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 A financial market is a market in which people trade financial securities and derivatives at low transaction costs. Some of the securities include stocks and bonds, raw materials and precious metals, which are known in the financial ma ...

such as

stock exchanges A stock exchange, securities exchange, or bourse is an exchange where stockbrokers and traders can buy and sell securities, such as shares of stock, bonds and other financial instruments. Stock exchanges may also provide facilities for the ...

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 (

governments A government is the system or group of people governing an organized community, generally a state. In the case of its broad associative definition, government normally consists of legislature, executive, and judiciary. Government is a ...

legislators A legislator (also known as a deputy or lawmaker) is a person who writes and passes laws, especially someone who is a member of a legislature. Legislators are often elected by the people of the state. Legislatures may be supra-national (for e ...

) cannot afford the risk. This includes fields like

banking A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets. Because ...

financial services Financial services are the 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, accountancy companies, ...

. 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 A monopoly (from Greek language, 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 situati ...

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 speci ...

, as this can lead to delivery of poor services with very high prices. This includes for example the

telecommunications Telecommunication is the transmission of information by various types of technologies over wire, radio, optical, or other electromagnetic systems. It has its origin in the desire of humans for communication over a distance greater than that ...

water Water (chemical formula ) is an inorganic, transparent, tasteless, odorless, and nearly colorless chemical substance, which is the main constituent of Earth's hydrosphere and the fluids of all known living organisms (in which it acts as ...

, 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 As a topic of economics, utility is used to model worth or value. Its usage has evolved significantly over time. The term was introduced initially as a measure of pleasure or happiness as part of the theory of utilitarianism by moral philosophe ...

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, rel ...

environmental protection Environmental protection is the practice of protecting the natural environment by individuals, organizations and governments. Its objectives are to conserve natural resources and the existing natural environment and, where possible, to repair dam ...

taxation A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, o ...

, and

labor law Labour laws (also known as labor laws or employment laws) are those that mediate the relationship between workers, employing entities, trade unions, and the government. Collective labour law relates to the tripartite relationship between employee ...

s. In a regulated market, the government regulatory agency may legislate regulations that privilege

special interests Advocacy groups, also known as interest groups, special interest groups, lobbying groups or pressure groups use various forms of advocacy in order to influence public opinion and ultimately policy. They play an important role in the developm ...

, 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 prep ...

airlines An airline is a company that provides air transport services for traveling passengers and freight. Airlines use aircraft to supply these services and may form partnerships or alliances with other airlines for codeshare agreements, in whic ...

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 Real estate business is the profession of buying, selling, or renting real estate (land, buildings, or housing)."Real estate": Oxford English Dictionary online: Retrieved September 18, 2011 Sales and marketing It is common practice for an intermed ...

. Another category are the markets that encountered major changes in regulatory approaches due to various

crises A crisis ( : crises; : critical) is either any event or period that will (or might) lead to an unstable and dangerous situation affecting an individual, group, or all of society. Crises are negative changes in the human or environmental affair ...

. A prime example are

following

stock market crashes A stock market crash is a sudden dramatic decline of stock prices across a major cross-section of a stock market, resulting in a significant loss of paper wealth. Crashes are driven by panic selling and underlying economic factors. They often foll ...

. 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 A merchant is a person who trades in commodities produced by other people, especially one who trades with foreign countries. Historically, a merchant is anyone who is involved in business or trade. Merchants have operated for as long as industry ...

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, ...

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 Ecology () is the study of the relationships between living organisms, including humans, and their physical environment. Ecology considers organisms at the individual, population, community, ecosystem, and biosphere level. Ecology overlaps wi ...

racial A race is a categorization of humans based on shared physical or social qualities into groups generally viewed as distinct within a given society. The term came into common usage during the 1500s, when it was used to refer to groups of variou ...

, or

religion Religion is usually defined as a social- cultural system of designated behaviors and practices, morals, beliefs, worldviews, texts, sanctified places, prophecies, ethics, or organizations, that generally relates humanity to supernatur ...

related issues. On the contrary, those against regulation see it as a tool for

lobbying In politics, lobbying, persuasion or interest representation is the act of lawfully attempting to influence the actions, policies, or decisions of government officials, most often legislators or members of regulatory agencies. Lobbying, whic ...

or as a source for creating

unfair competition Unfair may refer to: * Double Taz and Double LeBron James in multiverses ''fair''; unfairness or injustice Injustice is a quality relating to unfairness or undeserved outcomes. The term may be applied in reference to a particular event or situ ...

, be it intentional or not. Some advocates of

free market In economics, a free market is an economic system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of government or any ot ...

generally see any regulation except for the most essential ones as costly and inefficient.

Examples of regulatory bodies

Food and Drug Administration The United States Food and Drug Administration (FDA or US FDA) is a federal agency of the Department of Health and Human Services. The FDA is responsible for protecting and promoting public health through the control and supervision of food ...

(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 ...

(EPA)

References

{{reflist Free market Economic systems Market (economics)

Changes in regulation

Controversy

Examples of regulatory bodies

See also

References