After considering 16,000 years of humanity, Stanford University historian Ian Morris concludes in Why the West Rules - For Now that the most advanced and influential society is that which is best at "getting things done."
To quantify Eastern and Western societies' ability to get things done over 16,000 years, Morris (originally trained as an archaeologist) has designed an "index of social development." It is based on four metrics: per capita consumption of energy, organizational capacity, the ability to process/communicate information, and the ability to wage war.
This thoughtful way of looking at history raises the issue of government regulation and "the ability to get things done." I was reminded of this when puzzling over why China, inventor of the compass, paper, printing, gunpowder, and an early exploiter of coal and producer of iron, failed to realize its technological potential. Instead, it discouraged innovation and eventually succumbed to European domination.
Much of the reason for China's failure can probably be found in the work of famed sinologist, Etienne Balazs commenting on the Ming and later dynasties. As quoted by David Landes in his The Wealth and Poverty of Nations:
Chinese society was highly totalitarian . . . no private initiative, no expression of public life escapes official control . . . there is a monopoly of education, jealously guarded . . . there are clothing regulations, a regulation of public and private construction . . . the providential State watches minutely over every step of its subjects, from cradle to grave. It is a regime of endless paperwork and harassment.
The ingenuity and inventiveness of the Chinese . . . would no doubt have enriched China further and probably brought it to the threshold of modern industry, had it not been for this stiffling state control. It is the State that kills technological progress in China.
Now, consider the trend of regulation emanating out of Washington, DC over the past decade or so, as depicted by a recent graphic in The Wall Street Journal.
This chart clearly shows that the pipeline of upcoming Federal regulations, each of which will impose a cost on the economy of $100 million or more, has soared over the past five years. At the same time, Washington University's Center for the Study of American Business estimates that the cost of administering existing regulations will be $57 billion in 2012 while employing over 290,000 people. Finally, there are the costs of investment-dampening uncertainty when firms are unsure what regulations are likely to be imposed.
Smog and Highway Signs. Consider the Clean Air Act administered by the Environmental Protection Agency. The Supreme Court has upheld EPA's contention that it should not consider costs when imposing new regulations. The Agency is presently finalizing rules that will probably shut down a substantial number of coal-fired generating plants in the midwest and southern states before the end of their useful lives. The estimated all-in industry costs could exceed $80 billion (passed on to customers, of course) according to one research study.
However, when the Obama Administration's proposal to reduce ground-level ozone and the resulting smog was found to cost up to $90 billion annually, the President finally backed off, citing "the importance of reducing regulatory burdens and regulatory uncertainty." Well, at least $90 billion catches the President's eye.
One other very small victory for regulation skeptics: in August, the Department of Transportation eliminated 46 deadlines for local communities around the country to replace existing highway signs with DOT-mandated standardized replacements. (It kept in place an additional twelve).
DOT's reasoning? "Local and state transportation agencies are best-equipped to determine when they need to replace signs and other items in the course of their daily work.” But apparently they can't be trusted to design the eventual replacements.
There clearly is a place for sensible, cost-effective regulation in sectors such as processed food and pharmeceuticals, although frequently law suits for damages may be more effective than regulation in heading off egregious behavior. (Note that British Petroleum has paid out to date $7.5 billion in claims arising from its 2010 Deepwater Horizon accident and oil spill in the Gulf of Mexico.)
Reduce the Burden. While the regulatory burden may not currently approach that of the late Ming Dynasty, it is time to act. The White House and Congress should be spending as much time and political capital on "reducing the regulatory burden and regulatory uncertainty" - as the President puts it - as on spending and taxes.
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