Dear Friends,
It seems to me… regulation has a way of overgrowing the economic garden of a country. Regulation becomes a weed, when it ceases to be a standard and instead becomes accordant, or is a means to prevent competition. The reason for this is inherent in the market system. Schumpeter had the most insightful theory, in that he pointed to the capitalist himself, who is the greatest danger to capitalism. This weed, nurtured and protected by the capitalist himself, will eventually overgrow any garden… but knowing it’s roots will help to hold it back.
Economic operations cannot function without some regulation. When asked what he would do if he were made Emperor, Confucius replied, “I would rectify terms.” He meant he would set standards of measure for barter. This means that even 500BC wise men understood the need of an economy for regulation. Like anything in a complex system, and economies are complex systems, anything can gain a sort of life. This is especially true of something intrusive as regulation.
Regulation has it’s normative function, it allows us to interact in productive ways, and it is a means to close the door to competition. This is the crucial distinction to make, bad regulation is there to create some barrier to competition, it might make the initial step to staring up a competing business so high that an oligarchical system is set up. Bad regulation may holdup the permitting process to absurd extremes, like it taking Walmart 20 years and a Supreme Court decision, to get a permit to build in an overgrown cornfield, as an overt and stated means to limit competition.
When someone gets in a position of extreme wealth, often generated through their own virtue, they inevitably try their mightiest… to close the door behind them. They usually do this with regulation. Take Warren Buffett for example. Who has made the most money from Obama’s vetoing the Keystone Pipeline? Warren Buffett with his trains. The oil is still being shipped the Texas refineries, but it going by train, driving up the cost and lowering efficiency, however… Warren Buffett is making millions from it. And who is Obama’s greatest supporter of tax the rich? Warren Buffett. One hand washes the other. This is one example of how regulation benefits the wealthy anti capitalist at the cost of the average person. Add up all the millions of other examples we will never hear of and we can see why regulation overgrows the garden of an nation’s economy.
The next phase is, as the companies that built the regulatory maze for their own benefit eventually go under, the regulation that prevents entry still exists! The jobs, often high paid, are lost to economies that have not been overgrown with regulation. There is no mechanism within government to examine regulation. As a result, the pages grow and grow. The mass of regulation, if printed for the United States, would fill an average bedroom top to bottom. That mass grows, not linearly, but at the golden ratio. It grows upon itself and the mass of it requiring more simply to interpret what is already there.
More social services are needed due to the lowering job participation rate as the ability of the economy to generate jobs is smothered by regulation. This leads to the need for more taxes, to fund the social services, and more impediments are put in the way of entrepreneurs. As the economy is overgrown with regulation, the only people who can get the license or permit to do anything, are people politically connected. As soon as the do, they also seek to close the door behind them, so they have an interest in keeping anti competitive regulation, so the vine turns to wood and strangles out everything else, but the tree of political favor, that over tops it and it grasps for support. Add politically expedient redistributive cures and the feed back loop becomes self evident.
Sincerely,
John Pepin
