There are non-state forms of regulation, just as there are non-state forms of government.

  • Customers regulate by buying or rejecting products, and by writing positive or negative reviews, or through positive or negative word-of-mouth.
  • Lenders and investors regulate by establishing standards in return for their money.
  • Insurance companies regulate by establishing rules for coverage
  • Firms like Underwriters Laboratory and NSF provide testing for products

The list could go on and on. There are also cultural forms of regulation. A key example is one of the most powerful regulations in America’s history — the prohibition against speaking the N-word. This rule….

  • Ends careers and destroys fortunes when violated
  • Was never passed by any legislature
  • Is not enforced by police or courts
  • Is one of the most honored and obeyed rules in American history

Market forces and social norms are actually superior forms of regulation because they involve no violence and can rapidly adapt to changing needs. State regulation, by comparison, is slow because it depends on a political process. It’s also prone to manipulation by special interests. Even worse, The State itself is almost completely unregulated. No one really controls The State, and The State suffers no harm when it fails. Quite the contrary: Politicians tend to use failure as an excuse to grab more power and spend more money.

These examples point the way to the future . . .

For a deeper look at this subject read our short article, “How To Think About Regulation.”

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By Perry Willis & Jim Babka


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