Richard Rahn's modest proposal for "regulation therapy"

[Declan McCullagh <declan () well com>]

-------- Original Message --------
Subject: Richard Rahn's "Regulation Therapy" (The Washington Times)
Date: Sun, 11 Jul 2004 08:52:03 EDT
From: Richard Rahn
To: Declan McCullagh


The Washington Times
www.washingtontimes.com

Regulation therapy
By Richard W. Rahn
Published July 11, 2004

Do you believe the benefits of government regulation should exceed their
costs? Of course you do. Yet almost every day we can pick up our 
newspapers and
find examples of foolish, silly and just plain stupid regulations 
unjustified on
any reasonable cost-benefit basis.

For instance, banks and other financial institutions must file currency
transactions reports on anybody who deposits or withdraws more than 
$10,000 in cash
at one time. Millions of these reports are filed each year, on what even 
the
government admits are almost always totally innocent people.

Yet at the same time, very few criminals are nabbed as a result of the
reports, because the bad guys know the rules and how to get around them 
-- which is
easy to do. Meanwhile, millions of innocent people have their privacy 
invaded
at great cost to the banking institutions (and much of this cost is 
passed on
to their customers) for almost no benefit.

Thousands of equally foolish regulations exist. The result is every year
hundreds of billions of dollars are wasted, and citizens unnecessarily 
harassed
because of poorly thought out and mismanaged regulations. These costs 
make all
Americans poorer and less free, yet the problem has gone on for decades.

The problem of excessive regulation has been long recognized. A 
presidential
commission told Franklin D. Roosevelt back in 1937 that all the new 
regulatory
agencies he had created under the New Deal constituted, "a headless fourth
branch of government, a haphazard deposit of irresponsible agencies and
uncoordinated powers."

The problem has spread far beyond the agencies referred to in the report to
Roosevelt. Now, countless departments within the government have 
acquired from
Congress the ability to promulgate and enforce regulations.

Over the years, there have been attempts to reign in the regulatory 
octopus,
but the results have been limited. The Office of Regulatory Affairs at the
Office of Management and Budget has stopped some of the worst rule 
proposals. But
its mandate is limited to "major regulations" costing $100 million or more.
Many departments, such as the IRS, are exempt.

Too few government regulations are subjected to rigorous cost-benefit 
tests,
even when required. Many government agencies do not take the requirement
seriously, act in good faith or present accurate data. The regulators 
have a strong
incentive to underestimate the true costs of their regulations.

As Congress has increasingly delegated its lawmaking power to government
agencies, the previously established checks and balances have broken 
down. Even
when the intent of a regulation is desirable, administrative agencies have
little incentive to design it to be as cost-effective as possible.

Fortunately, there is a solution. In recent years, Congress has established
the right of "private course of action," whereby individuals can sue an 
agency
not adequately enforcing some civil rights or environmental laws. The 
courts
have been empowered to compensate lawyers who prevail in these suits for 
the
fees and associated litigation expenses in order to encourage private
enforcement of these laws.

Congress should expand the right of "private course of action" to allow any
individual or group to sue an agency for issuing a regulation the 
benefits of
which do not exceed the costs. If the private party is able to prove, by a
reasonable standard, that a regulation is not cost-effective, that party 
would be
entitled to normal legal fees plus the fees of professionals who did the
necessary technical work.

The agency issuing the faulty regulation should be required to pay the
awarded fees out of its own budget. In addition, the agency would be 
required to
withdraw the regulation or reissue it to operate in a cost-effective 
manner.

If the above proposal were adopted, regulatory agencies would have strong
incentives to be more careful both in the number and content of regulations
issued. It is unlikely the provision of "private course of action" would 
be greatly
abused, because those bringing suit against the regulatory agency would not
be reimbursed unless they could prove the regulation does not meet a 
reasonable
cost-benefit test.

I am no fan of our litigious society, but I would much prefer the trial
lawyers be employed reducing the deadweight loss from government actions 
rather
than adding deadweight costs to the private sector.

In sum, the above proposal offers a market solution to an existing lack of
adequate checks and balances within the government regulatory agencies. 
It would
empower the citizen to stop the excesses of government.


Richard W. Rahn is a senior fellow of the Discovery Institute and an 
adjunct
scholar of the Cato Institute.


Copyright © 2004 News World Communications, Inc. All rights reserved.


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