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Regulation – Something Different

Scandals! Shootings! War! Is there any end to the bad news?

The short answer is, “No.” Given that we will always have some terrible news to react to, it’s worth sometimes ignoring it and thinking about what a better world might look like. The idea is that by being calm and rational one might provide an example for the rest of the world to also be calm and rational.

You’re declaring all this income, right?

Along these lines I’d like to present something I’ve been thinking about. Periodically pending in Congress is some desire to regulate things or, more recently, remove regulations on things. A lot of people today have the opinion that regulation is a terrible thing, constricting freedom and economic growth. Others believe that as the world comes closer more regulation is necessary to stop bad behaviors no one thought of before.

Both can’t be right, can they? I would say, actually, that they are. We need different regulation and smarter regulation. It has to be transparent and committed to a clear purpose. And it should not regulate any more than it has to.

Regulation is necessary to set the standards of competition. A free market does not come naturally from a vacuum, it is created. This is one of the key principles being defined in People’s Economics which has wide ranging consequences.

Given that, a system of regulation based on the needs of a free market needs to be developed. I am proposing one which has four levels based on what is needed to create a legitimate market that is as open as possible but still properly takes into account externalities.

  • Level 1: Disclosure. All regulation starts with disclosure and openness. Consumers are usually capable of making choices on their own assuming they have the appropriate information. An example would be nutritional facts as required on all food items. Does this Twinkie make me look fat? You can decide!
  • Level 2: Standardization. When disclosure alone is too difficult to make sense of, categories of products may make sense. The standards don’t have to be written or even maintained by government, but can be defined by industries themselves. This includes things like nuts and bolts, which believe it or not are subject to a lot of regulation – most of it written originally by the American National Standards Institute (ANSI). A 1/4” 20 bolt has to be a quarter inch in diameter with 20 turns per inch – simple.
  • Level 3: Performance. Sometimes, meeting a performance standard is useful. For example, the standard tests which every car has to go through includes fuel economy. The numbers are reported based on a test which is at least close to meaningful in real life. Another example would be with nuts and bolts, again, which have requirements such as an A325 bolt has to have 10,000 PSI minimum tensile strength.
  • Level 4: Method. This should be relatively rare and justified when used. An example would be requiring all cars to have a catalytic converter. We could say, “No unburned fuel above a certain level” but the decision was made to require specific equipment on all cars. Is this really necessary?

You’d be surprised how regulated these are. And how necessary that is, too.

This is difficult to apply to all situations, of course. For example, what about a regulation prohibiting antibiotics in farm animals except when authorized by a vet, as we have now. Would disclosure be enough to stop overuse of dangerous anitbiotics? Probably not. But defining a category of “Antibiotic free” meat might. If that’s not good enough, performance might be judged by a test of meat for residual drugs. If all else fails, a Level 4 ban, “None shall be used” may be necessary.

There would also be reasonable sub-levels. Disclosure of nutrition may be a good thing, but prominent disclosure on cigarettes such as “These cause cancer” might be necessary – call it a Level 1B.

Why go through all this? Because it sets up ways of talking about regulation which voters can understand and judge for themselves. Disclosure is the basis of any free market, including the information necessary to be a good voting citizen and not believe unreasonable dogma.

This is simply the short version of this plan, presented quickly. The point is that it is possible to simplify just about anything by disclosure and standardization, helping us get past emotional debates which are more about feelings than facts. Those of us who support some level of government, in the name of a truly open market that is a level playing field, need to think along these lines and support rational planning first and foremost.

It may seem like a candle in the wind at times like this, but this is as good of a time to talk about rational, reasonable politics as any.

5 thoughts on “Regulation – Something Different

  1. Pingback: Regulation – Something Different – The Militant Negro™

    • I think that maybe we should start with small things we can sneak through. It would help build a centrist coalition through shared work and common purpose. This is a strategy much better suite for someone in congress, not in the position I have as a nobody, but it’s an idea.

  2. Someone asked me in mail how this would stop over-regulation or arguments that we are over-regulated. I would say this – I think we can see what percentage of all regulations are at various levels and judge from there. I would think a split on levels 1/2/3/4 would be around 52/27/14/7 percent – which is to say each more onerous level is 1/2 as common as the previous one. If it doesn’t come out that way, why? It would give us a way of judging how tough things are and how focused they are on the goals.

  3. Pingback: People’s Economics – Open Markets | Barataria - The work of Erik Hare

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