Some people think that a free market should be unregulated and that deregulation will lead to innovation.
This is partly true but largely false. An unregulated market can lead to exploitation and cheating. The people with the information and financial resources can take advantage of the consumers and make excessive profit.
A good example of a regulated, free market is the stock exchange. The regulator knows that it is easy for the retail investors to be taken exploited by by people who can manipulate the stock prices. The regulator writes and enforces regulations to ensure that the market is fair, and that information is readily available to all participants. Insider trading, manipulation of prices, release of false information and other unfair practices are disallowed. Those guilty can even go to jail.
Medical services used to be self-regulated. The medical profession sets guidelines on the prices to be charged for various common procedures and services. They are published and made know to consumers. They set the benchmark for fair prices and protect the consumer. When the guidelines were abolished by the Competition Commission, it was actually a step backward. Instead of helping consumers, this change actually caused more problems for consumers.
The regulator allows taxi companies to set their fares, calling charges, peak hour surcharge and other charges. This is supposed to allow free competition, but it is confusing to the public. The commuter does not know what is the fare, as it depends on the taxi company. If the commuter is at a taxi stand and an expensive taxi comes along, it is difficult for the commuter to reject that taxi, without causing unpleasantness.
A better approach is for the regulator to set the standard rates for the basic taxi service (which applies to taxis picking commuters along the road or at taxi stands. Premium services can be made available to commuters who call a taxi on their special hotline, as the commuter know and accept the charges for that premium service.
We need a regulated market to be fair to all parties and to improve efficiency. We can promote competition by giving choice to consumers (e.g. to choose the doctor) and for service providers to decide if they wish to provide the service at the regulated rates. In the stock exchange, an investor has the choice of buying or selling a specific stock. This is how competition can work in a free market to give better outcome and fair prices.
Tan Kin Lian
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