Regulations Are Down But Not Out

Published June 5, 2018

Recently I attended the launch by Scott Pruitt of the EPA’s new Office of Continuous Improvement (and, as proof, you can see me in the background of this official photo). Having worked in and around governments around the Anglosphere since the mid-1990s, these sort of initiatives do not fill me with much confidence.

The reason is, by the standards of competitive free markets, government agencies like the EPA can be made to operate less inefficiently but never truly efficiently. Too often even those on the Right simply believe they can “centrally plan” better than those on the Left. This is not right.

As Thomas Jefferson once said:

“That government that governs least governs best.”

This means that the EPA, as well as other agencies and departments of the Trump Administration, should continue to focus on reducing, not ‘improving’, regulations in 2018 like they did in 2017.

Regarding last year, the Competitive Enterprise Institute (CEI) optimistically reported in April that:

“The 2017 Federal Register contained 61,308 pages, the lowest count since 1993 and a 36% drop from Obama’s 95,894 pages in 2016, the highest level ever recorded.”

And noting:

“Federal regulation is a hidden tax that amounts to nearly $15,000 per US household each year, more than Americans spend on any category in their family budget except for housing.”

The Mercatus Center was also optimistic, but less so than CEI, when they reported in January that:

“During President Trump’s first year, federal regulations grew by about 0.65%, less than the growth rate of any other president’s first year in office since our data begin in 1970. This rate of growth is also less than one-third of the long-term annual growth rate for federal regulations, which, from 1970 to 2016, was about 2.1%.”

And noting that the number of EPA regulatory restrictions in the first year of Trump were just over 1,000 compared to that of almost 5,000 and over 6,000 for Obama and Bush II respectively.

But CEI also provided the following strong warning for the future:

“While agencies like the EPA are currently led by pro-liberalization appointees, the agency bureaucracies are likely biding time. Without congressional action, much of the Trump streamlining phenomenon will be transitory. Longer-lasting regulatory reform will require action by Congress.”

And noting this should also cover:

Regulatory Dark Matter including guidance documents, proclamations, memoranda, bulletins, circulars, letters and more.”

Action by Congress, and by the voters who elect them, will need to be prompted and guided through sound principles of economics and ethics. Such principles were written by me in 2014 and published in 2017 ie – the Ten Principles of Regulation & Reform. The first five principles of this book are concerned with the nature of regulation, whilst the second five with the reform of regulation:

1. Regulations seldom solve problems

2. Beware of unintended consequences

3. Regulations frequently redistribute income and power

4. Few regulations are actually intended to protect consumers

5. Regulations kill

6. Cost benefit analysis can improve regulation

7. Comparative risk assessment can improve regulation

8. Repeal existing regulations before adopting new ones

9. Enforcing property rights can be superior to regulation

10. Hands off the Internet (the digital economy abhors regulation)

Note that each of the core chapters of Ten Principles broadly address three types of questions:

What is this principle exactly?

Why is this principle important?

How is this principle applied?

Chapter 1 entitled “Regulations seldom solve problems“, as do other chapters, mainly draws upon the great thinkers from three free-market friendly schools of economics – ie Public Choice or Virginia, Chicago and Austrian. This chapter, for example, quotes David Friedman (the son of Milton Friedman) who wrote:

“Refusing to license the less qualified 50% of physicians may raise the average quality of physicians but it lowers the average quality of medical care. It does not mean that everyone gets better medical care but that half the people get no care [at all] or that everyone gets half as much.”

Chapter 2 entitled “Beware of unintended consequences“, for example, quotes Robert Bradley as follows:

“The deeper the cumulative process, the more unintended and unforeseen the regulatory process becomes. At some point the unforeseen turns into the unforeseeable; the total surprise that is so unique that it is beyond what could have learned through past experience.”

Chapter 3 entitled “Regulations frequently redistribute income and power“, for example, quotes Murray Rothbard who states:

“A well-known type of private coercion is the vague but ominous-sounding economic power. But economic power is simply the right under freedom to refuse to make an exchange. Every man has, and should have, this power. If we choose the economic power concept, we must employ violence to combat [it]. Such a society would be truly a war of all against all.”

Chapter 4 entitled “Few regulations are actually intended to protect consumers“, for example, quotes Dominick Armentano in the following terms:

“It is undeniably true that the antitrust laws have often been employed against innovative business organizations that have expanded output and lowered prices. Antitrust regulation is [yet] just another historical example of protectionist rent-seeking legislation.”

Chapter 5 entitled “Regulations kill“, for example, quotes David Friedman again:

“Caution kills. Which men and women and children make up [those] killed by caution no one can ever know; their deaths are statistics, not headlines. A statistical corpse is just as real as a thalidomide baby on the front page; it is just less visible. Visibility is an important element in politics and the FDA is a political institution. Given a choice between one tragedy on the front page and ten in the medical statistics, it inevitably prefers the latter. It thus has a strong bias in favor of overregulating, of stifling medical progress in the name of caution.”

If you remember nothing else from this article, my book or about regulation in general, then please remember the term of “Baptists and Bootleggers“. This is explained, in conclusion to this article, in the Introduction chapter of Ten Principles, thusly:

“There is usually some combination of true believers and special interests to the origination, continuation and growth of regulation. This was colorfully dubbed by Bruce Yandle as the Baptists and Bootleggers phenomenon. Like the Bootleggers in the early-20th-century South, who benefited from laws that banned the sale of liquor on Sundays, special interests need to justify their efforts to obtain special favors with public interest stories. In the case of Sunday liquor sales, the Baptists, who supported the Sunday ban on moral grounds, provided that public interest support.”

[Originally Published at Townhall]