We have just lived through 8 years of the most aggressive regulatory regime in history.   The % of GDP consumed by the federal government has never been larger.  But the number of new businesses openning is smaller than the number of businesses closing for the first time in history.  Where is the diverse constellation of start ups?  Where is the outburst of entrepeneurialism? 

 

The free market isn't perfect, but it is essentially based in reality.  If someone makes the best widgets in the wrold, that's great.  That benefits society.  The problem comes in when one widget company can't compete with another widget company, but they made a bigger contribution to a senator to deem their competitor as the "bad widget company" and hurt the consumer.  This is an extension of protectionism. 

 

Also, your point presuposes that the regulators have any idea what the heck they are doing.  Congress basically admitted that they didn't have any idea what a derivative was before 2006.  How were they supposed to write rules about them? 

 

I believe that the regulatory function of the state is to ensure things like reasonably safe food and advertisements that aren't intentionally deceptive.  Once you step outside basics like honesty and safety and you start pigeon holing the business model for producers then you have an adverse impact on the number of options available to consumers and cause monopolistic competition. 

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