One aspect of political economy that I like to impress on my students is the following: If a business can erect a barrier to entry to limit competition, it will be happy to do so. Many individuals are under the impression that businesses are enamored with the free market and will resist any attempt at being regulated. However, there are many examples where firms DEMAND regulation because it will ultimately restrict entry and eliminate competition, thus raising profits for the incumbent firm.
Many businesses argue that regulation is necessary to protect consumers, protect the environment, or other laudable goals. The real goal, however, is to limit competition by any means necessary.
Another interesting fact about the erection of entry barriers is that governments at all levels have a hand in the process primarily because these barriers take the form of a regulation or mandate from government.
The Institute for Justice, a public-interest law firm that specializes in the removal of entry barriers for entrepreneurs, has a number of cases online available for viewing (available here).
Remember: Firms will demand regulation as long as it creates an entry barrier, stifles competition, and increases profits.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment