The Case for Regulatory Intervention and Its Limits

This chapter addresses the issue of the balance between the state and the market. It examines the right scope and extent of regulatory intervention and discusses the question of whether a lawmaker should at all intervene into economy. Moreover, this chapter presents the conceptual foundations of the regulatory intervention. Furthermore, it provides a synthesis of the economic literature on why governments regulate and evaluates the advantages and disadvantages of the different forms of regulation, by involving an analysis of how firms respond to various kinds of incentives and controls offered by government.