If a market is “free,” it means there are no rules or oversight. Imagine a soccer game with no rules...it might turn into a bloody, headbutting massacre. Er, wait...they can use their hands, because there are no rules.
A regulated market has some rules. Enforcement helps, or else everyone can just ignore the rules. Most often, we think of governments regulating markets, but industries and labor groups could also set rules. And with all of the shameless lobbying happening...wining and dining politicians...it’s really not a stretch to say that there are groups regulating the market through the government in the U.S. today.
What kind of rules? Any kind. Child labor laws are rules. Minimum wage is a rule. Not being a monopolistic bully is a rule. Consumer protections are rules...food and drug requirements, safety standards, environmental and social reparations, reserve requirements for banks...they’re all over the place. It can be easy to forget some things are rules because we're so used to them. The EPA, the SEC, the FDA, the DEA...all rule-setters.
Back in the day, wealthy people sitting pretty at the top of industries were the ones setting the rules for their own industries. But that was a long time ago.
Supporters of regulated markets think of it like sports games: market mechanisms are great, but only if everyone’s playing fairly. Like in soccer games: no hands, and no bloody headbutting. Fair enough. Opposers of regulated markets think some rules go too far, and dampen market mechanisms. Those who don’t want to follow the rules...like wanting to do illegal drugs, or sell them...will have to go to the black market. And who enforces things in the black market? Whoever has the most force...literally. That’s why black markets can be violent, specifically the very profitable drug trade.
Related or Semi-related Video
Finance: What is the 1934 Securities And...14 Views
Finance a la shmoop what is the 1934 Securities and Exchange Act? okay if
you're going to exchange securities like trade stocks and bonds among yourselves [Stocks and bond exchange between man and woman]
well then there have to be rules right yeah you'd think well there didn't used
to be and then aunt 1934 came along and well she set the table the key element [Aunt setting dinner table]
that 34 Act created was the SEC itself it's not a football conference near
Florida it was a wise creation because it recognized that well whatever the
world looked like in 1934 it was highly likely that 50 years later it would look
a whole lot different and while horses and buggies went away [Horse and carriage disappears]
while that wasn't the case for stocks and bonds and keep in mind that another
Act was created a year earlier cleverly named yes the Securities Act of 1933
while that act focused on primary shares that is original shares like the kind
sold in an IPO well the 1934 Act was all about shares
traded after that initial set it's called the secondary market where
secondary shares are traded not primary ones well this new law made the New York [Group of people dealing in stock market]
Stock Exchange a big deal with big powers and made insider trading illegal
and believe it or not it really wasn't illegal back then and it you know thus
paved the way for many exciting Wall Street movies where greed is sometimes
good and sometimes not [List of Wall Street movies]
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