Government regulation makes us all poorer.
I’ve known this fact for quite a while. Deep down everyone does.
Without putting much thought into it most people may think that in the abstract government regulation does some good. They think, “Well sure, regulation protects consumers, customers, etc.” But far fewer people would take it as far as to say, “Consumers need protection from me,” or “I need regulators to protect me from myself,” or “my judgement is so inferior to magical government bureaucrats that I need them to make the correct choice for me.”
In other words, regulation is for other people. Not for me. And probably not for you.
We fall into this trap of thinking because in our everyday lives we generally feel like we can handle ourselves pretty well. We most certainly don’t think that someone needs to come in with force to protect us, or protect others from us. But we think that regulations must be around for a reason and so some or most people must need this type of interference in their lives. Most people must be bad and exploitative enough to warrant state-regulation.
Right?
Wrong.
This is absolutely not the case.
To the extent that we live in a free market society (not that large of an extent) people can only succeed by helping others, not exploiting. You become successful by creating value for others, not by taking advantage of others. And those that would take advantage of others are typically a tiny, though highly visible, minority. The problem with having shady or unethical practices in a free market is that it’s extremely high risk. The minute you are found out, nobody is likely to do business with- or hire you again. And by a similar token, the market encourages us to work with all honest and ethical people because if you won’t do business with them, your competitor will.
The incentives that the market offers tend to push society towards honesty, cooperation, inclusiveness, liberty, success, and wealth. One need only look at the world to see that those countries that have the highest levels of economic and market freedom are the same ones with the firmest systems of rule of law, highest levels of respect for human rights, the most opportunity, and the most material wealth.
Markets push us towards a better, more honest future but government regulators only serve to slow us down.
Regulation makes us poorer because it saps resources away from individuals and businesses without giving us much in return. Even by their own terms, regulations do little to improve our lives. Bad or contaminated meat still finds its way to the stores and restaurants, cars still pollute the atmosphere, underage kids still drink copious amounts of alcohol, people still do harmful drugs, and the list goes on and on.
But in addition to failing to protect us, many regulations actively harm us. By forcing companies to conform to arbitrary standards they cost them thousands and millions of dollars. This gigantic added overhead cost effectively bars new potential competitors from entering certain industries. It also takes away the choice of how much safety or what labor practices consumers want to endorse (or work in). A person who could afford a car without airbags or bad EPA standards or even without seat belts is prevented from having a car because this cheaper, less safe option is not allowed to them.
Now that I am working in the gaming industry—one of the most regulated industries in the US—I can see firsthand what compliance with the state’s orders entails. It means that we have whole departments that exist solely to make sure we are in line with regulations. It means teams of lawyers and support staff constantly having to make sure every move we make doesn’t violate some footnote in the small print of a regulation. It means having to play nice with regulators you can’t stand because they hold such power over you.
It means businesses are less able to provide their customers with what they need or want at a price they can afford.
State-mandated regulations make our lives worse. They add cost to business, increase the prices of the things we need and want, don’t live up to their stated goals, and often prevent market incentives from encouraging spontaneous order and regulation.
Free up those billions of dollars and all those great minds trapped in the web of compliance and see how much more society will thrive.