8.8

• Public ownership definition

  Ownership of industries, firms and other assets by central government or local government. The states acquisition of such assets is called nationalisation
• what does public ownership aim to do?

  provide essential services rather than to make profits
• what are the advantages of public ownership?

  • can ensure universal access to essential services
  • may reduce prices for consumers
  • encourages long-term planning
  • reduces duplication of services
• examples of public ownership?

  • NHS
  • public transport
  • social housing
• what are the disadvantages of public ownership?

  • may be inefficient due to lack of profit motive
  • risk of political interference
  • limited innovation and incentives
  • can lead to high taxpayer costs
• Privitisation definition

  The transfer of assets from the public sector to the private sector
• what are the advantages of privitisation?

  • increases efficiency and innovation
  • profit motive encourages better customer service
  • reduces government spending
  • can raise revenue for the state (one-off payment)
• what are the disadvantages of privatisation?

  • natural monopolies may exploit consumers
  • public interest may be overlooked
  • quality may fall if firms cut costs
  • job losses and inequality may increase
• regulation definition

  the imposition of rules and other constraints which restrict economic action
• what are the main types of regulation?

  • price capping
  • rate of return regulation
  • performance targets
  • quality standards
  • environmental rules
• what are the benefits of regulation?

  • prevents consumer exploitation
  • improves service quality
  • encourages fair competition
  • internalises externalities (like pollution control)
• what are the downsides of regulation?

  • risk of regulatory capture
  • expensive to enforce
  • may reduce innovation
  • can create compliance burdens
• deregulation definition

  the removal or simplification of government rules and regulations that constrain the operation of market forces. it aims to increase competition and efficiency
• what are the advantages of deregulation?

  • encourage new firms to enter the market
  • improves efficiency and innovation
  • reduces costs for consumers
  • stimulates economic activity
• what are the disadvantages of deregulation?

  • risk of reduced safety or quality
  • can lead to under-provision of key services
  • market failures may worsen
  • some firms may exploit consumers
• when is regulation preferred over deregulation?

  in industries where safety, equity or environmental protection is crucial, such as healthcare, utilities and transport. deregulation is more appropriate where market competition can thrive
• real-world example of regulation or privatisation

  the UK railway industry was privatised in the 1990s. regulation stil exists via the Office of Rail and Road (ORR) to protect consumer interests
• What is external regulation?

  • When a government body or independent regulatory sets rules and oversees firms’ behaviour, especially in monopolistic or oligopolistic markets
  • E.g Ofgem regulates energy firms, Ofcom regulates telecoms and CMA investigates competition
• regulatory capture definition

  occurs when regulatory agencies act in the interest of regulated firms rather than on behalf of the consumers they are supposed to protect
• what is self-regulation?

  • when an industry or firm sets its own rules or codes of conduct, often enforced by a trade body. its meant to encourage responsible behaviour without direct government intervention
  • e.g The Advertising Standards Authority (ASA) in the UK is an industry-led regulator
• Competition can bring about situations where:

  • social costs and benefits differ from private costs and benefits
  • Pollution creates situation where SC > PC
  • Over-consumption of demerit goods and underconsumption of merit goods
• what do governments use regulation for?

  • reduce social costs
  • provide employees/consumers with sufficient information to make informed decisions
  • set appropriate working conditions
  • ensure production of safe products
  • ensure appropriate adverting is used
  • ensure firms protect consumer rights and the rights of workers (employment laws etc.)
• why might governments favour self-regulation in some industries?

  • reduce taxpayer burden
  • promotes industry innovation
  • avoids delays and red tape
  • suitable for fast-moving sectors like technology and media
• is external or self-regulation more effective?

  depends on the market and objcetives:

  • external is better for monopolies and essential services (e.g water and energy)
  • self-regulation can work in competitive, innovative markets with strong consumer awareness