Unregulated By Government Doesn’t Mean Unregulated

Many people believe that markets must be either regulated by government or unregulated. They believe that if we don’t want markets out of control, lacking in regularity, predictability, and quality control, we have to let governments regulate them.

But that’s false, because markets forces regulate markets. The actions of every market participant constrain and influence the behavior of every other market participant in ways that make everyone’s actions regular—more or less predictable, falling within understandable bounds.

Consider market prices. In healthy industries, market forces are the only regulators of prices. The prices offered by some restrict the prices others can ask in any realistic hope that they’ll be accepted. If the Giant supermarket near my home is charging $2.00 a pound for red peppers, the nearby, upscale Eddie’s Market will not be able to charge a whole lot more than $2.00 a pound and still sell many peppers. Neither will the farm stands that open nearby in the summer. All will charge roughly the same price.

There is strong regularity to the prices of red peppers at any place and time. This regulation is accomplished by each seller’s reaction to the actions of his customers and competitors. In short, market forces regulate prices.

The same goes for quality. My wife won’t buy peppers that aren’t fresh and firm as long as she thinks she can get better peppers at some other store. The grocers might wish they could sell all their peppers, even those that have been on the shelf too long, but customers like my wife, and the self-interested actions of other stores, won’t let them. Their customers’ choices and competitors’ actions restrict—regulate—the quality of produce they can offer.

If market forces regulate product quality, the question arises, do we need government regulation at all?

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One Response to Unregulated By Government Doesn’t Mean Unregulated

  1. Matt Wavle says:

    The answer to the “problem” of ONE “selfish, greedy” capitalist is:
    SIX “selfish, greedy” capitalists. And without force (the backing of the state) monopolies cease to exist.

    Regulations also increase prices and/or decrease quality by reducing competition. Ask why Walmart and other huge corporations actually lobby for MORE regulation. It’s because it discourages start-ups and thereby reduces competition in the marketplace.

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