What Is Regulation and Deregulation?

Regulation is the process of governments passing laws to control certain activities, often restricting some business activities. Deregulation is the opposite process of governments removing these restrictions and granting businesses greater freedom.

Purpose of Regulation

Regulation laws may be passed to protect the public from what is viewed as unethical or dangerous business activities.

Example of Regulation

For example, New Zealand regulates research on biotechnology to protect public health and safety and to ensure ethical research practices.

Purpose of Deregulation

Deregulation may be enacted because regulations may be seen as harmful to businesses or competition.

Example of Deregulation

An example of deregulation is the U.S. Energy Policy Act of 1992, which removed restrictions on American electricity companies in an attempt to increase competition.

Problems of Deregulation

Deregulation can create disruption in the market and harm consumers. For example, Tom Allison, a counsel to the U.S. Senate Commerce Committee, argued that deregulation of the American airline industry led to disruptions and increased costs.

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