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The Public Policy

Regulatory Competition Is the Solution

Unfortunately, the Bush administration thinks it’s the problem.

(Page 2 of 2)

A single bureaucratic regulator inclines, unsurprisingly, not to the public’s interest but to its own. Indeed, that’s long been the complaint about the state insurance commissioners, who have prevented a national market for insurance from developing. When state regulators control prices and terms within their own jurisdictions, companies have no option for relief from excessive and ill-conceived regulation short of abandoning doing business there.

On the other hand, if regulators at different governmental levels are required to compete — as under an optional chartering system — businesses can hold regulators accountable by choosing which to be governed by.

WHERE THERE is a system of true interstate competition among regulators, as opposed to a feudal system of regulatory fiefdoms, a national market emerges. Consumers will hold regulators accountable for their policies by purchasing products from companies governed by consumer-friendly regulators — wherever those products originate.

Until the recent banking crisis, there was widespread consensus that the regulatory competition created by optional bank chartering had served consumers well. Predictably, politicians are using the banking crisis as an excuse to expand their power.

Worse, perhaps, politicians and bureaucrats are using fallacious arguments against regulatory competition as a way of avoiding their own responsibility for the current crisis, which was caused by the worst monetary policy since the Great Depression.

Regulatory competition isn’t the problem; it’s an immense and important part of the solution.

Page:   12

topics:
Business

About the Author

Lawrence A. Hunter is president of the Alliance for Retirement Prosperity.

Letter to the Editor View all comments (3) |

Goodbye Right Wingers| 12.24.08 @ 2:54AM

"On the other hand, if regulators at different governmental levels are required to compete -- as under an optional chartering system -- businesses can hold regulators accountable by choosing which to be governed by."

A good example of this was when Countrywide moved from OCC to OTS in an effort to hold its regulators "accountable." Fantastic result!!!! All hail regulatory competition!!!! All hail the lustful, unbridled energy of free market capitalism! The proof is in the bailout!!!

It's all over for your right wing crowd. Goodbye. Good f*** riddance.

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