What works better for true transformation: Market forces or regulations?
By Venkatesh Subramanian on 13/2/2015 One thing we can all agree is that what we need massive transformation at many levels to ensure we create much more wealth and prosperity including a fair and equitable distribution of the same across the world. Yet how we bring about such transformation is quite unclear. While many powerful technologies have been invented and widely adopted, they alone have not been able to create the level of wealth needed for the entire world and often have left us with a very skewed distribution of wealth. At the same time, only regulations focused efforts have miserably stifled the very innovation and entrepreneurship needed to create the wealth in the first place. What should the solution look like. Some of the challenges that must be addressed are:
- How to ensure destructive areas of the technology and innovation are kept at bay (i.e, the negative effects on the environment and sustainability)? Often regulation provides the best solution in this area
- How to ensure big monopolies are not created in the process? Here we have no clear answer, while regulations has effectively failed us to stop the monopolies from forming, market forces and technology and innovation have provided at least a means for a David to fight a Goliath
- Finally how do we ensure that benefits that technology and innovation bring are more equitably distributed?
Often regulations tend to operate in the same mindset that created the problem to solve it. But market forces and innovation at least brings a fresh mindset to solve the problem. Take this food for thought “The solution to preventing future economic meltdowns is to over regulate Banks of a certain size, but have no regulation or lightly regulate new entrants and specially one with a completely innovative idea or technology”!