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The costs of regulation are hard to see. With no dollars changing hands, their toll is measured in wasted time, prospective entrepreneurs who are dissuaded from doing business, and confused citizens whose days are ruined by misfiled paperwork.
This is a classic problem, famously laid out long ago by Frédéric Bastiat, in his essay What Is Seen and What Is Not Seen. These unseen costs accrue, making the business climate unfavorable to entrepreneurs and giving leeway for the government to arbitrarily administer regulated businesses.
The more difficult it is to navigate the bureaucracy and to apply to entitlement programs, the more time is wasted, especially for the vulnerable people who have little time to waste. The question is: what can be done?
Since no individual rule is particularly costly, many rules have to be repealed in order to make a difference. But this is difficult since many rules are put in place by interested constituencies. This concept of concentrated benefits and diffuse costs is a hallmark of regulatory economics.
How anyone who isn’t a specialist can understand even a portion of the Maryland Code baffles me.
I’ve explored regulatory policy’s many aspects in this space many times in the past. This interest led to my just-released study for the Maryland Public Policy Institute. The study lays out a framework for comprehensive regulatory reform in a state that perennially ranks as one of the most over-regulated places in the country.
In reading a portion of the many thousands of regulations on the books, I was struck by how inconsistent they are.
A page copied for a freedom of information request to one department could cost a different amount than in another department. Legal free speech on property managed by one agency would be illegal on property managed by a different part of the state bureaucracy. Subsidies for economic development and environmental remediation are spread into many different departments.
How anyone who isn’t a specialist can understand even a portion of the Maryland Code baffles me.
Combating regulatory proliferation is not easy, but fixing it simply takes a degree of political willpower. The fields where there’s the most to gain, like fixing land use regulation and liberalizing the state’s occupational licensing laws, will see stiff opposition from powerful entrenched interest groups.
But doing so is within the realm of possibility. The Cato Institute‘s Brink Lindsey called such issues “low hanging fruit guarded by dragons.” Reform is clearly needed; the issues revolve around making changes in a way least likely to allow the protected groups to derail it.
[adrotate group=”7″]One approach to liberalize occupational licensing would be to create a bipartisan panel that would craft suggestions for reform and put them before the legislature for a simple vote. By taking the amendment process off the table, it would help ensure that protected groups can’t carve their areas of operation out of the reform.
A major problem for small businesses can be onerous rules for land use and long waiting periods to obtain business permits. To reform this process, the state could pilot a new special economic zone in which local officials are empowered to serve as a unified body that issues permits. A similar body in place in the town of Devens, Massachusetts, has shown that permit times can be dramatically accelerated, lowering the cost in time and money for prospective entrepreneurs to open a business.
Economic development programs can also seriously complicate work with the state government. In many states, Maryland included, there are many programs that seek to address problems that are far too narrow. For instance, there are dozens of housing programs, each with its own bureaucracy and specific goals even though they all have the same broad goal of improving the state’s economic climate. But because there are so many programs and only a few know how to best take advantage of them, they end up being subsidies to knowledgeable, politically-connected individuals and businesses. Subsidies, however, should be directed toward broad-based programs to help the disadvantaged.
Regulatory policy is a world of unseen costs and dubious benefits. There is much that can be done to make the regulatory environments in the 50 states less harmful to prospective job-creators. The changes need to begin somewhere. Here’s one place to start.
