Is Govt Over-Regulated?

I heard a talk recently by Jal Mehta on his new book Allure of Order, where he says how he’d reform US (pre-college) schools. He wants the US to do like Finland where schools are great: select smarter folks as teachers, train them more, and give them more respect, time to prepare, and freedom to structure classes. When I asked him directly how he would pay for all this, he said to cut administration.

It seemed to me that Mehtra’s main complaint is that US teachers are over-regulated. And it occurs to me that this is a common complaint about US government. For example, we hear that US police are over-constrained by rules. And a similar problem would befall US single player health plans — while the UK National Health Service has lots of discretion that is mostly accepted by the UK public, US versions would instead be regulated in great detail.

If you think that private actors in the US tend to be over-regulated, you should wonder why. Perhaps it is because government regulators just act spitefully toward non-government actors, but more plausible are over-confidence and do-something biases. When problems occur, people want something done, and more regulations are something to do. Voters and regulators both overestimate their ability to anticipate future problems and what would help them.

But if this is why US private actors are over-regulated, then US government actors should be over-regulated too. For example, people should see things go wrong in schools, and so add more rules to “do something,” rules that assume too much about what rules can do, and that require too many administrators to implement.

This view suggests that being pro- or anti-regulation isn’t the same as being pro- or anti-government, and it suggests a possible left-right deal: reduce regulation in both private and public sectors. Have more trust in private competition to deal with the problems we leave to the private sphere, and in smart well-trained civil servants to deal with the problems we leave to the public sphere. And have less trust in lawyers, judges and rule-specialists of all sorts to fix our problems with more rules.

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  • http://entitledtoanopinion.wordpress.com TGGP

    How much regulation is there of the “kill list”?

    Also, a relevant previous post on police. Not that I am in complete disagreement with the late William Stuntz’ “The Collapse of American Criminal Justice”. But rather than treating regulation as a one-dimensional thing, his thesis is more about misregulation. Of course regulation must play a strong role for government agencies, as James Q. Wilson explained in “Bureaucracy” they can’t rely on profit & loss signals.

  • STINKY

    Are you advocating for less regulation, or better regulation?

    I don’t self-identify as a cynical, misanthropic individual, but I have friends on the far-left end of the sociopolitical spectrum, and friends on the far-right end, and the one point which they both seem to be in agreement on is that the “problem” (in an extremely broad, non-specific sense of the word) isn’t bad people; the problem is bad systems of governance that turn otherwise good people into bad people (“bad” meaning lazy and freeloading, or greedy and predatory, depending on whether you’re into libertarianism or socialism, respectively)

    I’ve never killed anybody, and I have no interest in ever doing so. If the law which prohibited murder were to go away tomorrow, I would be no more interested in killing anybody then as I would be now. The law isn’t there to prevent people like me from killing anyone, it’s there in an effort to contain and punish those that would.

    There needs to be some degree of regulation in society, because the capacity for wickedness exists in the heart of every human being that has ever lived. The idea that we should get out of everybody’s way and let them do as they will seems to imply that we will be happy to celebrate and benefit from the efforts of good people, and if bad people do bad things then, well, whatever.

    • anon

      The fact that you’ve managed to negotiate social life and pursue your interests without ever seriously contemplating killing anyone is cause for celebrating civilization. I doubt, though, that the distinction is as simple as “good people” and “bad people”. Murder rates–diachronically within a single population, mind you–are too highly variable to be explained in terms of good guys and bad guys; something like Nesbitt and Cohen’s honor/law model would seem to be a better fit.

      The immediate corollary is that most of us are probably not unusually resistant to the temptation of violence– we just happen to inhabit a low-violence equilibrium where a centralized state can manage most of the conflict resolution that otherwise gets resolved via murder. (About 90% of all murders constitute “self-help justice” from the perspective of the murderer).

      So, I’d say the law really is there to prevent you and me from murdering. Or, at least, to give us a credible pre-commitment not to murder, which can be just as valuable.

      I hope you never get to confirm this personally, but if a loved one of yours becomes a victim of a profound crime, I suggest you might find that the thought of life in prison is the only persuasive argument against taking justice into your own hands. And that you might be surprised at how resistant to persuasion you might find yourself even then. It wasn’t until I became personally involved in such a thing that it occurred to me how the purpose of the criminal justice system might be less to satisfy abstract requirements of justice than to prevent the victim’s kinsmen, e.g. me, from starting a blood feud.

  • JW Ogden

    I think that it is an interesting idea and has merit but as far as schooling based on this and much research like it, I believe that our schools are probably as good as those in Finland. Further I like the idea of direct instruction were the teacher is even more constrained. What local knowledge does the average teacher have that makes them do better less constrained?

    IMHO one way to allow less regulation without letting the bureaucrats run amok might be to un-bundle the functions of Government. We would elect a benevolence executive to run SS, SNAP, Food stamps etc. He would hire his employees. Before the election he would announce the level of taxation to pay for what he does. This might allow us not regulate the details of his organization because we would could focus on the cost and results. We could eliminate all the laws having to do with benevolence. We could do the same with other areas like defence or education.

    • IMASBA

      “I believe that our schools are probably as good as those in Finland.”

      On average perhaps, but the problems everyone seems to be overlooking in the US is that a) US schools are funded (very) locally, screwing over kids in poor neighborhoods and b) Americans like to keep things privatized but paradoxically US schools spend the most on extra-curricular activities, this implies there is less budget left for teaching.

      Another thing, when it comes to teachers the US is way too polarized: American teachers (in most states) are NOT underpaid compared to their European colleagues, including the Finns and are American teachers’ unions REALLY so much worse than those of other countries?

      • Jonathan Graehl

        I heard half of U.S. school funding comes from local taxes. Though in poorer areas the property for the school is cheaper, it’s probably usually a disadvantage on net – I’m with you in suspecting that poor neighborhood schools are bad not only because of their bad students.

    • Damien S.

      Uh, the graph in your own link shows Finland at the top by a decent margin, well ahead of the US, at least in PISA scores. Finland does worse in immigrant gap, which is surprising given one of the claims made for Finland in last year’s articles.

  • IMASBA

    When you outlaw stealing the thieves complain of over regulation…

    There will always be people complaining about regulation, especially in the United States and these people happen to be more vocal than the ones who are content. You could cut 99% of regulations and people would still be complaining because the nanny state interferes with their god goven right to dump poisonous chemicals in the river, meanwhile they fight tooth and nail to maintain regulation that says two consenting adults of the same sex cannot marry each other.

    There is indeed bias in people trying to fix difficult-to-prevent events with regulation, but there is also a lot of bias in assuming that people who complain about over regulation actually know what they are talking about, aren’t just complaining to complain, represent the majority and aren’t just looking out for their own interests at the expense of others.

    • Guest

      You’re pretty clueless.

    • sleepmon

      Wrong. There are far more entities that are positioned to gain from pursuing self-interested regulation in the name of the public good, than those who benefit from general deregulation. It’s a basic insight of public choice theory, and a pattern that shows up again and again. The benefits of general deregulation are dispersed, the benefits of a particular regulation are concentrated in one industry, which provides incentives for them to lobby. Look at the latest proposed regulations for E-cigarettes. There is no reason to think they cause any major harm, all the ingredients are non-toxic. But the FDA and Big Tobacco both want to ban them, so that they can do research that “finds” ill effects, so they can tax and regulate them. The average person who just wants to smoke E-cigs cannot do much about this.

      • IMASBA

        “the benefits of a particular regulation are concentrated in one industry”

        The benefits of CHANGING (either insituting new regulation or removing existing regulation) particular regulation you mean. But you have to realize how you sound to non-Americans: the idea that the FDA (whose regulations are mostly a joke compared to EU regulations and tend to support the interests of megacorporations more strongly) is in a conspiracy, using false science, to increase taxes (that won’t go to the FDA) is a bit out there for most of us. I often wonder how people can believe the government cannot even build a proper bridge but that it is disciplined, organized and unified enough to pull-off inter-departmental conspiracies.

      • Christian Kleineidam

        If you want to look at the incentives of an agency think about how a person can make a career in the organisation.

        An FDA official could make a career in the FDA by successfully putting E-cigarettes under regulations.

        As a result it’s plausible that the FDA pushes to regulates them.

        You can’t make a career in the FDA by standing up to big business and as a result that doesn’t get regulated as strongly.

    • Damien S.

      Thing is, you’re totally right, *and* there are lots of bad regulations out there. Yglesias made the point that the US is simultaneously over and under regulated; more precisely, it depends where you look. There’s not enough pollution laws and too many zoning laws. There are legitimate regulations to complain about, and there are people who object to anything preventing them from screwing over the public.

  • david3368

    You mention the NHS, but the political bargain there is that the government writes a cheque and then the NHS exercises discretion how to spend it. Crucially, in return the NHS doesn’t then use its massive oversight-free influence to lobby for a larger cheque! The same model is used for the BBC, which is also another statutory board.

    For all this to be a stable equilibrium, the amount of revenue to be allocated to these agencies has to be a third rail. If the amount is regularly under siege, then these agencies will find themselves obliged to mobilize to defend it, and then it will lose its apolitical position and come under complicated oversight.

    • Damien S.

      The NHS doesn’t lobby very well, then; overall the UK spends 80% of what most rich countries do on health care per capita.

  • Eliezer Yudkowsky

    Strongly related: “The Death of Common Sense”. Basic thesis, our distrust of bureaucrats’ individual judgment creates rules so complex that they become even less accountable since they can say they were following the rules, while screwing up everything due to complexity. http://www.amazon.com/The-Death-Common-Sense-Suffocating/dp/0812982746

    Solution: More discretion, fewer rules, more individual judgment, localized to clearly identified individuals who can transparently be held accountable for it. (Yes, we don’t trust the judgment of bureaucrats but the byzantine rules solution is even *worse*.)

    • IMASBA

      No system is perfect, people have to agree with the laws and practices, not only logically but also culturally. A system that works well in one country may not work as well in another country (the differences between Northern and Southern Europe illustrate this nicely). The US has the problem of a deeply ingrained mistrust of anything reeking of government and that hinders certain efforts and may indeed lead to byzantine laws to try to control the evil bureaucrats.

  • http://juridicalcoherence.blogspot.com/ Stephen Diamond

    The whole discussion of “regulation” in the abstract is silly. Of course regulation favors some interest or another: the question is, whose interests do you support? Opposing or favoring “regulation” is a sham; the “free market” is merely a particular form of regulation that benefits property owners and employers.

    A “deal” between left and right to decrease regulation across the board? Give both the state and private enterprise freedom to run rampant, subject only to the market and the discretion of “responsible” officials? Ask the ghosts of the dead Chilean leftists how good a deal that is, for it sounds exactly like the Pinochet regime. It’s called right-wing authoritarianism, and it’s entirely unsurprising that both “libertarian” Hanson and ultra-elitist Yudkowsky both support it.

    • Damien S.

      Do CEOs have too much or too little regulation, relative to the interests of their shareholders? My impression is too little. Or at any rate, too little accountability, which problem could be attacked via more regulations or more democratic oversight. (E.g. shareholders, the alleged owners, generally don’t even get a vote on CEO pay; a Swiss initiative aimed to change that.)

      • http://juridicalcoherence.blogspot.com/ Stephen Diamond

        CEOs haven’t expropriated the owners. What you’re saying is that there’s a “market failure” which benefits CEOs over shareholders. This seems like one area where the market is unlikely to fail, at least for the large holders. If there is a market failure here, it would be interesting to see the analysis.

        I don’t know that it would benefit shareholders to vote on the salary of CEOs. (Would it benefit citizens to vote on the POTUS’s salary?)

      • http://entitledtoanopinion.wordpress.com TGGP

        Partly due to Hanson’s blogging on corporate governance, I thought CEOs were capturing their boards and overpaid (particularly those of the largest firms). But Greg Mankiw (hat-tip to Tim Worstall) brought up a comparison to privately held firms that made me less confident of that.

      • Damien S.

        POTUS isn’t paid nearly as much as CEOs and faces a much higher risk of being killed in office. Situations doesn’t seem nearly as abusive. Being able to vote on other issues, like going to war or suspension of civil liberties, might well be beneficial.

      • IMASBA

        “nobody knows for sure if CEOs are paid “too much” ”

        There aren’t enough hours in a day to “earn” as much as those CEOs are getting, not even if Stephen Hawking was your dumber brother. As Damien pointed out the POTUS makes (far) less than the average CEO, while the POTUS is in more danger, has more responsibilities and runs a larger, more complex organization, in fact the average American CEO makes more than the leaders of the G20 combined. Furthermore there are large differences between nations: Japanese and German CEOs make significantly less than American CEOs but their companies still kick ass. As to why CEO pay gets to be so high, there are theories about that, I’d say it’s part corruption (via those perfect triangles), part tournament theory and part misconception (stock went up 20% after you became CEO therefore you made the company 20% richer, and similar BS ways of thinking).

      • Damien S.

        Yeah, did GM lose to Toyota because its CEO wasn’t being paid enough?

        I admit I’m socialist enough that I have trouble justifying why anyone should get to own more than $400 million, say. Especially in terms of incentives. A full-time working might get $40,000. Is someone getting $400,000 working 10x harder? $4 million, 100x harder? Gets to be not possible.

        Granted, tournament theory (I think) says the CEO prize is actually motivating the underlings, but I’m still not sure it works.

      • http://juridicalcoherence.blogspot.com/ Stephen Diamond

        There aren’t enough hours in a day to “earn” as much as those CEOs are getting, not even if Stephen Hawking was your dumber brother.

        A fair point but not directly relevant. I will more than agree with you that a CEO doesn’t create these superhuman use-values (to use Marx’s term). But that doesn’t mean choice of CEO isn’t responsible for a share of profit larger than the CEO’s salary! The CEO’s worth to a corporation isn’t based primarily (if at all) on his creation of use values. The status his name lends the corporation, the connections he has cultivated, these are his contribution. (Still, the spike in salaries is suspect, and I think that’s what needs to be explained, as I don’t think the hypotheses you mention succeed in explaining.)

        Is it a market failure? I think the concept itself is ambiguous. Is market failure relative to use values? Then you’re doing moral philosophy rather than economics. Is it relative to profitability? Then it serves as no moral criterion; but that would seem the better usage. Whether corporations would be more profitable if CEO salaries were lower seems an open question, although I’m inclined to see a bubble: but this has no adverse relevance to my socialist sympathies.

    • IMASBA

      “Opposing or favoring “regulation” is a sham; the “free market” is merely a particular form of regulation that benefits property owners and employers.”

      Blasphemy!

      “I don’t know that it would benefit shareholders to vote on the salary of CEOs.”

      The system is rotten to the core: there is often a perfect triangle between the board, the executives and the largest shareholders, that is to say, these people usually overlap quite a bit. This is most definitely a failure, though one could argue that corporations are not the natural result of the free market since they require laws to shield shareholders from liability and to give the corporation some sort of personhood. But it goes much deeper than that: humans are no more suited to cutthroat capitalism than they are to communism. Perhaps in a more enlightened future having billionaires around will be seen as just as archaic and unjust as having feudal lords around.

      • http://juridicalcoherence.blogspot.com/ Stephen Diamond

        I think human nature is highly suited to communism. The question mark hanging over communism is whether humanity can achieve the material abundance it requires. Robin understands that, which is why he plants his sharpest dagger precisely at that point.

  • Douglas Knight

    Why has there been a growth of school administrators in the US? How many are there in other countries?

    Hypotheses: (1) regulatory compliance; (2) pure parasites whose removal is of no consequence; (3) applying for grants, paying for themselves in the current environment, but nothing to do with regulations; (4) please suggest!

    Did Mehta say why he thought administrators were superfluous? Is that conditional on smart well-trained teachers, or does he think them superfluous with the current teachers? Did he mention regulation?

  • Christian Kleineidam

    A huge problem of the US education system is that money flows through burocratic grants instead money being simply payed to the school for educating students.

    • IMASBA

      No, in that case the problem is colleges being allowed to set prices to whatever they like (to make a big fat profit) and the government than slavishly paying grants to students. How those grants are being paid precisely does not matter, what matters is that the government spends money on things they have no control over, until it has been sucked dry.

      • Christian Kleineidam

        Those grants produce burocracy that not useful.

  • arch1

    It’s certainly not original, but my suspicion is that a significant (and perhaps the dominant) contributor to American over-regulation is lawyers.

    In the U.S., lawyers represent a hugely disproportionate fraction of our legislators and politically influential individuals; and not surprisingly, they tend to favor complex legalistic, lawyer-intensive solutions.

    • IMASBA

      It seems American law degrees are sold at lemonade stands considering all the mentally challenged politicians (foreign politicians aren’t always the brightest bunch but Americans take the cake). Lawyers being overrepresented occurs in most democracies though it’s taken to an extreme in the US and the US is also on the extreme end when it comes to having few scientists in politics.

      • arch1

        Lemonade stands: So one would think, but in my experience most stands either don’t stock them, or are down to just lemonade and maybe cookies by the time I swing by..

    • http://juridicalcoherence.blogspot.com/ Stephen Diamond

      Then you’re only left with another puzzle: why are lawyers so influential in the U.S?

      The answer lies in the American constitutional system, which makes “checks and balances” its centerpiece. The American system inherently favors small changes that preserve balance over sweeping reforms. [See Checking and balancing a country until it disintegrates. — http://tinyurl.com/qhbr55l ] (The civil-law system in most of Europe, where the legislature reigns supreme, not sharing power with the courts so overtly, avoids some of this defect. — see “Lessons from civil law” http://tinyurl.com/puj3yq8 ) So, one group lobbies for measures favoring it, which disadvantage another group. That group lobbies for modification restoring balance. This produces a high complexity. In effect, the system evolves more than being designed, and evolution is inelegant.

      Lawyers aren’t the U.S. ruling class, only its faithful servants. They have more the appearance of power than its essence. (See “Legalese: Pomposity ritualized” regarding lawyer psychology. http://tinyurl.com/yjaghbh )

      • arch1

        Thanks for this thought provoking response (so much so that I intend to follow up on the refs:-)

  • anonymous

    While I’m very interested in the discussion and the main points of the article that spawned it, I cannot get over the incongruity of the first sentence of the second paragraph with the paragraph before it. “Mehta proposed the mass-adoption of automated busses by city transit systems. When pressed for how any city could afford this, he suggested cutting tourist information centers. Mehta’s main complaint is that our cities are oversaturated by tourists.” It seems like you’ve seized on a side-effect of his main complaint: that schooling would be more successful if teachers had better status.

    It
    seemed to me that Mehtra’s main complaint is that – See more at:
    http://www.overcomingbias.com/2013/06/is-govt-over-regulated.html#disqus_thread
    It
    seemed to me that Mehtra’s main complaint is that – See more at:
    http://www.overcomingbias.com/2013/06/is-govt-over-regulated.html#disqus_thread
    It
    seemed to me that Mehtra’s main complaint is that – See more at:
    http://www.overcomingbias.com/2013/06/is-govt-over-regulated.html#disqus_thread

  • Philip Goetz

    Interesting, but I think there’s an asymmetry. Liberals are more consequentialist; they think of morality as trying to achieve social goals. Conservatives are deontologists; they think of morality as following a traditional code of rules. From that view, placing social goals, no matter how desirable they may seem, over traditional rules like not allowing marriage between people of the same gender or of different races, is immoral by definition. Conservatives seek laws, of a kind that need little oversight. Liberals seek goal-oriented regulation. So I would expect liberals to want more regulation of the private sector and of government, and conservatives to want less of both.

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