by Roger Bourke White Jr., copyright Oct 2011
This idea was inspired by the complaint that too much of America's brightest and best talent ends up working in jobs that don't "add value" to our society -- adding value in this context means things such as manufacturing, inventing, the arts and sciences. What is sucking talent away from those areas is jobs that are profitable but don't add value. The iconic non-value adding jobs are "evil" bank financiers and lawyers.
Of course the financiers and lawyers will argue that they add a lot of value, and that's why they are paid so much.
And that is true... but why? Why are they adding so much value?
Digging a little deeper into that mystery lead to my newest crazy-like-a-fox idea: Regulation Cap and Trade.
Modern America is a place with a lot of rules and regulations. These rules and regulations heavily affect our day-to-day living. They also heavily affect how businesses conduct their business.
Sometimes the rules and regulations are clear. But very often they are not. This means that someone clever needs to read them, discuss them with other knowledgeable people, and then test their theories about what the rules and regulations really mean. And, because rule of law is strong in America, designing rules and regulations is an important activity. We have well paid lobbyists who help legislatures craft laws.
The more complex and important rules and regulations become, the more value-add there is in spending time and cleverness paying attention to them. And this is why so many brightest and best migrate into jobs which pay attention to rules and regulations. They are well paid to do so because paying attention, and then providing advice, helps companies and people run their lives more efficiently.
Another thing that running a business needs is a lot of is money. And the more raising money becomes a complex task, the more it becomes an area where understanding rules and regulations is important to being effective, and this also becomes an area that attracts brightest and best. This is why brightests and bests move into banking and why they get paid so well for doing so.
This is the condition we are in now, in the second decade of the 21st century in America, and this situation has gotten more so over many decades. These days it's a difficult task to understand all the regulations surrounding running a business, providing health care, and raising money.
It is the combination of being complex and important that makes working in these regulation-understanding careers so profitable.
So... if we don't want these career areas to be so profitable, what can we do about it?
If we want to attract our brightest and best to other activities, such as developing and adapting new technologies, how can we do this?
The short answer is to reduce the complexity and importance of rules and regulations.
It's a short and sweet answer, and at the heart of the various limited government philosophies. But in practice having a bunch of citizens saying, "I'm for limited government." doesn't seem to produce limited government.
Sad but true.
It's not productive because while it's easy to say, "I'm for limited government." it's difficult to measure, and there are always, always, lots of citizens clamoring, "Yes, limited government is a great idea, but right now we need a new law to cover [X] situation."
A few decades ago I, and others, came up with the idea of putting limits on how long a law can be enacted for. (My choice was, "You can only write a law that lasts for twenty years. If after twenty years it's still a good law, then pass it again.") This idea gained popularity for a while in the late 1970's as the "sunset provision movement", but that movement faded without much result.
But we still need the regulation simplicity, it's still a good idea, so here is my latest thought on a way to move towards simplified rules and regulations, and to keep them simplified over decades of legislating.
The solution I propose is inspired by that wonderful "green idea": Carbon Cap and Trade. What I propose is Regulation Cap and Trade.
The basic concept here is that the total regulatory burden on the nation will be fixed -- we can have only "X" number of rules and regulations. Those regulations are spread between all the various governing agencies. Those agencies that want to write new regulations bid for regulation slots. Those that bid highest get to write more regulations.
Where do the slots come from? From those agencies that are willing to trade regulations for money. Those agencies that have regulations which are no longer needed can sell their's. The regulatory agencies can decide which they need more: rules or money? Those agencies giving up rules and regulations get money in their place. Regulating agencies can also free up slots by rewriting their rules and regulations so they take up a smaller count.
In this way there is an incentive to get rid of old rules and regulations, the huge mass of no longer needed rules and regulations is reduced, and dealing with rules and regulations becomes a whole lot simpler. Regulations cease to be the "creeping feature creature" they have been for decades.
The benefit of this is that total regulatory complexity is fixed. This keeps dealing with the government a lot, lot simpler, which is a very good thing. If dealing with the government is simpler, then the brightest and best will not be paid so well for doing so, and they can be paid better for more tangibly productive activities. And this is a really good thing for our society.
The hard part of this concept is measuring the "size" of a regulation. This is not an obvious concept, and for that reason it will likely be "gamed" until it is well figured out.
But, virtually any measurement system is better than no measurement system. So not having an obviously good measure is no reason not to start experimenting with the concept.
So, I propose we start this Glorious Experiment with something real easy to measure: the pages of regulation. Regulations are written in a standard page format. What gets bought and sold is simple page count... with one wrinkle: Where a regulation says something such as "refer to section [X] for further details" then section [X] is also included in the page count.
If my proposal is put in place, the total page count of government rules and regulations is first measured by a census, then capped. Any rule or regulation not included in the census is no longer binding. An agency or legislation can then create open pages by outright eliminating a rule or regulation or by rewriting it to reduce its page count. Blank pages are then available to sell on an open exchange, and any agency or individual can bid for them. This means that if you are a person or organization who wants to invest in limited government, you can bid for pages and simply pull them out of the market.
My feeling is that this system will provide a steady and ongoing incentive to produce rules and regulations with simple, easy to understand writing because such writing is compact. With time, regulations will become more transparent. As they become more transparent the talent needed to figure them out will diminish, and the brightest and best can then migrate out of the regulation creating/interpreting business because it won't pay so well. They can then get involved in other activities that can now become more important and thus pay them better. Things such as inventing, engineering and other endeavors that build the size of the American pie.
One way to get our brightest and best out of "non-productive" endeavors such as lawyering, financing and government regulation writing is to make these endeavors less important in running our businesses and lives.
One way to do that is to put a cap on how many regulations we can have as a nation. We set a limit and then we trade in rules and regulations -- before we add new rules and regulations we remove an equivalent number of less important rules and regulations.
This will simplify the legal and regulatory systems, which will make day-to-day living and conducting business in America much less dependant on understanding a growing mass of subtle rules and regulations and policies. Instead of thinking about rules and regulations we can be thinking about other things -- things which grow the size of the American pie -- things which will make our America a better place to live because there will be a lot more to it.
-- The End --
Update: The 18 Feb 12 edition of The Economist ran a series of articles with the theme "Over-regulated America" The home of laissez-faire is being suffocated by excessive and badly written regulation. They pointed out Dodd-Frank, Obama's healthcare reform, and Sarbanes-Oxley as iconic examples.
From the lead article, "Consider the Dodd-Frank law of 2010. Its aim was noble: to prevent another financial crisis. Its strategy was sensible, too: improve transparency, stop banks from taking excessive risks, prevent abusive financial practices and end “too big to fail” by authorizing regulators to seize any big, tottering financial firm and wind it down. This newspaper supported these goals at the time, and we still do. But Dodd-Frank is far too complex, and becoming more so. At 848 pages, it is 23 times longer than Glass-Steagall, the reform that followed the Wall Street crash of 1929. Worse, every other page demands that regulators fill in further detail. Some of these clarifications are hundreds of pages long. Just one bit, the “Volcker rule”, which aims to curb risky proprietary trading by banks, includes 383 questions that break down into 1,420 subquestions."
Other articles in that issue: The Dodd-Frank Act too big not to fail and Excessive Regulation tangled up in green tape.
Update: Here's a 15 Mar 12 Reason article, Complex Societies Need Simple Laws by John Stossel, complaining about too many laws. He sees the problem but he hasn't thought of my solution. And I have written about Dodd-Frank as a blunder in the March issue of Cyreenik Says.