The price of regulation


Jamie Whyte has written has interesting article for the The Times about how nothing comes cost-free, but always rests upon individuals. This piece touched upon the issue of regulation within our industries, suggesting that deregulation needs to be one of the key issues facing our economy in recovering from the current crisis.

The costs of regulation are often so great that smaller firms are not large enough to sustain great enough profits to remain in business. This has inevitably lead to many larger firms lobbying for greater legislation in order to stiffle competition and gain a greater market share. As the recent financial crisis showed, we cannot rely on a small number of large dominant firms within the economy. If one fails, we all suffer to a large extent. This logic applies to all industries.

In stifling our smaller firms by forcing excessive amounts of regulation upon them, we undermine the foundations of that industry. This is because stronger competition creates greater incentives for the larger firms to increase efficiency and innovate in order to survive.

This year we were shown how the dominance of financial markets by a few large firms almost had catastrophic effects for society. We should learn from this and not allow regulation to force smaller firms, that are so crucial to our industries, out of business.