One Step To Improve the Economy

 

Dear Friends,

 

It seems to me, one simple thing all governments could do to improve their economies, would be to create a panel, that would go over the regulations and laws then make an annual list of regulations and or laws that are outdated, redundant, harmful, pernicious etc… The legislative branch would then see to it that these regulations and or laws would be removed from the books. In this way any country could at least grab the low hanging fruit of economic improvement. There is not a country on Earth that would not benefit economically from this approach.

 

Regulations are the nemesis of economic expansion. While a standard facilitates market transactions, regulations are designed to give an economically favored group a leg up, in an other wise free market transaction. Since they give an economically favored group special treatment, they both skew the market, warping it and creating bubbles, and they create pernicious incentives. Pernicious incentives like, it being more economically beneficial to seek political favor than, to provide a good product at a low cost. Regulations undermine economic expansion in other ways as well.

 

Typically the favored economic group are older more established firms. Regulations raise the cost of entrance and extend the time line where a business operates in the red before it starts making money. This allows older more established firms to make higher profits and pay for political favor. Even a seemingly innocuous regulation like requiring a furniture store to have a changing table in their bathrooms, benefits older firms, they have the monetary cushion to absorb the cost, but new firms might be running in the red to hopefully get to profitability, so the extra cost might be the tipping point.

 

Now… many will say, oh well, so sad… but may I put this to you? As I have explained before in prior articles, small entrepreneurial businesses are the engines of growth in a market based economy, so when government regulations hinder the formation and operation of entrepreneurial companies, that regulation or law directly lowers the standard of living for that generation… and that lowering is magnified over later generations due to the effect of compounded growth!

 

Take the negative effects I have outlined and multiply them by the thousands of regulations on the books of every country on Earth, if they were combed of nits, a huge source of friction to the economic machine that is the market system would be removed. Such a panel, given sufficient funds and prestige, who’s ideas were followed through on… actually erasing the regulations and laws the panel suggested, would reward such wise governance with economic success. There would be push back, from those elite who’s sacred cows go on the chopping block, but I’ve heard somewhere, sacred cows make the best hamburger.

 

 

Sincerely,

 

John Pepin

 

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