JAMES MADISON, 1788
There is more regulation with fewer benefits, and the whole process grows increasingly arbitrary and murky. The totality of federal regulations now comes to 202 volumes numbering 131,803 pages. This is 14 times greater than in 1950 and nearly four times greater than in 1965. There are 16 volumes of environmental regulations, 19 volumes of agricultural regulations and 2 volumes of employment regulations. As for diminishing social returns and rising capriciousness, consider the GM-Pena dispute.
The Department of Transportation actually has a specific safety standard for side-impact crashes. The GM trucks meet that standard. But Pena ruled that the location of the trucks’ fuel tanks still represented an “unreasonable” design defect, GM sold about 10 million of these trucks between 1973 and 1987 and estimates that 6.3 million are still on the road. No one knows the cost of altering the fuel tanks, but figures between $500 million and $1 billion are bandied about. DOT projects that perhaps 32 lives would be saved over the vehicles’ time on the road; that’s between $16 million and $31 million a life.
Every life is precious, but not every accident is avoidable. There are bad drivers and bad luck. Even if fixed fuel tanks eliminated some explosions, they couldn’t prevent other serious crash injuries. And even if the trucks were recalled, the extra good for society would be negligible. In the process, however, Pena has virtually abandoned objective safety standards. Almost any vehicle is potentially defective. as Automotive News editorialized, because “every vehicle is somewhat worse in some aspect (frontal crashes . . . rollovers) than some other vehicle.”
Pena’s approach – imposing large costs for tiny benefits based on skimpy evidence–is, unfortunately, more and more common. Economist John Mortall III of the Office of Management and Budget has estimated the effectiveness of 53 health and safety regulations issued between 1967 and 1991, based on how much it costs to prevent one premature death from, say, toxic emissions. Seventeen of these rules extended a life for less than $1 million in regulatory costs; all but five of these rules were issued before 1986. By contrast, 18 regulations extended a life for more than $25 million. Most have been issued since 1986.
The point is not that regulation is bad. Among other things, it has made the air cleaner, cars safer and financial markets more honest. But the huge regulatory enterprise now has so much inertia that it can do much harm. Economist Thomas Hopkins of the Rochester Institute of Technology estimates that regulations impose more than $500 billion in costs annually Although costs and benefits may crudely balance (both, however, are hard to quantify), the drift is unfavorable. As easy social gains are exhausted, rules focus on marginal problems.
One effect is to reduce people’s purchasing power through lower wages or higher prices. Cleaner air or safer cars aren’t free. When the social gains from regulation are large, these costs are worth bearing. But if the gains are puny, then the costs are punitive and perverse. The late political scientist Aaron Wildavsky pointed out that, as people get richer, they live healthier and safer lives because they can afford to buy healthier and safer products. Thus, by depressing people’s incomes, costly regulations may also harm their health.
And there’s also the problem posed by Madison: relations between government and the governed. The explosion of laws and regulations makes more Americans potential outlaws. “Regulations are so uncertain and subject to so much arbitrary interpretation that you don’t know when you’re [in violation],” says William Niskanen, editor of Regulation magazine. “We’re in trouble when people’s moral instincts don’t give them any guidance when they’re doing wrong,”
All this suggests caution in embracing new regulations or expanding old ones. Alas, this is yet to be. The regulatory juggernaut rolls on. The Environmental Protection Agency is trying to force oil refineries to blend ethanol (a corn-based alcohol) with gasoline. The Justice Department is compelling banks to expand loans to minority borrowers. The Occupational Safety and Health Administration proposes to ban smoking in most buildings, except in specially ventilated smoking areas. Justifications for these new adventures in regulation are weak.
Even some environmentalists see the ethanol rule as mostly a handout to farmers. One top administration official says that its bank program rests on “untested” legal principles. And is workplace smoking really a major problem? In one survey, workers were asked, “During the past two weeks, has anyone smoked in your immediate work area?” About 80 percent said no. In estimating the cancer cases its rule might prevent. OSHA assumes that a fifth of workers face uniform smoke exposure over a 45-year work career. Wait. Most people work less than 45 years, and few face uniform smoke exposure, which, on average, is dropping.
But why bother with details? The regulatory impulse transcends the activism of Clinton appointees. Regulation enables government to confer benefits and conduct crusades outside the budget. Costs are less visible than taxes, and the public relations are better. Every regulation advances some “good cause,” while opponents–banks, tobacco companies–often wear black hats. The illusion is that all problems can be solved. The reality is the “gradual and silent” expansion of government power.
