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Updated: Aug 20, 2021

Government policy that monitors and controls the economic activities of certain types of private enterprise. Such policy arises because of the need to prevent the abuses of unrestrained monopoly power or because certain outputs are characterized as public goods or generate externalities. In the United States public utilities are governed by regulation because they are permitted to operate as monopolies in a geographic area. Railways have been regulated since 1887, and since then airlines, pipelines and road transport have also come under various government regulations.

Regulation is generally regarded as an alternative to nationalization as a means of controlling natural monopolies. The main distinguishing feature is that ownership of the firm remains in private hands, while the state exercises control of prices and possibly investment through a regulatory agency or commission. In the U.K. the proposal by the Conservative government to ‘denationalize’ British Telecom essentially involves changing its status from a nationalized to a regulated monopoly.

Reference: The Penguin Dictionary of Economics, 3rd edt.

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James Knight
Editor of Education
James is a lead content editor for Invezz. He's an avid trader and golfer, who spends an inordinate amount of time watching Leicester City and the… read more.