3 ms·

>"The "greatly increased compliance costs" narrative is garbage." If you are right, the Small Business Administration (a government agency itself,) must be ver

• rayiner 12y ago
  For context, the $1.75 trillion figure is about an order of magnitude larger than the entire U.S. legal sector. Clearly, the study must be measuring something other than the direct compliance costs: lawyers, accountants, environmental analysts, etc. $1.3 trillion of the number comes from estimating the difference between theoretical GDP and actual GDP given "economic regulations," ranging from quotas and tariffs to the Americans with Disabilities Act. They use a regression analysis based on a "Regulatory Quality Index" published by the World Bank. I don't know what to call this methodology other than "garbage." Fundamentally, many of these things are legitimate trade-offs, and it makes no sense to conflate those trade-offs with "compliance costs." A world in which the disabled are excluded from society is almost certainly going to be one with a higher GDP. A world in which we import all our food from South America is almost certainly going to be one with higher GDP than one in which we subsidize farming in the U.S. The fact that we choose not to live in that world doesn't make the difference between that theoretical GDP and the actual GDP a "compliance cost." Now, the cost of ADA litigation, or the cost of agricultural subsidies, etc, might fairly be considered a "compliance cost" but the SBA analysis goes far beyond that. It also analyzes things like the increased cost of electricity resulting from environmental regulation, without accounting for the cost of environmental damage. A Harvard study found that coal use alone causes $350 to 500 billion in externalized health costs: http://www.fastcompany.com/1727949/coal-costs-us-500-billion-annually-health-economic-environmental-impacts http://www.fastcompany.com/1727949/coal-costs-us-500-billion.... Under the methodology of the SBA study, a $100 billion increase in electricity costs from banning coal would be counted as a "compliance cost" but the $300-500 billion saving from reduced health damage wouldn't be accounted for. This is a very important methodological flaw, because most environmental regulations are fundamentally about dealing with negative externalities, by forcing them to be internalized. The SBA's methodology will account for the internalized costs, but not for the net economic benefit that arises from eliminating the externality. It's fundamentally flawed from a purely economic theory standpoint. NB: I'm actually supportive of the general trend of deregulation, although I think gutting environmental and antitrust enforcement is a bad idea. But the trend is indeed one of deregulation, not increasing regulation.
  • nickff 12y ago
    My point with the SBA study was not that it estimated compliance costs (as it clearly estimates cost of regulations), but simply to demonstrate that the scope and breadth of federal (and likely state) regulations have grown dramatically, and have a real impact on the economy. The SBA study also supports the notion that regulatory costs disproportionately impact small business, which is relevant to the basic discussion being had on this page. As table one from the SBA study shows, federal tax regulations cost three times as much (per employee) for firms with less than 20 employees than they do for firms with more than 500. There are many other studies with similar findings, and I will not bore you with a list of them, but they almost invariably find that regulations have increased in the last 40 years, that compliance costs have increased, and that small businesses have been disproportionately impacted.
  • judk 12y ago
    > A world in which we import all our food from South America is almost certainly going to be one with higher GDP than one in which we subsidize farming in the U.S. This isn't true. GDP measures price, not value. For a given pound of beans, slave labor and a lower sticker price has lower GDP, whereas a well paid laborer and a higher sticker price for the same product is higher GDP . (Ignoring the complication that foreign labor might not meet the D in GDP) GDP is dumb, in that producing more value at lower cost looks like lower GDP.