Economic regulations govern the power relationships between the individuals in society and the economically active organisations which affect them. They affect the legitimacy of economic power and its efficiency.
The regulatory environment has an impact on the overall health of the economy. Insufficient regulation allows unfairness and instability, whereas over-regulation can inhibit innovation, enterprise, effort and, ultimately, people’s satisfaction.
Regulations have to change rapidly in order to keep up with modernity. And economic activity is increasingly global, requiring global regulation (220.127.116.11).
The costs of regulatory activities may form part of government spending (3.2.3), or non-governmental regulatory organisations can charge fees to recover their costs.
As described earlier (18.104.22.168), they are instituted by politicians and are given legal authority. They can be categorised according to the reasons for which they are introduced:
- Some regulations are necessary for the smooth working of the economy (22.214.171.124).
- Consumers of goods and services, and investors, need to be protected from being cheated (126.96.36.199).
- Consumers also need to be protected against products and services which harm them (188.8.131.52).
- Some regulations are needed to enforce agreed human rights (184.108.40.206).
- The environment needs to be protected (220.127.116.11).