Understanding

Learning More About Financial Regulation in Microeconomics and Macroeconomics

Microeconomics and macroeconomics are two disciplines in economics that any economics student is very much familiar with. And unfortunately, both disciplines are no fan of each other. Currently, changes toward the financial services industry are palpable. What the country is going through in terms of financial regulation is unlike what is has been through in the past. In the present-day financial services industry, there are two major forces that are coming face to face. The area that most business students tend to gravitate toward is microeconomics. Profit maximization is essentially what this particular business area targets. For businesses to grow and make more money, fixed costs and marginal costs must be optimized. In simple terms, how CEOs view the world is what microeconomics is all about. It is the job of the CEO to do what they can for the benefit of the company for it to deliver value and make more money.

On the other hand, macroeconomics is very much attractive to policy geeks. The goal of this economic discipline is to attain equilibrium of the market. Simply put, services and goods with the greatest number can be exchanged between sellers and buyers with the application of mutually agreeable prices. You get a good competition between business establishments. What may be bad for the market will be the rise of oligarchies and monopolies. If you look at the world with macroeconomics, you are using the eyes of the government. This means that it tries to make everyone happy or perhaps equally unhappy.

You can expect these two perspectives to be going against each other with who different they are. Even if most individuals agree that everyone can benefit from efficient markets, it is not all the time that the government must side with microeconomic business interest when they take the essential steps to benefit everyone. Sometimes, competition can only be fostered when the financial industry finds a way to block the merger. Sometimes, there must be proper legislation of disclosures so that informed decisions are made between buyers and sellers. Imposing prohibitions and regulations for certain activities may also be necessary so that some will not be put to harm financially.

While it may be annoying to see the government and business sectors fighting over market regulations, it is expected. Unfortunately, the battle between microeconomics and macroeconomics stops when everyone is happy with the booming economy. When businesses make money, they become happy. Consumers having money also means that they are happy too. The government is also happy when everything in the system seems to work just good for all involved sectors.

However, with recent financial crises, the financial services industry may get lost and damaged. Any market bubbles are the responsibility of government regulators. To secure the economy, the government must make sure to enact the necessary financial and securities regulations and measures.

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