Regulations Inhibit Growth, Time to Take The Negative Consequences Seriously

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Regulations are good, some say. They keep evil elements from hurting consumers. But are regulations doing more harm than good?

By definition, regulations are laws that seek to produce pre-designed outcomes. The way they operate is by changing individuals’ behavior. As federal regulations grow, the number of restrictions on individual consumers and businesses also grow. Over time, the increased number of restrictions may completely close the paths to innovation. Who suffers? Both the consumer and the job seeker.

According to a 2013 study, the American regulatory system is so crowded and chaotic that economic growth has slowed by about 2 percent per year between 1949 and 2005. While that doesn’t sound as bad as you might have expected, the real impact of the US regulatory system is hard to assess given the lack of a working process that helps to review regulations and weed out what’s obsolete and harmful. Without a system that helps us identify the issues with the regulations put in place, there’s no way to determine how bad these regulations really are.

While it’s hard to assess the cost of regulation now, earlier studies have at least been able to find that the American regulatory environment has been very bad for growth and very good in stifling innovation and keeping entrepreneurs from sprouting from sea to shining sea.

Despite several administrations’ efforts to modify or cut regulations that simply don’t work, all attempts were in vain.

In order to achieve success, future administrations should not take part in the same failed attempts. According to research carried out by the Mercatus Center, the US government should embrace a series of government reforms in order to remove obstacles to economic growth in America instead.

Based on the success of the Dutch Administrative Burden Reduction Programme and the Base Realignment and Closure Commission’s efforts, the Mercatus team concluded that the American government should begin by promoting an independent review of the regulatory system in place so the burden is assessed promptly and effectively.

But the key to success in this case is true independence.

An independent look into what’s stifling innovation must not be effected by crony influences, since once the influence of particular groups or stakeholders are taken into account, review teams will have a hard time assessing what works and doesn’t. Instead, those tasked with the chore of reviewing regulations should simply focus on how effective regulations have been since they were implemented.

While other steps should also be taken if the US government is serious about trimming the burden of regulations, guaranteed independence in the review process is the most important aspect of successful reforms. If future administrations are serious about growing the economy and helping America prosper, they should prioritize this type of reform. Why? Because removing roadblocks promote the growth of businesses, giving Americans the jobs they so desperately need to live their own version of the American dream.