Innovation Is Replacing Regulation

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Innovation Is Replacing Regulation

Innovation Is Replacing Regulation by Giacomo Lev Mannheimer, Foundation For Economic Education

Consumer Protection Is a Competitive Edge

“Many people want the government to protect the consumer, while a much more urgent problem is to protect the consumer from the government,” Milton Friedman said. And it is truer than ever today, since the digital economy and its rules don’t seem to run at the same speed. As a result, many governments around the world – and especially in Europe – are having a hard time justifying to the 21st century consumer the need for endless authorization procedures, stifling regulatory demands of federal agencies, obscure laws on product liability, taxi’s monopolistic driving licenses, notarial records, et cetera.

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The justification for all such regulation usually concerns consumer ignorance. Crucial information about products and services within the market may indeed be ignored or misunderstood by the economic actors participating in it. And since trust among consumers and producers is essential for the economy to flourish, an assurance of quality and safety provided by the government is often viewed as a tool for economic growth and development. Regulation, in this regard, is deemed to be potentially helpful in identifying good suppliers and safe products, as well as in preventing frauds and rip-offs.

Until very recently, even the most stubborn free-marketers accepted the case for government intervention to mitigate market failures generated by the fact that producers would not be able or willing to provide information about give