Chapter 4: The regulatory space and the market
Market economies can be seen in terms of exchange and in terms of organization. This chapter discusses two different ways of framing the societal goals of regulation in relation to market economies. The first involves what is known as the 'representation hypothesis'. According to this way of framing the role of the regulatory system, the goal is for the regulator to represent missing interests and voices in the marketplace and to act for them. It focuses on imperfections in the processes of exchange. The second centres on the idea that the regulator plays a 'constitutive' role. What this means is that the goal of the regulator is to set the conditions under which a market operates and to ensure that the behaviour of individual actors in the market link to a society's broader sector-wide or economy-wide goals. It is about market 'shaping' and not just about representation. It provides for a focus on the organization of markets. Both the exchange and organizational view of markets are consistent with support for the idea that markets are the least bad way of organizing economic activity. Both, however, assume that societal goals will require some form of regulatory interventions in order to ensure that market imperfections are addressed. The representation hypothesis and 'constitutive' frames thus provide a way to bring both views of a market together in order to characterize the market.
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