Friday, June 17, 2016

Held Back or Held Up?

When it comes to regulations, follow the money

Just saw a post by Jim Pethokoukis that asks, "Is regulation slowing tech progress and innovation?" Reading the post reminded me of an earlier post by Jason Furman, Chairman of the President's Council of Economic Advisors, in which he discusses the "unearned benefits of preferential government regulation", stating that economic rents "have beneficiaries and these beneficiaries fight hard to keep and expand their rents."

A couple of months ago I wrote about Virginia's vehicle safety inspection program – a government-enforced program that cannot be shown to increase public safety. So, if it can't be shown, then why continue it? Because auto mechanics have a vested economic interest in its continuation. Similarly, there are also benefits imparted when competition is harmed by regulatory apathy – skewing the marketplace in favor of sellers over consumers.

In Mr. Pethokoukis's interview, Eli Dourado says, "There’s a lot of regulation that’s holding back drones and medical tech." My first reaction is a small groan; I've heard similar, generalized complaints for many years. I get it: the government is holding me back, it's the bureaucracy, blah blah blah.

My second reaction, however, is to ask, "Why are those regulations in place and who do they benefit?" Sure, there's something to bureaucracy putting mechanisms in place to guarantee its continued existence. But it's more likely that private interests realize economic gain by stifling change, innovation, and competition through regulatory impediments.

Focusing on the consumer yields the best result in any regulatory environment – whether it's the price we pay, the variety of products and services available, or the air we breathe. (Yes, we're all beneficiaries of clean air.) Broad-brush complaints yield broad-brush solutions with little understanding of the underlying causes and motives.

Undoing a complex tangle of preferential regulations takes time and effort, But instead of throwing your hands up in disgust, look the beast in the eye and git 'er done.