Paul Krugman on libertarian fantasies

He writes:

…the cost of bureaucracy is in general vastly overestimated. Compensation of workers accounts for only around 6 percent of non defense federal spending, and only a fraction of that compensation goes to people you could reasonably call bureaucrats.

And what Konczal says about welfare is also true, although harder to quantify, for regulation. For sure there are wasteful and unnecessary government regulations — but not nearly as many as libertarians want to believe. When, for example, meddling bureaucrats tell you what you can and can’t have in your dishwashing detergent, it turns out that there’s a very good reason. America in 2014 is not India under the License Raj.

In other words, libertarianism is a crusade against problems we don’t have, or at least not to the extent the libertarians want to imagine.


And what all this means in turn is that libertarianism does not offer a workable policy agenda. I don’t mean that I dislike the agenda, which is a separate issue; I mean that if we should somehow end up with libertarian government, it would quickly find itself unable to fulfill any of its promises.

You can read his further points here.  In fact I agree with many of Krugman’s observations in what I thought was overall a useful post.  It’s just that I think a lot of other viewpoints are living in a fantasy world too.

That said, Krugman grossly underestimates the costs of government regulation.  For one thing, government regulations are a major obstacle to the infrastructure improvements which Krugman is so keen on.  To use Krugman’s own pick of the cherry, he wrote another post defending the DMV for its on-line service and reasonable wait times.  It was not always so, but on top of that let’s not forget the Virginia DMV just tried to put Uber and other ride-sharing services out of business (Krugman himself wrote rapturously about Uber a few weeks ago and how it held out the promise of a society with diminished car ownership in some locales.  I say bring it on.)  Fortunately the regulators were temporarily overriden in this case, although they may reemerge as an obstacle in a subsequent bargain.  More generally, taxi license and medallion requirements are a disgrace in many places, and who is in charge of that?  Typically the DMV.

You might also ask whether DMVs underregulate where they ought to regulate more.  The number of road deaths in the United States each year is so high as to be scandalous.  I am not sure how much this problem can be pinned on the DMV (how easy is it to get very bad drivers off the road through legal/constitutional means?), but still it is hard to argue that in absolute terms these agencies are overseeing a successful regime of road safety.


Uber is as big a step towards a carless society as polio vaccines are towards immortality.

Carless society? Is that a thing now?

Fascinating--after I wrote this comment he changed the wording to "promise of a society with diminished car ownership in some locales".

I am not a big Uber fan boy (though I have nothing against it.) but if I thought Uber was going to be half as beneficial for humanity as the polio vaccines were I would be out in the streets fighting for it.

It's so bizarre reading all of these predictions about how Uber will make car ownership obsolete once people start companies with robo-taxis that can be at your house in 5-10 minutes. I just don't see it, although I think auto-driving cars will catch on really quickly once they're out.

Think about it. If the car is fully automated, then designers can probably opt for a more modular cabin on the inside - you could turn it into a small, moving mobile lounge personalized to your convenience. That is, if you own the car.

Robocars could cut our (married, suburban, high income, late 50's) car ownership in half. One to own, equip the lounge-like interior the way we want. Our other car replaced by a call-on-demand vehicle when schedules conflict.

Uber already has made us (married, 2 young kids, urban) a one car family, even with 2 kids.

In many states, taxi medallion regs are overseen by cities, not the DMV, which is often a state agency. See, for instance, the fights between Uber and multiple Texas cities:

I work for Flywheel -- we're a "push a button on your smartphone, get a taxi" app, and a competitor for Uber.

Taxi regulations are very local, and I'm sure there's somewhere where the DMV controls taxis, but Uber Regs is right that in the big markets, taxis tend to be overseen by a dedicated agency -- often a Taxi and Limousine Commission or a Metropolitan Transit Association.

Which doesn't really change the point that they are a function of government -- albeit local government -- and they are generally of somewhat dubious public use. They're usually good poster-boys for libertarian discontent with government and the indirect prices that we pay for it. Which is to say that they are probably not for the most part a big line-item on the government ledger, but they may be holding back innovation and economic growth.

These kind of local business regulations are in general pretty terrible. Lots of idiosyncratic stuff that's badly thought out or baldly protectionist, and because it's local, it's not important enough to generate interest in exposing how bad it is.

Restrictions on competition for doctors (licensing and immigration) and drug manufacturing (patents and importing) are a lot more expensive to our society than restrictions on competition to taxi drivers.

I wish anti-regulation advocates would focus more on restrictions that benefit the best off than restrictions that benefit low paid workers.

Dean Baker talks about this a lot.

Here, for example, concerning doctors - 'There is a widely believed, but largely silly, view that rising inequality is the result of technology and globalization. NPR gave us an illustration of how silly this view is in a segment on plans in California to reduce the duration of medical school from four years to three years.

The ostensible motivation was to help address a shortage of primary care physicians. The reason why the piece is relevant to the larger issue of inequality is that it never once mentioned the possibility of bringing in more doctors from other countries. Doctors in the United States earn on average twice what their counterparts do in other wealthy countries. Since we have no notable differences in health outcomes, the implication would be that our doctors are of no better quality on average than those in Europe and Canada.

This would suggest that there is a vast pool of doctors who could benefit from coming to the United States and working for more money than they would receive in their home country. The pool of potential doctors is even larger if we include doctors from developing countries who could be required to train to U.S. standards. To ensure that developing countries benefit as well, we could repatriate tax revenue from expatriate doctors so they can train two or three doctors for everyone that comes here. (If you plan to complain that this policy hurts developing countries read the last sentence as many times as necessary to understand it.)'

Or here, concerning drug manufacturing - 'Gilead Sciences charges $84,000 for Sovaldi but it doesn't actually cost $84,000 to produce the drug. Generic manufacturers make the drug available in Egypt for less than $1,000 per person and Indian generic manufacturers believe they could produce it for even less. If we allowed people in the United States to go these countries to get treatment, covering the cost of travel for themselves and immediate family, it would be possible to provide treatment for a small fraction of this cost.

If this were done on a large scale it would undermine the model of financing research through granting patent monopolies, however it is long past time that this 16th century mode of financing be re-examined. There is a vast literature in economics on the waste and corruption that results from policies like tariffs that raise the price of products above the cost of production.'

Considering that this is just a couple of examples from last week, it really is a topic that Dean Baker likes to emphasize.

Recently in New York State (country wide?) they made Physical Therapists get a doctorate instead of just requiring a masters degree. When my sister (who is set on becoming a physical therapists) inquired why the answer she was given was that it would lead to higher prestige and better pay for Physical Therapists. No one has come up with any study that shows that Physical Therapists who only have a masters have worse patient outcomes then Physical Therapists who have Doctorates. So who lead the charge to require Physical Therapists to have Doctorates? The trade association/guild (you have to be part of it) that represents Physical Therapists. For some reason, they don't require all the Physical Therapists who are already practicing with only a masters to go back to school. It is only the new ones who must do the extra schooling.

The same thing happened to young accountants. They doubled the number of sections of the CPA exam and beginning next year you need a masters degree to become a CPA.

I'm not sure the statement saying there is an upcoming ("next year") CPA requirement of a masters' degree is correct. Certainly not in Pennsylvania, where I am. But the requirements are set by the states, so maybe somewhere? However, I can find no mention of it after a bit of googling. For example, it is not mentioned on the AICPA website. What is true is that the trend has been to have a 150 credit hour requirement (rather than some smaller number such as 120) for the education portion of the requirements, which most states now do have. A master's degree is one way to at least partly achieve this.

Occupational Therapists are doing the same thing -- they are about to start requiring a doctorate for that, too. And if you talk to current PTs and OTs they will tell you that the majority of what they use every day was learned on the job, not in the classroom. Of course the foundational anatomy and body mechanics knowledge has to be there first but they are already getting that as part of their undergraduate and master's degrees.

But why even require a full BA first? Why not just have 2 years of OT training and then have a 1 year paid internship?

It's all about restricting labor and signaling "prestige" as you put it.

Immigrant medical professionals are needed because the pool of potential US doctors (in a country of over 300 million souls) has been exhausted? Or is it that US citizens are unwilling to put in the effort to go through medical school? Or that they're dissatisfied with the earnings of medical professionals? Or is there some other reason for a dearth of doctors?

They cap the number residency slots and to some extent the number of med school placements. More doctors mean existing doctors might make less money, despite making something like twice as much as their peers in other rich countries. Pity, that.

I believe that Dean Baker's point concerning doctors is that in the U.S., doctors are seemingly immune from the free trade rhetoric that surrounds the sacrifices that American steel or textile workers need to suffer for the greater good of the free market.

And that any number of equally trained Westen doctors are more than willing to increase their pay for medical services by 50% while undercutting American doctor fees by 25%, or that doctors in non-Western medical systems are even cheaper, though their services are likely to require costs in terms of equal certification of their training.

I'm quite sure that current holder of the Bartley J. Madden Chair in Economics at the Mercatus Center is capable of explaining how the current regulatory regimes relating to medical treatment and services is entirely comparable throughout what is generally called the West.

You have artificial barriers to the size of each new cohort of students.

I am acquainted with a number of young pre-med students, all smart and eager and able to do the work, even as they understand doctor salaries will decline in the future. The bottleneck is in the limited number of med school slots and, worse, residencies. My impression is that the AMA's guild-like protectionism is the main culprit.

Why aren't the for-profit hospitals providing large numbers of residencies to increase the supply of doctor to drive down their labor costs? Or why aren't the for-profit insurers funding large numbers of residencies to increase the supply of doctors and thus drive down the prices they pay for labor?

Why is the solution to a claim problem created by government always more government spending or government redistribution from individuals to corporations?

My pro-market, anti-regulation, anti-union, anti-guild biases urge me not to say this, but...

Every doctor I've ever had has been really, really smart. Philosophically I want to loosen the artificial, AMA-imposed restrictions (number of MD programs, number of residencies available, etc.). But the effect of those restrictions has been to ensure that only the brightest get through. Exactly how this works I cannot tell. Why isn't it the case that only (say) the best connected get through, or the most politically savvy get through? But whatever the mechanism, I've been grateful for the results.

Please, someone, help me find a way to explain this.

You can add lawyers to the list of over-protected professions. Not only do they have a legally-mandate exam, the bar, but the very nature of our over-complex legal system means more lawyers are required. By simplifying the law, everyone wins (except lawyers).

This isn't unique to the USA. Italy has a famously complex legal system (think Amanda Knox), and they have five times more lawyers per capita than neighbouring France. But as long so many of our elected politicians are (or were) practicing lawyers, it's unlikely to ever change.

"If we allowed people in the United States to go these countries to get treatment, covering the cost of travel for themselves and immediate family, it would be possible to provide treatment for a small fraction of this cost."

In other words, eliminate the US border control so you don't need to pay the Federal government for passports and stuff to go to other countries and return???

Surely you are not calling for the Federal government to distort the markets in other nations by paying excessive amounts for medical treatment and thus demanding it actually provide benefit for the tax money spent instead of going for some fraud...

Libertarianism - what a bizarre thing - as it has been described to me. It almost verges on a type of mental illness. A desire for a simpler, less cooperative, less competitive, less structured, anti-establishment, and anti-social existence. A yearning to return to medieval values. Strange.

In all frankness, it appeals to weak middle class men who think they would be masters of the universe if it weren't for the evil gubment.

I suspect most of them were brutally bullied in school.

I think who supports libertarianism depends on the society. Here in the Philippines the masses like or tolerate cradle-to-grave Big Brother government, so the 'weak masses' actually favor authoritarian big government in the PH. Also, in the USA the right-wing has taken the banner of Libertarianism to mean less taxes for Big Business, which is not exactly the same thing. There's a book "The Machine" by Lee Fang that points this out.

I'm a middle class male who was bullied in school but I want bigger, more effective government, policing and regulation enforcement so that society can be made more predictable, lawful and humane .... the last thing i want is the anarchy of widespread 'liberty'

that youtube video captures my childhood experience in public schools exactly. i'll never forget the day my glass cage broke.

It is the statists and not libertarians who want to tell other people want to do. Were you referring to the cartoon characters in some way? There are certainly libertarians with a variety of athletic abilities - Gov. Johnson is well known for climbing Everest. If you look at the polling data libertarians come from a lot of economic backgrounds as well. I do agree putting students in an environment with other immature people who have nothing in common with them other than age is very destructive. Ending government schools would open up resources to resolve that problem.

Or maybe 1995. Truly medieval. Or the mid 80's, which was the stone age.

If you don't know the difference, you really should get out more.

We can quibble about years (1895?) but the key point is that this is a desire for a fantasy, a mythical history. It is a 19th century America say, without 19th century financial panics, or 19th century fraud medicine.

Perhaps it is fantastical for Libertarians to dwell on specific time periods or the "good ole' days". But I don't think it is too controversial to say that at one point in time there was a much more manageable level of governance in the U.S, both in terms of manpower and in size of the total economy, where it could more better handle it's core purposes.

That strikes me as an emotional appeal, one about "felt burden" rather than efficiency or necessity. I mean, derek's 1995 presumably had few border for ebola. I suspect that the emotional answer is that ebola can be slid into a 1998 framework without changing it much.

If you are telling me that you want regulation that "feels like 1998" I have no answer. How can I know in rational terms what that even means? The backup camera for cars does not return positive ROI because in 1998 it would have cost $500 per auto instead of $50?

(I clipped the wrong word there, substitute "guidelines" for "border")

Like back in the 19th century when all that was needed to develop economic growth an provide opportunity was an army to implement wealth redistribution policies??

Things were much easier then because the poor yearning to be free could depend on the US army to liberate the land of non-whites so the government could pick the winners who would get the gift of land. We also had the good old days of strong Republican government where they could give you a good paying job where you didn't need to work hard, to reward party loyalty.

It was the evil Democrat who created the vast over-regulated civil service with its civil service exams and permanent employment. Things were far superior when government workers were rewarded for doing a good job of reelecting the party who hired them by keeping their job, and fired if they failed to do so.

"Good government" was just a ruse to expand government regulation.

What are you talking about? 1995 wasn't a fantasy. Nor was 1988 when I was in business. I had one government agency to deal with when they wanted taxes. Otherwise I just did what I did for a living.

And by the way, all the tools I used, the materials I used, almost everything was manufactured in North America. That is not the case now. And the regulatory burden is substantially heavier.

Anyone who doesn't recognize the correlation and causation is delusional. It isn't libertarians who are living in a dream world.

I believe more open trade may have something to do with your materials coming from other countries. You don't like protectionism, I'm guessing.

What free trade does is provide a competitive environment where regulatory structures win or lose. That is the complaint commonly heard here in Canada where free trade opponents decry the ability of foreign firms not subject to the rigorous regulatory environment winning on price, quality and availability.

What has happened is that the US and Canada have lost. Our cost structures from regulation are too high, production and innovation has moved elsewhere.

For a while the rationalization of regulation was pursued in some provinces. But then the Alberta oil boom happened, the governments were flush with cash or able to borrow seemingly unlimited amounts and the imperative to cut costs and engender a competitive business environment disappeared. In Alberta the costly safety regulations that the oil companies apply to themselves, and can afford are now becoming provincial practice. These are processes that take up about 12% or more of employee time. There is a push to apply them where I live, which will either drive people out of business or underground.

If the US government had to live on what it collected in taxes because the cost of borrowing was too high, the regulatory environment would change very quickly. Especially if the regulatory agencies started seeing their budgets squeezed.

Thank you, I also believe in the competition-driving value of free trade. I think we all win. Free trade makes everything cheaper and everyone (in the long run) better off.

Also, there may be more that goes into the formula than regulatory structures, like simple cost of labor and materials. When you get a batch of product from Mexico, that is usually the reason.

I am all for trading our regulations for those of Columbia in the name of competition. Of course, then we become Columbia (not District of, either). Ugh...

So Columbia can become the United States by imposing our system of laws and regulations? It isn't libertarians living in a dream world.

Wait? It isn't all about the regulations? Thanks! Pls tell Derek!

The XIX century was a halcyon era of progress, as TC has written. Steam power, modern weapons, longer life due to legitimate medicine, increased productivity, and what you call "financial panics" in fact was a beneficial culling of deadwood ala Schumpeter (late 19th century growth rates were roughly the same as in the modern era). As for fraud medicine, unless lead and arsenic was in the potion, likely it was placebo and therefore beneficial.

As for fraud medicine, unless lead and arsenic was in the potion, likely it was placebo and therefore beneficial.

Snake oil. Mislabeled (or unlabeled) ingredients. Potions of cocaine, opium, morphine and cannabis. Borax and formaldehyde as common preservatives.

I do indeed yearn for the ancient days of yore, when small business employment growth was keeping unemployment low, and GDP growing quickly. How many hundreds of millions of seconds ago was that golden age?

Yes, because today we don't have fraud medicine *cough*widely accepted myth of vaccine-driven autism leads to declining vaccination rates, electricity causes childhood leukemia*/cough* or financial panics *cough*1997 asian crisis, 1998 LTCM meltdown, 1999-2001 dot com bubble, 2005-2010 housing and financial crises (plural)*/cough*. But we do have more corporate welfare today than ever before, courtesy of our progressive plutocrats.

That's the way the Soviet priests described any political deviation from Bolshevik orthodoxy.

And now the church orthodoxy is used in Russia to crush freedom of speech. I guess who is oppressed and why is open to interpretation, or at least evolution.

You are obviously trolling, but it doesn't make sense to call millions of people mentally ill based solely on political values. While I believe a libertarians society would be simpler, there is no reason it would necessarily be less cooperative, less competitive, anti-social, or even less structured. It just means that what structure did persist would not be government driven and would involve less coercion.

I don't think the values are particularly medieval - a large minority of libertarians are not religious and libertarian social values such as equal treatment for gays have been accepted in modern times.

Modern Liberalism – what a bizarre thing – as it has been described to me. It almost verges on a type of mental illness. A desire for a simpler, less cooperative, less competitive, less structured, anti-establishment, and anti-social existence. A yearning to return to medieval values. Strange.

Fixed it for ya.

It really is a strange comparison, when you consider that medieval times were ruled by strong authoritarians, which is mostly what progressives love.

I'm a libertarian, but I believe some regulations are sensible. I'm accepting of a welfare state. Problem?

Not really. Despite what the morons uptread are blabbering about, libertarianism is a desire for and preference for personal liberty. You can favor personal freedom and still accept a generous welfare state.

Nope. That just suggests you're on the libertarian left.

There's been a sharp inversion of the term "libertarian" since the '90s. Back then, it referred primarily to people who wanted to legalize drugs and push back against political correctness. Guys like Bill Maher were considered the poster children of "libertarian".

Now, it refers to the "Unregulated Free Markets Cure Every Problem" crowd.

I think the switch happened when Ron Paul rose to prominence.

My advice to you would be when in doubt, to look up the definition:

1: an advocate of the doctrine of free will
a : a person who upholds the principles of individual liberty especially of thought and action
b capitalized : a member of a political party advocating libertarian principles

a person who advocates liberty, especially with regard to thought or conduct.
a person who maintains the doctrine of free will (distinguished from necessitarian ).
advocating liberty or conforming to principles of liberty.
maintaining the doctrine of free will.

The dictionary definitions of political identifiers have little or no relationship with how they're actually used.

"...the cost of bureaucracy is in general vastly overestimated. Compensation of workers accounts for only around 6 percent of non defense federal spending, and only a fraction of that compensation goes to people you could reasonably call bureaucrats."

What incredible disingenuousness. Miniscule! A fraction of GDP, a rounding error!

Krugman: Cost of bureaucracy < compensation of workers.

In the state I live, there is a state agency that knows it has incorrectly doled out more than $1B in money due to fraud and mistakes. Yes they are attempting to get some of that money back, but the "compensation of workers" pales in comparison to that waste.

Claiming "cost" is only that which happens and none of that which does not happen is a particularly small vision of what "cost" is.

Or claiming "cost" is only that which was intended and none of that which happened (and which could have been reasonably foreseen to happen) is the basis of every politician's claim that he will stand against "fraud, waste and abuse".

What of credit card fraud? Is that not a waste? Is that not a burden on small businesses?

Banks largely promote fraud because they don't want to restrict the use of credit cards with regulations, and they simply pass along the costs to consumers and small businesses and fight political battles with large businesses in DC.

Banks in the US are far less regulated than they are elsewhere, yet they cost more.

So, the rule of thumb is that the cost of an employee (including benefits, facilities to house them, IT, etc) is 2-3x their salary, so I immediately round that 6% number to 15%. Then, consider that the numbers of contractors is 2-4x the number of gov (according to: So, that puts the employment costs of bureaucrats at something like 50%. An over-estimate, I'm sure, but kinda undermines Nobel-Paulie's point.

And, that's long before getting to the non-budgetary effects of bureaucrocy, as thoroughly expounded elsewhere in this thread.

Really, he should know better.

"The number of road deaths in the United States each year is so high as to be scandalous." That surely depends on whether you compare it to road deaths in (say) the UK, or to murder deaths in the USA.

Krugman's use of "non-defense federal spending" as the baseline against which to measure the cost of workers in government is particularly disingenuous. The federal budget - unlike the state or municipal budgets - is dwarfed by defense spending and a handful of redistributive spending programs like Medicare and Social Security (to say nothing of the fact that defense employs a goodly share of it's own bureaucrats). The state and municipal bureaucracies are considerably different, and it is with bureaucrats at these levels that the majority of the public will interact with the most on a daily basis.

"The state and municipal bureaucracies are considerably different, and it is with bureaucrats at these levels that the majority of the public will interact with the most on a daily basis."

In general, the more local the government, the more maddening I find it. My federal interactions are ok. The state ones drive me nuts, but it's only once you get down to the county, city, and school district level that I become truly enraged.

Can anyone name a popular libertarian complaint about aggregate bureaucrat pay?

The notion that government workers are overpaid is quite common, especially among libertarians. A google search of keywords like libertarian, overpaid government workers, etc. will find you many results. Granted, most of those results will be on the individual level, but I imagine the view is common in aggregate as well. I've never heard a libertarian argue that while individual workers are overpaid, in aggregate total spending on government workers doesn't strike them as too high.

On the one hand: sure. There are libertarians who probably think that you could save a lot of money by cutting bloated bureaucrat pay. In the same way that there are lots of people of all persuasions who think that foreign aid is a big component of the federal budget. People are in general not very informed about policy issues, and the libertarian-on-the-street is similar to the democrat-or-republican-on-the-street in that sense.

I don't think, however, that any major libertarian policy organization has illusions about the size of the federal payroll.

Nylund, that is very precisely stated not my question.

(I have of course pointed out that is both obvious and likely true, or more precisely not disproven. But it is not what I believe relevant to the pivot I suspect pk is trying to make into a straw man.)

Actually, it's not so much about pay but about the other government employment structures that make no sense such as LIFO seniority rules or "Rubber rooms" ( Or the way public pensions are gamed -- which is /not/ to say I'm against them as a matter of principle.

I, for one, would be perfectly keen to pay government workers more (far more in the case of teachers) in exchange for abolishing these non-financial forms of compensation.

Yeah, I'm pretty sure the libertarian complaint about government bureaucrats is the policies and regulations they enact on people. Their actual salary cost is a distant concern.

Under current "rules", one of the most cost effective things a sudden libertarian-minded President could do would be to re-assign those bureaucrats to digging BLM fire roads by hand (in preparation for the land sale, of course...) in order to keep them out of other mischief and perhaps influence some of them that working elsewhere would be a good idea.

Double their pay to do half as much! I jest. But not much.

I refer to things like persecuting the coffee creamers and seed banks.

Just yesterday, I was denied registration of a simple commercial vehicle (compact car) during my second attempt to do so at the New Jersey DMV. I had done everything right (e.g. faxed in papers to get a 'corpcode' (this is just for DMV, not general business registration), obtained a notarized letter stating that I could register car on behalf of the company), but the DMV person who registered the 'corpcode' significantly misspelled the name of the corporation. I had done everything right except underestimating the incompetence of the NJ DMV.

When I lived in Virginia, it took just one visit to the DMV to register the same car - no separate 'corpcode' registration, no need to get a notarized statement.

New Jersey - the Wall Street for civil service!

The DMV here in Texas (aka, the Department of Transportation) is a nightmare. I'd give anything for it to be run as well as the Social Security Administration office just a few miles down the street. I can't get out of the DMV in less than five hours, whereas my few trips to social security have never lasted more than 15 minutes.

Ohio was just as bad, but now is actually pretty good.
I was a pretty pleased when getting my son a temp and renewing my license took 45 min.
Of course we privatised a few years ago.

Wait? DMV is about safety? Not in Illinois, where we sent a governor to prison as a results of deaths that occurred while he was in charge of the DMW (Secretary of State George Ryan).

And for what reason is the taking of pictures forbidden in Illinois DMV offices? Point a smartphone at someone (e.g. your child after they just passed the test) and the guards will be on you in seconds.

The fact that DMV's -- a state office -- are notorious for pitiful service across states in general means there is something inherent in bureaucratic systems that leads to this.

Your anecdote is of course part of the larger Libertarian argument as well. It's not only that the various levels of governments/bureaus are large and expensive, it's that they also have horrible returns in the form of their shitty service. But as we all know, true competition weeds out those who suck at what they do.

The "shitty service" has with 100% probability nothing to do with the budget is the evil incompetent big government...

The "shitty service" demands quotes but the "budget cuts" do not, Moreno?

As for budget cuts, I've never encountered one yet that decreased an individual's ability to accurately record a name.

I don't see any of our financial regulators leaning against the tide during the run-up to the 2008 financial crisis, in fact quite the opposite as they worked to 'improve' access of the poor to credit. The SEC/CFTC/Fed/FDIC/OCC/OTS/OFHEO/CFPB aren't mitigating systematic risk, or capturing Madoffs before they blow up. If you worked in finance and actually saw the things the meticulously document, you'll see they aren't effectual at all, and will miss the next one too. Indeed, these groups regularly just block entry, and thus competition, the greatest regulating mechanism in existence.

Then there's the little stupid things, like preventing hedge funds from posting performance results lest widows and orphan get excited by hedge funds. The effect is to make it less clear what hedge fund results are, and to make it easier for bad funds to hide their failures.

If all the financial regulators watched cat videos all day instead of doing what they are supposed to do, no one would know.

My understanding is that hedge funds are essentially unregulated and open only to sophisticated investors. In return for that leeway they are not allowed to market to the public...i.e., post performance results. If they want to sell to the public they can submit to regulation and become mutual funds. Seems to me to be reasonable consumer protection.

So how does prohibiting hedge funds from posting results protect small investors who are not allowed to invest in those hedge funds anyway?

Because intentions.

Krugman is being disingenuous here, in fact is pulling an old lie out.

For example, in the last couple weeks the EPA wrote a regulation that proposes to remove a bunch of HFC refrigerants from either new or retrofit installations, including automotive and small package coolers. This regulation will cost nothing in government employees or enforcement because the systems are in place already. It will add substantial costs to the food service industry.

Every regulation is there for a good reason, and every factory or business that relocates either head office or production elsewhere does it for good reasons.

Do you have a cost-benefit analysis of the HFC refrigerant rules?
Under obama's first fire years the cost-benefit of new EPA rules ranged from 1-2 to 1-20$
And since 1970 every dollar spent on clean energy reuglations created 4-8$ in economic benefits

Turns out pollution isn't good for an economy after all.

"Do you have a cost-benefit analysis of the HFC refrigerant rules? Under obama’s first fire years the cost-benefit of new EPA rules ranged from 1-2 to 1-20$"

Not credible sources.

Ah, everybody's a regulatory economics expert. Speaking as someone who has actually been inside the process, let me provide some insight. Cost-benefit analysis is almost entirely farmed out to private contractors. Although the EPA would like its contractors to maximize benefits to the extent possible, there's such a long history of law and policy on what is actually considered a legitimate benefit for most pollutants under the EPA's jurisdiction. Moreover, plenty of regulations are tanked before they are ever announced if the benefits don't add up. Assuming it does get proposed, there's a public comment period, and whether you believe this or not, technical comments are actually given serious consideration, and all comments are read and categorized for response by either EPA employees or their contractors. Then, the draft cost-benefit analysis goes through the OMB, which seems to consider its mission to be nitpicking every assumption to death for any regulation with substantial costs. Then, some rules get pulled by political appointees or by Congressional legislation before they take effect. Only when all of those hurdles have been cleared does a regulation actually take effect. But by all means, continue to spout off about this.

I've had to both respond to EPA regulations as well as seen the effects, directly, economically, on business costs. In several major cases, the EPA did very well. In others, they botched it - probably for political reasons. Ignoring the regulations that "never were", I'd say the cycle (post-issuance) is as follows: Initial confusion and over-reaction; Modification (possibly court ordered), Compliance, Unintended Side-Effects, Corruption and Mutation and Vast, inflationary Enlargement of regulation (based on various political/economic pressure groups influence). If the Obama admin's profound misuse of Title 9 as well as its abuse of disparate impact laws isn't sufficient for you to conclude that the Executive has too much power, then you are either a fascist or haven't been paying attention. The problem with regulation, as I see it, is that every regulation leads to several (more than 1) side-effects which require MORE regulations to correct. Without a SERIOUS and continuous effort at limiting (and pruning) our laws and regulations, we are doomed to self-destruct as a country. The Road to Hell is paved with good intentions.

"If you price pollutants at infinity dollars, then every EPA regulation produces infinite return!" - Oakplug.

I refer you to those audio tapes from a few months back where the EPA fired a contractor producing exactly these types of cost-benefit analysis because it didn't produce the numbers the EPA wanted.

Basically, you can't believe a lick of those numbers.

Google for "broken window fallacy."

What about all the bureaucrats that businesses have on their payroll? Everyone in medicine filling out paperwork is doing bureaucratic work. Everyone who fills out tax forms is doing bureaucratic work.

I don't think its excessive to ballpark healthcare regulation as costing 5% of GDP. If a Singapore system was workable, but cost double, you could conservatively argue that as much as 8% of GDP is being wasted due to healthcare regulations alone.

If anything, the Singapore's universal health care system is even more regulated than that of the US, with a greater role for state institutions. If the US were to adopt such a system I also think that we would save money, but not because of less regulation.

You can read about it here.

The US is not Singapore. We can't import their healthcare system anymore than Iraq can import our constitution.

What a pointless comment -- of course we can't just impart a top down replacement of the current system with Singapore's, but there is no reason that we can't move more people towards a more Singapore-like system. Many workers in the US are already moving towards HDHP with Health Savings Accounts which allows consumers to control their own health care dollars. The younger we encourage this kind of savings, the more money they will have to spend on health care when they are older and in need of more services. There is more efficiency from workers spending their own money than what you get when the government is spending everyone else's. It might take a generation or two to make a positive impact, but it is certainly better than the direction we are heading now.

Maybe if I elaborate more it will not seem so pointless?

Jan claimed that Singapore is more regulated then US health care but with better outcomes. But Singapore's government is more effective then the US government on almost every measure. I would want to see US institutions become more effective before I considered giving them more power one the grounds that "it worked for Singapore".

I wonder how many automobile deaths are caused by the added danger of High Occupancy Vehicle (HOV) lanes. I know 75% to 80% of the time I see a bad accident on the freeway it involves the HOV lane. There seems to be no interest in tracking HOV accidents -- even the non-fatal ones -- versus the baseline estimates that went into justifying the lanes.

What's the deal with the HOV lanes? People changing into the HOV lane at low speed and being hit by a much faster vehicle from behind?

If you think there is not an over-regulation problem, work in a health insurance company. It's mind-boggling how much of the company's resources are devoted simply to interpreting and complying with regulation. Even if you took the goal of all the regulation as a given, their are vastly simpler and more efficient imaginable regimes that could accomplish the same result with less paper-pushing bloat.

Or work in a hospital with a lot of medicare patients (i.e. ALL hospitals).

There are a few people in business here. Please list the regulatory agencies that you deal with. And a description of what you do, and an idea of the size of your business.

I'm in Canada, but here goes.

Employment regulations such as minimum wage, holiday pay, hours of work, etc.

WorksafeBC, OSHA equivalent.

Pressure Vessel Act, Electrical Safety Act. Administered by the BC Safety Authority.

Transportation of Dangerous Goods.

Environment Branch.

Canada Revenue, for whom I collect taxes.

City of Nelson, who collects fees for permits and licenses.

City of Castlegar, City of Trail the same.

Ministry of Labor, Canadian Federal regulatory agency who I'm subject to if I'm working in a place where they have jurisdiction. They have their own environment and labor regulations similar but not the same as the provincial ones.

I have 3 people working for me.

I forgot the provincial department that handles Corporations. I have to submit a bunch of paper through my lawyer every year.

Forgot another couple. If I work for a US company I have to submit reports for EPA perusal. Throw in import regulations and fees as well, since much of what I buy comes from outside of Canada and I import directly from time to time.

One of my clients had an ISO 2*** certification inspection and essentially it gave them a list of regulatory details that they needed to get done.

Out of curiosity, if you divided these into three groups, city, province, and federal, how would you rank those three groups in terms of ease or burden of working with each? That is, if there is even a correlation between the locality of the government and your experience with it.

It is more the complexity of the regulation. The local ones are usually simple, at least in my case. They want a cheque. The three that consume most resources is the tax department, they want money in a timely way, WorksafeBC who is unpredictable, capricious and a true regulatory risk, as well as the Safety Authority who is also unpredictable and capricious. Transportation has been expensive, but not a day to day concern, mostly investing in stuff to keep them happy. The rest I get letters from time to time threatening million dollar fines and imprisonment if I don't so something or other.

Three things characterize the regulatory environment in Canada. The Laffer curve is real, and the provincial governments are navigating a very fine line between losing revenue and regulating or adding costs, so there has been an enforced rationalism to the regulatory agencies.

Second is the capricious nature of the whole thing. It always comes down to the individual inspector or bureaucrat who can either make life hell for you or walk you through the requirements. Regulatory risk is real. I was in an office that houses a local building permit authority doing some work. I overheard five people going over a project. The fellow was halfway done his renovation/construction, and had applied for permits and was working with them. They were going over all the things they could nail him on to stop the project. I had to leave before I went postal. These people have enormous discretionary powers with no accountability.

Third is the lack of enforcement. There is none simply due to a lack of personnel. When I applied for a contractors license to the Safety Authority, which I needed ostensibly to do any work, it took 13 months for someone to get back to me. I had to have a conversation with the inspector in the process of application, and he worked alone covering a huge area. It was impossible for him to do what would be required. This adds to the capriciousness of the regime; nothing is enforced until something happens and there is a flurry of activity. Follow the rules you say? If you think it is that simple, you should get out more.

Sorry to ramble, but I know most of the people personally who are regulators. I go out of my way to have a relationship with them primarily to know what they require. It makes my job and theirs much better.

The moment one of these departments get a swat team on staff, I quit and move to another jurisdiction. I wonder if the developing country recipients of formerly US business and production facilities are due to the nature of enforcement?

A good example of government mandates increasing costs are the requirements for fire sprinkler systems in commercial and institutional buildings. Sprinkler systems never come into use unless there's an actual fire. They don't prevent fires. Building construction materials and management have minimized the risk of fire to the point that fire departments now respond to many more medical calls than fires. The increased cost of erecting a building with a sprinkler system might well influence the decision on whether it's built or not. Insurance companies love sprinkler systems of course and lower premiums to reflect this but even in the rare event that a sprinkler head douses a fire, water damage can be extensive. For many buildings, once a fire gets going the water supply to the sprinklers can be insufficient to effectively eliminate the fire. As in so many things in life, the government at one level or another treats all situations under its power with the same prescription.

Yes but Sprinkler systems have benefits due to less property damage loss of life or injuries from fires. For example building a home with a system will on net save around $3,000
Most of the reason people find regulations as bad is because they cherry pick the costs and leave out the benefits.
When you include costs and benefits you find that most regulations save more money then the costs especially worker safety after, energy/water efficiency, environmental, other safety, disaster prevention etc. If you're dead set against a regulation and you don't have a cost benefit analysis of it then you're basically in the dark on if that regulation is good or not.

In the abstract it is mentioned that the range of savings is quite large, from $704 - 6048, and that such savings are incorporating the labor of the homeowner performing maintenance at $0/hour. So there are three points to make here: 1. The range in prospective saving is huge, and this supports Chuck's claim of government requiring "the same prescription" for everyone, despite cost/benefit; 2. The report is obviously biased, as its finding is added to the literature that forms the basis for the regulatory agency producing it; and 3. The cost/benefit analysis you claim to love so dearly is obviously wrong because it prices the labor to perform maintenance at $0. Far be it from me to stop your cherry-picking, Oakplug.

I've discussed this issue with knowledgeable parties. A fireman in a small midwestern city estimates that in his eight years with his department he's made calls to about 7 fires where sprinkler systems triggered the alarm. An insurance executive tells me that there is no discount on premiums for coverage since sprinkler systems are required. He says that insurers favor sprinkler systems because they can prevent total loss incidents.

Contemporary structures are designed to prevent the spread of fire and built with fire rated materials. The sprinkler system can only be called a benefit if, at some point, the system is tripped by a fire, an occurrence that's increasingly unlikely as building codes are modified to decrease the chances of a fire.

"The increased cost of erecting a building with a sprinkler system might well influence the decision on whether it’s built or not."

Unlikely. Sprinkler systems are (as I recall) in the $1-2 SF range.
Plus they do have a market advantage.

Does Krugman think, and does TC accept, that Libertarians are interested in, say, welfare reform (and entitlement reform in general) only because it can save money? There are many who want to reform these programs because they are disheartened at the damage that bad incentives can have on people.

Agreed. Something like the Basic Income Guarantee may result in a larger tax burden but it is possible we would still prefer that to the current system.


"Compensation of workers accounts for only around 6 percent of non defense federal spending."

As others have noted -- what a ridiculous metric! Libertarians don't exclude the cost defense spending and they care very much about the cost of state and local government (the massive pension fund deficits that are threatening the solvency of many cities and states are obviously not federal). And then, of course, there is the massive cost of regulations (bureaucrats don't have to have high salaries to impose very costly regulations). The idea that libertarians are specifically focused on the cost of non-defense federal bureaucrats is simply preposterous (but not surprising to see coming from Krugman).

Most libertarians put focus on the wrong level. It is not the federal government which is slowing restaurant openings in Mendocino, nor controlling rents in Santa Monica.

If they were rational they'd be local activists and leave the largely distant and inconsequential federal regulation alone.

"Most Libertarians put focus on the wrong level"
Do you have absolutely any idea of what Libertarians actually believe?

Reason (Libertarian publication) quite often highlights heavy handed state & local regulatory regimes.

I'm afraid that 11 year old's bakery story highlights the emotionality of the concern, rather than the rationality.

It comes down to do you want 20th century food safety, or not? If you want that modern food safety, you can't say "except businesses run by children." I mean, it would be easy for me to get an 11 year old to front for my raw milk business, right?

Speaking on the topic of rationality. What consumer is going to buy raw milk from an 11 year-old?

But the point of that article was not to bring up the topic of food safety, it was to highlight the fact that you have no idea of Libertarians actually believe.

Again, I need to say "Dude." When your example is that we should be able to buy baked goods from random home kitchens, you ARE rejecting the 20th century framework for food safety.

And your argument is ridiculous, John. Everyone "buys" home-cooked products from their own kitchen.

Age of the offender is irrelevant. The lemonade stand story was peddled as egregious over-reach by government. I don't know the facts, but if somebody was selling a couple of dozen glasses of lemonade and was subject to this, then it was wrong - unless conditions were so unsanitary as to require action. Thomas gets it right, you get it wrong. To be clear, no rational person (assuming even average intelligence) can believe that all actions can be categorized into "allowable" and "disallowed" by some law/regulation enforcement jack-booted thug. The world is NOT black-and-white. Meaning: it does NOT come down to "20th [sic] Century food safety, or not". It "comes down" to how much government intrusion should we accept and on what basis? Should the basis be rational risk assessment, or some (delusional) counsel of perfection? Specifically, until your own home and life is 100.0000% compliant with all government regulation and law, you should stfu, based on your own expressed viewpoint. (Oh, btw on that point, it has been suggested by several prosecutors/attorneys general that no adult in this country can go a week without violating some federal, state or local regulation. I presume this means 'can go a week without violating a reasonable interpretation of some ...regulation'.) Be careful what you wish for. The more your arguments are reductive and sloganeering, the less likely you are to be part of the solution.

Gosh, I guess you are libertarian idealists if you are going to strip back food production oversight to 19th century levels. No more rat or fly counts, "it's their kitchen," and they'll manage it.

(Read this past week that the average Chinese experiences intestinal distress twice a week, because, food quality.)

Goalposts moved!

If I wanted to make libertarian arguments I would focus on the defense department, education and health care system, looking at all three from an international cross sectional cost/benefit analysis viewpoint. Over-regulation is small beer compared to those three.

Health care systems are really unfavorable for libertarians because the systems with more government including fully socialized ones are more efficient and provide better results then the non government run counterparts. This is true both in cross country comparisons and in individual countries as well (US socilzied health care like Medicare etc are more efficient then private insurance)

Of course, as has been pointed out over and over and over again, demographic parsing, adjusting for different recording guidelines (infant mortality), and adjusting for lifestyle paints a vastly different picture.

And Medicare is more efficient because they can put many of their costs onto other govt departments.
Also, when you ignore much of the fraud, you don't pay for the detection.

If only everyone could do this.

Where do you see the Medicare system having "better results" than private insurance?

Government pays for some things like childhood immunization, which has a big bang for the buck, but they also pay for seniors to get hip replacements, which has a very poor QALY/$ results.

You can talk about "overhead ratios" but this is very very different than finding out who spends their money most effectively.

I suspect the hip replacement results are because Medicare will pay for them for anyone, regardless of appropriateness. People in the 80's who aren't in good health should not be getting a new hip, and yet, you see doctors doing the surgery any ways because they are guaranteed reimbursement for it.

Over regulation of small beer is not small beer t'all.

Overall I think Tyler yields more to Krugman in the opening of this piece than he gains back in his closing. Sure, we can and should try to iteratively improve our government regulations, dropping bad, adding new (esp. for new domains like computer security). As anyone who is not a libertarian has to remind libertarians constantly, improvement is always possible because NO human institution is perfect.

Perhaps this is a general reminder that non-ideologues always compete a fantasy model, which by its nature, is perfect and different fore every believer.

So who are the ideologues? The ones who wish the regulatory burden would be about where it was in 1998 or the ones who think libertarians are nuts?

Obviously the ones who think 1998 or any other year was a perfect moment in time. I mean, would you like 1998 safety methods and standards for bagged salads?

A regulation was proposed last week that will make the equipment that keeps the salads fresh more expensive. Which will mean less choice and more prepared-far-away salads. So I suppose you are right. One regulation becomes necessary as other regulations have their effect on the market, which create necessity of more regulations as things start working as designed.

There are smart regulations and stupid ones. I've told this story here before, but here goes. Quebec had cheese producers of specialty cheeses. They were often religious orders, the cheese produced in old buildings with local milk production. The walls were impregnated with various bacteria that gave the cheeses their special flavors, along with the cows eating the vegetation specific to the area with it's specific mineral content in the soil. As well as specific bacteria that lived in the guts of the cows. Along with long established techniques for producing and storing the cheeses. A food safety nightmare, except that there wasn't any issue.

A regulation written in Washington or Ottawa would have produced the effect of making sure no one ate anything except orange and white cheddar. Stupid regulation that has defined the food production of the US.

The Quebec government who generally is worse than most, did something remarkable. The regulators figured that there was something of value to maintain, so they worked with the producers along with food scientists to come up with processes that met the modern safety standards but maintained the distinctive qualities of the cheeses. Not a simple task because it required analysis in detail of what created those qualities in the original locations, as well as the original processes. The initiative was successful; the distinctive cheeses still are sold, and the safety folks can sleep at night. One might ask how many small specialty cheese producers no longer exist, but who really cares about them.

On the other hand, last year Calgary had a flood, putting many people out of their homes. As per their character, the locals did what was needed to house and feed those who needed help. The provincial government regulators promptly shut down the initiatives to feed their neighbors. An extremely dangerous situation; someone with sewage filling their basement and first floor might eat food prepared in a non compliant kitchen. Better that they go hungry.

I posit that if in the US and Canada all regulations were applied to the letter vigorously and across the board that both economies would grind to a halt, there would be massive starvation, no health care. Only because there are enough people who have the sense to make sure things actually get done in spite of the rules do things work.

You have reduced yourself to the argument that since some salad regulations are bad, all salad regulations are bad (or that none should be attempted).

A bit more. Quebec had extreme construction regulations, to the point that hiring your neighbor's kid to paint your windows was illegal. The net result was that 50% or more of the construction industry was underground, meaning they didn't pay taxes, pay workers compensation premiums, pay any attention to safety regulations, building standards, etc. The rules were relaxed when it became clear that the government was losing substantial revenue due to the regulations working as designed.

In the greater Toronto area, according to a trade magazine, only 20%, yes, you read that right, 20% of the construction projects fulfill all the regulatory requirements for permits, fees, etc. Construction companies find that if they follow all the regulations they are 20-30% higher in price compared to those who don't. And if they follow the regulations they experience more inspections, more delays, more costs compared to an equivalent project happening a block away. Regulations working as designed.

That is my experience as well. If a job I am bidding involves heights particularly, I find that I need to add 10% for additional costs. As well as something to cover the time involved to deal with the regulatory agencies. Others who don't bother get the work. I would guess that there is a 1 in 5 chance that any given worker over his career would have a fall incident, so the odds are good that there will be no issue that will bring the attention of anyone to the non compliant work.

Could it be that the current US economy with unemployment and stagnation is due to the regulatory regime actually working as designed?

Joseph Tainter's "The Collapse of Complex Societies" investigates the historical and physical record of what burgeoning bureaucracy and its attendant regulations do to daily life and the effect of human response. Eventually people simply ignore bureaucratic dictates and move on with their lives. More and more business gets done through unofficial channels, tax receipts plummet, the state eventually starves.

John, you should learn to read.

I'd say the ideologues would be those who think the regulatory burden in 1998 was perfect. Not only are those people ideologues but they're detached from reality.
Here's a short list of some regulations that have occurred after 1998 that have save the economy money and many save lives as well.
EPA rules limiting pollution such as PM, NOx, and SO2 save a net of around 100bn (page 9 table III-4)
Furthermore new EPA rules under Obama have a benefit cost ration ranging from 2-1 to 20-1

So your 1998 position would result in hundreds of billions in economic costs. Calling it an ideologue is a nice way to say it a more accurate way would be calling ti a stupid position

"If we price pollution at infinity, all EPA regulations are infinitely profitable"

I always wonder:

If clerks at the DMV had zero wait times, with clerks sitting around waiting for customers, what would libertarians have to say?

Would they praise the department's remarkable efficiency, or would they use it as an example of rampant, excessive government employment, and coddled public-sector workers?

I think the answer's pretty obvious...

So you are defending 5 hour DMV processes? You should be ashamed of yourself.

It depends on what "5 hours" really is, a mean or a two sigma outlier. (I know that when I have to contact the DMV it is (1) rarely, and (2) not 5 hours. I use the reservation system and maybe spend 1/2 hour on premises. For a one in 3 or 5 year chore, that's not bad.)

Ooh, smart using big words.

Take that hours or half hours and multiply it by the number of regulations and regulatory responsibilities that a business has to look after and you have the explanation for income stagnation, the offshoring of manufacturing and increasing numbers of services.

If you don't get that, I really really suggest you get out more.

Dude, whenever you say "Ooh, smart" it is time to get up and leave the keyboard.

Or whenever you say "dude".

Yes, John is foolish, as we can all see. Has he ever waited in line 5 hours at a private establishment? Of course not.

Thomas, do you seriously think a 5 hour wait is normal, or near median, for any DMV in the USA?

As long as we are comparing equivalent points of measurement in public and private industries, it is a legitimate comparison. The point still stands - as everyone knows - DMV wait times are among the worst of any that most people experience. Do you not have any anecdotes about waiting in a setting that experiences competition?

I've also had luck with the DMV in three different states by doing most stuff online or by mail and never spending more than 30 minutes total at their office. Don't go at the busiest times (which would seem obvious), take advantage of any other efficiencies and you're home free.

Progressives always seem to have "luck" with their interactions with government bureaucracies. One wonders if it because government workers give special treatment to government workers.

And your experiences are just bad bad bad! It's a government function -- CANNOT FUNCTION well, amirite?

Yes Thomas, whenever I walk into a DMV I give my special wink that all in the club means I voted for Obama. I am then escorted into the private room where I don a fluffy robe and recline in a comfy chair sipping my martini. Ten minutes later I'm given whatever documentation I came for and am offered a choice of a 40 minute massage or the steam room. This is necessary least Romney voters figure out that maybe the DMV doesn't take two hours for everyone.

As a prior government worker (military), I have personally witnessed the fraud, waste, and abuse. No one calls the IG, because everyone wants a good evaluation and to go home early on Friday. Breaking the rules and giving special favors are simply the way things are done. Really, how long do you think a known Police Officer or mid-level bureaucrat waits at the DMV? Not long if the DMV employees know what's good for them. Unlike their average customers, other government employees can cause trouble for them.

At least in my state I doubt a 'known police officer' gets special treatment... There's only one or two DMV offices per county and there's a lot of different local police forces and the transactional people at the DMV are pretty low level. Maybe some might hurry one along if he came in wearing his full uniform, but then I imagine there's probably some rules about police wearing the uniform when they are doing purely personal business. If you want to find 'favors' for police I wouldn't look to the DMV as much as numerous coffee shops and eateries that comp cops coffee as a policy. possibly mid-level DMV people themselves navigate DMV faster, how much of that is corruption and how much is simply due to the fact that they have inside knowledge (i.e. when and which DMV offices are less busy etc). I don't know.

i don't doubt for a moment you're right at the micro level there's lots of favors, rule breaking, coner cutting etc. The question, though, is how much value would be generated if we rooted it all out? I suspect not nearly as much as libertarians like to think. For example, suppose we undertook a big project to ensure that no one ever ever ever gets special favors or faster service at DMV. I strongly suspect it wouldn't shave a half minute off the average wait time.

I think your post is completely correct Boonton, but I think that "favors" is simply a symptom of the underlying problem which are invariably the type of laws an regulations which insulate the DMV, its employees, and the public sector at large from competition and ownership. One phrase that was always repeated during my service was "take ownership", as in take responsibility, accountability, and pride in your work. The only reason that the phrase was necessary was because there wasn't any ownership of any kind to be found.

Do you not know the difference between random anecdote DMV wait times and regulations or are you being dishonest on purpose?

What regulations do you deal with on a daily, weekly monthly level? Who do you send cheques to regularly, submit reports to, have to wait for approval of? How much of your time is taken by this stuff, how much of your personal wealth or freedom is threatened by letters from these nice folks threatening fines or imprisonment if a form is not submitted?

Or maybe they wouldn't entertain your false choice.

It takes the same amount of manhours to process people whether the line is 1 long or 50 long. Businesses learned that a century ago and most non-union businesses rotate people according to demand and cross train back office and front desk staff.

Only government managers will sit and drink their coffee when the lines are 10 long with unopened stations.

I use the UPS store to send packages, not the USPS, even though half the time, I'm using postal service to do the actual delivery. The UPS store always has employees waiting around for me. I love it. Post Office is typically a 30 min wait at lunch hour. Bizarrely enough, the market finds UPS more efficient.

I find the people that rant the most about bloated, incompetent government the most are the people that work for them. I know quite a few civil servants and they can tell you stories believe me.

Sage words from my dad: "Work anyplace 3 years and be happy. Work anyplace 5 years, and know all the problems." It proved true for me in private companies large and small. The Anna Karenina principle in action.

You define someone experiencing a delay with the DMV as a mean or two sigma outlier. As you said it is a process you have to suffer every couple of years.

Now apply that mean or two sigma outlier to each interaction with a regulator that a business has to suffer through.

If you have a project involving siting of a factory, hiring workers, setting up transportation facilities, etc, how many years does your mean or two sigma outlier add to the process?

Three years?

A good rule of thumb I've found is that when someone uses big words to describe a menial event they are obfuscating, or worse, prevaricating. As is indeed the case here.

To me "mean" and "two sigma outlier" are thinking tools, like "percentage". That word might be three syllables with Latin root words but you don't use it to sound big -- you use it to help you think about things that are different sizes. Imagine when percentages weren't widely known and how snooty you'd sound using the word, but the concept is necessary for clear thinking so it spreads.

You could simply use "outlier" or "95th percentile". The decision to make your writing cryptic is intentional. In this case it signals a credentialed progressive. We are familiar with the type.

You just made up a bunch of junk there. I see no evidence that the median DMV delay is high, or frequent.

Yes. The problem is nobody wants to listen to the stories. I could tell a lot of them.

Some of them are merely along the lines of what have been already said in the comment section. The money we waste is worse then the money they pay us. I have had dreams where I am screaming at the Governor to try to convince him to shut down empty buildings heated with inefficient oil furnaces that have no one in them.

But a lot of things are more complicated then people want to hear. Shrinking and refocusing the state on its core functions would help a lot. But it does not seem that either party really wants to do that. At least in my state, I don't hear the republicans saying that the biggest waste comes from the programs that middle class loves.

There are people who do government service because they care about the mission, and there are people who do government service because they want a secure job despite being incapable of tying their own shoes. See the Iron Law Of Bureaucracy.

The 6% payroll figure is very surprising, to say the least.

"It’s just that I think a lot of other viewpoints are living in a fantasy world too." It would be nice to show, not tell. The biggest fantasy you point to is a more sanguine view of the DMV than you hold.

I'm sure that does not include the contractors, which have been very popular over the last several years.
Think of a $800 million website.

Nor does it include non-salary costs such as benefits, facilities, computers, etc.

The Canadian government has offered to dump money into Detroit and pay the cost of building a new bridge from Windsor to Detroit. A project that should have been a no brainer from the point of view of Michigan and Detroit has been caught up in the courts and Michigan politics.

Unmentioned here is the fact that the existing bridge between Detroit and Windsor is privately owned by a billionaire who doesn't want a second bridge there. The story is not about politics, bureaucrats and regulation but about private greed.

So again, the public interest is sold to someone who has money. Without the various levels of government that have control, the one who would want to protect his property would have to purchase all other available sites suitable for a bridge. As it is he only has to purchase a politician or two. Probably for shockingly cheap.

And it is the libertarians who are nuts.

Without "politics, bureaucrats and regulation" that billionaire would be left with nothing but "persuasion."

Actually, at this point the project is held up by national politics. The Obama admin doesn't want to give Snyder a pre-election success, so it's holding up the funds for the customs plaza on the Detroit side.

As others have already pointed out, Krugman seems to be defining away regulatory costs in a way that dramatically misrepresents the actual dollars lost to regulatory burdens—sure, the increased cost of laundry detergent from not being allowed to use certain ingredients may not be that high, but that fails to account for the internal business cost of hiring compliance managers, paying fines for inevitable violations, and the like.

But where Krugman (and virtually everyone else) really misses the ball is when they ignore federal funding schemes, i.e. government contracts. For every arguably burdensome federal regulation, there are at least a half-dozen incontrovertibly arbitrary rules governing businesses that receive federal money (either through contracts or funding agreements such as grants or cooperatives). Which is most medium-to-large businesses, because the federal government has its fingers in so many pies that it's virtually impossible to be a competitive businesses in many sectors without competing for federal money—Verizon, Dell, and Caterpillar are all companies that one wouldn't traditionally think of as "government contractors" a la Lockheed or Boeing, but do millions in businesses with the federal government that subjects them to onerous regulations above and beyond those that are universally applicable.

Granted, for many of the federal contractor regulations, they only apply to conduct on a given contract itself, but that just means the company has to choose between divergent reporting and compliance systems (and hoping they're correct when they assess which applies to a given project) or just accepting the conditions for all of their internal business.

True that. I worked briefly for a company whose entire business was high-tech contract work for DARPA. Interesting assignments, smart scientists and engineers, but by six months in, every one of them had been trained to look at every bit of work as a cost-plus reporting event. After a year, none of them could have fit in a private lab or company. The administrative staff were officious, overwhelmed and buried by their own inefficiencies. Nothing ever got done on time, and so there were constant negotiations with Army administrators (several of whom were hired upon their retirements, for the usual reasons.) Projects that (finally) churned out products and ideas with actual market potential were never seen as such and so were replicated (the wheel reinvented) by people outside the place. Total

How is that regulation? If making attractive products for the private sector was so easy why didn't your company opt to ditch gov't contracts? Otherwise if you accept a customer they say the customer is always right.

"Compensation of workers accounts for only around 6 percent of non defense federal spending"

How about compensation of workers as a percent of non defense/NON MEDICARE/NON SOCIAL SECURITY federal spending? Since these 2 programs are nothing more than the government stealing money from you today and giving it back to you after you have reached a certain age.

"Nationwide, those employed at all levels government combined to account for 15.3 percent of the total workforce."
Wow, didn't realize they sucked up so much of GDP.

Why is the author blaming the Virginia DMV for regulations written by private lobbyists? The DMV doesn't make the law, it enforces it.

So for a sum of money I can get what I want written into law, have tax payers administer it, and if someone doesn't go along, they pay a fine or do jail time.

And Krugman thinks libertarians are nuts.

Again, no human institution is perfect. You are setting an abstract and impossible ideal (perfect markets) against a concrete reality (money politics).

I mean, the "third tail light" law did not come into effect in the US until 1986. It is an example of a small money requirement with high returns (in both blood saved and dollars). The libertarian ideal is that no institution should ever dive that deeply into product design. If tail lights don't work, markets should just "know," or someone should sue until the design is perfect.

Ok, a compromise. Subject all the regulations on the books in the US, from all levels of government to the same cost benefit analysis as you did to the third tail light. The ones that don't meet that standard get thrown out.

And a dumb question. Could someone have put a third tail light on the vehicles they produced before 1986 and have met the regulatory standards of the time? There is a regulatory standard that I have to meet in what I do. It works and accomplishes what it is designed to do, but the technique and materials haven't changed in 50 years. It is very time consuming and expensive. Are there other ways of doing the same thing? There are in other similar endeavors, but we don't see them. It would take an unbelievable amount of effort to change the regulations in all jurisdictions in all the markets where it is done. So we keep doing it the same way, and you pay the costs in your groceries and anything you buy which has any connection to something done in a building.

"You are setting an abstract and impossible ideal (perfect markets) against a concrete reality (money politics)."

The nation/state or government in its many forms is the abstraction. One can't kick government in the gonads or pull its hair. On the other hand, the abstract government treats its subjects as concrete, it can confiscate your property and incarcerate you. That's the reality.

Until you've tried to get approvals to build a large commercial building, one is not qualified to opine on our level of bureaucracy. Same goes for trying to navigate the system of tax breaks offered by the Commonwealth of Pennsylvania. Businesses have to waste huge resources to seek this corporate welfare to keep up with the competition, yet we'd all prefer that there be no breaks so we could just focus on our business instead.

I'm sure it is easier to build a large building in Islamabad. (photo)


Speaking as someone who has worked for both the state and private construction, you are not listing to what Bill is trying to tell you. It is easy to find places where it is worse, but unless you are one of the people who tries to get things done, you don't know what you are talking about. You can't even imagine. In my state it is so bad the Government has trouble getting projects off the ground. And the Government finds it almost impossible to abide by all the rules and regulations. And it is getting harder every year. We are all being turned into criminals because it is impossible to follow the law.

To give you just one example. The laws governing hazardous waste are strict and the penalties are heavy. Nicotine gum is regulating by the FDA. After the gum is used, the wrapper it comes in is regulated by the EPA/DEC. You have to treat the wrapper is being the highest level possible hazardous waste (if you are a commercial/governmental entity). Without boring you with all the details and to protect the guilty parties, I know that serious violations of environmental laws have been committed because of this little gotcha. And this is just one example out of many.

Dude. We have buildings that don't fall down in earthquakes. That did not come for free. Some BS about nicotine gum doesn't change that.

You are right. It did not come for free. But that is the concept that you seem to have trouble grasping. The only way to be 100% sure that a building will not fall down is not to build it. Between that and building buildings that will fall down in a strong breeze is a wide Territory. We are fast approaching the "lets not build buildings" in my state. Moreover, there are better and worse ways of doing anything. You can by Toyota or a Dodge. They will both get you around but they will not both do as well.

Multiple agencies with over lapping jurisdictions are like having having multiple captains on the same ship. They don't make it safer, but they do make it harder to get things done.

"The only way to be 100% sure that a building will not fall down is not to build it."

Seek counseling immediately.

What state are you in?

I'll concur with Apeman. You don't have the faintest idea what you are talking about.

I would suggest that it is worse than that. The piling on of regulations guarantees that the majority of them are never followed, making it likely that bad things will happen.

I said this further down. In the largest metropolitan area in Canada, someone who knows estimated that only 20% of the construction projects are fulfilling all the regulatory requirements.Then you get a jackass like the President complaining how hard it is to get anything done.


You do realize that the building regulations and red tape are worse in Pakistan than in the US? They just provide leverage for the bribery.

You are making the Libertarian's point for them.

They have not bothered to write out detailed building regulations in Pakistan. It is as simple as "who have you paid?"

I think 'tacocopter fantasy' is a better name for this, namely the delusion that but for our meddlesome gov't all types of fantastic things like flying tacos and the cure for cancer would exist today.

Uber is a good example. Leaving aside the fact that uber is rapidly expanding despite the supposed regulation regime the US has, can you find me examples where states that are more friendly towards uber see a large portion of their GDP growth coming from uber and uber-like companies?

The problem here is the concept of 'opportunity cost'. Conceptually it's easy, the benefit you could have reaped had you made different choices than those you did. Practically it's impossible to really quantify. Is the alternative universe where DMV laws were setup on the libertarian model a utopia of robot taxis and flying groceries? Or is it a Mad Max world where your kids get mowed down by some driverless cars run by a Russian website whose corporate shell declares bankruptcy the moment your lawyer gets close to winning a lawsuit? What mechanism do libertarians have to argue their case given this uncertainty?

We knew there would be an anti-libertarian pop culture reference in there, didn't we?

I think a good example of a "low cost regulation" which actually imposed a really high cost on people has been (and in some states continues to be) the ban on gay marriage.

How much does it actually cost the government to have a law on the books which prevents gay marriages from taking place and being legally recognized? (Probably not much.)

How much of a personal cost on the gay couples who wanted to be married but could not be was/is there? (Probably quite a lot in terms of lost benefits which might have been extended to partners, inability to serve as next of kin in various situations, etc)

This is a good example of why the libertarian analysis is not that helpful. What about the 21 yr old drinking age vs 18? How about local zoning laws that keep a strip joint from opening next door to your house? Are these political decisions made by society or are they simply 'regulations' whose cost could be talled up by asking how many beers bars could have sold or strippers could have collected tips had different laws prevailed?

There is no ban on gay marriage. There is a ban on State recognition of gay marriage. The State won't recognize incestuous marriages or polygamous marriages either.

Also, this is an inapt comparison. Regulatory costs are passed on to consumers and raise barriers to entry. Not extending tax benefits or survivorship rights or divorce laws to gay couples is not the same thing.

If a gay man is hospitalized and unconscious and requires a potentially life-saving medical decision to be made, but the gay man's partner is not allowed to make that decision because their "marriage" is not recognized by the state, and that gay man dies because it took a long time to locate another relative, is there a cost? If so, who bears that cost? If not, why not?

Here's another example of a kind of cost associated with a gay marriage ban:

How much did it cost to enforce this law? Did it cost anyone anything?

But clearly there is a huge cost to not having gay marriage. A gay couple that wants to simulate marriage as closely as possible by drawing up a group of wills, powers of attorney, living estates and contracts could easily spend thousands of dollars on lawyers.

How is spending thousands of dollars on laywers in that case not the same as spending thousands of dollars to, say, navigate environmental protection laws for a manufacturing company or figure out if a patent troll has a valid legal case or not and if not is it worth fighting him in court?

Because it's a consumer transaction. Nobody has to bear that cost but the individuals involved.

Who has to bear the cost of, say, the regulations around opening a new dry cleaner other than the individual that's trying to do it?

Before you say 'customers' remember the gay couple who has to spend thousands on lawyers simulating marriage, if you take that indirect tact, probably would have otherwise given those thousands to the wedding planning industry so that many fewer jobs for cake bakers, venues, caterers etc. If that gay couple, say, own a dry cleaner then no doubt the cost of their wedding done by lawyers is going to get passed onto customers too.

"If that gay couple, say, own a dry cleaner then no doubt the cost of their wedding done by lawyers is going to get passed onto customers too."

Only an academic economist could become completely unmoored like this.

So you have no actual response to the fact that if a jurisdiction doesn't have gay marriage, it imposes a regulatory cost on individuals.

Or maybe what you might want to argue is that marriage is a type of regulation whose cost is negative. It's a 'product' that can only be provided by gov't which drastically saves couples a lot of money from having to try to create the whole institution via contracts from scratch. Other examples of 'regulatory benefit' might be LLC's and Corporations which again allow individuals to easily do something that would be very tricky to try to do on their own.

My gay marriage ban comment is my attempt to make the point that the government can impose a high-cost regulation while spending very little. Measuring government outlays is only one of the costs of regulation.

(I'm honestly not clear about how this example relates to the limitations of a general "libertarian analysis". I believe the kind of analysis that's helpful is the kind that counts the costs and benefits of the regulation on as many stakeholders as possible when evaluating its desirability. It seems like Krugman is counting mainly/only(?) government salaries when he tallies the 'cost of regulation.')

The benefits to married couples of which you speak are supplied by the government. The government has no business being involved in voluntary relationships between individuals, period,

I go to the notorious Department of Motor Vehicles office in Van Nuys, CA that is the model for the DMV in The Simpsons where Patty and Selma torture the public.

It's actually gotten a lot less horrible in the last decade.

I remember NJ DMV was like that. Waited a good 2 1/2 hours plus to get my license. One time I ran into a DMV five minutes before closing in the middle of a blizzard and there was no one there and was amazed I scored a registration renewal in less than 3 minutes!

But then they must have brought in some management consultant because when a new office oppened their entire system changed. Instead of long lines a helper greets you and scans your paperwork either sending you to an express line if all is in order or showing you what you need to do before you're allowed to get on line. Then it was like cutting butter. That was followed by some other improvements like web based transactions that allowed you to avoid even having to go to the DMV for most things.

After 9/11, though, it got tougher again. Licenses now required your birth certificate and it had to be an 'original copy' making it somewhat harder again. Still not as bad as it used to be but now you can take a half hour if it is busy. Licenses I'm not sure about since I have mine for decades now.

What does all this mean in terms of cost for society as a whole? I'm not really sure it means much at all. Back when DMV was 'bad' we either went there when we had a free day (in other words when the opportunity cost of lost time was its lowest) or we used mail as much as possible. Ultimately since it was something you only had to do once a year (or once every four years if you didn't wait until the last moment) it was a joke but not much of a real cost. While I'm glad they improved the DMV I can't honestly say that improvement has or even could relieve society of a lot of cost.

In terms of frustration I have to say banks have caused me more cost in terms of time and money than DMV ever did or could with Bank of America, once a holder of my mortgage being the absolute worst.

Sounds like Dr. Krugman needs to visit the real world. I will even believe his 6% number, but the damage that 6% can do is much larger.

For an example, there is a proposal to build a desalination facility down the street from me at a power plant with a seawater intake system. This facility is being designed for 50 million gallons per day of fresh water in water short and now very dry So. California. The developers have been working on the permits for 10 year and spent tens of millions on PR experts, Lawyers, lobbying, environmental studies, etc. The ratio of manhours per regulator is huge and with a quick unscientific decision he can cost a year of full time effort by dozens of people. These regulators must have their ego's stroked and never get real feedback even when they do something real stupid. Bureaucrats don't get mad, but they do get even with anybody that challenges their decisions.

This project recently got delayed aganin for a year again because some Coastal Commission Staffer thought he understands more ocean hydrolic engineering and biology and had a "brilliant" solution to the entrainment issue. Of course he was educated in geography and political science and hasn't a clue about his 100 million dollar demand. Now dozens of people, including flying in experts from the middle east (they do a lot of desalinization where they need water more than jobs for an educated elite of bureaucrats) to try an convince these bureaucrats to change their minds without telling them that their "idea" would be a truly stupid waste of a 100 million dollars and wouldn't actually solve the problem, just hide the problem on the bottom of the ocean.

This can be viewed as a great way for the educated elite of our society (top 10%) to extract a high income for a decade while the "median" worker remains unemployed. Almost all of these people doing the PR, environmental studies, reports, litigation, commissions, etc. have advanced degrees. The work slob with a high school education will be building and operating the facility when they actually, if ever, get through the regulatory process.

I could go on about a regulator (another one with a piled higher and deeper Ph.D.) with a "concern" about the possibility of a very well studied harmful algae species having a new unobserved life stage (imaginary life stage) that is almost totally chlorine resistant, killing a clam importing business and costing the applicant $25,000 in hardware trying to comply with all his imaginary "concerns".

It is these thousands of small cases that add up to regulatory killing of every area they have authority over but no responsibility.

Krugman also needs to note that every new regulation interacts with all existing regulations forming new possible delays and new ways for activists and NIMBY's to block anything they don't like. That means the regulatory system complexity is growing at a N! (N factorial = N*(N-1)*(N-2)... 1) type of growth rate. This growth rate is faster than an exponential, like Moore's law. The growth rate of an N! type function is so fast our brains can't get around it and it appears like the complexity came out of nowhere, where the last few regulations "broke the camels back". They didn't break the system by just adding a "concern" for the algae in the ocean, but because that interacted with all the existing regulations of the Calif. Coastal Commission which interacted with the Army Corp of Engineers regulations, the city regulations, the water boards, etc.

We have another case where the Coastal Commission demanded moving a ocean projects location a few miles, which was OK for a applicant, but then the Army Corp of Engineers receded the permit they have already given because the new area was in the shipping lanes. Two year of work down the tubes and lots of money and none of those hundreds of jobs for "median" workers is on the way, just more jobs for the educated elite as the bureaucrats fight for turf.

How can someone raise money for a project when you have dozens of bureaucrats that can say NO.

But you don't understand! Without every regulation on the books, you might get a stomach ache from drinking lemonade from an unregulated lemonade stand!

Yeah. That does sound pretty bad.

Yep. It is very bad. But the number of regulators is only a small part of the problem. The real problem is Americans in general. Tell them that something bad might happen and they get all scared and want the government to do something to keep that bad thing from happening. Somehow, people are incapable of weighing the inescapable risks of doing something against the risks of doing nothing.

These sound like real problems, however without expert knowledge it's impossible for us to say whether the concerns were real or imaginary. We can approximate how serious this is to the economy. CA has about 38M people and each person uses maybe 360 gallons of water a day for a total of 13,680M gallons a day. 50M gal. then would represent 3/10ths of 1% of the supply. A few website searches indicates that water in CA costs somewhere around $2286 per million gallons so desalinating 50M gallons a day would be an enterprise generating maybe $114K in GDP per day or a bit less than $50M per year. CA's GDP is around $2T per year.

In a more ideal world where this project gets done a few years faster because regulation is more intelligent and less burdensome, you still aren't going to amount to much more than a rounding error on the macro-scale.

That is not an argument for not doing it. Clearly wasting time on useless tests and reports is waste. But that's not Krugman's argument. Krugman's argument is that the US is not India or other nations where the regulatory structure is easily reformed to provide a noticeable boost to GDP.

Bureaucrats: we've made it so difficult, your industry is now a rounding error.

"In fact I agree with many of Krugman’s observations in what I thought was overall a useful post."

In the next paragraph you say he underestimates the cost of over regulation, negating his main thrust. So, Tyler, what do you agree with him exactly on? What do you think are the libertarian fantasies?

Paul Krugman is not an economist. He is a charlatan. That's about all that needs to be said.

Krugman has talked a lot about the cost of global warming, strongly suggesting that if not civilization destroying the cost is in the multi-trillions. One very simple way to slow down or even prevent global warming would be to move to nuclear power as the main source of energy. The reason that this is not happening, at least in the US, is due to regulations - which make nuclear power - statistically the safest form of power generation - too expensive to compete. So if you accept Krugman on global warming you have to accept that the cost of regulations, in just one area, are exceedingly high.

Invariably the biggest roadblock to building a nuclear plant today are:

1. Gas being super cheap and gas, unlike nuclear or coal, is much easier to switch on and off as demand varies.

2. Nuclear plants require liability protection not from private insurance companies but from the gov't.

Neither of these seem to be problems of regulation.

Krugman needs to gain some real world experience.

As far as I could see his column focuses on the cost of the administrators and completely ignores the cost of the regulations they are enacting. The biofuel mandates and the environmental destruction and increased consumer costs they caused is a good example that Krugman is ignorant of.

Here is another one.

Bill Would Streamline Rooftop Solar Permits

AB 2188 would force local governments to drastically reduce the amount of time it takes to acquire permits for solar panel installation.

"While it can take a solar company eight hours to install a home solar system, it can take as many as five weeks to get a permit,"

solar advocates estimate that the delays involved in obtaining permits can add between $1,500 and $3,000 to the cost of a typical solar system for a modestly sized home.

"AB 2188 is a commonsense approach to reducing red tape, promoting clean energy, and helping consumers save money."

Shorter Tyler:

Libertarianism should inspire liberalism.

Krugman's 6% number, even if true, is flawed. First of all, it doesn't make sense to exclude defense spending - libertarians would and will gut defense. Second, the cost of an employee goes far beyond compensation. It includes the capital expenditures for the physical building they work in, the land underneath it, furniture, office supplies, telecommunication costs, equipment and tools, any government transportation, and so on. The federal government also distributes money to states with strings attached, creating state and local bureaucracy off the federal books.

However, the core libertarian argument is not that the employees are all desk jockeys, but that what they do is not constructive or inefficient. So if you accept that we don't want to have a DEA, then we don't have to pay for a militarized helicopter, even if the cost of the copter dwarfs the amount paid to the pilot.

A libertarian administration, unlike others, really wouldn't promise much unless you view a promise to not do something as significant.

I am fine with the current level of road deaths, and I don't see how any regulation, even with constitutional changes could do anything about it. The only solution would be to end driving altogether, which would reduce happiness far more than a few deaths here and there.

We have drunks and addicts driving; we have people with dementia driving; we have people with no licenses driving.

Somehow, I think there's room for improvement that leads to fewer deaths and injuries -- and doesn't lead to the end of driving.

Maybe one of those saved from death or injuriy would be your friend, family member ... or even you, yourself.

Notice how there seems to be no reconitition of synergy here. Clearly the roads are a good example where both the amount of driving and happiness that happens depends upon regulations. For example, if we decided to let everyone choose which side of the street they want to drive on, I suspect most people would collectively agree to stay to one often happens in crowded markets. However all you need is a handful who decide to do something else and all in the sudden you'll get much less driving and happiness out of the roads.

In terms of defense spending and 'capital' (i.e. the offices gov't workers use), I think it's fair to include offices as part of the 6% figure but IMO it is unlikely to dramatically increase it. Defense spending, however, does not seem to fit the definition of regulation. You may think the new aircraft carrier is or isn't worth it but it's not 'regulation'.

Does raise an interesting question, though. A lot of regulations are only for gov't contractors. Are numerous pages of regulations about where spare parts are purchased and labor relations in a gov't contract really regulation or simply a customer setting down requirements on who they buy from?

Forget Uber.
Start from ground up.
Think about what it takes to start a "driverless car shared/taxi company"?
Not a great deal except software and marketing.
Why would Uber have an advantage?
Any great software consumer-oriented software company (e.g. Amazon, Google, Starbucks, Costco, WalMart) is as likely as anyone to start time-sharing driverless cars.
YOU can start a company.
But 5 driverless cars, doll them up, (or pimp them out of you prefer) and buy the software and tell all your friends.

If anyone is buying shares of Uber TODAY on the basis that it will evolve into a driverless car taxi company in TEN years (at best) s/he is, I suggest, nutz.

So I work in this industry.

You're right and wrong. Uber is presently holding onto its market dominating position by virtue of massive wealth transfer from its investors to passengers and (less so) drivers. I agree that it's a commodified market -- there's no particular reason that Uber will ever be able to turn this into a high-margin monopoly. As you note, anyone can start such a service, and Uber will have very little differentiation.

But it's a high-capital start-up. If you have 5 cars in your service, your passengers won't use your service because there will never be a car near them. You need hundreds of vehicles (and driverless cars don't really change this much -- they make it a little easier to start up a service, but as Uber and Lyft have demonstrated, it's not that difficult to attract drivers in the present technological environment). In turn, you then need tens of thousands of passengers, and that involves a lot of user acquisition costs.

High capital costs won't stop the commodification of the space, and Uber's investors are dreaming if they think they can ever make 20% margins. If Uber tries, it will be undercut.

That's just for the basic space, though. Uber and Lyft have both recently launched attempts to do what I call "actual ride sharing," which is to say multiple separate customers in one vehicle. It remains to be seen whether or not that's anything like practical, but if it is, it'd be a major step towards actually justifying a big dominant company in the space -- you need LOTS of passengers using your system to be able to realistically match some of them with others going to the same area, and LOTS of drivers to service those passengers.

Other attempts to increase utilization of the fleet could also have a bigger-is-better effect, from some kind of delivery/logistics service to providing for various kinds of specialty transportation needs.

"If you have 5 cars in your service, your passengers won’t use your service because there will never be a car near them."

1. Sure, if the car is 500 miles away or maybe even 5 miles away then "my" passengers won't use my cars. But these are driverless cars; they can go where directed. They will "home" back to a base somewhere; or just park until directed. Who knows? So it doesn't matter if my cars are not near them. In-city driverless-car sharing will be for the most part a commodity item and totally fungible.
2. Of course you are correct that no one can make a 5-car driverless car business unless plugged into a larger system...such as...dozens of possible vendors from Amazon to Hertz. I am hypothesizing that if I buy 5 cars then they will be part of someone else's system just the way a time share condo. Though of course the cost of capital is so low and cars so cheap that maybe no one will need to add private cars....who many many variables.

If the driverless car actually happens -- it's so science-fictiony that I still find it hard to believe -- then so many things are up for grabs that it is difficult to know for sure which of many scenarios will work for sure.

As a political theorist, Paul Krugman is a lightweight. While I applaud your charitable approach to opponents, in this case, you are deferring to a guy who is well outside his area of expertise and possessed only of his agenda.

Don't diminish yourself like that.

"political theorist"? That is a joke.
People who get to the top of the greasy pole -- e.g. Nobel Prize, column at NYT etc -- are GREAT politicians.

Libertarian ideology tends to focus on protecting individual freedoms and removing policy which restricts those freedoms. If this concept is taken to its logical extreme, we encounter serious problems. In a situation where government regulation is necessary to prevent some catastrophe, what stance can the traditional libertarian take? The article itself raises a fine example: government regulation on soap and detergent prevents producers from using phosphate in their product. As the situation in Lake Erie shows, if phosphate is used in soap products it will end up in watersheds, where it will spur the growth of poisonous algae that ruins drinking water.

What can be done about this besides government regulation? And yet libertarian views, taken to their logical extreme, would oppose such regulations. Clearly an uncompromising libertarian mindset is incompatible with the challenges that face our society today.

Which ones are "traditional"?

Libertarian theory has been grappling with that issue for decades, hasn't it? I'm pretty sure I've seen it mentioned, repeatedly, by more than one libertarian.

(Note that the example you give has a "libertarian theory" answer: property rights. If someone owns that lake [say, the polity living around it buys it or acquires it from first-use principles], they can ... sue for damages if you pollute their water.

Libertarians would say that your "problem" comes from assuming only half of a libertarian position; that of private action in industry without private property extended to where the State now rules; you assume that since the State (and thus "nobody") owns all the water now, that must be so, and that thus the problem is with the libertarians letting it get all dirty; they reply that the problem is that you've left this immensely valuable and useful thing "un-owned", when it is, in fact, an economic good subject to ownership.

They'd also say [myself included] that while that solution is certainly "different" from a State owning the water, that A) in many places, the State makes a hash of that kind of thing, too and B) there's usually no better incentive for managing a resource correctly than having an ownership interest in it*.

I suspect that much of your problem with "an uncompromising libertarian mindset" or "their logical extreme" arises from ignorance of all the things those pesky libertarians have ... been talking about on the subject for the past few decades?)

If Krugman wants to see the costs of regulation, he should try to open a taqueria in Los Angeles, try to operate it completely legally, fully complying with all taxes and workplace regulations, and see how many months he can stay in business before it fails.

He - and other ivory-tower academics - should read about George McGovern's misadventures in operating a business.

Is there a shortage of tacos in Los Angeles? Would easier taco regulation produce a noticeable increase in the GDP produced by LA?

try to operate it completely legally

Why is this important? No economist should ever talk about regulation as if it was a black and white affair. Consider speed limits. If you go over you are breaking the law. Yet 99.9% it's easy to exceed the speed limit by 10% or more without ever getting a ticket. Imagine a new regime comes to town and wants to install GPS's on every car that will automatically issue tickets whenever a car goes 1 mph or more over the speed limit.

According to the libertarian this is no change. You can't drive 65mph now, you can't drive 65 mph in the alternative world either. Yet for everyone else this is a huge change. Something that was previously allowed (going modestly over the speed limit) has now been banned. Cost analysis likewise is pointless. Yes it would cost millions if everyone at all times always complied with speed limits. But this is deceptive, since people don't comply with speed limits you won't save a fraction of that by relaxing them.

What this illustrates is that how regulations are enforced is much more important to economic analysis of their impact than what the regulations actually are or how numerous they are.

I have started a food business like Foobarista is describing, and the regulatory environment was brutal. Boonton, what you're missing is that the high costs of compliance mean that the wealthy are at an even bigger advantage when starting businesses. If you care about the little guy and level playing fields, you want lean regulatory environments. Enforcement may be sporadic, but the threat of enforcement creates risk, and therefore real cost. If you get a ticket while driving, you pay a fine. If your restaurant is shut down, even temporarily, how many families will suddenly lose their income? How many regs do you want to skip? How big of a risk are you willing (or forced) to take?


I have no problem supporting a 'lean regulatory environment' but let's get real here. Food seems to be one area of the economy where you are just as likely to find small businesses dominating a local market as large ones. Drive thru any city or town and you'll see the big businesses are almost always franchise operations (making them partially small businesses) or are true small businesses with one or two stores at most. On top of that new eateries seem to come and go like flies. That leads me to suspect getting a new one opened isn't quite as brutal as you describe. Perhaps it's a learning curve case where once you know how to navigate the regulations it becomes very easy to do so, hence you see many family businesses that splinter off into new outlets all the time.

You are ignoring that food in this sense is not a commodity and a small producer is just as likely (more in my opinion) to create a superior product than a large producer. You might make the same observation about Wal-Mart prints and the limited works of a master painter. To a much wider (but applicable to many of your arguments) application, "just because" you notice that the economy hasn't grinded to a halt, doesn't mean that regulations aren't too many or too strenuous.

I'm not following this. Ultimately when it comes to preparing food in eateries everything is a 'small provider'. Every McDonald's has only a handfull of people behind the register cooking the food, ditto for your family dinner. It's not obvious that there is any economic law that says a huge chain will only be low quality while the single shop will be high quality...though I suppose that 'law' would hold if we're talking about food as 'work of art' in the case of celebrity chefs.

But there are only a limited number of plausible 'celebrity chef' type places possible and yet, they too seem to open and close quote often in any given city which again brings us back to the fact that regulations are probably not a serious roadblock...even though they may be very annoying to the individual dealing with them.

The US has so many car deaths because it has too much driving and not enough biking.

He's not worth 200+ comments. Kruck Fugman.

And what all this means in turn is that libertarianism does not offer a workable policy agenda. I don’t mean that I dislike the agenda, which is a separate issue; I mean that if we should somehow end up with libertarian government, it would quickly find itself unable to fulfill any of its promises.


Does Krugman even understand what a "libertarian government" does? (Or is he maybe arguing against some weird subset of smaller-govenment Conservatism?)

It doesn't promise you More Stuff (let alone "more stuff for less money"); its point is to reduce the size of the state. (Not inherently; I mean any libertarian government notionally elected here and now would have that goal.)

You don't need to have a good story about "what amount of government spending is from entitlements and paying bureaucrats" to fulfill the promise of less State.

Arguably you don't need hardly any funding at all to repeal laws and close departments.

He seems to be arguing that because a libertarian government couldn't produce anarcho-capitalism (because of concerns for risk), that such a government couldn't "deliver on it's promises". That could be applied to any government, including the one we've had since the 2004 elections. Would Krugman make a similar case against a prospective President Obama? If not, what does that suggest about the argument he is making against prospective libertarian governments?

Not sure many have noticed this but the selective quoting of Krugman does seem to generate a misunderstanding. Krugman's original piece is at

The two fantasies he attacked are:

1. That the welfare state could increase benefits by ditching all its numerous complicated programs and replace it with a simple guaranteed income system.

2. That the US is suffering from too much regulation and economic growth could be significantly increased with a deregulation program.

The fact that the Federal workforce accounts for only 6% of Federal spending is in reply to the fantasy that you could pay for a lot more direct aid to individuals by abolishing major welfare programs. No most money gets spent thru a handful of super programs (social security, medicare, food stamps etc) where economies of scale mean you just don't need that much in terms of workers and infrastructure.

The payroll was never employed in response to the 'fantasy' over regulation.

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