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Regulation is the management of
complex systems A complex system is a system composed of many components which may interact with each other. Examples of complex systems are Earth's global climate, organisms, the human brain, infrastructure such as power grid, transportation or communication sy ...
according to a set of rules and trends. In systems theory, these types of rules exist in various fields of
biology Biology is the scientific study of life. It is a natural science with a broad scope but has several unifying themes that tie it together as a single, coherent field. For instance, all organisms are made up of cells that process hereditary ...
and
society A society is a group of individuals involved in persistent social interaction, or a large social group sharing the same spatial or social territory, typically subject to the same political authority and dominant cultural expectations. Soc ...
, but the term has slightly different meanings according to context. For example: * in biology,
gene regulation Regulation of gene expression, or gene regulation, includes a wide range of mechanisms that are used by cells to increase or decrease the production of specific gene products ( protein or RNA). Sophisticated programs of gene expression are w ...
and metabolic regulation allow living organisms to adapt to their environment and maintain
homeostasis In biology, homeostasis ( British also homoeostasis) (/hɒmɪə(ʊ)ˈsteɪsɪs/) is the state of steady internal, physical, and chemical conditions maintained by living systems. This is the condition of optimal functioning for the organism and ...
; * in
government A government is the system or group of people governing an organized community, generally a state. In the case of its broad associative definition, government normally consists of legislature, executive, and judiciary. Government i ...
, typically regulation means stipulations of the delegated legislation which is drafted by
subject-matter expert A subject-matter expert (SME) is a person who has accumulated great knowledge in a particular field or topic and this level of knowledge is demonstrated by the person's degree, licensure, and/or through years of professional experience with the s ...
s to enforce primary legislation; * in business,
industry self-regulation Industry self-regulation is the process whereby members of an industry, trade or sector of the economy monitor their own adherence to legal, ethical, or safety standards, rather than have an outside, independent agency such as a third party entit ...
occurs through
self-regulatory organization A self-regulatory organization (SRO) is an organization that exercises some degree of regulatory authority over an industry or profession. The regulatory authority could exist in place of government regulation, or applied in addition to governmen ...
s and
trade association A trade association, also known as an industry trade group, business association, sector association or industry body, is an organization founded and funded by businesses that operate in a specific industry. An industry trade association partic ...
s which allow industries to set and enforce rules with less government involvement; and, * in psychology,
self-regulation theory Self-regulation theory (SRT) is a system of conscious, personal management that involves the process of guiding one's own thoughts, behaviors and feelings to reach goals. Self-regulation consists of several stages. In the stages individuals must f ...
is the study of how individuals regulate their thoughts and behaviors to reach goals.


Social

Regulation in the social, political, psychological, and economic domains can take many forms: legal restrictions promulgated by a
government A government is the system or group of people governing an organized community, generally a state. In the case of its broad associative definition, government normally consists of legislature, executive, and judiciary. Government i ...
authority, contractual obligations (for example, contracts between insurers and their insureds),
self-regulation Self-regulation may refer to: *Emotional self-regulation *Self-control, in sociology/psychology *Self-regulated learning, in educational psychology *Self-regulation theory (SRT), a system of conscious personal management *Industry self-regulation, ...
in psychology, social regulation (e.g. norms), co-regulation, third-party regulation, certification, accreditation or market regulation. State-mandated regulation is government intervention in the private market in an attempt to implement
policy Policy is a deliberate system of guidelines to guide decisions and achieve rational outcomes. A policy is a statement of intent and is implemented as a procedure or protocol. Policies are generally adopted by a governance body within an orga ...
and produce outcomes which might not otherwise occur,Orbach, Barak
What Is Regulation? 30 Yale Journal on Regulation Online
1 (2012)
ranging from consumer protection to faster growth or technological advancement. The regulations may prescribe or proscribe conduct ("command-and-control" regulation), calibrate incentives ("incentive" regulation), or change preferences ("preferences shaping" regulation). Common examples of regulation include limits on environmental
pollution Pollution is the introduction of contaminants into the natural environment that cause adverse change. Pollution can take the form of any substance (solid, liquid, or gas) or energy (such as radioactivity, heat, sound, or light). Pollutants, th ...
, laws against child labor or other
employment Employment is a relationship between two parties regulating the provision of paid labour services. Usually based on a contract, one party, the employer, which might be a corporation, a not-for-profit organization, a co-operative, or any o ...
regulations,
minimum wage A minimum wage is the lowest remuneration that employers can legally pay their employees—the price floor below which employees may not sell their labor. Most countries had introduced minimum wage legislation by the end of the 20th century. B ...
s laws, regulations requiring truthful labelling of the ingredients in food and drugs, and food and drug safety regulations establishing minimum standards of testing and quality for what can be sold, and zoning and
development approvals Planning permission or developmental approval refers to the approval needed for construction or expansion (including significant renovation), and sometimes for demolition, in some jurisdictions. It is usually given in the form of a building perm ...
regulation. Much less common are controls on market entry, or
price A price is the (usually not negative) quantity of payment or compensation given by one party to another in return for goods or services. In some situations, the price of production has a different name. If the product is a "good" in the ...
regulation. One critical question in regulation is whether the regulator or government has sufficient information to make ex-ante regulation more efficient than ex-post liability for harm and whether industry self-regulation might be preferable. The
economics Economics () is the social science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics anal ...
of imposing or removing regulations relating to markets is analysed in empirical legal studies, law and economics, political science, environmental science, health economics, and
regulatory economics Regulatory economics is the economics of regulation. It is the application of law by government or regulatory agencies for various purposes, including remedying market failure, protecting the environment and economic management. Regulation Reg ...
. Power to regulate should include the power to enforce regulatory decisions. Monitoring is an important tool used by national regulatory authorities in carrying out the regulated activities. In some countries (in particular the Scandinavian countries) industrial relations are to a very high degree regulated by the labour market parties themselves (self-regulation) in contrast to state regulation of minimum wages etc.


Reasons

Regulations may create costs as well as benefits and may produce unintended reactivity effects, such as defensive practice. Efficient regulations can be defined as those where total benefits exceed total costs. Regulations can be advocated for a variety of reasons, including *
Market failure In neoclassical economics, market failure is a situation in which the allocation of goods and services by a free market is not Pareto efficient, often leading to a net loss of economic value. Market failures can be viewed as scenarios where indiv ...
s – regulation due to inefficiency. Intervention due to what economists call
market failure In neoclassical economics, market failure is a situation in which the allocation of goods and services by a free market is not Pareto efficient, often leading to a net loss of economic value. Market failures can be viewed as scenarios where indiv ...
. ** To constrain sellers' options in markets characterized by
monopoly A monopoly (from Greek language, Greek el, μόνος, mónos, single, alone, label=none and el, πωλεῖν, pōleîn, to sell, label=none), as described by Irving Fisher, is a market with the "absence of competition", creating a situati ...
** As a means to implement collective action, in order to provide public goods ** To assure adequate
information Information is an abstract concept that refers to that which has the power to inform. At the most fundamental level information pertains to the interpretation of that which may be sensed. Any natural process that is not completely random, ...
in the market ** To mitigate undesirable
externalities In economics, an externality or external cost is an indirect cost or benefit to an uninvolved third party that arises as an effect of another party's (or parties') activity. Externalities can be considered as unpriced goods involved in either c ...
* Collective desires – regulation about collective desires or considered judgments on the part of a significant segment of
society A society is a group of individuals involved in persistent social interaction, or a large social group sharing the same spatial or social territory, typically subject to the same political authority and dominant cultural expectations. Soc ...
* Diverse experiences – regulation with a view of eliminating or enhancing opportunities for the formation of diverse preferences and beliefs * Social subordination – regulation aimed to increase or reduce social subordination of various social groups *
Endogenous Endogenous substances and processes are those that originate from within a living system such as an organism, tissue, or cell. In contrast, exogenous substances and processes are those that originate from outside of an organism. For example, ...
preferences – regulation intended to affect the development of certain preferences on an aggregate level * Professional conduct – the regulation of members of
professional bodies A professional is a member of a profession or any person who works in a specified professional activity. The term also describes the standards of education and training that prepare members of the profession with the particular knowledge and skil ...
, either acting under statutory or
contractual powers A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to tran ...
. * Interest group transfers – regulation that results from efforts by self-interest groups to redistribute wealth in their favor, which may be disguised as one or more of the justifications above. The study of formal (legal or official) and informal (extra-legal or unofficial) regulation constitutes one of the central concerns of the sociology of law.


History

Regulation of businesses existed in the ancient early Egyptian, Indian, Greek, and Roman civilizations. Standardized weights and measures existed to an extent in the ancient world, and gold may have operated to some degree as an international currency. In China, a national currency system existed and paper currency was invented. Sophisticated law existed in
Ancient Rome In modern historiography, ancient Rome refers to Roman people, Roman civilisation from the founding of the city of Rome in the 8th century BC to the collapse of the Western Roman Empire in the 5th century AD. It encompasses the Roman Kingdom ...
. In the European
Early Middle Ages The Early Middle Ages (or early medieval period), sometimes controversially referred to as the Dark Ages, is typically regarded by historians as lasting from the late 5th or early 6th century to the 10th century. They marked the start of the Mi ...
, law and standardization declined with the Roman Empire, but regulation existed in the form of norms, customs, and privileges; this regulation was aided by the unified Christian identity and a sense of honor regarding
contract A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to tr ...
s.John Braithwaite, Péter Drahos. (2000). ''Global Business Regulation''. Cambridge University Press. Modern industrial regulation can be traced to the Railway Regulation Act 1844 in the United Kingdom, and succeeding Acts. Beginning in the late 19th and 20th centuries, much of regulation in the United States was administered and enforced by regulatory agencies which produced their own
administrative law Administrative law is the division of law that governs the activities of executive branch agencies of government. Administrative law concerns executive branch rule making (executive branch rules are generally referred to as " regulations"), ...
and procedures under the authority of statutes. Legislators created these agencies to allow experts in the industry to focus their attention on the issue. At the federal level, one of the earliest institutions was the
Interstate Commerce Commission The Interstate Commerce Commission (ICC) was a regulatory agency in the United States created by the Interstate Commerce Act of 1887. The agency's original purpose was to regulate railroads (and later trucking) to ensure fair rates, to elimina ...
which had its roots in earlier state-based regulatory commissions and agencies. Later agencies include the
Federal Trade Commission The Federal Trade Commission (FTC) is an independent agency of the United States government whose principal mission is the enforcement of civil (non-criminal) antitrust law and the promotion of consumer protection. The FTC shares jurisdiction o ...
,
Securities and Exchange Commission The U.S. Securities and Exchange Commission (SEC) is an independent agency of the United States federal government, created in the aftermath of the Wall Street Crash of 1929. The primary purpose of the SEC is to enforce the law against market ...
, Civil Aeronautics Board, and various other institutions. These institutions vary from industry to industry and at the federal and state level. Individual agencies do not necessarily have clear life-cycles or patterns of behavior, and they are influenced heavily by their leadership and staff as well as the organic law creating the agency. In the 1930s, lawmakers believed that unregulated business often led to injustice and inefficiency; in the 1960s and 1970s, concern shifted to
regulatory capture In politics, regulatory capture (also agency capture and client politics) is a form of corruption of authority that occurs when a political entity, policymaker, or regulator is co-opted to serve the commercial, ideological, or political interests ...
, which led to extremely detailed laws creating the
United States Environmental Protection Agency The Environmental Protection Agency (EPA) is an independent executive agency of the United States federal government tasked with environmental protection matters. President Richard Nixon proposed the establishment of EPA on July 9, 1970; it ...
and
Occupational Safety and Health Administration The Occupational Safety and Health Administration'' (OSHA ) is a large regulatory agency of the United States Department of Labor that originally had federal visitorial powers to inspect and examine workplaces. Congress established the agen ...
.


See also

* * * * * * * * * * * * *


References


External links


Centre on Regulation in Europe (CERRE)

New Perspectives on Regulation (2009)
an
Government and Markets: Toward a New Theory of Regulation (2009)

US/Canadian Regulatory Cooperation:
Schmitz on Lessons from the European Union, Canadian Privy Council Office Commissioned Study
A Comparative Bibliography: Regulatory Competition on Corporate Law


Wikibooks

* Legal and Regulatory Issues in the Information Economy
Lawrence A. Cunningham, A Prescription to Retire the Rhetoric of 'Principles-Based Systems' in Corporate Law, Securities Regulation and Accounting (2007)
{{Authority control Economics of regulation * Public policy