There Is No 'Good Regulation'
For an unapologetic capitalist, it's particularly frustrating when an allegedly pro-capitalist politician lacks the intellectual ammunition to adequately defend the free market. Concessions to statist opponents provide the illusion that statists have the moral upper hand. This is especially self-defeating when a politician -- a successful capitalist in his private life who should recognize the dangers of statist principles -- is reduced to merely quibbling over good and bad applications of an inherently pernicious principle.
Mitt Romney was just such a politician in the last election.
While arguing against the hyper-regulation embodied in Obamacare and Dodd-Frank during the first presidential debate, Romney simultaneously conceded: "I mean, you have to have regulations so that you can have an economy work. Every free economy has good regulation."
Notice that no indication of what constitutes "good regulation" is given, nor is any moral or political justification provided. It is simply asserted. Despite the fact that regulation has harmful consequences for business, as Romney rightly observed in his answer, he still planted his feet firmly in the political middle ground of "good regulation". Romney even went one step further and declared regulations necessary for a "free economy."
Let's first consider this concession to central planning with a thought experiment.
Imagine that before you wrote a letter, an internet post, a book, gave a speech, or any other form of exercising your right to free speech, you first had to run the content by a bevy of government bureaucracies.
The Department of Defamation or the Bureau of Inciting Violence would examine the content to cull out those particular unprotected uses of speech. Or worse, the government would screen out what should be protected speech under the 1st Amendment, using such agencies as the National Institute of Hateful and Offensive Speech and the Obscenity Administration.
At the cost of your time and money, the government would be playing prosecutor before you ever published a word.
Any serious defender of free speech would rebel at such a prospect. SCOTUS has consistently held that prior restraints on free speech are the "essence of censorship" and generally void as a matter of law (see, e.g., Near v. Minnesota).
To hold prior restraints as valid is an inversion of the basic American principle of innocent until proven guilty. The government would be holding the speaker as guilty, and the speaker would bear the burden of proving himself innocent -- before even a word was spoken or published.
This 1st Amendment example broadly captures the essence of objective law vs. regulation; namely, the protection of one's freedom to act vs. the necessity of gaining the government's permission before one is allowed to act.
Economic regulation is directly analogous to prior restraints on free speech. Just as a preliminary injunction on free speech holds one guilty before a word has been spoken, economic regulations constitute prior restraints on commerce whereby the businessman must first prove his innocence before he is allowed to engage in commerce.
For some reason, prior restraints on right to property are not only not given parallel treatment, but are considered necessary for a "free economy" -- by an alleged defender of the free market no less. Since the Left despises private property and thinks profit is made by poisoning and harming customers, businessmen are treated as guilty until they prove themselves innocent before a phalanx of government bureaucracies, such as the FDA, EPA, SEC, OSHA, ATF, and on and on.
Yet, nobody thinks to ask why the marketplace for ideas has not collapsed without concomitant bureaucracies strangling free speech with prior restraints?
If a customer is negligently or intentionally harmed by the actions of a business, criminal and civil liability exists under the law -- just as it does for unprotected speech, such as defamation and inciting violence. However, while prior restraints on free speech are regarded as tantamount to censorship under the 1st and 14th Amendments, no consideration is given to the oppression prior restraints have on the use and disposition of one's property, even though the right to property is similarly protected under the 5th and 14th Amendments.
Much is made, quite rightly, of the "chilling effects" prior restraints have on free speech and the marketplace for ideas, but nary a second thought is given to the "chilling effects" economic regulations have on the marketplace for goods and services.
According to the Small Business Administration, the total cost of regulations in 2008 was $1.75 trillion dollars. In other words, over 13% of the U.S. economy is chewed up just so services can be delivered, or just to get goods on the shelves.
Advocates of economic regulation will claim that regulation is a necessary cost of doing business and will reduce the costs of harm created by businesses. Let's dig a little deeper into that claim.
In the case of free speech, one of the "chilling effects" is that one may not exercise his right due to the prohibitive legal costs in having to prove his innocence. Indeed, the same is true for business development and innovation. For instance, consider that the average cost of getting a new drug past the FDA is $1.3 billion dollars, and can be as much as $11 billion dollars.
How many live-saving and life-enhancing drugs are never developed because of the prohibitive cost of regulation? How many other products are never produced because of the capital wasted in complying with government edicts, which would otherwise be put to productive enterprises? The number is inestimable. And this is just one product market.
Classical economist Frederic Bastiat referred to this phenomenon as "the seen, and the unseen". The "seen" being the allegedly prevented harms, the "unseen" being the development of new life-enhancing technologies that were never undertaken because of the prohibitive cost of regulation.
Just as a prior restraint on speech may "freeze" information for a period of time and render that information moot -- such as uncovering a crime that is about to happen -- so too does economic regulation "freeze" the benefits of new products. In this study, it was found that delays in FDA approval of drugs approved elsewhere in the world resulted in over 200,000 deaths over a thirty year period. Again, one product market.
What of the claim that regulation keeps us "safe"? Not only do FDA-approved drugs kill 106,000 people per year, but the increased FDA regulations in 1962 increased the number of deaths -- due to increased delays and expenditures -- by a 4:1 margin over the allegedly live-saving benefits of the new regulations, according to this study.
This last study brings up an important question that advocates of regulation need to answer: if regulation allegedly prevents harm, then why do harms such as death increase with increasing regulation?
While the U.S. has never had a completely unregulated free market, one cannot deny that regulation retards economic growth -- within an industry, across industries, or across countries. Makes sense, as individual producers and consumers are best able to judge what is in their mutual self-interests, not government bureaucrats in a distant capital.
But this is not primarily a cost/benefit analysis. The essential issue is an individual's moral and constitutionally-protected right to the possession, use, and disposal of property. The goal of statists is to condition individuals to placidly accept paying tribute to the government for the privilege of exercising their inalienable rights.
When an allegedly pro-capitalist presidential candidate concedes that such an assault on private property is necessary for a "free economy", you know the statists have achieved their goal.
Attacks on free speech are more transparent, but once sundry statists condition individuals to beg for government permission, censorship of free speech is a fait accompli -- set up by first destroying the right to property.