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Posted at 9:53 AM ET, 01/13/2011

Worrying about regulations

By Ezra Klein

Michael Mandel is waging a one-man war against the government's tendency to pile on regulations during economic downturns. I worry his approach is a little indiscriminate: Genetically modified crops can still contaminate non-genetically-modified crops even if the economy is weak. So there either need to be standards for how to handle that problem or GMO producers will be laden with legal threats and uncertainty over regulations they they know will come eventually, but whose content they can't yet predict. That's a much worse position for a young industry.

But there's definitely something to Mandel's argument that most regulations exert some economic drag (though they also often have other benefits), and recessions might change the cost-benefit analysis for both old and new regulations. And I agree with Sen. Mark Warner's argument that old regulations rarely get reviewed, and that implies there are a lot of rules out there that long ago should've been lifted. I don't know whether tying regulations to the business cycle or instituting a one-in-one-out policy is really the right way to address the problems, but I'm increasingly convinced that the rigidity and insulation of the regulatory state is a problem worth worrying about.

By Ezra Klein  | January 13, 2011; 9:53 AM ET
 
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Comments

--*That's a much worse position for a young industry.*--

Isn't that, and shouldn't it be, that young industry's worry? Shouldn't they be quite cautious that they won't be sued into oblivion before they put their product on the market?

Doesn't government "approval" give a false sense of safety, while also limiting liability?

--*I'm increasingly convinced that the rigidity and insulation of the regulatory state is a problem worth worrying about.*--

And yet, Klein, you spend your days propagandizing for more and heavier regulations. Are you unaware of your own proclivities? Stupid people often are.

It becomes more apparent, the longer one reads Klein, that the rightness or wrongness of things are immaterial to his world view. It is the short term ends, shallowly viewed, that have him continually over the intellectual barrel.

Posted by: msoja | January 13, 2011 10:14 AM | Report abuse

One-in-one-out is wrong because there is a fallacious assumption that an industry being under-regulated means that another is over-regulated.
Subject industry regulation to a 10-year or so review of the cost-benefit analysis. Give it either to a panel of neutral experts on regulation and governance generally and not to specific industries.
Alternatively, give it to a permanent panel of Congressmen who either agree that no change is needed or refer the regulation back to the original agency for re-review and re-analysis.

Posted by: ctown_woody | January 13, 2011 10:58 AM | Report abuse

Yeah, Ezra, given the relatively quantifiable nature of regulations' benefits which you articulate quite clearly and quite often, it would be helpful if you offered some rubric to help quantify this economic drag so we can do a proper cost-benefit. Obviously, each industry will ALWAYS be crying about how regulating their behavior is counterproductive to the common good, but they obviously have a conflict of interest!

You mention our weakened state as arguing against regulations, but as you well know, a huge reason why we are in this weakened state is because of radical deregulation of the financial industry (and with health care, the pockets of unregulated insurance markets). So, this is quite a pretty fix we're in: from what you're saying, an economy that has failed so many people is too weak to sustain regulations that would help ensure what it failed to provide unregulated!

Posted by: Trogdorprof | January 13, 2011 11:16 AM | Report abuse

Yeah, Ezra, given the relatively quantifiable nature of regulations' benefits which you articulate quite clearly and quite often, it would be helpful if you offered some rubric to help quantify this economic drag so we can do a proper cost-benefit. Obviously, each industry will ALWAYS be crying about how regulating their behavior is counterproductive to the common good, but they obviously have a conflict of interest!

You mention our weakened state as arguing against regulations, but as you well know, a huge reason why we are in this weakened state is because of radical deregulation of the financial industry (and with health care, the pockets of unregulated insurance markets). So, this is quite a pretty fix we're in: from what you're saying, an economy that has failed so many people is too weak to sustain regulations that would help ensure what it failed to provide unregulated!

Posted by: Trogdorprof | January 13, 2011 11:18 AM | Report abuse

I think the fundamental assumption here is faulty. There's a deadweight to regulation, but there's also a deadweight (as you point out) to uncertainty and the likelihood of litigation. And there's certainly a deadweight to the un-internalized costs of the things regulations are supposed to reign in. So you could make an argument that downturns are actually the best times to get new regulations in place, because the amount of activity that needs transitioning is minimized.

Posted by: paul314 | January 13, 2011 12:31 PM | Report abuse

One of the big problems with regulations is that by necessity they are too broad brush, being created for the entire country, effecting companies of all different sizes. In other words, some industrial regulation that makes perfect sense to ameliorate some huge problem created by a huge company, might end up creating a huge problem for some small company. There are always unintended consequences that can be significant. Look at the controversy over the 1099 regulations in the healthcare bill. The laudable goal is to raise additional revenue by preventing cheating, but the paperwork burden on businesses would cost a fortune.

Posted by: AuthorEditor | January 13, 2011 12:32 PM | Report abuse

Instead of a loyalty oath to the Constitution, Republicans (and Democrats) might consider adding a Review & Revise clause to legislation that requires regulatory statutes.

Not quite a sunset provision, but one that, after a trial period (two, three, four years?) mandates a review of goals and results to see if the two coincide.

If they don't, Congress can revise the rules if deemed plausible, or replace or revoke the law as necessary.

Part of the problem is nothing forces one Congress to review the regulations of a past Congress except gross unintended consequences and/or disaster.

Of course, this requires a certain amount of bipartisan imagination and co-operation. But it would give both sides an opportunity to repair problem regs or statutes rather than leaving them carved in stone.

Just a thought ...

Posted by: tomcammarata | January 13, 2011 1:44 PM | Report abuse

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