I certainly do, especially when it comes to politics. I’ve been pushing myself over the past four or five months to really go through what I believe political.
Test it. Contemplate it. Resolve issues. And reform my beliefs into something that lines up with not only my faith, but how we should treat others (and live).
The regulatory system has been hot and heavy on my mind the past few weeks. As a capitalist, and lover of freedom, I’m against the government intervening in the market. Nothing good comes of it.
But as a concerned citizen, and a Christian (who knows the world is rife with sin), I know you can’t leave people to their own instruments. You need order. Structure is needed.
I’m against government regulation, but I still see the need for regulation. How the heck am I going to resolve this?
I Give You… Private Regulation
That’s right my friend, there’s a fix to this predicament.
But how can regulations work if the government isn’t enforcing them?
Instead of using force, private regulatory companies use reputation and trust. Consumers want to know they’re getting the best product. They want a standard they can look to and say, “Ok, this product fits this standard, I trust this standard, so I’m going to buy it.”
One of my fellow Google Plussers, Brad Dillon, describes this system below.
Regulations aren’t necessarily bad, it’s who’s doing the regulating and what kind of skin do they have in the game. Like the private groups doing the NON-GMO project, or the Underwriters Laboratories Company that sets all kinds of standards on electronics products. They do their own testing, set their own higher standards, and put their UL symbol on things for approval. That symbol and their work is what represents them, it’s their reputation and it’s all they have. People who produce products want that UL approval and tag on their product.
Government regulation doesn’t need to maintain any kind of reputation, well, we know their reputation isn’t great. Their solution is simply more control, more bureaucrats, and of course, more money. Then, they fail to do what they promised in the future, because… why would they?
Remember also most of the banking and financial scandals that end up coming to light aren’t because the SEC finally got it right… it’s typically because another private company or investor catches on to the scam someone else is running. These people tend to regulate themselves and each other for good reason.
Companies and consumers get lazy about such regulation (moral hazard) when they have this belief that a government agency is doing that job for them. I don’t know how many times or how bad people have to be let down by this belief before they take matters back into their own hands and enforce a competitive market by strong consumer action.
Another part of regulation though is that big business benefits from one size fits all solutions, so a big company is more likely to support and even help write legislation for the industry since they can more easily absorb these costs and at the same time limit their total liability… it’s the small time businesses that have a hard time keeping up on all levels.
Regulatory capture is quite attractive, once the government has control, they make a nice target to acquire. Why bother competing and listening to all the market and consumer demands when you can just control the apparatus and get a government enforced monopoly by way of burdensome regulations? It’s cost effective to do so. [Emphasis Added]
What Did He Mention Above?
- Regulations aren’t bad. It’s who’s doing the regulating that’s important.
- Private regulatory companies rely on reputation and trust.
- Companies want these standards because it validates their product in the consumer’s eye.
- Government regulation isn’t based on reputation. It’s based on money, political and corporate interests, and power.
- Private organizations are the ones who discover these industry scandals. The government is always late to the party.
- Companies tend to regulate themselves and competitors for good reason. It reins in fraudulent business tactics, and keeps competition fair.
- Companies and consumers get lazy when they rely on the government to regulate the market. This is what they call a “moral hazard.”
- Big business benefits from government regulation.
- Big businesses can easily absorb regulatory costs. Small businesses can’t.
- Government regulation tends to create monopolies, destroy small businesses, and kill competition.
Private Regulation Exists, My Friend!
This isn’t some fairly tale land. It’s real.
Brad mentioned one company in particular, Underwriters Laboratories Company (UL).
UL is a global independent safety science company with more than a century of expertise innovating safety solutions from the public adoption of electricity to new breakthroughs in sustainability, renewable energy and nanotechnology. Dedicated to promoting safe living and working environments, UL helps safeguard people, products and places in important ways, facilitating trade and providing peace of mind.
UL is one of many private regulatory entities who take upon themselves to innovate, inspect, and set standards for their specific industries.
Not only is their goal to provide safety to you, the customer, but they also offer knowledge, expertise, and a whole host of services to keep you informed.
The Comics Code Authority (also known as the Comics Code) was another example of private regulations. The Comics Code was the standard used throughout the Comic industry from the 1960s until 2011. It was finally abandoned in 2011 by all major comic companies.
Why you ask? Because Marvel and other big comic companies had established themselves as respectable icons in the comic industry. The Comics Code Authority wasn’t providing the ratings that Marvel and DC Comics needed to adequately inform their consumers, so Marvel and DC took it upon themselves to break off.
Now, Marvel and DC Comics are providing informational ratings for their customers. If a private regulatory organization fails to provide enough value, it’s left behind for something better. It’s competition in the regulatory business!
Some of the Benefits
Private regulation gives you a whole host of benefits that government regulation simply can’t match.
- Low compliance costs
- Low cost overall. Private regulatory entities finance themselves from business, instead of taxpayers.
- Flexible and responsive to new technology, concerns, suggestions, from companies and customers alike.
- Completely voluntary
- Eliminates heavy paperwork
- Businesses know the costs of such regulation and can easily adapt to it.
- Promotes transparency between business and consumer
- Effective enforcement of regulations through legal contracts, pulling products out of the market, public announcements, etc.
- Well formulated guidelines and firm specific recommendations so businesses can easily adopt new practices.
- Minimum to no government interference
The Best of Both Worlds
No longer do you have to stress over your desire to protect customers from harm, and have a Free Market system.
The private regulatory industry is your answer for no more stressful nights. And the best part is, this isn’t theory. It’s real, it works, and it’s been successfully running itself for decades.
Beats the heck out of bureaucratic red tape, don’t you say?