Caveman Books

The Caveman Explores Economics & Politics

Thoughts About Economics

Part I.

Part II, THE INVENTORY ... MODEL OF MONEY

Part III, The Overall Model

Part IV How Much Cash Is Needed In An Economy?

Part V, Money Needed ... Determined By Production Increases

Part VI, How Do Profits Impact ... An Economy?

Part VII Assets

Part VIII Summary

Part IX, Money and Fractional ... Reserve Banking

Part X, Government

Caveman Articles

Money

Government and Taxes

Creating Money & Inflation

Tax Rates VS. Tax Receipts

Taxing The Rich

Government Debt

Government Stimulus



 

 

 

 

 

Is Government Regulation Necessary?

 

Government regulations are everywhere, from the smallest little village to the humongous Federal government. Any time that someone gets killed or injured, a whole army of do-gooders look for ways to pass a law so that event never happens again. Unfortunately, the event is usually repeated, just in another form. The question arises, are all these government regulations really helping?

 

Some recent studies concerning traffic regulations have shown that eliminating government imposed regulations actually improves safety. These studies were done over the world in places like London. The traffic experiment involved removing all signs, traffic lights, stop signs, and other controlling mechanisms. The results showed that traffic moved more orderly and that less accidents occurred than when all these devices were in place. What happened is that people quickly learned that without the imposed regulations, they needed to cooperate in order to have smoothly running traffic and to avoid crashes and injuries.

 

People formed common sense “regulations” that they followed. Everyone soon learned these rules of the road and they became much more courteous to their fellow drivers and the pedestrians. Why did this work?

 

RESPONSIBILITY FOR BEHAVIOR

When the government was in charge of making regulations, putting up signs, installing traffic lights, etc., the bureaucracy became responsible for behavior. When all these controls were removed, the people had to be responsible for their own behavior. What a difference in attitude!

 

Peer pressure is involved in this process. And the views of your peers are far stronger than the regulations of government. If a teenager’s friends think it is OK to smoke pot, the average teenager will side with the peers and ignore the laws.

 

People learn to be honest with each other or else they won’t have many friends. Laws would not have any significant effect. Either people are honest because it is in their best interest, or else they have found it rewarding to be dishonest. If dishonesty includes stealing, then some people think that they can get away with it and they’ll do it whether there is a law in place or not. The law only helps in determining the penalty, if caught. Without laws, the civil court system can be used to sue the robber and recover damages, which might be far more than the actual worth of the theft. It might include cutting off the hand as practiced in the Middle East.

 

Government and its regulations are not essential to a smoothly running society. But once government takes responsibility for society’s organization, it lets the people off the hook.

 

COMMON SENSE APPLIED TO LAWS AND REGULATIONS

When people are responsible for their own actions, society almost surely runs smoother than when some other body is in charge. People just naturally follow what they think is right but not so much when someone else imposes their ideas. America was founded on the idea of individual responsibility implying small government.

 

So how do we place the responsibility back on the individual? Rather than willy-nilly passing laws to cover every possible injustice in the country, we must carefully evaluate whether a new law is the only way to solve a problem. In most cases where the government has assumed responsibility, it is the wrong solution.

 

As an example, take the Gulf oil spill. The knee-jerk reaction is to impose more regulations on the oil industry. And surely we can’t expect a single company to police itself when nobody owns the Gulf resources. Self-policing will work in many areas, like, say, restaurants. Particularly with modern communications, the restaurant cannot afford to have a reputation of serving dangerous food. But in the Gulf, it is the well-known tragedy of the commons where the resources are not taken care as well as if they were truly owned. But the answer lies in industry forming an association that sets its own standards for drilling in the Gulf. The only government involvement might be to require anybody that drills to belong to that association. The association would discipline itself and probably set higher standards because all of their reputations are at stake, not just one.

 

On the other hand, when the government sets the regulations, all of a sudden the responsibility becomes that of the government. Only if the company violated the government rules is it responsible, otherwise the government is responsible because it set the rules. Rules set by an association of oil drillers whose reputation is at stake will be far stronger than that of a bureaucrat in Washington who won’t even get fired for getting it wrong.

 

CONCLUSION

The U.S. is drowning in regulations; it no longer will be able to lead the world without some changes. Getting the government out of the regulatory business is an important first step.


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