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Capitalism has the same problem all economic systems have, and that is a unidirectional drive toward more regulation. More regulation benefits entrenched compan

Capitalism has the same problem all economic systems have, and that is a unidirectional drive toward more regulation. More regulation benefits entrenched companies and creates barriers to entry to new ones, who have increasingly bigger hurdles to overcome and a rapidly expanding list of ways they can be sued or regulated out of existence. Regulation always increases; it never declines (except for small, select bits in little deregulation burps here and there). So long as a government endures, you can expect there will continue to be more and more laws and regulations, not fewer. Eventually the system ties itself up with too much red tape, like one of those old cartoons where the character becomes tangled in a ball of yarn. Which is not to say total deregulation is a good thing. You need regulations in place to protect individuals, who often lack power and information, from suffering by decisions made by corporate super organisms with significant advantages in power and information. The problem with the national movement toward ever more regulation is it enables the successful to do the same thing they do in every other socioeconomic model, which is to build firewalls aimed at preserving their class and wealth and keeping out competitors. I say this as a diehard capitalist who sees it as the best economic model we've happened upon yet. Particularly in the early days of a well-regulated capitalist society, there's immense potential for anyone to reach the top. However, the longer the society continues, the more it stifles itself with labyrinthine laws, credentialism, certifications, and 10,000 rules to operate legally in any established industry (e.g., finance, automotive, utilities, etc.).

ionised 10y ago
The first paragraph in your post can just as easily be applied to the idea of no regulation. Without regulations you have corporate anarchy and an impotent and uninformed consumer base. Free-market capitalism naturally gravitates towards monopolies without a regulatory body to step in an attempt to preserve fair competition. Regulation can be used to entrench big players that is true, but it can also be used to prevent entrenchment. The trick is finding a nice balance and it is an ongoing struggle. And this; Regulation always increases; it never declines Is clearly untrue, as it was a series of deregulations of the financial services industry beginning with Reagan's clown-act presidency that led to our last financial crash. Protections put in place in the decades before were set up to prevent exactly the problems we have faced over the last few years.
Kadin 10y ago
There is, pretty clearly, a sort of "Goldilocks Problem" with regards to the optimal amount of regulation: you need some level of regulation, or you get monopolization by first-movers who then use their advantage to prevent the emergence of competitors and extract rents. On the other extreme, too much regulation is typically associated with regulatory capture, and protection of entrenched participants ... such that they can prevent competitors and extract rents. You can end up at the same end-state (small number of very large market participants, little competition, huge barriers to entry) via either route. I do not think that it is fair to say that regulation always increases and never declines; in the U.S. we have seen regulation swing back and forth over time. The early U.S. was a largely deregulated economy, which became regulated due to demands by citizens that companies be controlled; the tide turned in the later 20th century, with widespread utilities and transportation deregulation, fewer union-favoring labor rules, the repeal of Glass-Steagall, etc.; I think it's still unclear whether the tide has turned again today.

ionised 10y ago

The first paragraph in your post can just as easily be applied to the idea of no regulation. Without regulations you have corporate anarchy and an impotent and uninformed consumer base. Free-market capitalism naturally gravitates towards monopolies without a regulatory body to step in an attempt to preserve fair competition. Regulation can be used to entrench big players that is true, but it can also be used to prevent entrenchment. The trick is finding a nice balance and it is an ongoing struggle. And this; Regulation always increases; it never declines Is clearly untrue, as it was a series of deregulations of the financial services industry beginning with Reagan's clown-act presidency that led to our last financial crash. Protections put in place in the decades before were set up to prevent exactly the problems we have faced over the last few years.

Kadin 10y ago

There is, pretty clearly, a sort of "Goldilocks Problem" with regards to the optimal amount of regulation: you need some level of regulation, or you get monopolization by first-movers who then use their advantage to prevent the emergence of competitors and extract rents. On the other extreme, too much regulation is typically associated with regulatory capture, and protection of entrenched participants ... such that they can prevent competitors and extract rents. You can end up at the same end-state (small number of very large market participants, little competition, huge barriers to entry) via either route. I do not think that it is fair to say that regulation always increases and never declines; in the U.S. we have seen regulation swing back and forth over time. The early U.S. was a largely deregulated economy, which became regulated due to demands by citizens that companies be controlled; the tide turned in the later 20th century, with widespread utilities and transportation deregulation, fewer union-favoring labor rules, the repeal of Glass-Steagall, etc.; I think it's still unclear whether the tide has turned again today.