Regulations Cause Unintended Consequences

Published September 1, 2007

This article is the fourteenth in a continuing series excerpted from the book Smoke or Steam? A Guide to Environmental, Regulatory, and Food Safety Concerns, by Samuel Aldrich, adapted and serialized by Jay Lehr.

Everyone has much to lose if regulatory standards are set beyond those necessary to protect health or ensure minimal unwanted environmental harms. The zealous pursuit of safety is deceptively attractive but has hidden costs when carried too far.

First, the potential benefits of new products are postponed. For example, in today’s regulatory climate the Salk vaccine for polio–which has saved countless American lives since it was first produced in the 1950s–would have been delayed for several years while many persons, mainly children, fell victim to the disease.

Second, when new product development costs become too great due to superfluous regulatory testing requirements, the developer may decide not develop the product, though it might have been highly useful.

Third, costs and delays associated with the regulatory process are deadly for small companies. Excessive pursuit of safety results in large companies getting larger while small companies never start up or quickly go out of business.

Paranoia Has a Cost

As a nation, we have become so paranoid that when one person appeared on Larry King Live and said his wife’s death was caused by a cellular phone, a study costing between $15 million and $25 million was launched almost at once. Purchasers of cellular phones have been paying for the costs of frivolous cell phone litigation and the costs of additional, yet unnecessary, safety research.

There is another hidden cost in that the additional regulatory resources devoted to unnecessary cell phone research have resulted in a slowdown of the regulatory approval process for other beneficial products.

When Businesses Capitulate

Some persons willingly accept risks, as the cost of an anticipated benefit, if they are given the freedom to choose. When government begins imposing its own value system over people’s right to choose what is in their own best interests, freedom is the victim. Personal choices are sacrificed to government’s “more enlightened” view of what is best for each person.

The natural tendency of a business or industry is to resist regulations that it believes are unnecessary or unwise. But as the power of the environmental activist movement grows, there is a disturbing trend for industries to decide their best interests dictate that they purchase a seat at the regulatory table rather than fight.

The McDonald’s fast food chain bowed to pressure generated by environmental activists and switched from plastic to paper containers. They gave up the polystyrene foam because it was costing too much to fight the anti-plastic groups.

The conversion to paper actually required a greater input of energy, which harmed McDonald’s and society at large. Moreover, the shift to paper angered environmental activist groups that oppose tree harvesting.

Favor Big Companies

A mom-and-pop dry cleaner is required to complete and file the same number of onerous forms as dry cleaner conglomerates. It is a tremendous competitive advantage for the larger company to accept onerous regulation if it alone among its competitors has sufficient income to buy the professional legal assistance needed to bear the paperwork burden.

Of course, giant corporations retain specialists in Washington, DC to inform them of potential new regulations. Occasionally, awareness of impending changes gives them valuable lead time over smaller competitors in developing a response.

We do not mean here to criticize bigness, but rather the artificial, government-erected barriers that punish smaller businesses.

Even when large companies are justifiably inclined to fight unnecessary regulation, there is a limit to how much time and money an industry can be expected to devote to defend a principle. The combination of wealthy environmental activist groups, their willing mouthpieces in the left-leaning media, and a government with endless resources dedicated to gaining and maintaining power present an all too formidable adversary.

Jay Lehr, Ph.D. ([email protected]) is science director for The Heartland Institute. Samuel Aldrich is an emeritus professor at the University of Illinois. His groundbreaking book for laymen, Smoke or Steam? A Guide to Environmental, Regulatory, and Food Safety Concerns, is available from The Heartland Institute for $12. The table of contents of the book, containing 211 topics, can be viewed at