Should the government regulate businesses?Should the Government regulate businesses? If so, what kinds of laws does the government need to make? If not, why not?

Expert Answers
enotechris eNotes educator| Certified Educator

The purpose of government is to safeguard rights, not regulate business.  Capitalism works precisely because it allows markets to fail.  Congress fails precisely because it attempts to regulate markets. The bad products, the poorly run businesses under Capitalism die a market death, and the better products, the well run businesses live a market life.

Except if you're GM.  Except if your some other large influential business that has Congresspeople under control through your lobbyists, then your crappy business doesn't die, but lingers on, exacerbating the economic problems, because the moribund business then is allowed by blessing of Congress to compete against the better (yet sadly less congressionally influential) companies.

These then cannot flourish as they should, and moreover are put at a huge disadvantage, since they didn't get any free money from the government. Why give your tax money to the government, who can then turn around and give it to some favored business?  It's your money; why can't you favor some business as you see fit?

Government should stay out of business. Now Congress runs GM.  Watch how good the cars become. Meanwhile, Toyota can't make enough Priuses.  Which economic model would you consider superior when having to part with your hard-earned money to buy a car?  The model produced by government mandate, or the model produced by a solvent, profitable car company?

If a business is violating rights, then it is the purpose and responsibility of government to redress the violation, creating laws as necessary, and curtail or alter that business activity, and that's it.

If government would confine its activities regarding business to that, good business would flourish, bad business would diminish, and rights would be preserved.  It's as simple as that.

pohnpei397 eNotes educator| Certified Educator

From the point of view of an economist, the only time when government regulation is appropriate is in the case of what is called "market failure."  There are two major kinds of externalities that can be addressed by regulation:

  1. Externalities
  2. Lack of competition

Externalities (at least negative ones) are things like pollution, where there are hidden costs associated with some economic activity.  There are hidden costs to pollution because it costs money to clean up, or it can cost money to cure people made ill by it.  These costs are not reflected in, for example, the price of a car that pollutes or electricity produced by a polluting power plant.

This is the classic case for government intervention.  The government can impose a variety of regulations to prevent the externality.  These regulations should interfere as little as possible with the market.  So, for example, an economist would say the best way to prevent greenhouse gas emissions is to tax the carbon content of fuels.  If the government did so, the price of the fuel would reflect the pollution it causes.  This would fix the market failure without government actually intruding on the market by telling businesses what to produce, how to produce it, etc.

Other answers have discussed monopolies (lack of competition).

So: government should regulate in the case of market failure.  If it does, it should impose regulations that do not interfere with market processes any more than is necessary.

Ashley Kannan eNotes educator| Certified Educator

This is a complex issue that has been the central principle for many a philosophy and even more writings on the subject.  There is much to be said for the market to act as its own regulator.  The Classically Liberal approach that allowed a sense of laissez faire to guide the relationship between government and business has many positive points.  The market is a living and breathing entity and government control helps to take away from its overall effectiveness.  However, the abuses historically seen when there is little or no industrial oversight are too challenging to ignore.  I think that a balance has to be struck between where business can prosper and flourish, but also one where business is geared towards the improvement of the life of all individuals which includes worker, owner, and management.

readerofbooks eNotes educator| Certified Educator

That question is so broad that I has to have a yes and no answer. There are a lot of business out there. However, if you are speaking of a general answer, I would say that the government should stay out of the the private sector. I know that this is minority position in this current economic climate, but all this current government intervention may produce more problems in the long run. I think what is assumed (and it is a big assumption) is that the government would do a better job if things were regulated. I think in many ways the government is less qualified, even if they are well intentioned, because the government is not a business and they lack the know how.

lrwilliams eNotes educator| Certified Educator

I feel that government should have some regulations as mentioned in post #8 in regards to safety issues and things that effect the environment. I also however feel that they should leave the day to day operations of business alone. The recent business bailouts are the start of government control of businesses.

epollock | Student

Business is already regulated since they have to file incorporation papers, pay wages and abide by federal rules in paying social security, payrolltaxes, etc. They also have to abide by everything from enviornmental laws to air quality statutes.

krishna-agrawala | Student

Some degree of government regulation of private business is necessary in the general interest of people in the society. Such control is exercised by all countries in the world including countries like the USA, which are supposed to be the most capitalist of all the capitalist countries very staunch belief in democratic system of government.

The most common way of regulating private businesses in most of the countries is through its system of taxation and tariffs. These are fixed by the government to support and promote certain type of industries and business practices, and discourage others. In particular there is heavy regulation of foreign trade in form of these tariffs as well as other non tariff barriers like direct restriction on import or export of certain items, or specifying other conditions that restrict international business activities.

In addition to this there are many other laws that regulate business and industrial activities. These include the very general laws of contract that affect business transactions, or law directly intended towards regulating businesses. These deal with issues like, monopolistic practices, consumer safety and and protection of consumer interest, conditions and terms and employment, and industrial safety.Another very important objective of government is to protect the environment.

All these laws are necessary to prevent and control deliberately unethical business practices on part of businesses, to protect the consumers and employees from unfair use of economic power by big companies, and to factor in impact of activities businesses and consumers on others external to thee relationship between them.