Government Regulation
In the article, Richard Wellen notes that regulation is not always performed by the state, but refers to the establishment of systems and agencies that sanction, monitor, and supervise the business. According to the author, the role of the government within a market-oriented society includes that of increasing the nature of efficiency through which the market operates. In the market system, the government does this through the correction of market failures that bring about instances such as monopolies or even situations that contribute to pollution or social harm to bring about efficient functioning of the entire system. In addition to this, the author notes that the government does have a role in the provision of integrated infrastructure. This may be in the form of social overhead capital, which refers to the various activities that do enhance, directly and indirectly, the levels of output and efficiency in production. Take the example of education, banking, and health facilities, among others. The government does have a role in ensuring equity; the reason for this is that markets do not bring about equity in the distribution of income. The government ensures this through the use of taxes to share the income among certain groups within the market.
The disagreements concerning the methods, goals, and the consequences of the regulation all arise from the government through its powers, becoming a challenge to capitalism. Wellen notes that most individuals view the restrictions that the government uses as interference that is unwarranted with the decision making of private businesses. The idea forwarded is that the regulations would lead to the creation of expensive compliances as well as red tape that would bring about inefficiencies and, at the same time would stifle the process of innovations and its benefits. The argument presented is that the government acts as a nanny state with its policies as it believes the businesses in the market are unable to look after their safety. The problem is that without the government and its interventions, capitalism will gain ground; thus, the government acts as a means through which capitalism is challenged. According to Dimitri Zenghelis, technological innovation is recognized as one of the main drivers of economic growth. For innovation to take place, there has to be a ready market that would act as a motivation for individuals to innovate. Thus a strong government policy is required to create a challenge to capitalism that, in the long run, might be a hindrance to innovation and growth of the market.
In addition to this, the disagreements concerning the goals, methods, and consequences of regulations come in the face of the government’s use of policy as a market catalyst. An example of this is noted in the levies placed on the use of fossil fuels while granting subsidies for businesses that utilize renewable energy. The imposing of more taxes on a particular sector will as well make investors lose interest in this sector. In the same way, increased taxation would as well discourage investment from an entrepreneur who would want to start a business. Government policies can also have an impact on the interest rates as the cost of borrowing might go up, leading to a reduction in consumer spending. The disagreements towards government intervention in the market are argued in that it would reduce the ability of businesses to sustain themselves.