A regulated market (RM) or coordinated market is an idealized system where the government or other organizations oversee the market, control the forces of

supply and demand In microeconomics, supply and demand is an economic model of price determination in a Market (economics), market. It postulates that, Ceteris_paribus#Applications, holding all else equal, the unit price for a particular Good (economics), good ...

, and to some extent regulate the market actions. This can include tasks such as determining who is allowed to enter the market and/or what prices may be charged.''Encyclopedia of Management'', Pennsylvania State University, Gale, 2009, p. 31. The majority of

financial markets A financial market is a market in which people trade financial securities and derivatives at low transaction costs. Some of the securities include stocks and bonds, raw materials and precious metals, which are known in the financial marke ...

such as

stock exchanges A stock exchange, securities exchange, or bourse is an Exchange (organized market), exchange where stockbrokers and stock trader, traders can buy and sell security (finance), securities, such as share (finance), shares of stock, Bond (finance) ...

are regulated, whereas over-the-counter markets are usually not at all or only moderately regulated. One of the reasons for regulation can be the importance of the regulated activitymeaning the harm suffered should the industry fail would be so fatal that regulators (

governments 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 is a m ...

legislators A legislator, or lawmaker, is a person who writes and passes laws, especially someone who is a member of a legislature. Legislators are often elected by the people, but they can be appointed, or hereditary. Legislatures may be supra-natio ...

) cannot afford the risk. This includes fields like

banking A bank is a financial institution that accepts Deposit account, deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital m ...

financial services Financial services are service (economics), economic services tied to finance provided by financial institutions. Financial services encompass a broad range of tertiary sector of the economy, service sector activities, especially as concerns finan ...

. Secondly, it is common for some markets to be regulated under the claim that they are natural monopolies, or that a

monopoly A monopoly (from Greek language, Greek and ) is a market in which one person or company is the only supplier of a particular good or service. A monopoly is characterized by a lack of economic Competition (economics), competition to produce ...

would very likely appear should there be no regulation. It is crucial to prevent misuse of monopoly power, as this can lead to delivery of poor services with very high prices. This includes for example the

telecommunications Telecommunication, often used in its plural form or abbreviated as telecom, is the transmission of information over a distance using electronic means, typically through cables, radio waves, or other communication technologies. These means of ...

water Water is an inorganic compound with the chemical formula . It is a transparent, tasteless, odorless, and Color of water, nearly colorless chemical substance. It is the main constituent of Earth's hydrosphere and the fluids of all known liv ...

, gas, or

electricity supply Mains electricity, utility power, grid power, domestic power, wall power, household current, or, in some parts of Canada, hydro, is a general-purpose alternating-current (AC) electric power supply. It is the form of electrical power that is de ...

. Often, regulated markets are established during the partial

privatisation Privatization (rendered privatisation in British English) can mean several different things, most commonly referring to moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation w ...

of government controlled

utility In economics, utility is a measure of a certain person's satisfaction from a certain state of the world. Over time, the term has been used with at least two meanings. * In a normative context, utility refers to a goal or objective that we wish ...

assets. A variety of forms of regulations exist in a regulated market. These include controls, oversights, anti-discrimination,

environmental protection Environmental protection, or environment protection, refers to the taking of measures to protecting the natural environment, prevent pollution and maintain ecological balance. Action may be taken by individuals, advocacy groups and governments. ...

taxation A tax is a mandatory financial charge or levy imposed on an individual or legal person, legal entity by a governmental organization to support government spending and public expenditures collectively or to Pigouvian tax, regulate and reduce nega ...

, and

labor law Labour laws (also spelled as labor laws), labour code or employment laws are those that mediate the relationship between workers, employing entities, trade unions, and the government. Collective labour law relates to the tripartite relationship be ...

s. In a regulated market, the government regulatory agency may legislate regulations that privilege

special interests Advocacy groups, also known as lobby groups, interest groups, special interest groups, pressure groups, or public associations, use various forms of advocacy or lobbying to influence public opinion and ultimately public policy. They play an impor ...

, known as

regulatory capture In politics, regulatory capture (also called agency capture) 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 of a minor ...

Changes in regulation

Regulation is subject to changes over time, due to both technological advances as well as the change in attitude towards regulation in general. An example for industries that are no longer regulated is the rail service or

airlines An airline is a company that provides air transport services for traveling passengers or freight (cargo). Airlines use aircraft to supply these services and may form partnerships or alliances with other airlines for codeshare agreements, in ...

in the US. On the other hand, there are also industries that did not need regulation in the past, but are in need of it now. This includes for example the

real estate market Real estate business is the profession of buying, leasing, managing, or selling real estate (commercial, industrial, residential, or mixed-use premises)."Real estate": Oxford English Dictionary online: Retrieved September 18, 2011 Marketing and ...

. Another category are the markets that encountered major changes in regulatory approaches due to various

crises A crisis (: crises; : critical) is any event or period that will lead to an unstable and dangerous situation affecting an individual, group, or all of society. Crises are negative changes in the human or environmental affairs, especially when ...

. A prime example are

following stock market crashes. The practice of regulating markets dates back centuries when ancient societies relied on standardised weights and measurements and practised punishment for theft and fraud. For the most part, market regulations have been imposed by the central governments and to a lesser extent by interest groups. One notable example of such interest groups is medieval

guilds A guild ( ) is an association of artisans and merchants who oversee the practice of their craft/trade in a particular territory. The earliest types of guild formed as organizations of tradespeople belonging to a professional association. They so ...

. They were associations of merchants and

artisans An artisan (from , ) is a skilled worker, skilled craft worker who makes or creates material objects partly or entirely by handicraft, hand. These objects may be wikt:functional, functional or strictly beauty, decorative, for example furnit ...

that controlled the practise of their profession in their particular area. Guilds defined requirements for practising their profession, which usually meant that only guild members could practise their profession or sell their goods within their city. Since the beginning of the 20th century, labour groups at times have had regulatory roles in some markets.

Controversy

Regulation is considered a polarising issue. Those in favour of regulating usually see it as beneficial to the wider society, for example regulations targeting

ecological Ecology () is the natural science of the relationships among living organisms and their environment. Ecology considers organisms at the individual, population, community, ecosystem, and biosphere levels. Ecology overlaps with the closely re ...

racial Race is a categorization of humans based on shared physical or social qualities into groups generally viewed as distinct within a given society. The term came into common usage during the 16th century, when it was used to refer to groups of va ...

, or

religion Religion is a range of social system, social-cultural systems, including designated religious behaviour, behaviors and practices, morals, beliefs, worldviews, religious text, texts, sanctified places, prophecies, ethics in religion, ethics, or ...

related issues. Those against regulation see it as a tool for

lobbying Lobbying is a form of advocacy, which lawfully attempts to directly influence legislators or government officials, such as regulatory agency, regulatory agencies or judiciary. Lobbying involves direct, face-to-face contact and is carried out by va ...

or as a source for creating

unfair competition Anti-competitive practices are business or government practices that prevent or reduce competition in a market. Antitrust laws ensure businesses do not engage in competitive practices that harm other, usually smaller, businesses or consumers. ...

. Some advocates of

free market In economics, a free market is an economic market (economics), system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of ...

generally see any regulation except for the most essential ones as costly and inefficient.

Examples of regulatory bodies

Food and Drug Administration The United States Food and Drug Administration (FDA or US FDA) is a List of United States federal agencies, federal agency of the United States Department of Health and Human Services, Department of Health and Human Services. The FDA is respo ...

(FDA) *

Securities and Exchange Commission The United States 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. Its primary purpose is to enforce laws against market m ...

(SEC) * Environmental Protection Agency (EPA)

References

{{reflist Free market Economic systems Market (economics)

Changes in regulation

Controversy

Examples of regulatory bodies

See also

References