NCPA - National Center for Policy Analysis

Changing Government Regulation

July 2, 2002

Government regulations often impose unnecessary social costs, and reduce competitiveness and economic growth. Over the past few years, the public has begun to demand greater government efficiency -- in regulatory policy and other areas.

Experts suggest several steps for regulatory reformers within government bureaucracies.

  • Agencies that provide services to businesses and industries should not charge them more than the cost of providing the services.
  • Well-drafted laws can create incentives for private entrepreneurs to discover ways to achieve policy goals at lower costs.
  • If the government structured itself more like the purchasing departments of major manufacturing firms, the need for complex regulations would diminish.

However, observers warn that government restructuring can have the unintended effect of adding complexity to existing law. In fact, agencies can become hostage to special interest groups and reflect their views rather than the public interest. And they can concentrate on increasing perceived benefits rather improving cost effectiveness.

The traditional approach to government stresses top-down management that is increasingly obsolete in a world of rapid change and increased competition. Modern society is not well suited to traditional government, due to increasingly more complex economic and social institutions. Government, therefore should follow the private sector in moving towards a more decentralized management structure.

Source: Joseph V. Kennedy, "A Better Way to Regulate: What Government Can Learn from the Market," Policy Review, October-November 2001, Hoover Institution.

 

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