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Sunday, May 10, 2015

Proliferating Rules and Diminishing Returns

A good friend of mine forwarded a link to Charles Murray's piece in the WSJ yesterday titled "Regulation Run Amok- And How to Fight Back" (Rules Run Amok).  He knew that the article would pique my interest and he was right.  It is a preview of part of a larger work which is to be published shortly, a book called "By the People: Rebuilding Liberty Without Permission". I will need to read this. However, I suspect I may have some basic disagreements with the author.

The premise of the article is that the regulatory state is out of control, a contention that I wholeheartedly agree with. However, he goes on to suggest that the regulated have an inherent advantage over the regulators, given sheer numbers. He contends that the regulatory state is analogous to a regulatory Wizard of Oz, appearing all powerful but in reality being relatively weak, like the old man behind the curtain. I think he has got this all wrong.

The proliferation of rules backed up by the regulatory power of the state is a set up for use of arbitrary power, which can and will be wielded by the worst of humanity. This sort of environment will and does serve as a magnet for those with the worst of intentions, who see the potential for power and control. Yes,, there might not be sufficient resources to enforce rules effectively and consistently. However, that will not longer be the purpose of any of this. Rules will be enforced to yield the maximum of power to a different end; personal gain for those who have placed themselves in strategic positions to benefit from selective application of rules. This is a story as old as mankind.

In my opinion, the regulatory state run amok has its origins in acceptance of a set of assumptions which now goes increasingly unchallenged. We see challenges in how people fare in our world and we look for solutions. People are poor. People get sick. People treat other people poorly. People foul their environments. We have a host of tools to address these situations, either as individuals or as groups. We can use persuasion or we can use coercion to nudge or shove other people or groups to behave in such a way to improve their own lots or the lots of others.

Our current situation has grown out of the mistaken belief that when a problem arises, the best and increasingly only way to address any and all problems is via state politics. See a problem and pass a law. However, not all problems are amenable to legal redress. The law is a blunt instrument based upon the assumption that the best way to get people to do something is to hold a gun to their heads, using the coercive power of the state to force them to behave in particular ways.

Almost 20 years ago, Richard Epstein wrote an incredibly insightful book "Simple Rules for a Complex World". I have cited this book many times in this blog. It was perhaps the book which has influenced my thinking more than any other book I have ever read. What he presents in this book are a compelling set of arguments for why we should not default to increasingly complex rules, especially legal rules, to optimize a world dependent upon humans working together. The concepts are actually relatively simple. Not all problems require action, particularly legal action. Isolated bad outcomes are compatible with good systems. Not all additional legal interventions result in better outcomes.

Once one starts down the road where every single undesirable outcome serves as the basis of some additional intervention in the form of increasingly complex rules, it leads to a cascade of creation of new rules which create worse outcomes which then serves as the basis of even more rules. While ignoring the rules may seem like a workable solution, I am VERY skeptical that this will yield anything more than individual short term gains at the cost of the creation of contempt for all rules, both functional and non-functional. That sounds like a strategy to optimize one's circumstances immediately before the onset of chaos.

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