Do Governments Work for Public Interest?

This article shows a simple example of government regulation taking place in the country of Hungary in the retail market. The government is attempting to apply regulation on retail store sizes, banning the construction of any building over 300 square meters. This use of entry controls is what Stigler would say is the ‘most important’ form of government regulation. It seems, at first, that the government might be trying to issue this regulation with a public interest argument by saying that the regulation would help local, smaller retail businesses. A Hungarian government official explained that these larger retailers, who are typically controlled by international groups, were controlling about 69% of all returns, while they only represented “1% of all retail enterprises.” The public though, explains that this regulation is in fact NOT looking out for public interest, since this regulation is neglecting the potential loss of local jobs, regardless of corporation ownership. This ban also is negatively affecting other local Hungarian business, such as the real-estate and office market. Despite this attempt at government regulation for supporting local businesses, it seems that the government might not have really been looking into the best interest of the public. It might have looked ‘good’ on paper to do this as a way of supporting local businesses, but this neglection of some basic international trade shows an obvious negative impact. Stigler would argue that there could be a possibility here that the industry is looking more towards itself rather than at consumers and the negative impacts outside of the industry. Some firms, we learned, seek government regulation because it allows them to act and receive the benefits of a monopoly/oligopoly without the work of getting to that position; instead, the government does it for them. So here, we might be seeing a government trying to ‘cover up’ almost selfish industry seeking behavior with a ‘so-called’ public interest argument.