Turgot regarded industry regulation as a system of coerced cartelization and special privileges conferred by the state. Regulations effectively serve as taxes which increase costs incurred by the producers/sellers, which reduce competition and discourage innovation. Rather than protecting consumers, these regulations compel them to buy inferior products at higher prices.
Economic activities involve the use of the particular knowledge in sole possession of individual market participants. It is not possible for a government or a theorist to obtain or use all such such knowledge. The owners of labor and capital are best suited to employ these factors to the most advantageous use with the help of their skills, experiences, and expectations.
Commerce is necessarily reciprocal. People transact because these transactions make them better off. Individuals benefiting from trade results in the society benefiting overall. If a business defrauds its customers, it would lose customers, and thus be punished by the market. If the government tries to prevent fraud by mounting regulations, it effectively treats every seller as corrupt and every buyer as gullible. It creates needless friction for the honest and capable many to save the few who are unwilling to do their own research.
In light of the above, instead of creating regulation, the government should restrict itself to protecting the nation from invasion and upholding the rights of the sellers to sell and the buyers to buy.
Reference
- Murray Rothbard, Economic Thought Before Adam Smith (1995), Chapter 14.