‘Caveat Emptor!’, by Peter Sinclair

Caveat Emptor!

Peter Sinclair

Monday 28th February 2012: The economist Peter Sinclair Responds to Mark Prisk’s Politeia Address

Mark Prisk gave a fine overview of what he and his Department are doing. Regulation, he said, had a remarkable tendency to bore or excite; his remarks came emphatically in the second category!

He juxtaposed the competing parties: some people argue that regulation is inherently costly and excessive; others bitterly lament that we do not have nearly enough of it. Both positions are overdrawn. What we need is better regulation. Frequently, that goes hand in hand with less regulation; but not always.

“Caveat emptor” was once a hallowed legal principle: buyer beware! Now we have been drifted towards “Caveat vendor” (seller beware), which can certainly be less efficient. Just as bad, the legal setting can be ambiguous, or muddled by inconsistent regulations and precedents.

Costs to business are critically important; and so are benefits. Regulation should be subject to an expected net benefit test.

There are regulations; and there are regulators. The regulatory bodies set up by the Thatcher government, to protect against abuse of power by natural monopolies after privatization, have worked pretty well. But the case for retaining the Office of Fair Access is highly debatable: is there any reason to doubt that university admissions officers try to select on merit? Needs-blind admission is the answer, not threats.

But can there be underregulation? Yes: what about supermarkets loss-leading on alcohol, killing village pubs and adding to A and E costs in the NHS?

*Peter Sinclair is Emeritus Professor of Economics at the University of Birmingham. He responded to Business Minister Mark Prisk MP’s Politeia Address on Monday 27th February.

*Mark Prisk MP, Minister of State for Business and Enterprise, gave the opening address of Politeia’s Recession or Recovery series on Monday 27th February.

Professor Peter Sinclair

Peter Sinclair is Emeritus Professor in Economics at the University of Birmingham, having been a tutor at Brasenose College, Oxford. A former Director of the Bank of England's Centre for Central Banking Studies, he has written extensively on a wide range of economic topics including inflation, unemployment and tax.

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