Over the past few weeks, I’ve been thinking about government regulations in general. Jim Parks’s article a week ago was the latest to prod me on the topic, but I had already been mulling over the topic since I read an interesting take on industrial safety in Slate.
Most recently I was struck by the way that discussions about regulations often follow this predictable formula: Liberal says “We need more regulations.” Conservative says “We need fewer regulations.”
And yet, what struck me most about this form of argument is that, to a large degree, they seem to both be wrong. Or at least seem to be missing the point.
Imagine trying to bake some bread, and it’s just not turning out the way you want it to. One person says, “It needs more ingredients.” Another says, “No, it needs fewer ingredients.” How profoundly silly that would seem. What matters is not the quantity of ingredients, but rather the types of ingredients, the amounts of each ingredient, and how they’re applied.
In fact, in any system, whether cooking, engineering, or government, those are the key elements. So we hear conservatives moan about particular regulations that get in the way of something useful, and then use that as the proof that regulations are evil. And we hear liberals moan about how the lack of regulations gets in the way of something useful, and then use that as proof that regulations are good.
In the end, they’re both right about many of the examples, and wrong about the conclusions. Good regulations need to be focused on the ends, not the means.
In open financial transactions, regulations are needed to ensure that information isn’t hidden in an imbalanced way. In commerce, regulations are needed to ensure that the buyer is able to ascertain everything that is relevant to the buyer’s decision, and that the buyer has realistic alternatives to engaging with the seller. In industry, regulations are needed to ensure that external parties aren’t impacted by industrial waste. And this is just the tip of the iceberg.
In other words, there are plenty of reasons why regulations are of great value. But, as I said before, good regulations need to be focused on the ends, not the means. If a regulation is too proscriptive, it often leads to unnecessary inefficiencies. Any given regulation is written by a relative few people, and while they’re typically experts in their field, they cannot be expected to anticipate changing conditions, nor can they be expected to know the most ideal solution to a given problem. Worse yet, those who write regulations typically don’t have enough capacity to handle both new ones and maintenance of old ones, to keep them up to date with the latest situational changes.
So if a regulation is too proscriptive, it gets in the way of innovative solutions to difficult problems. Solutions improve most rapidly when natural selection is applied. Look at the success with sulfur reductions in industrial air pollution. Through the use of a cap-and-trade system, not only were sulfur levels reduced by the targeted 40% three years ahead of schedule, but also at a cost of only 25% of the expected levels. History suggests that a more proscriptive model would have produced worse results.
Proscriptive regulations are needed in some areas, particularly in definitions. If you buy something called “olive oil,” you don’t want to find out that what you bought was, in fact, only 5% olive oil and 95% soybean oil. If you buy a car and care about the gas mileage, you want to be confident that the same method of measurement was used for both the Chrysler and the Toyota.
Aside from those areas, regulations should be carefully crafted to avoid being proscriptive. Make the end clear, and leave the means to the market. This was effective in addressing acid rain, and can be similarly effective in many other areas as well.
Of course, whatever regulations we have are meaningless if there’s no enforcement. Lately we have had a rapidly increasing number of food recalls, much of which can be attributed to lack of enforcement of existing food regulations. The lack of enforcement is a direct result of intentional underfunding of the regulatory agencies by Congress. It’s as if we have a recipe that calls for a cup of flour, but nobody bothers to check that we grabbed the correct measuring cup, or that the powder we scooped was flour instead of, say, powdered sugar or scouring powder. The underfunding is a mechanism by which the number of regulations can be effectively reduced. Nonetheless, it’s a useful approach only if one doesn’t care which regulations are reduced. In other words, it speaks to Conservative says: “We need fewer regulations.” It does nothing to address the usefulness of any particular regulation.
And that’s the crux. Nothing about which regulations we need has anything to do with how many regulations we have or should have.
In the end, the recipe for good regulation depends not on quantity. It’s all about the degree, application, and enforcement.
- Title IX Hurdles (538refugees.wordpress.com)
- Rockefeller Seeks to Suspend EPA Carbon Regulations (businessweek.com)
- Risk, Reward, and Regulation (jimdew.wordpress.com)
- Alan Krinsky: Why Do Progressives Favor Regulation — and Should We? (huffingtonpost.com)