Who cares about regulation?
The big problem with regulation isn’t that it’s inefficient. It’s that it’s boring. Most regular people don’t notice—or care about—how regulations impact daily life.
Partly, this is economists’ fault. Many of us have forgotten that ideas—just like goods in the marketplace—need marketing. With just a little improved story-telling, economists can make a big difference in helping people see why regulation matters in practical, concrete terms.
To pick an easy one: Once upon a time, air travel was an expensive luxury. Then in 1978, airlines got deregulated and everything changed. Ticket prices fell 40 percent. Suddenly, we witnessed something incredible: for the first time, low- and middle-income Americans could afford to see the world—something historically only available to the rich.
Sure it leaves out a lot. But that’s what make it a powerful story. It contains no math. It doesn’t use the word “efficiency”. And it helps people who don’t care about economics see why regulation matters.
There are lots of economists who tell these stories well. Within the field of regulatory economics, three of the best are Randall Kroszner, Alfred Khan, and Bruce Yandle.
What makes them good? Understanding regulation, like most hard problems in economics, takes experience as well as theory. The world of regulation is a tangled thicket of bureaucrats, lobbyists, and public-interest moralizers. These economists did time in Washington, working in senior policy positions next to the actual people who write regulations, and came back alive—tempered by the experience and full of insights.
Some samples:
From Bruce Yandle—formerly of the President’s Council on Wage and Price Stability in the 1970s—see his famous essay “Bootleggers and Baptists” (PDF) from the May 1983 issue of Regulation magazine.
From Alfred Kahn—the so-called “father of airline deregulation” during the Carter administration—see his entry on “airline deregulation” from the Concise Encyclopedia of Economics.
And from Randall Kroszner—formerly of President Bush’s Council of Economic Advisors—check out this 2003 interview with the Federal Reserve Bank of Richmond’s Region Focus magazine.
From Kroszner on the incentive to regulate:
When you spend much of your career working in a certain industry, you begin to see more nuances … That may be why you find so many people who, in general, are free-market advocates but when it comes to their industry, they are willing to say we need this regulation or barrier.
In some cases they may be right—there may, in fact, be a market failure. But the real question is: Should the government take action? I don’t believe that markets work perfectly all the time. Virtually all markets are imperfect in some way. But what is the relevant alternative? The alternative can be much, much worse.
I am a great believer in the power and importance of free markets for advancing human good. But it’s not because those markets work perfectly—it’s because I can’t think of a better alternative.
Sure, deregulation makes markets more efficient. But is that something that resonates with most people? Probably not.
The far more interesting story is that better markets mean life’s basics get done cheaply. And that means more time for the good stuff in life, like leisure, self-development, creativity and—of course—fun.
Posted by Andrew on Thursday May 27, 2004 | Feedback?
