The Other Reason Big Business Supports Federal Regulation
By Bryan Caplan
Contrary to popular belief, Big Business often supports federal regulation. Economists’ standard explanation: Regulation either directly restricts competition, or indirectly imposes a greater burden on smaller businesses. But there is another important reason why Big Business supports federal regulation that economists often overlook: To avoid the enormous transactions costs of dealing with 50 different sets of state regulation, and thousands of different sets of local regulation.
Case in point: See what ERISA regulations did for Wal-Mart:
On July 19, a federal district court ruled Maryland’s “Fair Share Health Care Fund Act”–more popularly known as the “Wal-Mart law”–cannot be implemented because it violates a 32-year-old federal law.
In his decision, Motz found the Fair Share law “violates ERISA’s fundamental purpose of permitting multistate employers to maintain nationwide health and welfare plans, providing uniform nationwide benefits and permitting uniform national administration.”
Libertarians have often praised leftist historian Gabriel Kolko’s Triumph of Conversatism for showing how Big Business supported Progressive-era regulation in order to suppress competition. When I re-read the book, however, I suddenly noticed a lot of evidence that the main motive of pro-regulation business was actually regulatory standardization.
In short, businesses often favor federal regulation as the lesser evil, rather than a positive good.