Why the Law is Inappropriate for Regulating Certain Aspects of Business Activity

Published 02 Jun 2017

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At the heart of all free societies is a free economy, populated by businesses that are allowed to conduct their operations without interference by cumbersome regulations and pressure from legal forces. Of course, without regulation, one sees such catastrophes as Enron and Tyco, in which everyone ultimately loses, so the question remains- should the law regulate all aspects of business activity. In this essay, the argument will be made, and supported by examples that the law is inappropriate for regulating certain aspects of business activity.

Let the Market Be Free!

There is a vast difference between a free market and a market without any regulations. What is meant in this context by a free market is one where buyers and sellers are allowed to conduct business once they have agreed that there is something of value for both parties to exchange, and that this exchange is in fact fair and legal (Bomann & Wiggen, 2004). This is vastly different from a market where unfair advantage is allowed to be taken, or harm done to others, as well as markets that are so restrained by excess laws that no meaningful business can occur. Therefore, what is needed are regulations only for certain aspects of business activity and not every aspect.

An example of how excess regulation can hurt an otherwise free market can be seen in the regulation of property rental rates in New York City. Admittedly, some regulation in this area is necessary to make sure that rates are not inflated to the point where everyone is manipulated and harmed. However, there have been occasions when rent rates were regulated to an excessively low amount, while the tenant got a very good deal, the landlords were unable to properly maintain and pay taxes on their rental properties, let alone derive a fair profit for their offered property. Once the effort was made to keep laws from over-regulating the rents in New York City did the free market have the ability to once again function (Gurian, 2004).

On the other hand, as was stated earlier, the total absence of regulation can also lead to major problems; an ideal example is the anti-trust action of Major League Baseball. Once this professional sport was made exempt from federal anti-trust laws, what was seen was a situation where professional baseball teams were in essence blackmailing their home cities to build new stadiums and give other benefits to the teams, lest the teams leave those cities and cause major financial losses to the cities once the teams were no longer associated with them. Lack of regulation also made it possible for players to be offered massive sums of money to play baseball, which created a sort of legal free-for-all whereby any means necessary to obtain key players was in fact put into action (Rouse, 2001).

What is the Answer?

Clearly, there needs to be a balance between regulation to prevent corruption and unfair advantage and so much regulation that nothing can be accomplished, which proves that the law is inappropriate for regulating certain aspects of business activity. There need to be rules in the game of business, but the game must also be permitted to take place without being suppressed (Economic Perspectives, 2002).


In closing, while it is easy to say that certain business activities should not be regulated, putting this into action is quite another matter. Therefore, what will be needed indefinitely is a way to regulate without restraining if the free market is to continue to grow and thrive.

Works Cited

  • Bomann-Larsen, L. & Wiggen, O. (Eds.). (2004). Responsibility in World Business: Managing Harmful Side-Effects of Corporate Activity. Tokyo: United Nations University Press.
  • Financial Market Behavior and Appropriate Regulation over the Business Cycle. (2002). Economic Perspectives, 26(1), 30+.
  • Gurian, C. (2004). Let Them Rent Cake: George Pataki, Market Ideology, and the Attempt to Dismantle Rent Regulation in New York. Fordham Urban Law Journal, 31(2), 339+.
  • Rouse, J. (2001). Regulating the National Pastime: Baseball and Antitrust. Public Administration Review, 61(5), 630.
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