It ISN’T the Regulations, Stupid!

From Paul Ryan to Jim Sensenbrenner, from the Governor’s mansion to the Assembly & Senate floors, the siren’s call of the deregulation fairy can be heard across the Dairyland.  The trouble is, regulations aren’t the problem.  In fact, in the financial sector, a lack of regulation has caused global catastropher.  Don’t believe me, believe Ronald Reagan’s Assistant Secretary of the Treasury Paul Craig Roberts.

Roberts, largely credited with the invention of “Reaganomics,” says in an essay today on The Big Picture, that it’s a lack of regulation that is the root cause of our current economic woes.

The economic mess in which the United States and Europe find themselves and which has been exported to much of the rest of the world is the direct consequence of too much economic freedom. The excess freedom is the direct consequence of financial deregulation.

“Free market” economists have made a mistake by elevating an economy that is free of regulation or government as the ideal. This ideological position overlooks that regulation can increase economic efficiency and that without regulation external costs can offset the value of production.

Thirty-three years ago in an article in the Journal of Monetary Economics (August 1978), “Idealism in Public Choice Theory,” I developed a model to assess the benefits and costs of regulation. I argued that well-thought-out regulation could be a factor of production that increases GNP. For example, regulation that contributed to the quality and safety of food and medicines contributed to specialization in production and lower costs, and regulations enforcing contracts and private property rights add to economic efficiency.

The ongoing financial crisis has given us a taste of what the absence of regulation can produce. Despite the enormous cost, the financial system remains unregulated. As soon as Wall Street devises a new financial instrument and finds new suckers, it will happen again.

Regulations are like anything else, they can be used for good or for evil.  But a wholesale attack on regulations as a category of government action is unconscionable .  Regulations protect workers, they protect seniors and anyone who takes medicine.  They ensure that the differently abled are granted equal access to buildings and that schools and school busses are safe.  They ensure that the air we breathe and the water we drink is clean.  Could regulations be improved?  Of course they could.  Like any human endeavor, regulations can improve over time, become more refined, more targeted and even eliminated as the science they are based upon evolves.  But to pretend that regulations are wholesale bad is silly.  And to pretend that overregulation is the cause of our current economic slump is absurd on it’s face.  As Roberts shows, it is not regulation that is the problem, but rather a lack of regulation.  The utterances from GOP Bizzaro World continue unchecked.

And let’s not pretend for a minute that all regulations are bad.  Many industries thrive on the regulatory “hot vents” created by government rules.  They develop innovative products and solutions based on regulations imposed by government agencies, often with beneficial results for citizens.  I work in the healthcare technology field.  We have developed numerous products in response to Medicare incentives for physicians required by the Federal government as part of the reimbursement strategy.

Like any “supplier,” the physicians who receive Medicare reimbursements are required to adhere to certain rules and regulations.  This is no different to the rules and regulations imposed on them by private insurers.  Many of these requirements center around Electronic Medical Record (EMR) systems which, when used properly, can improve patient outcomes and reduce medical errors.  This is true in the medical device field as well.  Regulations play an important role in ensuring both safety and efficacy.

Would you want to get into a CT scanner that had not been approved by the FDA?  How would you know if the radiation dosage administered by the machine was safe?  You wouldn’t.  You wouldn’t know until years later when, as a result of that excess dosage you developed a tumor you would not have otherwise had.  And it would be a long shot to think that you would ever even connect that diagnosis to the CT scan you had years earlier.

Which leads me to my final point.  What I find thoroughly fascinating and completely ignored by the mainstream press is the GOP’s hidden coupling of deregulation and tort reform.  Their plan is to make it easier for companies to defraud or injure the public and then harder for the public to seek recompense for the actions of corporations.  So if you’re injured by a product, you’re on your own.  Or whatever small pittance you’re able to extract from these companies will be but a pinprick to their all-important bottom line.

Profits before people!  It’s the GOP Way!

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2 thoughts on “It ISN’T the Regulations, Stupid!

  1. From a November 7, 2011 article in the New York Times:

    For the last nine years, the World Bank has been grading countries on 10 measures of business regulation: getting electricity, enforcing contracts, protecting investors, dealing with construction permits, trading across borders, registering property, resolving insolvency, paying taxes, getting credit and starting a business.

    Based on these criteria, these are the top 10 countries where it is easiest to operate a business:

    Singapore
    Hong Kong
    New Zealand
    United States
    Denmark
    Norway
    United Kingdom
    South Korea
    Iceland
    Ireland
    That’s right: The United States comes in fourth.

    Here’s the url to the article:

    http://economix.blogs.nytimes.com/2011/11/07/is-overregulation-driving-u-s-companies-offshore/?emc=eta1

  2. I forgot to cut and paste this bit from the article:

    Hong Kong beats the United States, but mainland China — that bugaboo of American employment protectionists — does not. Instead, China comes in 91st. Despite the higher regulatory burden, American-based multinational companies have increased their employment in China by 161,400 from 2007 to 2008, a gain of about 20 percent, according to the Bureau of Economic Analysis. (The most recent data are for 2008.) In fact, American employment in China rose 77 percent in the prior decade, from 1998 to 2008.

    India does even worse, with a ranking of 132nd.

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