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This seems like a greatly oversimplified view of things. Regulations are tools. They’re not inherently good or bad. It depends on how you use them. If the bad

This seems like a greatly oversimplified view of things. Regulations are tools. They’re not inherently good or bad. It depends on how you use them. If the bad regulations outweigh the good, the solution isn’t to give up on regulation, it’s to cut the bad ones. It doesn’t make sense to lump together regulations on the acceptable amount of lead in drinking water, regulations on operations of a commercial airline, and regulations on customer data.

AnthonyMouse 8y ago
> Regulations are tools. They’re not inherently good or bad. It depends on how you use them. It's not just that though. There are good and bad regulations in the sense that the law against murder is good and DMCA 1201 is bad, but there are also compliance costs for any regulation, even good ones. Economic transactions have a certain amount of surplus. The value of doing something is $100 and the cost of doing it is $20, so we do it and gain $80 worth of surplus. Compliance costs consume part of the surplus. Maybe it costs $5 more but we gain $10 in positive externalities, so it's worth it from a societal perspective. (But not from the perspective of the parties or we wouldn't need a regulation to get them to do it.) The problem comes when you start stacking them. $25 is still less than $100. $50 is less than $100. $90 is less than $100. But at $101 people stop participating in the transaction and you lose the whole stack. All the benefits of the transaction, to everyone, including the positive externalities the regulations were intended to provide, are lost. This is true even if every regulation is individually justifiable. There comes a point when the compliance costs exceed the economic surplus available to cover them. It doesn't matter if the regulations have nothing to do with each other, they can still conspire to destroy the thing they were supposed to be improving.
- scotty79 8y ago
  > There comes a point when the compliance costs exceed the economic surplus available to cover them. If something is not worth doing right maybe it shouldn't be done at all? You are making the same point, opponents of minimum wage. "But I'll go out of business!!!" If your business is that bad, than maybe you should!
  - nickpp 8y ago
    Or business will pass the compliance costs to the consumer, thus raising price for all. Those breaking the law and not complying will have a competitive advantage, as well as those large enough to spread the compliance costs over all their production. And thus the raise of the regulation-loving mega-corporation. Wages are the price of work as established by the free market. Minimum wage in effect eliminates less competitive workers from the market place, since their added value becomes less than their cost. They are simply replaced by more productive workers or robots. The most vulnerable members of our society are affected the most, being robbed by the dignity and opportunities of a paid job and being relegated instead to live off the government's teat.
    - chmod775 8y ago
      Edit: I thought my parent poster was the same as my grandparent's parent. I removed a paragraph aimed at the latter. Sorry! [...] Just because people earn less and have less money, the economic output in goods won't change. Goods will simply become cheaper. What really matters is WHERE the money is removed from the system because companies/individuals supposedly hoard it, pay low wages, or cost of compliance is high. Because that place/group/country will become poorer compared to the rest of the world or country. There's many complex interactions when you think about economies at global or nation scale. To get to the matter at hand: > Or business will pass the compliance costs to the consumer, thus raising price for all. Yes. They may need to hire two additional people or change their manufacturing process to a more expensive one to comply with some safety standards and whatnot. The good might become slightly more expensive compared to other goods, and some economic output will be lost. But everyone will have to do that, which gets me to your next point: > Those breaking the law and not complying will have a competitive advantage. Criminals always had a competitive advantage. It's the job of law enforcement to make sure this doesn't happen - if that doesn't work you have a bigger problem. This argument is useless. > as well as those large enough to spread the compliance costs over all their production. Depends on what the compliance cost is. Need to hire an extra guy to do paper pushing for compliance? This cost (maybe) can be spread. Need to use more expensive materials? Bigger corps won't have more advantages here than they had anyways (buy in bulk etc.) > Wages are the price of work as established by the free market. That's the theory and mostly true. The problem is a disparity in bargaining power and stakes at wage negotiations. You need organizations selling that "work" who are at least as powerful as their buyers (read: unions). A lack of unions can force companies (through no fault of their own) to determine wages by the market price of their produce, instead of raising their prices. An union has the power to negotiate wages across entire industries - thus allowing companies to compete without doing so on the backs of their workers. (Edit: This is essentially a way of arriving at a minimum wage for that industry). > They are simply replaced by more productive workers or robots. Again. Maybe they should use robots - if a robot can perform the work for less than what could be considered a livable wage for a human worker, the human worker is best used elsewhere. You just made a good argument that minimum wages could increase economic output. > The most vulnerable members of our society are affected the most, being robbed by the dignity and opportunities of a paid job and being relegated instead to live off the government's teat. The dignity of a job that is paid so badly that the government has to indirectly subsidize the industry by giving the worker additional government aid, even though he has a paid job? Another great example that the free market fails at setting fair wages. Industries like that should be forced to increase their prices instead of indirectly being subsidized with tax payer money by having their workers receive government aid. Yes: McDonalds & Co. prices may increase - but you were paying that anyway, indirectly, with taxes.
- oldcynic 8y ago
  But you make that argument like there's a fixed pot of money to go around. $25 to spend on regulation, but tough our ancestors already regulated speed limits and copyright so you can't have any more. Pity about the environment and data privacy but hey. Thing is there's been a fair bit of growth since my childhood, or even since the widespread adoption of the www. Just compare the sheer amount of crap people have compared to a child of even the 90s. Plenty of slack left for some regulation and changes without even the cost of compliance of 20 years ago - there's so much more money in the system. If a business is so marginal that it can't cope with a change in interest rates or a new regulation or tax rate then any number of other tiny events would have sunk it anyway. Note: Not to say I in any way agree with this poorly thought out piece of proposed regulation - it needs a similar response to that given to ACTA.
  - Silhouette 8y ago
    But you make that argument like there's a fixed pot of money to go around. Well, usually there is. For example, I have a business that should be in a good position to take on its first "real" employees right now. We have the opportunity to take on more work, which would bring in more revenue, which would both boost our profits and create decent paying work for the extra staff. Surely these are all good things from a productivity and economic point of view. But we aren't doing any of that, as a direct result of the time, money and extra risk that would be involved. Obviously an employee has to generate more benefit for the business than it costs to employ them or it's not worth hiring, and that's your "fixed pot of money" in the case of employment regulations. If a business is so marginal that it can't cope with a change in interest rates or a new regulation or tax rate then any number of other tiny events would have sunk it anyway. That's true. For a lot of new or very small businesses, one bit of significant bad luck can sink them. Hopefully they will grow beyond that to become more established and robust to minor setbacks, but that takes time and it doesn't just happen automatically. In the meantime, every adverse change in taxes or fees or regulatory overheads really can be a serious problem.
  - AnthonyMouse 8y ago
    > But you make that argument like there's a fixed pot of money to go around. $25 to spend on regulation, but tough our ancestors already regulated speed limits and copyright so you can't have any more. Pity about the environment and data privacy but hey. Nobody is saying the amount is fixed over time, but that doesn't make it inexhaustible. At any given point there is a finite amount of overhead it's possible to absorb before you're doing more harm than good. If you think your new regulations are more justifiable than your ancestors' old regulations, nobody is saying you can't repeal the old ones to leave more surplus for the new ones. But if you overload a ship, it sinks. > Thing is there's been a fair bit of growth since my childhood, or even since the widespread adoption of the www. Just compare the sheer amount of crap people have compared to a child of even the 90s. Plenty of slack left for some regulation and changes without even the cost of compliance of 20 years ago - there's so much more money in the system. "Progress creates surplus" is not a rule. It very often moves it from one place to another. For example, the rise of refrigeration and microwave ovens in workplaces made it more attractive to bring lunch from home. That means less business for restaurants and fewer customers to amortize fixed costs like rent, which reduces the allowable regulatory overhead before the restaurant goes out of business. > If a business is so marginal that it can't cope with a change in interest rates or a new regulation or tax rate then any number of other tiny events would have sunk it anyway. "Don't worry about marginal costs, marginal businesses would fail anyway" is how you successfully boil the ocean. You destroy the marginal businesses -- which is obviously bad -- but you also push an entirely different set of businesses toward the margin, so that when the next regulation or interest/tax rate hike comes, they also sink when they would previously have been able to survive. And the entire issue here is that it's cumulative. We started with a business that had $20 in costs and $100 in value. That is nowhere near marginal. One regulation that increases their costs by $5 is easily survivable. But twenty such regulations bankrupts them. You have to weigh your alternatives, you can't have everything at the same time.
- fauigerzigerk 8y ago
  No, I don't think what you're saying is true in general (even though it is certainly true in many individual cases). Some regulations/laws increase efficiciency by reducing complexity or risk and therefore reduce cost as well. Your logic is built on the assumption that without regulation there would be no need to agree on the things that we regulate. But the alternative may in fact be endless piecemeal negotiation, duplication of work, great uncertainty, high hedging and legal costs and a lack of transparency that makes markets inefficient for long periods of time. It's very difficult to get regulation right though. So I too think that erring on the side of less regulation is generally a good idea.
- mikeash 8y ago
  I don’t see how that’s possible. If two regulations are in completely unrelated areas, how can they combine to destroy something? There are plenty of cases where regulation benefits all of the involved parties. My favorite example is safety equipment for race cars. Absent regulation, there’s huge pressure to not have any because it increases weight and slows you down. But if you regulate it so everyone has to have it, you stop that dangerous incentive and everyone is better off. And of course the classic theoretical framework for this is the prisoners’ dilemma. Forcing the prisoners to cooperate makes them both better off, but they won’t do that on their own.
  - AnthonyMouse 8y ago
    > I don’t see how that’s possible. If two regulations are in completely unrelated areas, how can they combine to destroy something? Let's take three unrelated regulations. Factories can't pollute the environment, vehicles have to undergo crash testing, and buildings above a certain height are not allowed in a particular area. Now we look at a local newspaper. It has to buy newsprint from a factory, the factory's costs have gone up due to environmental regulations, so the price of newsprint goes up. Then it has to deliver the print edition to readers, the safety standards cause vehicles to be more expensive, which raises its delivery costs. Then its rent is higher because the zoning regulation prevents the construction of more commercial rental properties. The local newspaper is struggling to survive as it is. It can survive any two of these regulations but the combination of all three puts it out of business. (And having too many newspapers go out of business may put the newsprint factory out of business etc.) So we need to prioritize. Environmental regulations and vehicle safety are pretty important, so we should have those and not the zoning regulations. > There are plenty of cases where regulation benefits all of the involved parties. You're talking about the consequences of the regulation, not the compliance costs. Even if everyone is better off -- even if the regulation is worth having -- it still required everyone to spend some amount of resources on lawyers and safety equipment and so on. You can only do that finitely many times before you exhaust your available resources. Which means the regulations we have should be only the ones that yield major returns.
    - mikeash 8y ago
taysic 8y ago
Realistically though its much, much harder to cut down on regulations than invent new ones. There is much more inertia one something is in place, because some people's jobs depend on regulating it / some businesses have already sunk money into complying / etc
lucio 8y ago
and who regulates the regulators?
- mikeash 8y ago
  Congress.
tekknik 8y ago
Regulations increase the cost of entry, which means less competition, which means it hurts the free market. It really is as simple as that and you can most definitely group all regulations into the same category in this case.
- mikeash 8y ago
  Regulations can help free markets too. For example, restaurant health regulations make people more willing to patronize different establishments. If a new restaurant can’t get off the ground because those health regulations are too difficult to comply with, that sure sounds like a good thing to me (assuming the regulations themselves are reasonable).
  - tekknik 8y ago
    sure, reasonable regulations, meaning those designed to protect human life. how exactly do these regulations do that again?

AnthonyMouse 8y ago

> Regulations are tools. They’re not inherently good or bad. It depends on how you use them. It's not just that though. There are good and bad regulations in the sense that the law against murder is good and DMCA 1201 is bad, but there are also compliance costs for any regulation, even good ones. Economic transactions have a certain amount of surplus. The value of doing something is $100 and the cost of doing it is $20, so we do it and gain $80 worth of surplus. Compliance costs consume part of the surplus. Maybe it costs $5 more but we gain $10 in positive externalities, so it's worth it from a societal perspective. (But not from the perspective of the parties or we wouldn't need a regulation to get them to do it.) The problem comes when you start stacking them. $25 is still less than $100. $50 is less than $100. $90 is less than $100. But at $101 people stop participating in the transaction and you lose the whole stack. All the benefits of the transaction, to everyone, including the positive externalities the regulations were intended to provide, are lost. This is true even if every regulation is individually justifiable. There comes a point when the compliance costs exceed the economic surplus available to cover them. It doesn't matter if the regulations have nothing to do with each other, they can still conspire to destroy the thing they were supposed to be improving.

scotty79 8y ago
> There comes a point when the compliance costs exceed the economic surplus available to cover them. If something is not worth doing right maybe it shouldn't be done at all? You are making the same point, opponents of minimum wage. "But I'll go out of business!!!" If your business is that bad, than maybe you should!
- nickpp 8y ago
  Or business will pass the compliance costs to the consumer, thus raising price for all. Those breaking the law and not complying will have a competitive advantage, as well as those large enough to spread the compliance costs over all their production. And thus the raise of the regulation-loving mega-corporation. Wages are the price of work as established by the free market. Minimum wage in effect eliminates less competitive workers from the market place, since their added value becomes less than their cost. They are simply replaced by more productive workers or robots. The most vulnerable members of our society are affected the most, being robbed by the dignity and opportunities of a paid job and being relegated instead to live off the government's teat.
  - chmod775 8y ago
    Edit: I thought my parent poster was the same as my grandparent's parent. I removed a paragraph aimed at the latter. Sorry! [...] Just because people earn less and have less money, the economic output in goods won't change. Goods will simply become cheaper. What really matters is WHERE the money is removed from the system because companies/individuals supposedly hoard it, pay low wages, or cost of compliance is high. Because that place/group/country will become poorer compared to the rest of the world or country. There's many complex interactions when you think about economies at global or nation scale. To get to the matter at hand: > Or business will pass the compliance costs to the consumer, thus raising price for all. Yes. They may need to hire two additional people or change their manufacturing process to a more expensive one to comply with some safety standards and whatnot. The good might become slightly more expensive compared to other goods, and some economic output will be lost. But everyone will have to do that, which gets me to your next point: > Those breaking the law and not complying will have a competitive advantage. Criminals always had a competitive advantage. It's the job of law enforcement to make sure this doesn't happen - if that doesn't work you have a bigger problem. This argument is useless. > as well as those large enough to spread the compliance costs over all their production. Depends on what the compliance cost is. Need to hire an extra guy to do paper pushing for compliance? This cost (maybe) can be spread. Need to use more expensive materials? Bigger corps won't have more advantages here than they had anyways (buy in bulk etc.) > Wages are the price of work as established by the free market. That's the theory and mostly true. The problem is a disparity in bargaining power and stakes at wage negotiations. You need organizations selling that "work" who are at least as powerful as their buyers (read: unions). A lack of unions can force companies (through no fault of their own) to determine wages by the market price of their produce, instead of raising their prices. An union has the power to negotiate wages across entire industries - thus allowing companies to compete without doing so on the backs of their workers. (Edit: This is essentially a way of arriving at a minimum wage for that industry). > They are simply replaced by more productive workers or robots. Again. Maybe they should use robots - if a robot can perform the work for less than what could be considered a livable wage for a human worker, the human worker is best used elsewhere. You just made a good argument that minimum wages could increase economic output. > The most vulnerable members of our society are affected the most, being robbed by the dignity and opportunities of a paid job and being relegated instead to live off the government's teat. The dignity of a job that is paid so badly that the government has to indirectly subsidize the industry by giving the worker additional government aid, even though he has a paid job? Another great example that the free market fails at setting fair wages. Industries like that should be forced to increase their prices instead of indirectly being subsidized with tax payer money by having their workers receive government aid. Yes: McDonalds & Co. prices may increase - but you were paying that anyway, indirectly, with taxes.
oldcynic 8y ago
But you make that argument like there's a fixed pot of money to go around. $25 to spend on regulation, but tough our ancestors already regulated speed limits and copyright so you can't have any more. Pity about the environment and data privacy but hey. Thing is there's been a fair bit of growth since my childhood, or even since the widespread adoption of the www. Just compare the sheer amount of crap people have compared to a child of even the 90s. Plenty of slack left for some regulation and changes without even the cost of compliance of 20 years ago - there's so much more money in the system. If a business is so marginal that it can't cope with a change in interest rates or a new regulation or tax rate then any number of other tiny events would have sunk it anyway. Note: Not to say I in any way agree with this poorly thought out piece of proposed regulation - it needs a similar response to that given to ACTA.
- Silhouette 8y ago
  But you make that argument like there's a fixed pot of money to go around. Well, usually there is. For example, I have a business that should be in a good position to take on its first "real" employees right now. We have the opportunity to take on more work, which would bring in more revenue, which would both boost our profits and create decent paying work for the extra staff. Surely these are all good things from a productivity and economic point of view. But we aren't doing any of that, as a direct result of the time, money and extra risk that would be involved. Obviously an employee has to generate more benefit for the business than it costs to employ them or it's not worth hiring, and that's your "fixed pot of money" in the case of employment regulations. If a business is so marginal that it can't cope with a change in interest rates or a new regulation or tax rate then any number of other tiny events would have sunk it anyway. That's true. For a lot of new or very small businesses, one bit of significant bad luck can sink them. Hopefully they will grow beyond that to become more established and robust to minor setbacks, but that takes time and it doesn't just happen automatically. In the meantime, every adverse change in taxes or fees or regulatory overheads really can be a serious problem.
- AnthonyMouse 8y ago
  > But you make that argument like there's a fixed pot of money to go around. $25 to spend on regulation, but tough our ancestors already regulated speed limits and copyright so you can't have any more. Pity about the environment and data privacy but hey. Nobody is saying the amount is fixed over time, but that doesn't make it inexhaustible. At any given point there is a finite amount of overhead it's possible to absorb before you're doing more harm than good. If you think your new regulations are more justifiable than your ancestors' old regulations, nobody is saying you can't repeal the old ones to leave more surplus for the new ones. But if you overload a ship, it sinks. > Thing is there's been a fair bit of growth since my childhood, or even since the widespread adoption of the www. Just compare the sheer amount of crap people have compared to a child of even the 90s. Plenty of slack left for some regulation and changes without even the cost of compliance of 20 years ago - there's so much more money in the system. "Progress creates surplus" is not a rule. It very often moves it from one place to another. For example, the rise of refrigeration and microwave ovens in workplaces made it more attractive to bring lunch from home. That means less business for restaurants and fewer customers to amortize fixed costs like rent, which reduces the allowable regulatory overhead before the restaurant goes out of business. > If a business is so marginal that it can't cope with a change in interest rates or a new regulation or tax rate then any number of other tiny events would have sunk it anyway. "Don't worry about marginal costs, marginal businesses would fail anyway" is how you successfully boil the ocean. You destroy the marginal businesses -- which is obviously bad -- but you also push an entirely different set of businesses toward the margin, so that when the next regulation or interest/tax rate hike comes, they also sink when they would previously have been able to survive. And the entire issue here is that it's cumulative. We started with a business that had $20 in costs and $100 in value. That is nowhere near marginal. One regulation that increases their costs by $5 is easily survivable. But twenty such regulations bankrupts them. You have to weigh your alternatives, you can't have everything at the same time.
fauigerzigerk 8y ago
No, I don't think what you're saying is true in general (even though it is certainly true in many individual cases). Some regulations/laws increase efficiciency by reducing complexity or risk and therefore reduce cost as well. Your logic is built on the assumption that without regulation there would be no need to agree on the things that we regulate. But the alternative may in fact be endless piecemeal negotiation, duplication of work, great uncertainty, high hedging and legal costs and a lack of transparency that makes markets inefficient for long periods of time. It's very difficult to get regulation right though. So I too think that erring on the side of less regulation is generally a good idea.
mikeash 8y ago
I don’t see how that’s possible. If two regulations are in completely unrelated areas, how can they combine to destroy something? There are plenty of cases where regulation benefits all of the involved parties. My favorite example is safety equipment for race cars. Absent regulation, there’s huge pressure to not have any because it increases weight and slows you down. But if you regulate it so everyone has to have it, you stop that dangerous incentive and everyone is better off. And of course the classic theoretical framework for this is the prisoners’ dilemma. Forcing the prisoners to cooperate makes them both better off, but they won’t do that on their own.
- AnthonyMouse 8y ago
  > I don’t see how that’s possible. If two regulations are in completely unrelated areas, how can they combine to destroy something? Let's take three unrelated regulations. Factories can't pollute the environment, vehicles have to undergo crash testing, and buildings above a certain height are not allowed in a particular area. Now we look at a local newspaper. It has to buy newsprint from a factory, the factory's costs have gone up due to environmental regulations, so the price of newsprint goes up. Then it has to deliver the print edition to readers, the safety standards cause vehicles to be more expensive, which raises its delivery costs. Then its rent is higher because the zoning regulation prevents the construction of more commercial rental properties. The local newspaper is struggling to survive as it is. It can survive any two of these regulations but the combination of all three puts it out of business. (And having too many newspapers go out of business may put the newsprint factory out of business etc.) So we need to prioritize. Environmental regulations and vehicle safety are pretty important, so we should have those and not the zoning regulations. > There are plenty of cases where regulation benefits all of the involved parties. You're talking about the consequences of the regulation, not the compliance costs. Even if everyone is better off -- even if the regulation is worth having -- it still required everyone to spend some amount of resources on lawyers and safety equipment and so on. You can only do that finitely many times before you exhaust your available resources. Which means the regulations we have should be only the ones that yield major returns.
  - mikeash 8y ago

taysic 8y ago

Realistically though its much, much harder to cut down on regulations than invent new ones. There is much more inertia one something is in place, because some people's jobs depend on regulating it / some businesses have already sunk money into complying / etc

lucio 8y ago

and who regulates the regulators?

mikeash 8y ago
Congress.

tekknik 8y ago

Regulations increase the cost of entry, which means less competition, which means it hurts the free market. It really is as simple as that and you can most definitely group all regulations into the same category in this case.

mikeash 8y ago
Regulations can help free markets too. For example, restaurant health regulations make people more willing to patronize different establishments. If a new restaurant can’t get off the ground because those health regulations are too difficult to comply with, that sure sounds like a good thing to me (assuming the regulations themselves are reasonable).
- tekknik 8y ago
  sure, reasonable regulations, meaning those designed to protect human life. how exactly do these regulations do that again?