Greg Jones

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Does self-regulation work?

Does self-regulation actually work? Is it effective in modifying behavior in the long term? Or does there always have to be a financial incentive, or threat of sanctions to ensure a group of people comply to any standards. Is it human nature to require an incentive , to feel they have gained a profit or avoided sanctions, or can society rely on public's concern for the greater good. Can society and capitalist business organizations behave in an institutionally altruistic way, without threat of sanctions or finical incentive, in regards to the idea that they can self-regulate their own behavior and business practices long term.

  • Nov 22 2013: Self-regulation has worked in some cases, but has lead to nothing, or even been disastrous in others. I think the problem is with the desire to regulate in the first place. From an economic standpoint, regulation is simply an added cost calculated as (the chance of getting caught) x (the fine if caught) = (total cost of regulation). If the profits of doing something unlawful are outweighed by the total cost of regulation, it actually makes economical sense to break the law!

    Of course, government can act to increase the total cost of regulation by increasing the change of getting caught and increasing the fines. But increasing the chance of getting caught requires costly investments in policing, while increasing fines is (in the case of individuals) often perceived as unjust, or (in the case of organisations) hardly effectual.

    I believe a better alternative is taxation. Taxation also increases the cost of doing something unwanted (but no longer unlawful), so it is very similar from an economic standpoint. However, since everyone is subject to taxation, not just the few who get caught, it seems like a lot fairer measure than fining. Taxation also leaves people and organisations more free than if regulated, which, for me, is an important ideological point. Finally, an added benefit is that taxation could be such that it is equal to the economic cost of unwanted behaviour (e.g. pollution), so that these funds can be used to address the consequences (e.g. cleaning it up).

    Sadly, taxing does not get around yet another problem of regulation: it can be circumvented by reconstructing a company according to the myriad of exemption laws, or, even simpler, by moving to somewhere else. This is why I believe the world should work together to create more uniform tax and regulations systems. The actions of global corporations must be addressed on a global scale.
  • Nov 21 2013: History has proven that self-regulation does not work when it is against self interest.
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    Nov 20 2013: I think for the individuals, it's possible to realize self-regulation.For example: Chinese people have good study habit becasue they raise it from their childhood and it has become part of their own behaviors. But for the business area, I don't think it's possible because business always has something to do with the profit or benefits which drives people out of control without laws or regulations or supervisions from people in society.
  • Dec 3 2013: I used to think yes, now I say no. The problem with self-regulation is that ultimately it depends on the market, and requires a majority of the market to be socially conscious, and aware.

    Fairtrade is a good example - it has devised a set of standards around ethical practices by producers, fair wages to workers and a fair price for output. These standards are not very onerous, and indeed some argue that they do not go far enough. Non-fairtrade coffee beans sold in poorer regions of the world are sometimes produced in very tough conditions and are sold to corporations at a very low price.
    Now, if self-regulation worked, Fairtrade would inevitably become a universal minimum standard for the coffee industry - people would flock to fairtrade coffee, causing sales of non-fairtrade coffee products to plummet, forcing those vendors to either switch to fairtrade or downsize and eventually close.
    This hasn't happened for a number of reasons - awareness, apathy and especially price. Because social responsibility & moral obligation are neither universal nor absolute values, SR is just one factor to be considered, often subordinately to price. The market demands low prices first, frills second.

    Thus legal regulation is needed because market regulation does not work. In a free market, where 99% of businesses adhere to a fantastic non-obligatory standard, it only requires 1 to ignore that standard, undercut the prices of the rest, and gain quick and vast market share from the poor, the cheap, and the indifferent.
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    Nov 22 2013: Robert, read this article from Wards, a reputable auto industry source, http://wardsauto.com/blog/dear-taxpayer-your-auto-bailout-loan-repaid-interest. It will clarify how we, you and I, made a profit on the bailout.
    But... I think you make good points. I believe government could be much smaller. That's another debate. However, smaller government is the antithesis of regulation. It is also the boon of those who would put profits ahead of your health and well being.
    Self regulation is too little and tyranny is too much. We as a society must find the common ground. Our very survival as a democracy depends upon achieving the "common good."
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    Nov 21 2013: To many variables ... there are always consequences ... Considering big business, government, etc ... the answer, IMO, is always no .. However a farmer would be an example of self regulation that works ... How about a preacher ... they each regulate their hours and requirements for success.

    Rules, policies, regulations are written for those who have proven they are not trustworthy and a law, etc ... was established and a consequence. That does not stop anyone it just says if you do be prepared to pay the price if caught. Many people are honest and do a fair days work for a fair days pay.

    Even the Puritans had rules and consequences ... share in the work - share the food ... if not no food. Compare that to todays entitlement programs and you have some of the reason that self regulation does not work.

    We need less government, more opportunity for either success or failure, and no entity should ever become to big to fail whether it is General (Government) Motors or banks. Tax payers have already lost 1 billion to Government Motors in bankruptcy write off and stand to lose billions more.

    We have laws in place for failure in business .... that is unless big brother likes you and wants your vote and contributions and the unions you work with.

    In summary our leaders in business and politics have shown us that truth and honesty are not the rule of the day.
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    Nov 21 2013: This is, in another form, the fundamental question of human behavior i.e., Hobbs V. Locke. If we take 20 people and put them on a distant planet and leave what will happen? Almost certainly within the first day they will form a tribal government and the only way to self regulate is to leave and suffer almost certain death alone.

    Business is the same. People don't do what's good for the business out of a sense of fairness, they do it out of a sense of self protection. The janitor works hard not because he loves the company but because he/she loves the job and teh money it brings. The CEO will cut corners, reduce costs, sell bad or marginal product if it betters his position by strengthening the company.

    My father was a federal meat inspector. When self regulation was tried the companies where it was done immediately began selling diseased animals, meat that had been on the floor, etc. This happened in every case. Why? Well it increased profits.

    Society bears teh responsibility to regulate what we value.

    Love the Cessna, BTW.
  • Nov 21 2013: In short, no.
    Even where government regulation does not apply, you still need things like competition or strong cultural traditions to keep various systems in line. It doesn't have to be official, but the regulation needs to come from somewhere. Otherwise, the system will start doing what's best for itself at cost to everyone else.
  • Nov 20 2013: S O M E T I M E S in what is called a monopoly
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    Nov 20 2013: Capitalist business and altruism are incompatible by definition, as profit maximization is and can not be a stable mechanism, a stable foundation for the common good or even for reliable, sustainable and fair trades and markets.

    In medicine, continuous growth of organic cells is considered a disease and often ends lethal because we haven't found the cure yet to stop its triggering cause and the self-regulation of our immune system doesn't work on it either as those on growing cells are marked 'friendly'.
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    Nov 19 2013: Self regulations and the desire to obtain an economic advantage are not disconnected ideas. Will they be altruistic? No. However, the question is, do they need to be? The answer is again no. That's the point of capitalism. It works within our nature to create a successful environment for ourselves, while simultaneously acting as a system of resource management.

    Note my discussion on the topic: http://www.ted.com/conversations/21505/is_capitalism_best_understood.html
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      Nov 20 2013: Who oversees the overseers? It not just top down from government to the working class public.But a complex web of oversight from top down and grass roots up, an ever changing and fluid but hopefully successful mechanism.Does true self regulation actually exist at all, or is there nearly always a silent partner overseeing it, either by government, governing bodies of grass roots opinion?
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        Nov 20 2013: Who oversees evolution? Nobody. Natural selection works without oversight. While governing always works to subvert this process, it does still occur.
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    Nov 19 2013: It is the only one that really does work.
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    Nov 19 2013: Capitalist Business' main objective is to maximize its benefit- (and all those social responsibility mission statements on their web pages are just words #fact). I don't see the status-quo changing unless the Govs. (which,sadly, are funded by these big corps.) penalize them and the consumer and society sanction these people.
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      Nov 19 2013: Why is it such a bad thing that corporations main objective is to maximize its benefits/profits? That's the same thing that organism do: maximize their own reproductive odds, or those of people who may be closely related. This has worked for quite literally billions of years.
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        Nov 20 2013: Fair enough.
        When corps./organisms don't care about surrounding elements and their main objective is to maximiz their personal benefit then they need sanctions and extreme control e.g.: viruses, American mass weapon production corps.
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          Nov 20 2013: Well, ignoring the fact that you picked one disease that isn't actually alive, viruses only receive "sanctions" when it comes to humans. Do viruses need sanctions? Evolutionary has been occurring for billions of years. Has the system collapsed? No. Were there sanctions? No.
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        Nov 20 2013: If there is no 'control/sanctions': chaos shall take place. Look at our world now, a bunch of corps. and 'banks' control whole system, which are controlled by a handful of people. Are you happy with the status-quo? Mr. Goldman?
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          Nov 20 2013: With what evidence do you substantiate your claim that "chaos shall take place"? To me, it seems that the notion that chaos would ensue without government amounts to much the same argument as creationists use to posit that there must be a god. Neither takes into account naturally existing processes that dictate patterns of behavior.

          You're right that a bunch of corporations and banks control the system, kind of trashing the idea that government and regulation work, but the reason that they have such control is in large part due to big government. These corporations and banks gain their power through the government. Indeed, most of the corporations and banks in control of the world are directly supported, and would collapse, without government support.
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    Nov 19 2013: Are you asking about individuals or specifically about businesses?
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      Nov 20 2013: I was thinking in terms of organizations that have an impact on our daily lives, but could also pertain to smaller organizations and even I suppose the responsibility of the individual. After all, any organization of any size is a co-operative group of individuals, anyone of whom can break the chain of responsibility to varying degrees .