Government regulation

In classic economics, the “tragedy of the commons” is the proposition that individuals acting in their own self-interest will foul or deplete shared resources. Outside intervention, the theory goes, is necessary to protect the things that benefit everyone but are owned by no one.

The late 19th century provided ­dramatic demonstration of the principle as rapid industrialisation transformed Europe and North America. Innovations flourished and vast ­fortunes were made – but pollution fouled the air, workers had to toil in appalling conditions and dangerous products were foisted on an unwary public.

The catastrophic 1911 Triangle Shirtwaist factory fire in New York led to a wholesale revamping of occupational safety regulations, and other worker and consumer protection rules followed. Oil, financial and railroad monopolies inspired the creation of competition authorities.

The Depression then sparked ­comprehensive financial reforms. That has been echoed more recently, with tough new regulations aimed at preventing a repeat of the 2008 bank collapses. The financial services ­sector is also being reshaped by tougher enforcement of existing regulations, especially against market abuse and mis-selling of retail products.

The proliferation of regulation does have downsides. Most rules increase costs and make it harder for new businesses to start. Participants in regulated markets can also become overdependent on the rules.

Brooke Masters