3.6 - Limits to Regulation Flashcards
1
Q
What are the potential problems with government intervention?
A
Regulatory failure
Govt failure
Opportunity cost
2
Q
What is regulatory failure?
A
Intervention is either ineffective or leads to deeper + more persistent market failures
3
Q
What is regulatory capture?
A
Regulators take increasing sympathy + lenience on a utility
4
Q
What is government failure?
A
Intervention worsens market failure/efficiency
5
Q
What are the causes of government failure?
A
Distorted price signals
Excessive administrative costs
Information gaps
Unintended consequences
6
Q
Which factors are used to judge intervention?
A
Real prices
Size of profit
Employment
Performance targets
Productivity
Investment
Environment
