 2007-8. Insufficient regulation allows unfairness and instability, whereas over-regulation can inhibit innovation, enterprise, effort and, ultimately, people’s satisfaction.
Economic regulations need to change rapidly to keep up with modernity. And economic activity is increasingly global, requiring global regulation – as described later (3.4.1).
The costs of providing the framework of economic regulations form part of government spending on administration (3.2.3). Non-governmental regulatory organisations can charge fees to recover their costs.
As described earlier (3.1.2.1), regulations are instituted by politicians and are given legal authority. They can be categorised according to the reasons for which they are introduced:
· Some regulations are necessary to ensure that markets work efficiently, for the smooth working of the economy (3.3.1.1).
· Consumers of goods and services, and investors, need to be protected from being cheated (3.3.1.2). They can then buy with confidence, contributing to overall prosperity.
· Health and safety regulations are needed for products and services, working conditions and public infrastructure (3.3.1.3). This is a moral and political issue as well as being a matter of economic legitimacy.
· Some regulations are needed to ensure that employees are not exploited and to provide them with some economic security (3.3.1.4).
· The environment needs to be protected (3.3.1.5). Whilst this can be seen as a moral issue, it is also essential to avoid serious long term economic damage.
(This is an archive of a page intended to form part of Edition 4 of the Patterns of Power series of books. The latest versions are at book contents).