Saturday, April 14, 2012

The truth about Regulations

Regulations:  Rules that must be complied with or a fine will be levied.  Examples include Environmental Protection Agency regulations that force factories to invest in technology to reduce carbon dioxide and other pollution into the atmosphere.

According to National Review, "The Week," (April 30, 2012 issue), "Big Business doesn't really mind them, especially when they prevent other firms from competing."  This allows the big business to gain a larger market share. Regulations aren't free market, yet firms seeking to shore up the bottom line "profit" don't necessarily care about free market.

"That's why health insurance companies wanted Obamacare:  it gets rid of the small market insurance companies by forcing them to comply with new regulations.  One such regulation would force insurance companies to accept patients with preexisting conditions," according to National Review.  This is like taking in a debt, and results in bad business practice.

Large companies can eat the cost or shift it to customers by raising prices.  Small companies are often forced to raise prices or close their doors.  So while it's easy for large companies to raise prices, smaller companies can't do this so easily as it makes it harder to complete.  It's often easier to simply go out of business, or at least lay off workers.

"New business start ups are presently at a 30 year low, and adding more regulations are only going to increase this statistic," National Review writes.

So a few regulations are fine in that it keeps industries and firms honest.  Yet as regulations increase, we reach a point of negative returns.  Too many regulations result in anti-capitalistic markets that benefit big business.

No comments: