If a market is “free,” it means there are no rules or oversight. Imagine a soccer game with no rules...it might turn into a bloody, headbutting massacre. Er, wait...they can use their hands, because there are no rules.
A regulated market has some rules. Enforcement helps, or else everyone can just ignore the rules. Most often, we think of governments regulating markets, but industries and labor groups could also set rules. And with all of the shameless lobbying happening...wining and dining politicians...it’s really not a stretch to say that there are groups regulating the market through the government in the U.S. today.
What kind of rules? Any kind. Child labor laws are rules. Minimum wage is a rule. Not being a monopolistic bully is a rule. Consumer protections are rules...food and drug requirements, safety standards, environmental and social reparations, reserve requirements for banks...they’re all over the place. It can be easy to forget some things are rules because we're so used to them. The EPA, the SEC, the FDA, the DEA...all rule-setters.
Back in the day, wealthy people sitting pretty at the top of industries were the ones setting the rules for their own industries. But that was a long time ago.
Supporters of regulated markets think of it like sports games: market mechanisms are great, but only if everyone’s playing fairly. Like in soccer games: no hands, and no bloody headbutting. Fair enough. Opposers of regulated markets think some rules go too far, and dampen market mechanisms. Those who don’t want to follow the rules...like wanting to do illegal drugs, or sell them...will have to go to the black market. And who enforces things in the black market? Whoever has the most force...literally. That’s why black markets can be violent, specifically the very profitable drug trade.
Related or Semi-related Video
Finance: What is The Securities Amendmen...9 Views
finance a la shmoop what is the Securities Amendments Act of 1975
alright people before 1975 we're thinking Nixon era here trading stocks [People greeting Nixon]
was very much a regional thing New York was the Sun and the rest of the world
well more or less just orbited the 1975 Act created a national market clearing [Countries orbiting galaxy]
system so that a share of IBM traded for generally the same price in California
Georgia New Hampshire and New York this way smaller less liquid regional systems [US states appear beside IBM]
or regional pieces or regional trading bins weren't penalized with higher
transaction costs than you know those suit-and-tie wearing wolves on Wall [Transaction costs crossed out]
Street and that's pretty much it that's what the 1975 securities Amendment Act
was all about basically it just was passed to ensure that the SEC would
consider any new regulation that might come down the pike from that point
forward in terms of fairness across a level playing field [Moving through a tunnel]
nationally yeah fairness or the wind [Football player placing football on the field]
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