Many good things have happened both in the United States and worldwide this century. In the U.S., we have the lowest unemployment rate in half a century. Worldwide prosperity is growing so fast that the rate of extreme poverty fell by half between 1990 and 2015, five years ahead of the World Bank’s optimistic goal.
The bad news is that along with great economic performance has come a good bit of silly, one might even call it stupid, regulation and proposals for regulation. Here are my top seven for the United States, although I’m open to hearing about other, even stupider ones.
These are the opening 2 paragraphs in my article “The 7 Worst Ideas for Regulation This Century,” published today by the American Institute for Economic Research in Great Barrington, MA. Thanks to Jeffrey Tucker for a quick turnaround.
Here’s the last paragraph, in which I speculate briefly about the reason for such regulations:
In introductory economics, you learn the concept of a normal good. A normal good is one that people buy more of when their income rises. Could stupid policies be a normal good?
READER COMMENTS
Kevin Dick
Jun 13 2019 at 1:54pm
Renewable portfolio standards for electricity generation.
Electric vehicle subsidies… for luxury electric cars.
Phil
Jun 13 2019 at 2:24pm
Nearly every one of these is an example of Pillar 6 – unintended consequences. More policymakers should read and heed Hayek.
Jon Murphy
Jun 13 2019 at 3:57pm
Depends on who is choosing. Since politicians are the ones who choose policy, then we should look at this from their POV. But what is the “income” of a politician that would affect their choice here? This is where it gets a little murky. What’s the constraint under which politicians choose?
David Henderson
Jun 13 2019 at 6:26pm
Really good point about who is choosing.
You asked the right question by asking about the constraint. So here’s what I’m thinking:
The wealthier a country, the more its people can put up with wealth-destroying regulations. So it’s true that the people are not choosing the policies per se, but they are putting up with destructive politicians.
That’s all I’ve got, as Penny says when trying to explain physics on The Big Bang Theory.
Jon Murphy
Jun 13 2019 at 8:57pm
I have no problem with that logic; as I am sure you know, I agree. I’m just not comfortable calling the pattern a “normal good.” Perhaps a normal bad?
Jon Murphy
Jun 13 2019 at 8:58pm
Eh, I don’t like “normal bad.” That would imply that as income rises, people want less of it, the opposite of what you’re saying here. Perhaps an “inferior bad”? Something people tolerate more as income rises?
IVV
Jun 14 2019 at 12:56pm
“The wealthier a country, the more its people can put up with wealth-destroying regulations.”
I think there’s a bit more to it than that. Adopting a stupid policy can also be used as a cultural and class marker. Belief in the stupid policy lets people know what society you belong to, and it also acts as a barrier to letting just anyone in. If you can’t (fiscally, physically, mentally, or emotionally) afford to put up with the stupid policy, you can’t afford to be a member of the class. It’s much like a male bird’s elaborate plumage in that way.
Mark Z
Jun 13 2019 at 7:32pm
Actually, I think his point applies to the general public, and may be consistent with diminishing marginal utility. People who are on the verge of starvation should, in theory, have a stronger interest in preventing regulations that lead to wastage or inefficiency in producing food, than people who are wealthy and can easily afford to eat the price increases (pun intended). The less scarce resources are in general, the less people will care about inefficiencies introduced by regulation. I think rich big cities likes San Francisco and New York may present some empirical evidence for this theory.
Hazel Meade
Jun 13 2019 at 4:39pm
I’d like to hear a list of the 10 worst already existing regulations. I keep hearing about bizarre things like having a pocket below the waist causes a different tariff to apply so clothing designers put pockets below the waist when they want to produce in China. Likewise, the US goverment regulates all sorts of aspects of the auto industry. It would be an interesting exercise to try to grasp just how much regulation is out there and then come up with a top 10 list. Maybe it would be too hard to pick just 10.
Thaomas
Jun 14 2019 at 8:19am
Only rent control is that significant in terms of damage done.
I’d argue that much more significant, not necessarily in order, are:
1. Zoning/development restrictions in cities
2. Zero pricing of use/congestion of city roads and streets
3. Zero pricing of pollution, especially CO2 emissions
4. Immigration restrictions
5. Trade restrictions
6. Occupational licensing
Jon Murphy
Jun 14 2019 at 9:32am
Why do you assume zero pricing for #2 and #3?
Thaomas
Jun 14 2019 at 4:23pm
At least where I live they are not priced. The user’s/congestor’s income is the same however they use/don’t use, congest/don’t congest, so no incentive is created to equate the marginal value to the user/congestor equal to the marginal costs. Isn’t that the goal of regulation?
Jon Murphy
Jun 14 2019 at 5:57pm
There’s no gas tax? No charging for parking? No tolls? No auto registration fee? No metro? All these things and many more are all pricing pollution and congestion
Thaomas
Jun 15 2019 at 9:13am
Well, all very crude gestures at pricing use and congestion. Even the gasoline tax which is a somewhat approximation to a use charge is probably way too low and does not deal with costs differing by location. If you’ve ever driven around looking for a parking spot, even in an area with parking meters, you’d know that parking is not prices appropriately. And there is just no cost at all for a driver to engage in congestive behavior.
Jon Murphy
Jun 15 2019 at 9:30am
You just laid out several prices that drivers do pay for congestive behavior.
And yes, all the prices I listed are “crude,” but so what? All prices will be crude. A carbon or congestion tax will be no different.
My point is: the optimal level of congestion and pollution is not zero. To make the claim the level is too high (which is the same as saying the price is too low), you need to consider the forms of pricing that already exist and the transaction costs of enacting new prices. You may find we’re already at an optimum. Indeed, you may conclude that the prices are too high.
Walter Antoniotti
Jun 14 2019 at 10:45am
So what is the solution to these problems?
Alan Goldhammer
Jun 14 2019 at 12:20pm
David, you are somewhat incorrect regarding “grandfathered drug.” FDA never relinquished authority to regulate drugs either on the market prior to 1938 when the safety provisions were put in place or prior to 1962 when the efficacy provisions came in. Current guidance on this topic is HERE. As FDA notes, they continue to examine such drugs if issues arise, particularly on the safety side. There are numerous examples of FDA taking action against manufacturers once a New Drug Application for one of these older drugs is approved. One of the problems with the older “unapproved” drugs is that they are not subject to an approved manufacturing process and there could be safety issues that go unreported.
IVV
Jun 14 2019 at 1:29pm
Regarding the plastic bags, only California comes close to the level of sanctimonious attack on business under the parasol of environmentalism that you see in Europe. The horrors of plastic are constantly being parroted in popular culture over there. Worries about carbon footprint helped to push diesel engines over gasoline. Diesel engines do provide a higher MPG, but release a lot more particulate into the air–a fact that car companies in general (not just VW) had to hide because European governments required the impossible (and made air pollution worse in Europe).
Recent attacks on fast fashion are… okay, if classist. Consumers don’t need nearly the amount of clothing that low-end retailers produce, but low-income consumers do present a demand for low-cost options. I just think there’s got to be opportunity to make this just more efficient, not depicted as a mortal sin.
The one thing I’ve noticed that amuses me the most (but is honestly not a problem) is that in men’s rooms in Germany, men will turn off the sink faucet while soaping their hands, only turning it back on again to wash it off. I just thought, there’s no way you’ll get American men to show that level of environmental concern in a place where they’ll only be seen by other men.
Benjamin Cole
Jun 14 2019 at 7:36pm
Yes, stupid regulations…like property zoning. How can any clear thinking individual condemn rent control but leave the topic of property zoning entirely unexamined?
And, egads, how about the national fuel ethanol program?
I see far too much ala carte libertarianism.
Sheesh, there are whole buffets designed for “libertarians.”
David Henderson
Jun 14 2019 at 7:51pm
You asked:
I wasn’t aware of proposals for property zoning that were introduced in the 21st century. But if you have some in mind, please do share.
Benjamin Cole
Jun 15 2019 at 7:25pm
Oh, come, rent control is an idea developed in the 21st century? And property zoning was only applied in the 20th century?
Rent control and property zoning must be considered as married twin evils, or even two sides of the same coin. Never mention one without quickly mentioning the other.
Sure, some cities are implementing rent control while others cities are allowing it to lapse, just as some cities are tightening zoning and others are loosening marginally, and all this is happening continuously across the United States.
Jon Murphy
Jun 15 2019 at 11:13am
Good stuff. I’d swap out $15-minimum-wage for student loan forgiveness. Given inflation, the real minimum wage will fall over time, whereas loan forgiveness would have the nasty effect of causing people to borrow more on the expectation that it will be forgiven
Mark Z
Jun 16 2019 at 12:56am
Outlawing private health insurance comes to mind as one that’s been proposed.
Restrictions on the number of H1b visas granted per year seems like another big one.
diligentdave
Jun 16 2019 at 2:22pm
Generally I’m against regulations, such as caps on anything. However, as a cardholders from several of the large banks over the years (& currently), I’ve learned these lessons—
1) When banks screw up, credit card customers pay. Back when Enron failed, and most all large banks paid large sums to the US Government, simultaneously declaring that they were not admitting any fault, without exception, every bank with which I had a credit card increase my interest rates from 12% to 16% up to 29.99% interest ALL!
2) Interest rates on credit cards always rise to well above 20% when you owe money on them. It is part of BIG MONEY’s way of keeping so many of us in perpetual financcial servitude. Or, more simply, in DEBT SLAVERY.
Sure, no one put a gun to my head to borrow. But, with how income is these days, as our ‘friend’ Dave Ramsey says, “If you don’t have a plan (to handle emergency expenses), Visa and MasterCard do! Thanks for the heads up, Mr “Better Than (You Deserve!”
However, they’re not just jacking rates sky high because of risk (unless you factor in that they cause the majority of the risk of card holders being unable to pay back the debt, by pushing their rates sky high)! But they charge high interest rates JUST BECAUSE THEY CAN! They may only pay 2.5%, and charge a minimum of that much for what they lend card holders— No Reprieve, and No Negotiations!
Yea, I think, 15% would be something more affordable to pay back. But economists will forever say “Don’t regulate rates!” It has only made big banks far richer, and Americans more indebted.
I would argue that BIG BANKS since the 1980’s have grown to such a size, and because of employee pay that has NOT kept pace with inflation, it is a sweet, sweet gig lenders have found in keeping most everyone in perpetual financial servitude!
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