Regulation Stifles Innovation
President Obama has vowed to reduce
regulations in the US Government. Whether
these actions will be substantial is for the
jury to decide later, but today we address
to what extent regulation is good for the
society. Liberals are upset that Obama would
even consider reducing the regulatory
apparatus while conservative fear he wonít
go far enough.
What Is Regulation?
Basically, regulation is a law except that
generally it was not passed by any
legislative body except in some broad sense.
For example, Congress gave authority to the
EPA to decide what might be polluting the
country and, in turn, to devise regulations
with the force of law to reduce pollution.
If you violated the regulation, you were
perhaps sent to jail with no less authority
than if the regulation had been passed as a
law by Congress.
Supposedly the regulatory agency was
better equipped with experts to decide what
regulations (laws) were needed than Congress
was. So Congress gave EPA the authority to
pass all the laws needed to have less
pollution. One problem is that the EPA is
not made up of representatives of the
people. First it is in the Executive Branch
and thus surely a big step removed from the
peopleís desires. Worse, it becomes its own
mafia, staying in existence from one
President to the next. In that respect, it
has little if any accountability to the
voters and often little accountability to
the President to whom they report.
Who Can Abide By All The Regulations?
In the old days, our Congressional
representatives wrote most of the laws that
were passed. Oh, maybe they had an assistant
or two to do the actual writing or to check
the constitutionality of a proposed law.
Under that case, the representative and his
small staff could hardly write more than the
affected citizen could read.
Today, each Congressperson has a huge
staff each of whom can be delegated to write
portions of the bill. But that is not
enough. They also can access the regulatory
agencies for help as well. Soon, you have a
cast of thousands writing proposed
legislation. No wonder, you have 2200 page
bills that probably no single author read
and understood. After the bill is passed, it
leaves open many more details for the
regulatory agencies to write more. The
result: You have an army of people writing
regulations for which the average citizen
cannot possibly understand or abide by. To
be safe, that average person needs an army
of lawyers just to understand how the
regulation affects the citizen in his
What About The Effort To Comply?
Since regulations have the force of law,
theoretically no one has a choice but to
comply. Fortunately or unfortunately,
compliance officers are usually no smarter
than the average citizen. So they too have a
big problem in making sure all citizens
comply with all regulations.
One thing we learned about crime fighting
in New York City is that enforcement of even
the tiniest law was essential in reducing
major crimes. With regulations being so
extensive it is virtually impossible not to
violate some regulation as a citizen and it
is virtually impossible for the
administrators to catch every violation. So
people become lax when it comes to obeying
the law. Did we have a Madoff because we had
too few regulations or because we didnít
enforce those on the books? Probably the
latter. Could have the Arizona shooter been
stopped with existing laws before the crime?
Probably. But law enforcement already has
too many laws to enforce, many that society
could live without just fine.
The income tax is a set of regulations
designed and enforced by the IRS based on
some general guidelines set down by
Congress. We all know that the cost to
comply is huge. As many propose, a simple
post card should suffice for an income tax
return. But because Congress and the IRS
over-regulates, Americans are spending weeks
this time of the year on maneuvering their
way through untold regulations. The cost is
enormous; and the IRS is just one
bureaucracy. If you manufacture a product,
the regulations are equally as extensive and
onerous as income tax law. All of these
regulations add to the cost of everything we
How Do Regulations Stifle Innovation?
In the first place, all of the time used to
obey the regulations and fill out the
paperwork could just as well be used to
design a new product or invent a new medical
cure. In fact, a manager of a corporation
probably spends more time worrying about
whether his company abides by all the
regulations when instead he/she should be
guiding the company to new products and
Even worse, some regulations tell
manufacturers how something is to be built,
not what canít be done. Health care
regulations including the new ObamaCare are
trending toward telling doctors how exactly
to treat patients. Yet many of the
successful drugs of the last decades became
useful for things other than those
originally anticipated by the drug
manufacturer. How did that happen? Doctors
treating patients with multiple problems
noticed that using such and such a drug
intended to help one problem found that it
helped a different problem.
If that doctor were told that the only
way to treat the second problem was defined
by regulation, the new use of the drug might
Innovation comes about through a free mind.
That mind is stifled when time and effort is
spent on considering how to obey government
imposed regulations. That is not to say that
the country doesnít need laws to protect
against evil doers. What it does say is that
common sense needs to be applied in
inventing new laws (and regulations).
First any law should be so simple any
affected citizen can understand the law.
Second Congress should not delegate any
law-making to a regulatory agency. If
Congress canít write a law that is
understandable, then it probably shouldnít
be written in the first place. (The Ten
Commandments donít take a genius to
interpret). Finally, there are always more
than one way to skin a cat, as they say. The
example of a postcard income tax form is a
great example. Just as much revenue (or
more) would be gathered with such a simple
form as with the humongous set of IRS
regulations today. All the social
engineering aspects of tax law make the
country no more social.
All citizens need to elect
representatives who write their own laws and
do not delegate law-making to the