Yeah I do research, among my analyzing. I have done research my whole life, research papers, research projects, through elementary to graduate school. Well the one cool thing about research is that you see things that others might not see, or at least, a combination of things that others may have never seen. For instance I came across a Dutch Competition Act, that starts like this:
“We Beatrix, by the grace of God, Queen of the Netherlands, Princess of Orange-Nassau, etc. etc. etc.
Greetings to all who see or hear these presents! Be it know:”
How cool. They have so many people and deities that are gracing this act that they need three etc. Yes three etc. etc. etc.
And on the whole purpose of this Competition Act; it’s to foster competitive markets in the Netherlands. Can someone explain to me why the government is best suited to foster competition? Anyone…..any intelligent answer gets you a beer.
I believe that the government is best suited to foster competition for several reasons. In my remarks today I shall proffer a set of considerations that hopefully you, John Taylor, will find quite valuable regarding the need for governments to foster competition. The word “foster” simply put means to promote the growth and development of. Ultimately, this is what the government is attempting to accomplish. The idea/task of creating actual, real, “fair”competition can only be accomplished through the use of regulations, as you and I emotionally discussed in my car while parked on Cary Street this weekend. And as much as I know you hate to admit it, without rules, and consequences for not following these rules, there would be chaos. Sometimes I have dirty thoughts about young children, but you know why I don’t act on those thoughts. Because I am regulated. But that’s besides the point. Hopefully after reading my thoughts on the subject you will not respond with a series of quotes and recited definitions, as you are often known for, but will maybe see the light, and realize that everyone isn’t against you. And even if you don’t, I still hope you will buy me a beer.
The first imperative when evaluating market regulations and thus creating or “fostering” competition is to enunciate clearly the public policy objectives that regulations are intended to promote. These are all ideas we spoke about in my car and hopefully all ideas we can agree on. What market characteristics do policymakers seek to encourage? Efficiency? Fair and open access? What phenomena do we wish to discourage or eliminate? Fraud, manipulation, or other unfair practices? Systemic instability? The answers to these questions are obvious and I think we can both agree that the government is doing it’s best to create a fair playing field for all.
A second imperative, once public policy objectives are clearly specified, is to evaluate whether government regulation is necessary for those purposes. In making such evaluations, it is important for you to recognize that even an unregulated market will never truly be “unregulated.” As we spoke about, the self-interest of market participants generates what we will call “private” market regulation. Thus, the real question is not whether a market should be regulated. Rather, the real question is whether government intervention strengthens or weakens private regulation. (Ex. A secretary at a real estate brokers office not being able to quote prices over the phone unless she is licensed etc.) If incentives for private market regulation are weak or if market participants lack the capabilities to pursue their interests effectively, then the introduction of government regulation may improve business, thus improving competition.(A positive) But if private market regulation is effective, then government regulation is at best unnecessary, so why would you care if the government regulated it at all if it didn’t affect you. (Basically a positive, so we now have a positive, plus basically a positive which equals positive.)
Whether government regulation is needed to foster competition isn’t really the question because it’s obvious that they are needed. The question John is what form of government regulation is optimal. A “one-size-fits-all” approach to regulations is almost never appropriate, and for some reason, that is how I feel you look at all of these of regulations. There has to be a set of standards. The degree and type of government regulation needed depends on the types of goods traded, the types of market participants, and the nature of the relationships among market participants.
Since the one-size-fits-all approach isn’t appropriate, maybe we could offer businesses a choice between seeking the benefits and accepting the burdens of government regulation, or forgoing those benefits and avoiding those burdens by transacting in financial markets that are only privately regulated. Either way, there has to be regulations and the only way to make sure everyone is playing fair and competing on the same level is for the government to step in and create a standard across the board.