Markets and Regulatory Policy in International Perspective

Few markets have escaped regulatory intervention by state authorities. State regulations almost everywhere guide and constrain market forces. The political process over-rides the market process to an extent which is incompatible with the spirit of a free market society. This view is held by a growing number of voters in many western countries. In the United States and in Great Britain government is actively engaged in reducing bureaucratic control in favour of more private initiative. In other countries, for example in the Federal Republic of Germany and some northern European countries, the continual growth of state intervention of the 1960s and 1970s has come to a halt. Increasingly, state intervention has been criticized for failing to achieve its objectives, or at least for failing to balance costs and benefits. Also, the need to avoid ever-increasing budget deficits in low-growth economies requires a careful reconsideration of government spending. However, deregulation policies have been tentatively adopted by only a few European industries — for example, bus transport and garbage disposal. The political process once more reveals its natural tendency to conserve the status quo and its property-right structure when there are conflicts of interest. There are other shortcomings of collective decision-making such as the tendency to ignore the long-run consequences of a change in the incentives for private agents. Thus, it seems that more thorough analysis of regulatory policies is urgently needed. The regulation conference and workshop held at Berlin in July 1981 were conceived to promote such studies.