Getting by with Fewer Rules

Suggestions for Trimming the Regulatory State

In my last Substack post I wrote about the encroachment on our lives of the bureaucratic state and its rules. I gave several big picture examples and talked about a few ways to fight this trend. With this post, I want to get more into why this is a problem and just how big the problem is.

What’s the big deal with regulations, anyway? We need laws to help govern bad behavior, don’t we? Yes, we do. We need laws against using force or fraud to get what you want. We need laws against behaviors that endanger others, such as drunk driving or dumping toxins into a water supply, for example. There are rules and laws that make it possible for us to live together in harmony.

But rules have a cost. The example of paying income tax illustrates this. If the rules for paying income tax were simple (you made X, so you pay Y percentage of X), we would all do our own taxes. Because the rules are anything but simple (the constituency issue below explains why), most of us pay a highly trained and expensive professional to do our taxes for us. And there is the cost of running a huge IRS to police tax avoidance. This is but one example of the cost of the regulations that govern us.

There are three overarching reasons why we should be skeptical of many of the rules that govern us and those that are proposed. The first is efficacy. Rules often don’t accomplish what they are meant to accomplish. Health care is full of rules designed to make it more affordable and accessible, and they have failed miserably. Prohibition made alcohol illegal (and still makes other drugs illegal), and that failed as well.

The example of prohibition illustrates the second problem with rules. That is, the fact of unintended consequences. For alcohol in the 1920s and other drugs today, making them illegal means that their manufacture and distribution are handled by criminal elements. Similarly, welfare law gave us welfare dependency. COVID policies caused learning loss in kids and inflation. And so on.

So, for rules that don’t work and that cause unintended consequences, why don’t we just repeal them? Therein lies the third problem with rules, the constituency problem. Most laws are passed because someone lobbies the legislature to pass them. These lobbyists are not hired by average citizens. They are hired by companies, industry groups, and other interest groups. It is not surprising that the rules they advocate will benefit those very groups. Protectionist laws such as tariffs are a great example. They are proposed not because they are good for you, but because they are good for an industry that makes campaign contributions to politicians. In other words, every law starts with a constituency – a group that will support politicians who enact and defend the rule. Furthermore, those who benefit from the unintended consequences as well as those who obtain exemptions from the law’s unintended consequences also become part of the constituency. This is called cronyism. It should not surprise us that we pass a lot more laws than we repeal, and that repeal of ineffective or counterproductive laws is so hard.

I want to finish by highlighting a resource that helps to illustrate how common are counterproductive laws. The Cato Institute is a libertarian, free market think tank based in Washington, DC. They provide reliable, nonpartisan information and free market policy proposals to policymakers and the public. Cato has published a Handbook on Affordability (free) which presents the libertarian, free market approach to affordability. The Handbook provides over 100 policy suggestions, both state and federal, over 11 domains ranging from fiscal policy to housing, health care, and food. All involve repealing or minimizing regulatory burdens, and all are geared toward making our daily lives less expensive. I urge you to take a look at it.

The Handbook highlights the tip of the iceberg. There are many other cases of overregulation. The next time you hear of a proposal for a new law or regulation, ask yourself: Who benefits? What are the likely unintended consequences? Is this issue so important that force must be used to address it?