Saturday, March 17, 2012

Regulations as a political scapegoat

Because Federal and State Regulations are pretty arcane and remote from most peoples day to day experience they are a regular boogie man for politicians seeking to get elected.  Currently regulations are frequently described as "job destroyers" or some similar term.

As someone whose business in significant part depends on understanding the nature and history of Federal and State regulations the political rhetoric sometimes seems divorced from reality.  Regulations aren't some cruel torment dreamed up by politicians to torment business people, they are generally a crucial part of making markets function.  They are simply laws to insure people clean up the messes they make trying to make as they go about their business.

Suppose I own a paper manufacturing business.  I act responsibly by disposing of all my toxic chemicals in a responsible manner.  The guy across town builds a paper manufacturing business, but he just dumps his toxic chemicals in the river.  He now has lower costs than me, so can undercharge me.  If I don't stop acting responsibly he puts me out of business.   So instead of the rest of us paying slightly higher costs for paper now society has a poisonous river they will have to clean up, and lots of people are probably going to get sick and have lots of medical bills.

Or suppose I manufacture widgets.  I pay my employees a decent wage, spend the money I need to spend to make the workplace safe, and make a little profit.  Then the guy across town starts building widgets.  He doesn't spend a dime to keep employees safe, pays the employees as little as possible and undercuts my prices.  I am out of business unless I adopt his business practices, and the the long run, maybe so is he as the workers in the town eventually can no longer afford the widgets he is manufacturing.

Regulations are always long and complex, even convoluted.  They have to be to prevent people from using slick lawyers to get around them.  But they are absolutely necessary to the long term health of society.  Are there obsolete or poorly thought out regulations?  Unquestionably - but it is hard work to figure out which ones are obsolete or not accomplishing their goals, hard work that the politicians who rail against regulations are seldom willing to do. History has demonstrated that often the regulations that politicians loudly complain about are the ones that make wealthy people behave responsibly to protect our economy and our health.  Meanwhile obsolete or useless regulations get ignored because their is no political hay to be made in eliminating them.

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