By Alasdair Macleod – Re-Blogged From http://www.Silver-Phoenix500.com
Regulations are nearly always introduced with the best intentions. In financial services, they aim to stop unscrupulous brokers and banks from ripping off the public through bad practices. Manufacturers are banned from making products which are dangerous to children, the environment, or which might fail through shoddy workmanship. However, state intervention in commercial matters is based on shaky grounds, consistent with denial of the role and workings of markets, and an overriding desire to interfere.
This contrasts with a true understanding of why free markets work, and the control the consumer exercises over prices and choice, subordinating them to his subjective decisions. Consequently, regulation is based on an unreasoned belief that the individual needs state intervention to ensure standards are maintained, and that bad practices will be eliminated. The incorrect assumption is that free markets encourage unscrupulous manufacturers and service providers to defraud the consumer, when in fact, reputation becomes the paramount relationship in trade.