“The total number of federal regulatory restrictions is now more than one million. And they’re not all necessarily good ideas.”
From: New York Times
More Freedom on the Airplane, if Nowhere Else
By TYLER COWEN
It is sometimes the small events that reveal the really big problems lurking beneath the surface. That’s the case with the Federal Aviation Administration’s recent decision to grant airlines the liberty of allowing the use of electronic devices during takeoff and landing.
You still won’t be able to call on your cellphone during those times, but, if the airline allows it, you will be able to read on your Kindle or play Angry Birds throughout the flight.
That’s the good news. What’s the deeper problem? Our new Kindle freedoms, however minor they may seem, show how hard it is to clear away the old, unnecessary regulations that are impeding the economy.
After all, the previous restriction on electronics during flights was broadly unpopular in a way that cut across partisan lines. Yet, for many years, the public’s complaints did not bring concrete change, mostly because of regulatory inertia. (If you’re worried about safety, by the way, the airlines can still, at their discretion, demand that these devices be turned off when deemed necessary.)
Conservatives typically complain about too much regulation, but liberals should be concerned, too, because pruning away rules we don’t need should help usher in an economy with more job creation and stronger economic growth.
The total number of federal regulatory restrictions is now more than one million. And they’re not all necessarily good ideas. For instance, the Food and Drug Administration has banned some useful asthma treatments because they have a slight negative impact on the ozone layer. The nation has medical-device regulations that take longer to satisfy than those of the European Union.
Many regulations, when initially presented, can sound desirable. The problem is that, taken in their entirety, excess rules divert attention from pressing issues like the need for innovation and new jobs.
Michael Mandel, an economist at the Progressive Policy Institute, compares many regulations to “pebbles in a stream.” Individually, they may not have a big impact. But if there are too many pebbles, a river’s flow can be thwarted. Similarly, too many regulations can limit business activity. When the number of rules mounts, it can become hard for a business to know whether it is operating within the law’s confines. The issue is all the more problematic when federal, state and local constraints all apply.
Our public sector is overregulated, too. For instance, the tangle known as government procurement has exacerbated problems with the Affordable Care Act’s health insurance exchanges. The required formal processes made it difficult to hire the best possible talent, led to nightmare organizational charts and resulted in blurred lines of accountability. It’s hard to turn on a dime and fix such problems overnight, no matter how pressing the need.
We don’t really know the total regulatory burden in our economy today, in part because there are too many rules and side effects to add up all the costs. Nonetheless, we are continually increasing the obstacles to doing business. America has lost the robust productivity growth of much of the postwar era, and the share of start-ups in the economy has been falling each decade since the 1980s. Although overregulation is hardly the only culprit, it is very likely contributing to the problem.
The point isn’t that we should eliminate all regulation or give up on clean air and water. In fact, we may need tougher guidelines — albeit simpler ones — to govern what is permissible for activities like financial risk-taking or burning coal. Still, a paring back of regulation in many areas, based on clearer priorities, seems in order.
The Office of Information and Regulatory Affairs, within the White House, has advocated a retrospective review of unnecessary regulations. That’s a good idea, but the office has a full-time staff of only about 50, and its budget, adjusted for inflation, has declined since the early 1980s. The regulatory agencies outspend the office by a factor of about 7,000. The core problem is that the system is not geared for an efficiency-oriented regulatory review.
Some past deregulatory successes came in “big bang” changes, like the airline deregulation of the 1970s, which shut down the Civil Aeronautics Board. What we need today is the selective pruning of bad regulations. Cost-benefit studies are a good idea, but they tend to be done when we have the worst possible information about the effects of regulations — namely, before the regulations are passed. Furthermore, cost-benefit studies may look only at some of the largest regulations, and not the general problem of regulatory accretion over time.
Better bureaucratic incentives are needed. Agencies are now motivated to generate regulation after regulation, because those are the formal assignments set before them. One possible step forward would be to require agencies to submit plans for retiring some fraction of their regulations over the next few years, and to reward these agencies for seeing this process through.
In short, your newly found Kindle freedom isn’t a big deal in itself. In fact, the time it took to win that small yet popular change should remind us that, behind the scenes, much more needs to be done.
TYLER COWEN is a professor of economics at George Mason University.