The Regulatory Process

I am always disappointed by public meetings.  We hold public meetings for people to give us comment, and we never get the kind of comment I hope for.  I keep hoping some guy will stop in and say “Why, that problem looks like one we solved for a tricky transportation issue!  You might not think so, but I think the underlying structure is the same.  Have you thought about this algorithm, which worked for us?” And then I would say, “That just might work!  Maybe you could show me how you derived it over dinner tonight.”  And he would say “Only if I can take you out for dessert after, so we can talk about other potential applications.  But it will have to be in Midtown, because I rode my bike here.”  And then I would start blushing and fanning myself, because I would be thinking impure thoughts.

That is from Megan Non-McArdle.  Her politics are not mine, but if you scroll down her blog for the last few days, you’ll find some of the best posts on regulation in all of Blog Land; here is her post on how regulation can go wrong. 

From my angle:

1. Government regulations have a very large aggregate net benefit relative to their costs; rules for clean gas, taken alone, might be more valuable than all the other regulatory costs we bear.  If you don’t believe me, try visiting Mexico City in November.  I’ve also been to Delhi.

2. Many government regulations are simply unnecessary.

3. No one has come up with a good algorithm for weeding out the bad regulations from the good ones.  Nonetheless cost-benefit analysis, for all its philosophic flaws, can serve this function.  You don’t have to take CBA very seriously for this to be true.  It will reject towing in icebergs from the Arctic to supply water in New Zealand, and for the right reasons.  A deeper question is whether throwing darts at the Federal Register, as a means of eliminating new excess regulation, will bring a positive expected return.

4. In many areas the difference between "government regulation" and "government protecting property rights" is not well-defined.  Reread #3.

5. The costs of regulation sometimes involve intransitivities.  Many small regulations, examined individually, might be said to bring zero net harm, but taken collectively they tax innovation.  It is simply very hard to run a business and deal with extensive regulation; attention and effort are scarce.  More people on the left should take seriously the political conversion of George McGovern to a pro-business stance, after he tried running a business himself. 

6. In Megan’s area — water policy — property rights are especially likely to be poorly defined and the scope for regulation (or is that "enforcement of property rights"?) is especially likely to be strong.


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