Column on Regulation Mania

Regulation Mania
Tibor R. Machan
Government regulation of the American economy–with the implication for
all economies–is back in favor with politicians, bureaucrats and, most
importantly, certain outspoken economists. (Nobel Laureate and Princeton
University professor Paul Krugman, who is a regular columnist for The New
York Times and a very frequent talks show guest is a good example, as is
political scientist James Galbraith of the University of Texas at Austin.)
These and a lot of other people have lamented the very moderate
deregulatory efforts under the Reagan and subsequent Republican
administrations. Their refrain goes, "If only there had been more
government regulation, the current economic fiasco would never have
happened."
A couple of matters need to be said in response to the mania for
government economic regulation. First and foremost, government regulators
are no Gods, nor angels, but human beings every bit as susceptible to
making mistakes and even being corrupted as are all those folks who work
in the market place. The question, "And who will regulate the regulators?"
hasn’t ever been answered satisfactorily because no one will. It is an
irreparable situation–something for which Professor James Buchanan
received the Nobel Prize when he and Gordon Tullock identified the
problems with public choice. The gist of this theory is that all persons,
in or outside government, tend to promote their own agendas. I would add
that this is especially the case in government where accountability and
budgetary constraints are minimal and where the very loose, vague idea of
the public interest is impossible to follow as a guide to forging policy.
There is also a serious problem with government regulation that is rarely
mentioned, namely, that it involves something inimical to the free
society, namely, prior restraint. In the criminal law it is well
recognized that no one may be incarcerated or otherwise punished unless he
or she has been convicted of a crime. But government regulations impose
burdens on millions in the market place who haven’t been convicted of any
crimes! This is unjust. Not that matters of injustice figure heavily in
contemporary political thinking which is now proudly pragmatic,
unprincipled, and thus allows for arbitrariness.
Third, government regulation is very, very costly and removes resources
from the market place that could generate economic growth, employment, and
deposits that could be used to provide loans for starting business
enterprises. I am not here in the position to recount the enormous cost of
government economic regulations but there are many works that demonstrate
it clearly and convincingly, including such popular fares as John
Stossel’s early special on ABC-TV, "Are We Scaring Ourselves to Death?"
Stossel showed, with concrete numbers, that the cost of government
economic regulation actually results in extensive poverty, something that
is the major cause of misery in a society.
Arguments for government regulation are plenty but they aren’t good ones.
One is based on the phenomenon of market failures but omits from
considerations that there is a far greater hazard from political failures
when governments regulate the market. Another is based on the myth of
positive human rights, duties everyone owes to others to take care of
them, a position that encourages impermissible involuntary servitude in
society. The only slightly credible support for government regulation,
identified in an article by Kenneth J. Arrow, another Nobel Laureate in
Harper’s Magazine back in 1984, comes from what Arrow called judicial
inefficiencies associated with air pollution and other negative
externalities or harmful side effects of economic activities such as
manufacturing. But even this is unnecessary when one considers that such
bad side effect could be dealt with through public health laws that
prohibit defiling the air mass and other public realms.
All in all, the case for government regulation is weak and those who
promote the idea seem more convinced of their own invincibility as
managers of the economic lives of the rest of us than of any positive
elements of the process. It is time to stop the expectation that
government regulators can solve our problems.

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