Setting safety standards: regulation in the public and private sectors
The rise and fall of government regulation challenges both sides in the debate over the proper role of government and business in protecting people against various risks. Leaving business to its own devices is suspect for reasons suggested by horror stories such as the exploding Ford Pinto. The "failures" of the free market are well recognized. Consumers frequently lack information. Businesses often lack the incentive to internalize "external costs" such as pollution. The costs of organizing collective interests can be prohibitive; and without the watchful eye of regulatory inspectors, the unscrupulous lack a powerful reason for self-restraint. But, as the revolt against regulation reveals, government regulation has its own serious shortcomings.