Saturday, November 19, 2011

Regulation: It's Not All Smoke

"Protection" has costs beyond the environment.

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The current debate over "job-killing regulation" seems to focus on polluting more and depleting natural resources more quickly. There is a link between poor health and pollution; there is no link between poor health and bad interior design – unless clashing colors cause you to spasm.

As reported in The Economist earlier this year:
Florida’s legislature recently debated a bill to remove licensing requirements from 20 occupations, including hair-braiding, interior design and teaching ballroom-dancing ... But the people who care most about this issue – the cartels of incumbents – lobbied the loudest. One predicted that unlicensed designers would use fabrics that might spread disease and cause 88,000 deaths a year. Another suggested, even more alarmingly, that clashing colour schemes might adversely affect “salivation”. In the early hours of May 7th the bill was defeated.

In the 1950s ... fewer than 5% of American workers needed licenses ... [Now it's] almost 30%. Add to that people who are preparing to obtain a licence or whose jobs involve some form of certification and the share is 38%. Other rich countries impose far fewer [handcuffs] than the land of the free. In Britain only 13% of workers need licenses.
State-by-state regulation and licensing make it difficult for people to relocate when looking for work. Other countries admire the degree of labor mobility we have in the United States, but it appears we're heading in the wrong direction.

There are 50 state insurance commissions – each with its own rules, constituency, and turf to protect. Do you think that has any effect on the cost and availability of healthcare insurance?

If we're going to look at the cost of regulation and its effects, let's really do it without picking politically expedient targets solely to score points. What regulations, subsidies, and barriers cause artificially high prices for consumers, cause abnormal profits in some sectors, and restrain growth in other sectors?

Don't subsidize or promote any one sector over another. Don't protect the incumbents just because they got there first. Don't let the incumbents build more walls by imposing arduous restrictions or licensing provisions that provide no real value to consumers.

Let's understand the overall effect of regulation – not just one side of the equation.  Let's tear down the supports that prop up favored industries and stifle competitive markets, because it's the loss of competition that reduces employment.

We don't need to sacrifice our health, environment, and natural resources to grow our economy. Instead, let's promote a competitive environment where talented people thrive without having to scale man-made barriers to success.