Using Price Theory to Reform Overregulated America

August 10, 2011

In 1787, there were four federal crimes.  Now there are over 4,000. The Code of Federal Regulations runs over 157,000 pages.  America is overlawyered and overregulated, and the economy is suffering for it, say Ryan Young and Jacqueline Otto of the Competitive Enterprise Institute.

Congressmen from both parties recognize this.  But reform eludes them.  Economics has just the tool for identifying such reforms: price theory.  Price theory says when something is cheap, it tends to be abundant.  But when that something becomes expensive, demand goes down.

  • Right now, the "price" of passing a law or regulation is relatively cheap, but the "price" of repealing a law is steep.
  • In an average year, Congress will pass about 200 bills and agencies will enact over 3,500 regulations, and each one is viewed as an accomplishment to be touted in front of cameras and microphones.
  • Repeal is much more politically expensive -- almost every program and regulation has its vocal defenders.

The rules of the game, then, need to be changed.  One way to do this: give states a veto power over federal rulemaking.  Indeed, William Howell, Speaker of the Virginia House of Delegates, and Randy Barnett​, a Georgetown University law professor, have proposed adding a repeal amendment to the Constitution.  This, Howell and Barnett argue, would give the states a recourse without having to go through federal court.

Short of that, the House and Senate could establish repeal committees.  These committees would be unable to pass laws and regulations, only to repeal them.  Another option is to add an automatic sunset provision to all new regulations -- meaning that they would expire after, say, five years unless specifically reauthorized by Congress.

If Congress and agencies want to pass more sweeping new regulations, the political price they pay should be in line with the economic price that we all pay for them, say Young and Otto.

Source: Ryan Young and Jacqueline Otto, "The Big Repeal," American Spectator, August 9, 2011.

For text:

http://spectator.org/archives/2011/08/09/the-big-repeal#

 

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