Protection of Consumer, Employee, and the Environment

Abstract

Regulation is a type of government intervention in economic activity through commands and controls enforced with coercive power. Government as a regulator of business has evolved over three major periods in the United States (see Chapter 3). Philosophically, Emile Durkheim stated that people will be destroyed, and societies will disintegrate without some sort of social regulation, particularly when there is rapid economic progress. Of all organizations, the state is most equipped to provide for the welfare of the system and protect labor. Government’s regulation to business generally falls into two categories—economic (or industrial) regulation and social regulation. Economic regulation sets prices or conditions on entry of firms into an industry. It also includes the regulation of financial firms. Social regulation, otherwise, involves the correction of externalities (see Chapter 2) and is largely protective in nature. Consumer protection refers to the regulatory framework designed to ensure the rights of consumers, as well as fair competition and accurate information in the marketplace. The underlying rationale of consumer protection is to correct market failure associated with asymmetric information (see Chapter 2).