Regulatory Choice
Introduction
For regulation of an activity the state faces a basic choice. It can regulate the
activity by legislation or it can leave it alone. If it leaves the activity alone, it is
in the hands of private citizens. If an activity is so left alone and involves
production and distribution of goods it will fall into the regime of market
forces. While the market is not a direct concern for legal reasoning, it requires
some attention because for many activities it is a constant alternative to
government intervention both in principle and in political rhetoric.
Market
Thomas Jefferson once warned that if government directed “when to sow
and when to reap we would soon want for bread”.
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Laws are backed by force of arms. Markets, by contrast, operate with forces
of self-interest and scarcity, which drive suppliers to produce as much as they
can in pursuit of profits, and drive purchasers to seek the best deal for their
dollar. Market forces are founded on scarcity and self interest because humans
have unlimited wants while the resources to satisfy those wants are limited. As
the fundament of market forces, scarcity drives both buyers and sellers as it
creates the law of supply and demand. These laws determine how limited
resources are used in an attempt to satisfy unlimited wants.
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Market forces are constituted by the desires of purchasers and sellers to better
themselves as they cope with scarcity. These forces provide incentives for
consumers to buy and for sellers to produce. In a market economy, where
they are allowed to operate, they drive participants to strive for the best
position.
Sellers seek to produce at the lowest cost and sell at the best price to make a
profit as they turn goods into dollars. This is the law of supply. Wherever
there is demand there will be a supplier. Sellers are motivated to produce
because they want to maximise their profits. With maximum profits they
maximise their utility (which means benefit, satisfaction or enjoyment). This
law of supply also has an important consequence for the deployment of
resources -
because of the constant desire of sellers to better themselves,
resources will gravitate towards their most productive use.
Buyers seek to satisfy their wants in the best way as they turn dollars into
goods. This is the law of demand - the desire of people to acquire goods and
to acquire goods in a way that maximises their utility.
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Alan Anderson “Get ready for a bidding contest” The Sydney Morning Herald
16 August 2004
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See Hicks (1980).
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