On regulations

Arnold Kling links to an article on regulation by Bruce Yandle.

Yandle’s general concern is well-founded – it is a problem that the unaccountable regulatory agencies are turning out massive quantities of regulations.

Yandle has no idea how to solve this problem.

Solutions from the few people that are trying to address the problem of unaccountable regulatory agencies fall into two categories.

1) Kling suggests "radical Federalism or competitive government." The good news is that this proposal would actually solve the problem. The bad news is that it’s impossible. The problem that we’re trying to solve is that unaccountable regulatory agencies have taken control of the government of the US. Achieving Kling’s proposal would require these disparate agencies to band together to radically reduce or destroy their own power and existence. Nothing could be more unlikely (they’ll never band together, for one).

2) Yandle’s solution, which is basically for Congress to reassert its own power over these executive agencies, suffers from the inverse of the problem with Kling’s solution. It is theoretically possible for Congress to reassert control over the legislative function, however the result would not be better government. You may not like unaccountable regulators making decisions, but you really wouldn’t like Congress making decisions.

Part of the problem is that people don’t understand regulators. If you talk to a reasonably successful one, you’ll be surprised about how much they know about the industry they regulate (it’s not clear to me that the average regulator is less knowledgeable about the industry he regulates than the average private sector worker in that industry). You’ll also be surprised about how aware he is about the problems of over-regulation. Regulators don’t sit in rooms randomly thinking of ways to undermine competitiveness in the US economy. Yandle seems to oscillate between assuming that regulators are promulgating random regulations on subjects which they don’t really understand to assuming that they’re all-knowing.

For example, his suggestions to fix the problem of too much regulation include:

  • Agencies should be required to conduct potential cartel analysis for every major industry rule. They should also identify industry winners and losers under proposed rules, account for the gains and losses that may result in a rule-induced regulatory cartel, and estimate deadweight losses imposed on consumers.
  • The Antitrust Division of the Department of Justice and the Federal Trade Commission should be required to review major rules in cooperation with the White House’s Office of Information and Regulatory Affairs, and should intervene as appropriate in regulatory proceedings that may have inefficient outcomes.
  • In conjunction with the required retrospective assessments and industry reviews, Congress should hold annual hearings to review those reports, with an eye toward improving the competitiveness of the U.S. economy and identifying the economic gains obtained through regulatory review by OIRA

I think these reforms would end up giving regulators more power. They assume that regulators are omniscient. Why give them an opportunity to increase their power by performing these rampantly-speculative analyses? What do Justice and the FTC know about inefficiencies in regulations in FAA regs, for example? What does Congress know?

If you want to solve the problem, you’ve got to figure out how to get someone to be held responsible (Justice and FTC and Congress don’t count). It has to be a person and this person has to get in trouble if regulations fail. Real serious trouble.

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13 Responses to On regulations

  1. Gian says:

    Striking similarity of these discussions with those of pre-revolutionary Russian intelligentsia depicted by Solzhenitsyn in November 1916.

    There the war-time regulations issued by multiple authorities, Military, Zemgor, Duma commissions, Local Governors, special plenipotentiaries etc worked to ultimately wreck the Russian war effort and played no insignificant part in the revolution that followed.

    Meanwhile there was a sensible (classical) liberal line that got drowned in the babble of Left and Right.

  2. Handle says:

    The only people who can decide which rules are more or less important are the regulators themselves. The problem is there is no real cost to the regulator in the promulgation of new rules – so they tend to accumulate and grow like cancer even if their benefit is completely marginal or hypothetical.

    So set a rules budget, or a maximum number of words that all agency rules can have in aggregate. I know it sounds ridiculous, but go with it for a second.

    All new rules would have to compete with each other and past rules for priority because of space limitations. What should happen is that a new rule will only be approved if it’s more beneficial than every rule already on the books. All congress has to do is decide whether, in terms of a general feelings, it wants more or less “regulation”, (which is, apparently, as deeply as many politicians and people think about the issue) and just lower or raise word quotas appropriately.

    If your agency was just told, “You must erase enough rules to reduce the total size of all your rules by 10%” how would you decide which ones go? My point is that probably only you and your coworkers can make that decision competently. Only the regulators can stop over-regulation.

    • Leonard says:

      So there’s a word budget and a money budget? The same thing would happen to the words as has happened to the debt: they’d raise the limit every year. As with the debt budget, I suppose this does at least offer a handle for the outer party to attempt obstruction. However just as I see little effect from the debt limit, so there would be little effect from a word limit. There is at least a good reason why people should think that the debt limit should not be raised, namely, analogy with normal indebtedness for individuals. There is no analogical reason not to raise the word limit.

      • Handle says:

        I told you it would sound ridiculous. But seriously, I maintain, that only counter-regulator bureaucrats can regulate the regulators and their regulations (say that ten times fast!).

        The problem with cancer cells is that they’ve lost that bit of self-control code that tells them to stop replicating and growing. That’s the whole notion of “checks and balances” – that you have to set up countervailing forces and pit them against each other to establish something like a rough equilibrium and balance – or else something will break loose and grow until it takes over and eventually kills the organism.

        The Constitutional design was to codify and formalize Montesquieu’s conceptions of how the British system worked and pit the separate political branches and the courts against each other. But actually, it’s the gigantic permanent civil service in the various departments and agencies that really run the show. They weren’t anticipated, and there’s currently no effective check for them.

        My contention is that the only thing competent to check the regulators is other regulators. Divide et impera You have to find a way to pit them against each other in a way that stops the cancer from growing uncontrollably by pushing it up against some kind of real constraint.

      • Leonard says:

        only counter-regulator bureaucrats can regulate the regulators

        You are just pushing the problem off by one level. If you can get responsible counter-regulator bureaucrats, you can just as easily get responsible bureaucrats. However you can’t get either in democracy, because there is no personal responsibility within a giant committee. (I got the “giant committee” image of democracy from Moldbug; I find it very helpful in thinking about how democracy works.)

        You cannot mechanize good government. It requires good judgment as well as responsibility.

    • I like the idea in principle but see a different problem – word deflation.

      Be prepared for the flowering of new doubleplusgood super-words that actually say a lot, while helping keep regulators under the “limit”.

      Interestingly it’s a parallel problem to what occurred in the financial industry, with the flowering of rating-arbitrage “AAA” securities…

      Regulations that draw sharp lines with boundaries are invitations for those boundaries to be explored to the limit. This should apply equally well to regulations about regulations.

  3. dearieme says:

    The problem with your suggestion, Handle, is that American English is generally so wordy that it would be simple to reduce the verbiage by 10% without reducing the burden of regulation in the slightest.

  4. Fake Herzog says:

    Great post. Many years ago I read a little book about bureaucracy and regulation called “The Death of Common Sense” by Philip Howard. He essentially came to the same (somewhat counter-intuitive) conclusion you do: if you want better and more effective bureaucracy/regulations you need to give bureaucrats more responsibility. Only when their jobs are on the line — when as you say “you’ve got to figure out how to get someone to be held responsible…and this person has to get in trouble if regulations fail. Real serious trouble.” — will incentives change for the bureaucrats in charge.

    I can’t recommend Howard’s little book enough.

  5. John says:

    Off Topic:

    How Much Would It Cost To Buy Congress Back From Special Interests?

    http://www.zerohedge.com/article/guest-post-how-much-would-it-cost-buy-congress-back-special-interests

  6. Brent says:

    Phillip has written a number of good books on the subject.

    Along the lines of “solving the power by increasing power + responsibility” I think that ultimately we need judges making common-law rulings on these regulations, and ultimately, instead of the regulations. Conservatives are terrified of giving judges more power because they’re afraid of progressives using that power for bad ends. I’m not sure how we give judges responsibility along with power… At some point it comes down to people in power living up to largely unwritten codes. No system of checks and balances can take that place of that. No “government by steam”, as Mencius says. Especially in a time such as ours where custom, manners and morality are badly decayed…

  7. RS says:

    > I got the “giant committee” image of democracy from Moldbug; I find it very helpful in thinking about how democracy works.)

    Aye, clever lad he.

    > You cannot mechanize good government. It requires good judgment as well as responsibility.

    I think you’re referring to the ‘gov of men’ vs the ‘gov of laws’. It takes good men to recognise other good men, and the recognition is not ‘scientific’ or even ‘objective’… it’s almost more like poetry… this is somewhat the negation of the ‘gov of laws’

    Don’t know if youre a yank byut what yourse saying is severely anti-Madisonian and ‘anti-American’

    • Leonard says:

      It is true that recognizing good men is like recognizing good poetry — it requires human judgment. But I don’t see the problem of governance in terms of finding good men. I see it in terms of responsibility, that is, of rewarding good judgment and punishing bad judgment. A bad man may be a good ruler — if he is properly incentivized. The converse is also true. (Indeed, it is men who I would call mostly good who’ve got us to where we are now. It is not that progressives are bad people; they are generally good people with bad ideas.)

      I am a Yank. But obviously an un-American one. I am OK with that — Americanism in my mind is associated with democracy and the idea of universal rights über alles, neither of which I believe in.

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