Any government doing the regulation has perverse incentives. The main effect of government regulation is to keep entrenched business successful and keep out ne

Any government doing the regulation has perverse incentives. The main effect of government regulation is to keep entrenched business successful and keep out new competition -- regulatory capture. The government has to do a balancing act because it doesn't compensate the victim and it doesn't want to drive businesses out of town -- how much regulation is too much, how much is too little. Look at how the FDA works -- they have nothing to lose when the deny a drug, and a lot hassle when the approve a drug that turns out to be harmful. This is why so many potentially effective drugs sit on the shelf waiting for further tests.