Or, Regulation = Freer Markets
For years, various food companies have been using "castoreum" to flavor ice cream and other foods because of its rich, sensuous, vanilla-like flavor. The problem? Castoreum is a fancy word for a compound extracted from the crushed anal glands of beavers. Not only is this stuff disgusting and inhumane, it's kept totally secret. Under FDA rules, companies don't need to include castoreum on the ingredients list -- they can just call it "natural flavoring."
Technically speaking, beaver ass glands are natural, and beaver ass gland flavor could technically be described as a natural flavor. What's more natural than beavers? Let's see...
So, who built this? How could regulation make a market freer?
Here are the competing worldviews:
A company uses a legal but obscure and disgusting natural flavor to increase profits vs. customers deserve to know when they're eating bizarre products.
With less regulation, you wouldn't even have a label on that ice cream, let alone know its nutritional value or main ingredients. With more regulation, you would know that you were eating beaver ass gland ice cream.
If you are a company, I can see why less regulation looks attractive: the fewer unflattering facts about your product you are forced to expose so that consumers can make educated purchasing decisions, the more weird and potentially toxic shit you can put in our ice cream in the name of profit. And of course, regulations exposing your shortcuts and money saving ingredients make actual competition take place in the market. If we know that Yum-yum ice cream is cheaper because it is full of rat feces and beaver ass glands, it will suffer in the marketplace, whereas if ALL we know is that Yum-yum ice cream is cheaper, it would prosper in the marketplace despite its ingredients.
Yum-yum ice cream company, though, is in business for one purpose only - to make money. If it is incorporated, than it answers to the shareholders and MUST make money for them. It is not nor should it be Yum-yum's job to make beaver ass gland-free ice cream, unless the market demands it and it delivers a return on investment for Yum-yum's shareholders. That is the role of the market!
In order for the market to function, though, consumers need to be rational. This is the current (epoch's) economic gospel. Economic theory as we are all taught it says that:
1. People act with full information
2. People have known preferences
3. People choose the best option available
Think about beaver ass gland ice cream for a moment, though. If it isn't disclosed on the label, how can you act with full information? If you don't know that "natural flavoring" or "castoreum" mean "crushed beaver ass gland," can your preferences even truly be known to yourself? If you have no way to know which brand of ice cream contains beaver ass glands, how can you choose the best option available? This means that the free market is broken, because, as long as you can't be a rational consumer, the market can't behave rationally.
Companies operating in a competitive market will, for profit-driven reasons, design their advertising, products, contracts and pricing structures in order to induce as well as in response to consumer irrationality, resulting in both market efficiency losses and financial and other harms to consumers. Sometimes competition or other market forces compel companies to educate consumers and reduce irrationality, like the Susan G. Komen fiasco, but these mistake-correction forces are limited in frequency and scope within the market. The existence of skewed demand, generated by the irrational consumers, creates a market failure – a behavioral market failure. Basic consumer labeling regulations, deliberately designed for creating rational consumers, is the fix.
That would be regulation creating a freer, fairer, and more competitive market. We, i.e. society, build that!