The “Why” of Government Regulation
1.Some economists believe in an efficient
market and would like the role of government
to be making sure that competition can exist.
2.Other economists have less confidence in
the market, and believe that direct intervention
(i.e., regulation) is needed to correct market failures.
Approaches to Government Control
concentrates on maintaining competition.
The principal thrust of antitrust is to
curtail monopoly power.
direct intervention in the decisions of firms,
forcing them to behave in a way that will produce
results as near as possible to those that would
occur in a competitive market.
Economic Theories of Regulation
1.Market Failure Theory
2.Capture Theory 3.Public Choice Theory
Rationale for Regulation of Insurance
1.Vested in the Public Interest Rationale failures
in this field can affect persons other than
those directly involved in the transaction fiduciary
nature of insurance and extensive influence