This week’s Economist has an article that points out what many US residents, and readers of this blog, know full well:
But red tape in America is no laughing matter. The problem is not the rules that are self-evidently absurd. It is the ones that sound reasonable on their own but impose a huge burden collectively. America is meant to be the home of laissez-faire. Unlike Europeans, whose lives have long been circumscribed by meddling governments and diktats from Brussels, Americans are supposed to be free to choose, for better or for worse. Yet for some time America has been straying from this ideal.
From federal financial regulation to local lemonade stand regulation, the regulatory systems in the US are a mess. I generally focus on energy and technology regulation (with the occasional foray into national security and surveillance), but that’s one piece of a large, complex, regulatory puzzle that has taken on a lumbering life of its own, beyond the intentions of the designers and well beyond any sincere interest they might have in reining it in. The growing weight of the regulatory state is both economically and socially corrosive.
I think the Economist has also hit on a home truth in its assessment of why we are in this messy, inefficient, costly regulatory thicket:
Two forces make American laws too complex. One is hubris. Many lawmakers seem to believe that they can lay down rules to govern every eventuality. Examples range from the merely annoying (eg, a proposed code for nurseries in Colorado that specifies how many crayons each box must contain) to the delusional (eg, the conceit of Dodd-Frank that you can anticipate and ban every nasty trick financiers will dream up in the future). Far from preventing abuses, complexity creates loopholes that the shrewd can abuse with impunity.
The other force that makes American laws complex is lobbying. The government’s drive to micromanage so many activities creates a huge incentive for interest groups to push for special favours. When a bill is hundreds of pages long, it is not hard for congressmen to slip in clauses that benefit their chums and campaign donors. The health-care bill included tons of favours for the pushy. Congress’s last, failed attempt to regulate greenhouse gases was even worse.
Yes. Hayek’s Pretence of Knowledge meets Smith’s “man of system”, Tullock’s rent seeking, and Olson’s concentrated benefits and diffuse costs. Regulatory complexity creates benefits for politically-powerful special interests, but it creates costs for everyone else, and this ongoing process feeds the egos of our elected representatives who believe they can engineer, design, and manipulate society to achieve their desired outcomes.
The Economist rightly recommends that regulatory proposals should have to pass a benefit-cost analysis by an independent group, and more importantly, that regulations should be simpler and more transparent. In this they invoke themes that resonate with Richard Epstein’s Simple Rules for a Complex World.
I would go farther. The underbrush of regulations that are passed and persist beyond their usefulness, the accretion of costly conflicting regulations, all of these have produced a stultifying regulatory thicket that makes attempting productive, entrepreneurial economic activity costly or impossible has to be evaluated and cleared out. I recommend that we make it popular with the American people by turning it into a reality TV show — Extreme Makeover: Regulation Edition. It’ll be like those makeover shows when you go into the house of the hoarder, clear out the stuff and put it all on the driveway, clean the place and modernize it, and then evaluate each piece individually and in its systemic entirety (to see whether or not the complexity is beneficial) before it goes back in the building. D’you think Ty Pennington could whip those legislators into shape and get them to see the folly of their ways?