Who do Regulations Help Anyway?

You don’t need many rules and regulations for everyone to have maximum freedom when there are very few people in a large amount of space, such as in Wyoming today, or the American frontier of yesteryear. But when you cram increasing amounts of people into a smaller area, you get a “state of nature” which guarantees freedom only for the strong. This means that in larger, more complex societies, rules and regulations that inhibit some behaviors ensure more freedom for all.

A Wyoming cowboy has little need of regulations

A Wyoming cowboy has little need of regulations

Less People, Less Rules

Think about living in Wyoming where there’s six (6) people per square mile. Everyone can have a gun and you can fire off to your heart’s content without any of your immediate neighbors likely even aware you have one. No one needs to regulate this behavior. The same action in Manhattan, where there’s 66,940 people per square mile, will have considerably different consequences for your immediate neighbors’ freedom.

It may seem counterintuitive, but in a modern nation state, rules and regulations prevent you from impinging on another’s freedoms, and ensure everyone has the maximum freedom possible.

Times Square crowds, Manhattan, NYC

Squeezing off a few rounds will have different consequences in Times Square to Wyoming.

Diffusion of Responsibilities

Because you encounter exponentially more people in a city, you don’t have the same social dynamics of close-knit communities in smaller populations where the only people you come across are the same people you see for your entire life. So the strong de facto responsibilities and obligations that neighbors and kinfolk have in smaller communities are simply diffused to a broader public in larger communities – as manifested by the government, which executes these responsibilities via laws and regulations.

In today’s America, less than 15% of the population lives in rural areas.

Wisconsin farm

Protected minorities

Who do Regulations Harm?

You could be forgiven for thinking that all regulations are “job killing,” given how often the latter phrase precedes them in today’s political discourse. But this claim is misleading at best.

“The term “regulation” is framed from the viewpoint of corporations and other businesses,” argues Berkeley Cognitive Science and Linguistics professor George Lakoff. “From their viewpoint, “regulations” are limitations on their freedom to do whatever they want no matter who it harms. But from the public’s viewpoint, a regulation is a protection against harm done by corporations seeking to maximize profit at the cost of harm to the public.”

Societies create regulations to do two things: protect consumers and citizens from entities that have asymmetric power over them, and to more efficiently allocate costs in cases of what economists term negative externalities. This is when a business increases profits by offloading indirect costs (such as say, pollution), onto a third party, rather than paying for it themselves.

The Deepwater Horizon oil platform on fire

The Deepwater Horizon oil platform explosion. Price tag: $65 billion

Who do Regulations Help?

It is true that regulations create constraints on private businesses’ ability to act. But well designed regulations also level playing fields and allows small businesses to compete with multinationals, such as in America’s thriving craft beer market. They give both consumers and businesses options for redress in the case of disputes, and perhaps most importantly, prevent the tragedy of the commons.

Regulations can certainly reduce some jobs in some sectors. Environmental regulations have helped to kill coal jobs. But they have also created new jobs in other industries. Solar now employs more people in U.S. electricity generation than oil, coal, and gas combined. Academic research does not support the idea that regulations stunt job growth at the macro level. In fact, on aggregate, when you compare the jobs lost and gained by regulation, it’s actually a wash.

Solar farm

Job creaters

Asymmetric Gains and Losses

So if we call for the elimination of regulations from entities such as the Food and Drug Administration, the Environmental Protection Agency, and the Security and Exchange Commission, what would the resulting effects look like? A relatively small group of people, let’s say tens of thousands, who work at the affected businesses would undoubtedly make higher profits because they could externalize many costs. But those costs are borne by tens of millions of people—including you and me—in the form of foods that make you sick, unsafe drinking water, air pollutants that cause sickness and disease, drugs with unknown side effects, financial fraud, mortgages that create debt traps instead of wealth, and 401(k)s that enrich the people selling them instead of the people buying them.

It’s easy to demonize abstractions like “job-killing regulations.” It sounds quite different to say you “want to get rid of clean air or water policies that prevent your children from becoming asthmatic or suffering from lead poisoning so that a corporation can return higher profits.”

 

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