Regulation - Reasons For Regulation

Reasons For Regulation

Regulations, like any other form of coercive action, have costs as well as benefits. Efficient regulations can be defined as those where total benefits exceed total costs.

Regulations can be justified for a variety of reasons, including:

• Market failures - regulation due to inefficiency. Intervention due to a classical economics argument to market failure.
  • Risk of monopoly
  • Collective action, or public good
  • Inadequate information
  • Unseen externalities
• Collective desires - regulation about collective desires or considered judgments on the part of a significant segment of society
• Diverse experiences - regulation with a view of eliminating or enhancing opportunities for the formation of diverse preferences and beliefs
• Social subordination - regulation aimed to increase or reduce social subordination of various social groups
• Endogenous preferences - regulation's purpose is to affect the development of certain preferences on an aggregate level
• Irreversibility - regulation that deals with the problem of irreversibility – the problem in which a certain type of conduct from current generations results in outcomes from which future generations may not recover from at all.
• Professional conduct - the regulation of members of professional bodies, either acting under statutory or contractual powers.
• Interest group transfers - regulation that results from efforts by self-interest groups to redistribute wealth in their favor, which may be disguised as one or more of the justifications above.

The study of formal (legal and/or official) and informal (extera-legal and/or unofficial) regulation constitutes one of the central concerns of the sociology of law. Legal sociologists have in particular been interested in exploring the limits of formal and legal regulation in changing patterns of social behaviour.