Containing Market Power
The traditional public-interest view of economic regulation is normative: that regulatory measures should be taken to reduce excessive market power. More specifically, government should regulate industries where there are too few firms to ensure vigorous rivalry. Government should regulate industries particularly in the extreme case of natural monopoly. In earlier. times, regulation was justified on the dubious grounds that it was -needed to prevent cutthroat or destructive competition.
This was one argument for continued control over railroads, trucks, airlines, and buses, as well as for regulation of the level of agricultural production. Economists today have little sympathy for this argument. Meter all. competition with increased efficiency and low prices is exactly what an efficient market system is designed to ensure.
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