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by kube-system
972 days ago
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Yes, some regulations don't work. "Regulations are the only way to solve market externalities" is not the same statement as "All regulations solve market externalities". The market can never solve market externalities, by definition. |
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The vast majority of regulations don't work. At least not if your definition of "work" is to actually solve market externalities. But they're great for job security for regulators and politicians.
> The market can never solve market externalities, by definition.
This is not correct. Markets can solve externalities, through market transactions that shift ownership so that the externalities are internalized. The main thing preventing this is government regulation that raises transaction costs so that the necessary adjustments cannot be made. This has been known at least since Ronald Coase published his famous theorem.
In other words, government regulators prevent markets from solving externalities, and then complain that markets can't solve externalities so government regulators have to step in.
It's true that there are cases where there are no market transactions that can internalize an externality. But in those cases, regulation can't solve them either; there are no solutions for such cases. Welcome to the real world.