There's some fairly obvious ones: we had a problem where a chemical we were using in many products (CFCs) was destroying a critical part of our atmosphere – ozone. CFCs were cheap, so in free market competition, companies were optimizing for short term success with the unaccounted for externality of increasing skin cancer rates in humans and other animals. Regulation is brought in to patch that externality – successfully helping the world transition to alternative technologies
You can see regulations as part free market capitalism, you just have to zoom out from individual corporations and consider the system patching out local minima with regulations to help achieve global minima.
I mean there's a sliding scaling from sophisticated regulations like CFCs and basic ones like laws against theft (despite it being cheaper to simply steal products from other people). I'm not sure you'd call laws against theft a regulation but it's in the same spirit as the CFCs example
Of course, regulations without careful thought and planning don't lead to optimization either – but the point is, from experience we've learned systems with 0 global regulations tend to have issues and enter in to local minima – so the trick is working out the right level and quality of regulation
"Free market capitalism" does not mean there should be no laws whatsoever. It is a trivial realization that markets have to operate within their given environment, including laws. Nevertheless you can aim for as much freedom as possible. You can make it illegal to shoot people, without having to set prices for goods and labor in law.
I don't think regulations is synonymous with basic laws in such discussion. And therefore the CFC example is also not a good one, as it is obviously an externality. Nobody claims it should be legal to pollute the environment for free.
A more complicated challenge is climate change, which is like the CFC example taken to the extremes. Since every company uses energy the responsibility is spread among everyone. However, every group, from countries to companies stands to lose competitively from using more expensive but less damaging sources of energy – the market pressures drive towards companies that take advantage of externalities like this
So a solution could be global regulation, where we all unilaterally agree to transition to better energy sources, however this has massive resistance and is the battle of our time
This sort of regulation is certainly more subtle than don't steal or shoot people but ultimately leads to a system that's better for all the players
That is a common trope, supposedly free running capitalism would just waste as much energy as possible without regulation.
It is of course nonsense, even without regulations industries have an incentive to save on energy, as it is a cost factor.
Or think about cars - people would prefer to buy cars that use less energy, so that they have a wider range. Therefore there already is an incentive for car manufacturers to develop more energy efficient cars.
Also people can decide they only want to buy products that adhere to certain production standards, even without centralized government.
Overall, nobody claims externalities should have no price.
For sure, energy has a cost which you want to optimize for - no question about it. The crux is when that cost is artificially low: you can dump your radioactive waste in the river for as much as it costs to transport it, but the cost is then payed by the people downstream. Now as you say if this is tightly causally linked, the people downstream will fight back against you and then it's not so cheap. But the problem comes when the causality gets foggy; it takes decades before there's enough data gathered to connect the high cancer rates with the waste dumping miles upstream. By that time the people who made that decision made bank and exited and are beyond accountability
Where this causal disconnect occurs is where regulation is most effective
I think we agree, you want to price in your externalities, but pricing externalities _is_ regulation, so we're saying the same thing. Perhaps we're crossing wires somewhere
There's some fairly obvious ones: we had a problem where a chemical we were using in many products (CFCs) was destroying a critical part of our atmosphere – ozone. CFCs were cheap, so in free market competition, companies were optimizing for short term success with the unaccounted for externality of increasing skin cancer rates in humans and other animals. Regulation is brought in to patch that externality – successfully helping the world transition to alternative technologies
You can see regulations as part free market capitalism, you just have to zoom out from individual corporations and consider the system patching out local minima with regulations to help achieve global minima.
I mean there's a sliding scaling from sophisticated regulations like CFCs and basic ones like laws against theft (despite it being cheaper to simply steal products from other people). I'm not sure you'd call laws against theft a regulation but it's in the same spirit as the CFCs example
Of course, regulations without careful thought and planning don't lead to optimization either – but the point is, from experience we've learned systems with 0 global regulations tend to have issues and enter in to local minima – so the trick is working out the right level and quality of regulation