A regulated market (RM) or coordinated market is an idealized system where the government or other organizations oversee the market, control the forces of

supply and demand In microeconomics, supply and demand is an economic model of price determination in a Market (economics), market. It postulates that, Ceteris paribus, holding all else equal, in a perfect competition, competitive market, the unit price for a ...

, and to some extent regulate the market actions. This can include tasks such as determining who is allowed to enter the market and/or what prices may be charged.''Encyclopedia of Management'', Pennsylvania State University, Gale, 2009, p. 31. The majority of financial markets such as stock exchanges are regulated, whereas over-the-counter markets are usually not at all or only moderately regulated. One of the reasons for regulation can be the importance of the regulated activity - meaning the harm suffered should the industry fail would be so fatal that

regulators Regulator may refer to: Technology * Regulator (automatic control), a device that maintains a designated characteristic, as in: ** Battery regulator ** Pressure regulator ** Diving regulator ** Voltage regulator * Regulator (sewer), a control de ...

( governments, legislators) cannot afford the risk. This includes fields like banking or

financial services Financial services are the Service (economics), economic services provided by the finance industry, which encompasses a broad range of businesses that manage money, including credit unions, banks, credit-card companies, insurance companies, acco ...

. Secondly, it is common for some markets to be regulated under the claim that they are

natural monopolies A natural monopoly is a monopoly in an industry in which high infrastructural costs and other barriers to entry relative to the size of the market give the largest supplier in an industry, often the first supplier in a market, an overwhelming adv ...

, or that a monopoly would very likely appear should there be no regulation. It is crucial to prevent misuse of

monopoly power A monopoly (from Greek el, μόνος, mónos, single, alone, label=none and el, πωλεῖν, pōleîn, to sell, label=none), as described by Irving Fisher, is a market with the "absence of competition", creating a situation where a spec ...

, as this can lead to delivery of poor services with very high prices. This includes for example the telecommunications, water, gas, or electricity supply. Often, regulated markets are established during the partial

privatisation Privatization (also privatisation in British English) can mean several different things, most commonly referring to moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation when ...

of government controlled utility assets. A variety of forms of regulations exist in a regulated market. These include controls, oversights,

anti-discrimination Discrimination is the act of making unjustified distinctions between people based on the groups, classes, or other categories to which they belong or are perceived to belong. People may be discriminated on the basis of race, gender, age, relig ...

, environmental protection, taxation, and labor laws. In a regulated market, the government regulatory agency may legislate regulations that privilege special interests, known as

regulatory capture In politics, regulatory capture (also agency capture and client politics) is a form of corruption of authority that occurs when a political entity, policymaker, or regulator is co-opted to serve the commercial, ideological, or political interests ...

Changes in regulation

Regulation is subject to changes over time, due to both technological advances as well as the change in attitude towards regulation in general. An example for industries that are no longer regulated is the

rail service Rail transport (also known as train transport) is a means of transport that transfers passengers and goods on wheeled vehicles running on rails, which are incorporated in tracks. In contrast to road transport, where the vehicles run on a pre ...

or airlines in the US. On the other hand, there are also industries that did not need regulation in the past, but are in need of it now. This includes for example the real estate market. Another category are the markets that encountered major changes in regulatory approaches due to various crises. A prime example are stock exchanges following stock market crashes. The practice of regulating markets dates back centuries when ancient societies relied on standardised weights and measurements and practised punishment for theft and fraud. For the most part, market regulations have been imposed by the central governments and to a lesser extent by interest groups. One notable example of such interest groups is medieval

guilds A guild ( ) is an association of artisans and merchants who oversee the practice of their craft/trade in a particular area. The earliest types of guild formed as organizations of tradesmen belonging to a professional association. They sometimes ...

. They were associations of merchants and

artisans An artisan (from french: artisan, it, artigiano) is a skilled craft worker who makes or creates material objects partly or entirely by hand. These objects may be functional or strictly decorative, for example furniture, decorative art, s ...

that controlled the practise of their profession in their particular area. Guilds defined requirements for practising their profession, which usually meant that only guild members could practise their profession or sell their goods within their city. Since the beginning of the 20th century, labour groups at times have had regulatory roles in some markets.

Controversy

Generally, regulation is a very polarising issue. Those who are in favour of regulating usually see it as beneficial to the wider society. This has to do for example with regulations targeting ecological, racial, or religion related issues. On the contrary, those against regulation see it as a tool for lobbying or as a source for creating unfair competition, be it intentional or not. Some advocates of free market generally see any regulation except for the most essential ones as costly and inefficient.

Examples of regulatory bodies

* Food and Drug Administration (FDA) *

Securities and Exchange Commission The U.S. Securities and Exchange Commission (SEC) is an independent agency of the United States federal government, created in the aftermath of the Wall Street Crash of 1929. The primary purpose of the SEC is to enforce the law against market ...

(SEC) *

Environmental Protection Agency A biophysical environment is a biotic and abiotic surrounding of an organism or population, and consequently includes the factors that have an influence in their survival, development, and evolution. A biophysical environment can vary in scale f ...

(EPA)

References

{{reflist Free market Economic systems Market (economics)

Changes in regulation

Controversy

Examples of regulatory bodies

See also

References