Essay: Theories of Regulation

22 Oct

Essay: Theories of Regulation

Sample Essay

Before commencing on the main task it is important to have a background understanding on the two theories namely, economic interest theory and public interest theory. Again a comparison between the two theories shall also be considered in this section.

Public interest theory and as can be noted from its nominal connotation is geared towards the public good. It therefore accounts for regulation with a specific aim for public interest. This public interest can further be underscored as the preferred mode of distribution or better still the allocation of scarce resources both at the individual point of view and at the collective point of view. It is also worth noting that public interest theory and market failure have a relationship as they are both used in economic regulation. In this regard, public interest theory as an economic regulation is founded on the fact that government is responsible in regulating markets in those moments when markets cannot regulate themselves (Stigler 1971). Further to this market failure manifest itself in instances where the price mechanism that controls supply and demand breaks down, compelling government to take charge (Peltzman 1976).

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