8.8

• What is nationalisation?

  Transfer of private assets to public control
• What happens to an industry during nationalisation?

  The government gains control of the industry
• When was the railway industry in the UK nationalised?

  After 1945
• Why are natural monopolies created by nationalisation?

  It is inefficient to have multiple water pipes
• What are the objectives of nationalised industries compared to privatised industries?

  • Nationalised industries prioritize social welfare
  • Privatised industries are mainly profit-driven
• What is a potential benefit of nationalised industries?

  They can yield strong positive externalities
• How do the objectives of nationalised industries differ from those of privatised industries?

  Nationalised industries focus on social welfare
• The arguments for and against the privatisation of state-owned enterprises

  • Privatisation means the assets are transferred from the public sector to the private sector, the firm is left to the free market and private individuals, it also covers the deregulation of the market. 
  • Since they are operating on the free market, firms also have to produce the goods and services consumers want. This increases allocative efficiency and might mean goods and services are of a higher quality. Competition might also result in lower prices.
• What is the purpose of government regulation?

  To control consumer consumption of goods
• What are positive externalities of regulation?

  A higher skilled workforce
• What is a potential issue with compulsory recycling schemes?

  High administrative costs and difficulty in policing
• How can bans on harmful goods affect consumption?

  They can still be consumed on the black market
• How might bans raise costs for firms?

  Firms may pass on higher costs to consumers
• What is the effect of deregulating the public sector?

  It allows firms to compete in a competitive market
• What does deregulation mean?

  Reducing how much an industry is regulated
• What is the impact of excessive regulation?

  It is often referred to as 'red tape'
• What are the pros and cons of regulation and deregulation?

  Pros of Regulation:

  • Protects consumers from harmful goods
  • Ensures a skilled workforce through compulsory measures

  
  

  Cons of Regulation:

  • High administrative costs
  • Difficulty in enforcement

  
  

  Pros of Deregulation:

  • Enhances competition
  • Improves economic efficiency

  
  

  Cons of Deregulation:

  • Potential for reduced consumer protections
  • Risk of monopolistic practices
• The problem of regulatory capture

  • There is the risk of regulatory capture. This is when regulators start acting in the interests of the company, due to impartial information, rather than in consumer interests. This information disadvantage is a problem for regulators.
  • The problem of asymmetric information can make it hard to determine what level a price cap should be imposed to. 
  • Without sufficient information, governments could make poor decisions and it could lead to a waste of scarce resources.