Sunday, October 19, 2014

Regulations, Again

This post is written as a small "corrective" to the essays in my book about regulations.  It is easy to imagine from my essays that I am FOR a regulatory state.  This is a simple way to characterize my more complex notions about regulations, but it is inaccurate.  I am for SENSIBLE regulation.  I am for whittling away much (probably most!) of today’s regulations and today’s regulatory agencies, but I am not for eliminating them.

First, what is a regulation?  A regulation is nothing more than a law respecting organizations, rather than individuals or persons.  Laws dictate our personal behavior: you MUST do this or you MUST NOT do that.  With penalties for non-compliance.  Regulations are the same as laws for people but they concern themselves instead with organizations, especially businesses.  No one would suggest that we should not have laws against murder or vandalism.  Even if it could be shown that these anti-social behaviors increase with the introduction of laws that prohibit them, still no one would suggest that we not regulate these behaviors with laws that include criminal penalties.  Similarly, we do not want to eliminate a regulation with penalties for bad behavior, even if the bad behavior might increase with the imposition of the regulation.  As with laws, regulations are appropriate where we want to coerce good behavior or prohibit bad behavior of corporations and other organizations (“artificial persons” in legalese).

However, the anti-regulatory folks do have a point or two.

  • If a regulatory agency fails to regulate, why should we taxpayers have to pay for it?  If it does not enforce its own regulations, it is not the fault of the agency, it is the fault of its management, who should be removed and charged with criminal inactivity.
  • If a regulation is added to the mix of already too much regulation, we end up with a regulatory mess which no one knows how to navigate.  Once again, why should we have to pay the bill for something that is not doing the job that it was created to do?
  • If a regulatory agency is too big to do its job effectively and efficiently, it should be cut down to size.
  • Many, if not most, regulations were invented, not by Democratic or Republican office holders, but by lobbyists acting on behalf of commercial interests.  The IRS code is filled with regulations that were put in place to benefit Exxon-Mobil, GE, Apple, etc.  And to make it tougher for their competitors to compete with them.

I don’t want to overstate my case.  If it is appropriate to have laws that regulate our personal behavior – if, that is, we do not favor anarchy – then, by the same reasoning it is appropriate to regulate businesses and other organizations.  However, most of our regulatory apparatus is in need of real reform, not elimination but reform.  Because if we were beginning from scratch, we would all of us agree that businesses and other organizations need rules to live by.  Businesses do not self-regulate good behavior, any more than people do.

So, let us all agree that ending the regulatory state is not really a desirable goal, and get to work pruning the rot out of the regulatory state.  Yes, the IRS Tax Code is beyond any man’s ability to comprehend it all.  The people who know it best should scrap it and start over, and write a simpler code that does not allow for special interests taking it over.

In the end, I am probably in agreement with the anti-regulations forces that more than half of our regulatory state has to go.  Maybe 75%, maybe 90%, as technology can perform wonders if brought into the game.  But let’s not throw out the baby with the dish water.