We had an interesting discussion today on the purpose of regulation. The case in point was the banking and securities regulation in 1933 & 1934.
Three key purposes:
1/ To ensure fairness, leveling the playing field – e.g. information disclosure, less friction
2/ To manage externalities – e.g. systematic risks or spillover effects
3/ To build public confidence – although it may create some enduring wedges as well
On the third point, the banking or securities act is not the perfect example; but in healthcare/drug, FDA seems to deliver a better outcome.
Also today, China’s State Administration for Market Regulation issued statement on fines over grocery group buying companies.
In the long run, good regulations are helping the industry grow – it encourages balanced growth, instead of growth at all cost.