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Why are rules and regulations important?

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Quick Answer

Rules and regulations can help keep workers safe and prevent harm for business and industrial practices. They can also ensure that companies compete in a fair manner. Regulations can help ensure that businesses do not collude to raise prices.

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Why are rules and regulations important?
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Full Answer

During the early stages of the Industrial Revolution, rules and regulations were light. This occurred in the United States as well, and many businesses used exploitative techniques to prevent workers from leaving. Throughout the 20th century, regulations helped eliminate child labor and raised the pay of factory workers, miners and people in other fields.

Rules and regulations also affect entire industries. By outlawing anti-competitive practice, lawmakers and regulators seek to prevent one company from dominating a field and raising prices because there is no competition. However, this technique does not work in certain fields. Electrical companies, for example, are generally granted a monopoly because having multiple companies running power lines is inefficient. These companies are usually regulated heavily.

Libertarians argue that rules and regulations are rarely needed and that market forces can effectively regulate companies. They also argue that rules and regulations prevent new companies from entering certain fields. Opponents of this point of view allude to historical abuses of power and the lengthy period of time it takes for these market forces to have an effect.

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