How much regulation is needed in a free enterprise economy?

Question

It's been my observation that the less regulated a capitalist economy, the more it tends to concentrate more and more wealth into fewer and fewer hands. If you picture some kind of enterprise that results in a net gain for someone, then picture this person investing his profit in another enterprise it would seem to me that capital is being concentrated. This scenario being repeated and repeated, the result can only be the establishment of an aristocracy and a proletariat. Of course, it won't be a a straight line, in some cases the business will fail and the investors capital will be scattered. But it will then start collecting again. It seems analogous to the concept of entropy increase. Doesn't this seem to argue for some sort of redistribution of wealth?
I suppose I'd better point out that I am well aware of the fact that a profit motive is important. If a business fails, then the employees have lost a job. But the investor has lost perhaps his "job" plus X dollars. (p

he's probably lost a lot of money. Therefore the one who put the money at risk deserves the lion's share of the proceeds. No one needs to point that out. But how do we see to it that the employees are not reduced to the status of property?
The communists tried to take care of this by eliminating the personal profit motive. I'm not sure I'm willing to go so far as to place all the capital in the hands of the state, but why would people think that the mere fact that the soviets and the maoists screwed it up proves that communism must be a failure? Did the soviets and maoists prove that feudalism is superior?

thanks, james. But I have a suspicion (can't prove it) that the self-regulation of a free market doesn't address my concern. Or to put it another way, that self-regulation will only put off the situation I have outlined. That in the end too much of the "fuel" self-regulation runs on will be monopolized.

thanks haggismoffat, I'm not sure I understand completely what your were trying to say, but I still have some comments. I stated in the question that I understood that the investor must stand to gain. That's very elementary. And so I would not recommend taking all net gain. The investor must get "the lion's share" of the net gain. And if another part of your point is that as the investor gains, so do all others involved in the transactio it would seem to me that that would require an infinite supply of wealth for the market to draw upon if we were not to find ourselves in the situation of more and more wealth in fewer and fewer hands.

One more thing, I am not at all satisfied that socialism or communism will properly address my concerns. But you see, I am also not at all satisfied that an unregulated free market will do so, either. what I'm looking for is some reason to think that the path we're on will not lead us to the destruction of the middle class with a resulting division of society into a small, privileged class riding on the backs of a large overworked, underfed, majority. We all know it has happened before and those were unregulated, capitalist societies whether the word had been invented or not.
and just so you know, of the choices between laissez-faire, communism and socialism, I suspect that western European type socialism is probably our best bet. Even with all the problems involved in those systems. But I'm willing to be talked out of it. Just give me something to work with

Answer 1

You are dreaming. Regulatory bodies are captured by industry groups who then get rid of competitors. The lawyers and civil servants make a fortune out of essentially useless knowledge about how to use the system. Politicians then sell favors to release people from the system. Courts are invoked to get people out of the system. There grow up two alternative bars - the bar composed of regulated industry lawyers and the bar composed of their opponents.

Answer 2

Is your goal equality or highest standard of living.
Your beginning premise is that a net gain to someone is a net lose to someone else and that is not the basis for a free enterprise system. If that were true then a command economy is the best way to go. Remember, everytime the investor starts a company he is producing something someone wants to pay for that is not being made or at least he is making it cheaper or better. Therefore as the investor is making money the people consuming the good is also better off since they chose to buy it. Both are better off. If on the other hand the investor knows that if they make money it will be taken and redistributed then why would he take the chance on losing it by starting a business

Answer 3

I hate to break the news to you, but the United Stated government has become MUCH larger and has created MUCH more regulation over the last 30 years. Wealth has been concentrated into the hands of the few just as government grew larger, more controlling and more regulatory.
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Now if you want more regulation I suggest this experiment.
>> Give up all the innovations of American free enterprise and live off the innovations of more regulated Europe. You can start by giving up the Internet and computer technology, along with a whole host of things I won't list.
Then determine which standard of living you prefer.
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Answer 4

depends on what part. The Right wing believes that the government should not tax trading, or taxes at all. the Left wing believes that the Government should not tell people what to buy and not to buy examples: Tax cuts given by Republicans, but also Republicans passing laws in the past that prohibits the sale of birth control (which was repealed), also Prohibition (also repealed) currently certain drugs are banned Libertarians who believe EVERYTHING (and i mean everything) should not be regulated by the government, in a sense they belive no government is the best kind. and libertarians are called Extreme Left Wing radicals

Answer 5

A free economy will regulate itself - thats what the titile of this type of economic structure implies- the law of supply and demand govern.

Answer 6

I thought according to the "laissez-faire" principle, the less regulation, the better.