What is the theory of economic regulation?
Theory of economic regulation is an economic theory developed by George Stigler. The purpose is to explain 'offer', "demand" and practical use of government regulatory power over the economy. In particular, Stigler examines different ways of being able to influence and use government power to develop their economic needs. The theory also examines the connection between demand for regulation from large companies and consumers. The theory of economic regulation states that when a conflict between these two groups arises, large companies almost always win because they have much more political power for various reasons. Many different interest groups, from large oil companies to small environmental organizations to consumers in general, often seek government regulation. Such an IS Regulation generally aimed at providing a certain advantage or correcting harm against the interest group in question. Groups with greater organizational powers and resources are generally able to ensure greater government regulation in their favor.
by theoryEconomic regulations are almost always able to ensure beneficial regulation over smaller organizations and consumers. Large companies have more work resources and are able to organize effective collective movements. Smaller organizations and consumers tend to organize collective actions so much because of the cost of it and relatively small potential benefits.
Some of the possible government regulation methods are also examined in the theory of economic regulation. Two primary methods are direct regulation of subsidies and protectionistics. Direct subsidies provide short -term benefits, but also encourage new companies to enter the industry, creating more competition. Protectionism, on the other hand, is intentionally created to create obstacles to the entry into the industry. This protects companies from a potentially costly competition.
criticism against the theory of economic regulation mostly includes its relative iGnorization of regulation delivery. The theory of economic regulation focuses mainly on the motivation and methods of those who require economic regulation. However, regulatory bodies have their own motivations, which can make them act in a way different from the motif predicted by large companies. Regulatory bodies generally seek political support and re -election of desire, campaign financing and other benefits. In some cases, support for smaller organizations or consumers can provide these benefits to help large companies.