The American regulatory regime is generally broken. It cannot adapt – only grow – resulting in 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, setting deliberately opaque metrics for success (if at all) 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 better able to navigate and a complex regulatory environment, all at the expense of small businesses. Regulatory costs are 20% higher on average for small businesses compared with all firms.
Regulatory solutions should focus on the process for creating and evaluating regulations in the first place. These procedural reforms begin with transparency and cost-benefit analysis 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.
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