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The Influence of Microeconomics and Macroeconomics on Financial Regulation

Any economics student that you come across is well aware of the fact that there are two major disciplines in economics, namely, macroeconomics and microeconomics. And sadly, these two disciplines are against each other. In the present, there will be many changes that will affect the financial services industry. There are many forces that affect the current financial regulation of the country. In the present-day financial services industry, there are two major forces that are coming face to face. When it comes to business students, they often lean toward 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. Simply put, microeconomics views the world using the eyes of the CEO. A CEO does the best that they can for the company to deliver value and make more money.

On the other hand, macroeconomics is very much attractive to policy geeks. For such an economic discipline, the primary goal is to attain market equilibrium. This implies that whatever services or goods are in the greatest number, they can be exchanged at prices that are mutually agreed by both sellers and buyers. You get a good competition between business establishments. The use of oligarchies and monopolies is bad. Macroeconomics essentially looks at the world using the eyes of the government. This implies making everyone involved happy or even sort of equally unhappy.

Since these two perspectives are very much different, it is expected that they will go against each other in various instances. While efficient markets generally make everyone happy, the government must take the necessary steps that may go against the microeconomics of businesses to get there. If necessary, the government, especially the financial industry, may block a merger so that they can promote competition in businesses. For sellers and buyers to make informed decisions, too, legislation of disclosures may be necessary. At the same time, certain activities must be stopped or regulated so that some will not be harmed by others financially.

While it may be annoying to see the government and business sectors fighting over market regulations, it is expected. However, you should know that if the economy is on the rise and everyone is quite happy, the power struggle between microeconomics and macroeconomics stops. When businesses make money, they become happy. Consumers are equally happy too because they have money. The government is quite happy because the system is working just fine for everyone.

However, with recent financial crises, the financial services industry may get lost and damaged. It is up to government regulators to keep tabs on any market bubbles. To secure the economy, the government must make sure to enact the necessary financial and securities regulations and measures.

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