A regulation is a formal or official rule that must be followed by those it applies. Regulations aim at controlling behavior, ensuring uniformity, reducing or increasing opportunities and also creating standards where they do not exist. In fact, there are agencies whose mandate is to carry out the work of regulations. These agencies include; government agencies, federal agencies and even local agencies. Unfortunately, there are those who benefit from such regulations while others suffer.
Advantages of industrial regulations
It is necessary to have regulations in place due to several reasons, which among them includes; ensuring minimum standards e.g. customers service, equal opportunities at the work place. In addition, weak companies will be protected against the strong ones. Customer’s protection is improved against exploitation especially from monopolistic industries. Industrial regulations enhance ethical behavior at the work place. For example, they ensure equal treatment of employees at the work place. They encourage competition and encourage new entrepreneurs to enter the market (Parto and Brent 81).
Disadvantages of industrial regulations
Compliance with the regulations is sometimes expensive to the firms and instead of protecting the customers as earlier intended; these costs are charged on customers in the form of higher prices of the products. It is also often argued that “politically” connected business take advantage of the regulation and drive both the small and medium sized business out of the market (Shy 67). Another disadvantage of industrial regulation is that it hinders innovations and creativity. It also stifles development due to many bureaucracies that it creates. They can lead to monopolies as opposed to reducing them.
An example of non monopolistic regulation
A perfect example of a regulation imposed on a non-monopolistic industry is “market orders” used for fruits and milk in the United States.
Pros of this regulation
This regulation has ensured that the products produced are of high quality and safe for consumption. The product’s flow into the market is also controlled and thus it reduces cases of surplus or deficit. Through this regulation, uniformity has been improved in the way the products are packaged. Also, reserve of these products is created for use during shortages. To add, there has been a rise in explorations and this has enhanced the quality of the products.
Cons of industrial regulation
“Market orders” has limited competition just like any other cartels. This is because the entrepreneurs must work within this regulation because they are prohibited from providing customers with milk at a cost that is lesser than what the government has authorized. This has increased the government’s revenue at the expense of consumers.
Ways in which regulators can remain honest
Indeed, there has been dishonesty among the regulators. This has made the agencies not to run effectively as intended. Fortunately, there are ways through which the dishonesty levels can be reduced. One, the regulators ought to be adequately remunerated as this will reduce the temptation of defrauding cash.
Secondly, there should be regular training on the dangers of being dishonest. This will serve as to create awareness among regulators. Thirdly, policies should be put in place to revert such behaviors. For example, anti-corruption policy can be formulated. Fourthly, there should be a system of rewarding those who are honest and punishing those who are dishonest. Last but not least, there should be clear segregation of duties so that one person’s work can be appraised by another.
In a word, the intent of imposing regulations is chiefly for the good of both the consumer and the supplier. Certainly, there are benefits that accrue from such regulations but, we cannot assume that they have disadvantages.
Therefore, the operations of such agencies should be monitored so that they are able execute their work effectively, one being getting rid of dishonest personnel. Luckily, there are ways through which dishonest levels can be reduced or eliminated as discussed earlier.