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2010-12-13 19:44:10

A. P. E. Final Part 1
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  1. Regulations
    Federal and State Regulations are sources of Business information

    Understanding the regulatory process is key to finding the regulations

    Each state has its own regulatory process and this may vary from state to state

    Iron Law of Regulation- Any regulatory agency creates winners and losers within the affected industry
  2. The Federal Regulatory process:
    • 1. A bill becomes a Law
    • - Consult Congressional bills, reports, and the law for information detailed information

    2. The law is published in the Statutes at Large and eventually in the US Code

    3. The law may call for development of specific regulations for a specific subject, or problem and may specify a federal agency to oversee the regulatory process.

    4. A federal agency drafts a regulation and publishes it in the Federal Register for comments

    5. Comments are received, revisions may take place; final regulation is published in the Federal Register

    • 6. Final regulation will be published in the next annual revision of the CFR (Code of Federal Regulations). CFR is organized by subject areas.
    • - Both the FR and the CFR have indexes that are easy to use. Most databases, legal information services, etc. will cover changes.

    7. Enforcement of the regulation is assigned to specific federal agencies. Some agencies have courts that try violators of regulations.

    8. Through trial and error, revisions are made to the regulations. Revisions of regulations appear in the FR and then the final revisions in the CFR.
  3. State Regulatory process:
    It varies for each state. But generally, follows the same procedures as the federal level: Legislative actions (laws), the regulations are written by an agency, published in a State Registrar, administered and enforced by a state agency.
  4. What are reasons for governmental regulations?



    Too much competition

    Order in Society

    Order in an industry

  5. The Political Economy of Regulation
    • Regulation involves a complex set of economic and political forces. Public choice analysis provides some insight – it suggests:
    • - Demand for regulation often stems from
    • special-interest and redistribution concerns.
    • - Through time, regulatory agencies often adopt the views of the interest groups they regulate.
    • - Regulation is inflexible; it will be slow to adjust to changing conditions.
    • - Failure to approve a highly beneficial product will cause fewer problems for regulators than approval of a dangerous product. So, agencies approving new products (like drugs) generally apply tests that are too restrictive from the viewpoint of consumer welfare.
  6. Relation of Business
    • Traditional Economic Regulation:
    • -- Seeks to fix prices and/or influence entry into specific industries.

    • During the 1970s, widespread dissatisfaction with
    • economic regulation led to significant deregulation in the trucking and airline industries.

    This deregulation resulted in new entry, intense competition, and discount prices.

    Health and Safety Regulation:

    Designed to reduce risk.

    These mandates frequently specify in detail the engineering processes to be followed by the regulated firms and industries.

    While traditional economic regulation is now less common, health and safety regulation has been growing.
  7. The Cost of Regulation
    • Governmental regulation is much like a tax.
    • Because it increases costs, it will lead to higher prices and reduces output.

    The same lack of information that generates much of the demand for health and safety regulation, also makes it difficult to evaluate the effectiveness of each regulatory activity.