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Home Publications Blogs Beat the Press What Does It Mean to Put a Limit on the Cost of Regulations?

What Does It Mean to Put a Limit on the Cost of Regulations?

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Tuesday, 28 August 2012 04:37

A NYT article on Governor Romney's approach to the economy discussed his attitude toward regulation. It tells readers that Romney:

"stopped talking about the benefits of regulation, focusing instead on its costs. His campaign platform includes proposals to curtail rule making, like capping the total cost of regulation at the current level, without adjusting for inflation."

What does a limit on the cost of regulation mean? Suppose that I have more oil than Saudi Arabia underneath my backyard, but recovering it requires an incredibly hazardous chemical that will cause the death of everyone in a 10-mile radius. (I live within DC, that's a lot of people.)

Does Governor Romney give me the green light to wipe out the DC metro area because the regulation prohibiting drilling would be very costly? That would seem to be the implication of an approach to regulation that only looks at the cost.

This would be an absurd approach to regulation. If that is really what Romney is proposing then the NYT should feature a front page article on his crazy views on regulation. Voters should be made aware of how wildly out of line Romney is with current practices.

Alternatively, if this is not what Romney is saying, then the NYT should get his approach to regulation right.

Comments (6)Add Comment
...
written by Mark Jamison, August 28, 2012 6:05
Regulations are a necessary and proper part of a free market economy. They reduce externalities, think environmental regulations, and they insure that markets are transparent and fully informed, think consumer protection regulations.
While the Right currently demonizes regulations, they actually often like regulations, at least the kind that tilt markets in their direction. What the responsible Right, and yes there used to be such a thing, often raised was the problems inherent with the regulatory process. Those are problems of both human nature and the nature of bureaucracies. There is a tendency to make regulations that are obtuse and also an unfortunate habit of failing to review, correct, and replace regulations that has become either outdated or transcended by new development.
Designing regulations and regulatory processes that are more efficient and perhaps less costly to comply with is a worthy goal. Unfortunately what Mr. Romney suggests is that the thinking that led Ford to make explodable Pintos, it's cheaper to settle the lawsuits than fix the problem, is a reasonable calculation. Streamlining regulation and regulatory compliance in ways that support effective regulation is much different than doing a cost benefit analysis on regulation versus environmental degradation or human life.
Romney has it completely wrong but that doesn't relieve progressives of examining and addressing the problems inherent in any regulatory regime.
Cost of Not Regulating: 25 Million Unemployed or Underemployed, 1 Trillion Output Gap
written by Last Mover, August 28, 2012 7:35
As a private equity parasite who specialized in regulatory loopholes to create market failure through privatized gains and socialized losses that destroyed jobs while increasing wealth concentration, Romney is well aware of the costs and benefits of regulating or not regulating, especially in regard to the financial industry.

If Romney was concerned about the "cost" of regulation then by definition he would be concerned about the "cost" of not regulating as well, since the two are inseparable. The "cost" of one is defined as the "lost benefit" of the other. For example the "cost" of not regulating heavy traffic at an intersection with red lights is the lost benefit of fewer accidents with red lights.

Likewise the cost of not regulating the financial industry was a primary cause of the deep recession, driven by a private shadow banking industry using heavily leveraged ratios for capital requirements on credit for house loans as slim as 40:1 that enabled the housing bubble.

If anyone understood how this ratio of extreme risk could be avoided and shifted to others through privatized gains and socialized gains in a too-big-to-fail industry, it was Romney.

Now Romney wants you to forget how we got here due to the absence of specific critical regulations as he focuses on the "cost" of silly miniscule regulations from the supply side at the margin going forward, as if removing them would somehow unleash an avalanche of spending and jobs in the private sector large enough to erase the trillion dollar output gap and achieve full employment.

And never mind there's no demand anyway to absorb whatever they're selling from the phony supply side boost, thanks to Romney and his pals who were worried about the "cost" of regulation before the deep recession, just as they claim now.
A Journalistic Feat
written by Ron Alley, August 28, 2012 8:37
We should congratulate Mr. Appelbaum on his journalistic feat. He managed to write an article about Mr. Romney's "evolving" views with using the terms chameleon, flip-flop, wishy-washy or weak to describe Mr. Romney.
...
written by skeptonomist, August 28, 2012 9:25
Real environmental costs are frequently hidden, and sometimes completely unseen. Who foresaw even 40 years ago the potential costs of carbon dioxide in the atmosphere? In the 19th century and well into the 20th environmental costs were ignored almost completely, but as population increases it will be increasingly necessary to account for them. The conservative approach - the way it was done in the past is best - is totally inappropriate, though it's what industries and Republicans want.
...
written by andrew clearfield, August 28, 2012 9:38
yet again I think you've deliberately misinterpreted the Times' statement. What they we really meant was: "crooked people of the world, send us your press releases, we will turn them into 'news' reports without altering a thing"
inherent problems
written by David, August 28, 2012 10:50
...
written by Mark Jamison, August 28, 2012 5:05
... but that doesn't relieve progressives of examining and addressing the problems inherent in any regulatory regime.

Mark, what is your point in adding this last remark? Is there any evidence that progressives have not realistically examined AND addressed those problems? If anything, of late, regulations get written by the monied class, and then we elect a Democrat to try to straighten out the profit-centered bias these regulations introduce as best we can while working in conjunction with forces that do not care one whit about externalities, but complain mightily if their clumsy oafish stewardship causes progressives to work to impose limitations on their recklessness. These very people are the ones who lobby to be the regulators and contribute hundreds of millions in toto to election campaigns. So I fail to see where progressives have failed in this duty other than losing fights against more powerful interests.

Cost of Not Regulating: 25 Million Unemployed or Underemployed, 1 Trillion Output Gap
written by Last Mover, August 28, 2012 6:35

...

Likewise the cost of not regulating the financial industry was a primary cause of the deep recession, driven by a private shadow banking industry using heavily leveraged ratios for capital requirements on credit for house loans as slim as 40:1 that enabled the housing bubble. ...


The term "market-based credit system" (see http://ideas.repec.org/a/aea/a...07-12.html) I think is preferable to "private shadow banking industry", since the latter seems to engage reflex opposition to an area that obviously needs regulation (but with a Republican House, such measures have been stopped for now). A part of the market that blew a $1 trillion hole into the economy has not been grabbed by the neck and straightened out: that's crazy talk!

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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