Padded Bras, Idiotologies, and Government Regulation

After my last diatribe about supply-side economics a business friend of mine gently reminded me that I left out the impact of government regulation. So immediately I decided to write something about the impact of government regulation and warn my 17 readers about the evils of government. I was stoked.

But then it dawned on me that this is 2016 and the year of a presidential election. It also dawned on me that the candidates have waged a war or revolution against most things large – large companies and large government. And revolutionaries don’t care much about careful analysis – or for that matter, any analysis. They prefer to have rallies and shout slogans and be especially proud of themselves for defying the man.

So I immediately felt a sense of reluctance. Who really cares about the impact of government? We have our ideological camps and the camps already have well-rehearsed slogans. One camp says to regulate those greedy, immoral corporations. The other camp screams that governments are morally bankrupt and bought and paid for by those corporations. Between revolutionary zeal and warring idiotologies (not a misspelling) why should I spend time writing “on the one hand this and on the other hand that”?

Why? Because it feels good. It tastes better than a fried egg on toast. I started writing these blogs back in 2010 because I felt like spouting off. So why should things be any different in 2016? Okay I have less hair and can’t remember where I left my keys but why should any of that matter?

So onward with regulation.  My main point is that many of us who are not Rand Paul supporters immediately side with the pro-government regulation camp. Even Adam Smith believed that competition needed some oversight from the government. Smith believed competition is a very benign force for society. Business people might like to talk-up competition but some would prefer less of it. And I recall reading about market failure and how such failures mean that markets are not always self-medicating. I loved the topic of externalities – wherein an innocent third party gets negatively affected by business activity. A great example is the business on a river that pollutes the river making padded bras for ladies and as a result poor Nathan’s drinking water tastes like hydraulic fluid.

And the rest of us nod when our friends point out that police and fire protection are forms of government intervention. Naturally we want someone to objectively oversee the process of making sausages and medical devices. And we know that financial scam artists like The Fonz who misrepresent the benefits of reverse mortgages should be examined for head lice and their truth-telling.

So it is pretty clear that government regulation, like pole dancing, has a good side. Government regulation is here to stay and for many good reasons. But like pole dancing, it is worth pondering at least now and then if there is bad side. Looking for bad sides is not an activity cherished by many of us. How could there be a bad side of government regulation? After all, the mission is correct and government workers are underpaid servants of the people. Think of those nice workers at the airport who so gently and caringly pat you down as you shed your shoes, wallets, nail clippers, weed pipes, and other vestiges of your human dignity.

So the case is pretty strong for government regulation and even daring to analyze it makes me seem suspicious to many people. Larry don’t attack our government! But golly gee I am not attacking anyone. I simply want to ask some questions – is it possible that governments don’t necessarily make things better? If corporations can’t fix problems, then why are governments naturally better? Is it possible that governments sometimes have nice people but that temptation leads them down the wrong path? No, I am not going to answer all those questions. I am just saying…just because business creates problems it does not necessarily mean that something called government is the better solution.

Citizens evaluate government all the time. Private toll roads replace free government roads from time to time because it is believed that markets provide more efficient outcomes especially when Government George’s cousin Bob owns the local asphalt plant. Formerly Soviet Bloc countries have privatized many of their corporations as part of programs to create more efficient outcomes for their workers and consumers. I often wonder why I can’t choose Singapore Airlines to fly from Indianapolis to Seattle. Surely Delta customers would benefit from a bit more competition for domestic airlines.

It is okay to stay focused on government. It is possible that government has unintended side effects. It is possible that government over-does its mandate. It is desirable to scrutinize government as much as we watch over business. I won’t repeat any of the estimates of the costs of government regulation on the average firm and customer – because they are probably exaggerated. But they are real. Yup, we want a clean and safe environment. But we also don’t want to throw the baby out with the dirty bath water. Government regulations impede productivity and they raise business costs and negatively impact our nation’s economic growth. That’s for sure. We need to regulate government so that we get it just right – plenty of safety and plenty of growth!