TWO BRANDS OF REGULATION

It is customary to distinguish between two forms of regulation. Economic:regulation involves the control of prices, entry and exit conditions, and standards of service. It is most important in industries that are natural monopolies. (Recall that a natural monopoly is a market in which the industry’s output can be efficiently produced only by a single firm.) Prominent examples are regulation of public utilities (telephone, electricity, natural gas, and water) as well as regulations in other industries (transportation, radio, and lV). The financial industry has been heavily regulated since the 1930s, with strict rules specifying what banks, brokerage .firms, and insurance companies can and cannot do

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