How Should the Economy be Regulated

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Essay: How Should the Economy be Regulated? Richard Rosen



"The current economic crisis provides a rare opportunity to re-think how the economy should be regulated in the coming decades. A key issue usually completely absent in such debates is how to democratize decisions pertaining to capital investments in basic industrial and service sectors. Achieving key social goals should be a criterion deeply embedded in such decisions. Two such goals are climate change mitigation and alignment of investments with sustainable development in general. Regulatory processes pertaining to capital investments in basic sectors should empower stakeholders whose lives are affected by such investments. Beyond capital allocation, future regulation should allow for stakeholder input in determining what kinds of products should be produced and what their prices should be in cases where markets are substantively non-competitive. U.S. Public Utility Commissions illustrate a powerful but underappreciated model of a proven regulatory approach that can and should be expanded to key sectors of the economy as a means to democratize decisionmaking. This would help correct the regulatory failures exposed during the economic crisis and enable a balance of public and private interests in shaping a form of managed capitalism for the future." (