The American regulatory regime is generally broken. Because the regulatory state cannot adapt – only grow – we have seen an uncontrollable metastasis of millions of restrictive and ineffective regulations, which cost the economy an estimated 1.9 trillion dollars a year. The average state code contains over nine million words, and the Federal Register contains 175,000 pages of regulation.
Administrators create rules with limited input from those impacted by their rules and make their metrics for success deliberately opaque to those being regulated so that regulators can push political agendas without fear of recrimination. Meanwhile, special interests – especially large corporations, industry lobbying groups, and other powerful incumbents – are often able to their regulatory overseers at the expense of small businesses. Regulatory costs are 20% higher on average for small businesses compared with all firms.
Regulatory solutions must begin with transparency and cost-benefit enabled by advances in information technology. Good regulation is important; all of us want to keep hucksters, polluters, and cartels in line. But we need an adaptive regulatory system that quickly and easily scraps bad ideas and encourages innovation, particularly from entrepreneurs and small companies.
REGULATORY SANDBOX: A state’s future is determined by its ability to attract and retain new industries. Yet state regulations often prevent the introduction of new products or drive them to other states. Regulatory sandboxes allow state officers to approve and monitor new products at their introduction, instead of banning them outright. By complimenting ongoing regulatory reform efforts, this attracts new businesses and offers a pathway to cut outdated regulatory burdens.