The Ratcheting up of Regulation

The enforcement of norms is an everyday event. Whether through disapproving looks across a bin of oranges at the grocery store in response to a parent’s disciplining techniques, or the scoff of disbelief at your friend’s new beau’s use of culturally insensitive language, or showing up to work with a card and flowers for a co-worker who recently lost a spouse. The behavior of shaping, criticizing or supporting of each other is judged and metered out with eye movements, gestures, and offers to help.

Once an infraction is deemed serious, it is made a law- you shall be prosecuted if you leave your toddler in a hot car while you shop. There is a lot of ground covered, a lot of degrees of severity and risk in parental actions, between scolding a toddler over a pyramid of piled up produce and locking someone up for child endangerment. But everyone can agree that we are all better off by formally acknowledging a certain threshold of acceptable behavior and enforcing persecution against those who cross over.

We are all better off knowing we can drink tap water from the faucet and that our houses won’t crumble overhead, and we can feed our kids hotdogs from the concessions stands at the Little League games. Accepting these standards and counting on a system, comprised of a series of reportings and enforcements, will maintain the freedom to move in and between communities safely. This is a social advantage we often take for granted.

It can also be shown that at some point there are diminishing return to regulations as their burdens cause detriments that are costly. Most of these arguments set up a discord revolving around health and safety (often tied in with the environment) versus the ability to supply families with income from a job. But this source of monetary capital also affects a person’s ability to lead a healthy safe life. You end up with this big teeter-totter where on one side all the variables set to maximize production of industry are weighted, and on the other, all the variables set to maximize social concerns piled up. What we want to find is at what point where the board finds balance.

Since this topic will be the question of this century, let’s start with a wide angle view in considering the use of regulation to keep the teeter-totter level.

Regulations for commercial enterprises seem to ratchet-up more freely than to release and reevaluate. There are many indications that the systems in place which regulate commerce, (often bureaucracies like Departments of Commerce and Federal Administrations, but cities as well) are not getting the feedback necessary to properly account for all the downsides to their actions. Things at the city and county level work fairly well. Yet, I propose that in the case of big business the intended beneficiaries of the regulation are removed from the system. They do not receive an accurate evaluation of the issues nor a proper accounting. And except to become activists at times of tragedy, they fail to regularly communicate with the regulating agencies.

For purposes of contrast, first consider water quality which is administered at the city level. Complaints about the water filter up through the city council and can be voiced at open city council meetings. Elected officials respond to constituents, especially those who show up. Even city staff feel the pressure when the seats are all taken in the normally hushed city council chambers. Other than the very notable example of Flint MI (and undoubtedly a few under-reported incidents) potable water is successfully provided to 331 million people in the US.

Take hot dogs at a concession stand. The county public health people have the power to decide the cleanliness of the two-windowed, wood clad concession stand with its pretzel warmer and popcorn popper and slushy machine. It is in their power to have it to meet the same standards as a science lab, of they so choose. But the regulator, who is more than likely a part of the community, knows that if the rules checklist becomes too long, making the workload too great for the already tapped, completely volunteer workforce to handle, it will shut down. No concessions, no extra money. No extra money, no new uniforms or dugouts, or pitcher mounds. Do ballfield concession stands or Rotary pancake breakfasts really need to be run at restaurant level standards of cleanliness to keep people safe? Or is there some other level that is ‘good enough’ that won’t squelch to whole endeavor?

Regulation of businesses, however, are missing the community tie-in. Commercial enterprises are regulated by bureaucracies, where people develop careers and other monetary incentives to successfully develop and implement regulations. It’s their job. The purpose of the position is to protect the consumer, where more protection always seems better.

This system removes the citizens that show up at the council meeting both in favor and against city action from the system. The bureaucrats judge and evaluate. They search for evidence to justify their position, not from the public, but from other detached experts. The consumer who can best express the complete picture of tradeoffs for their particular lot in life, has no routine forum. The next closest party to the transaction is the business person who hears and tries to comply with the requests of the consumers. Yet he/she is considered tainted by a money motive, and hence regarded with suspicion or often disregarded.

With the absence of a consumer evaluator, there is no system wide continual assessment of the costs and benefits of the regulation. There is no dynamic information being provided to determine when the regulation has gone too far and is causing too great of a burden.

So what to do? One solution is to consider how people live, by considering their revealed preferences. Testing, if you will, where the new standards are in relation to what the population expresses as their acceptable risk level. For instance, say you have a city that imposes a rental property review based on a scoring system comprised of a four page list of items. Missing smoke detector 5 points, missing receptacle plate 2 points, no furnace tune-up in the last year 5 point, ripped window screen 1 point, etc.. When the property scores 20 or more the renters must vacate the property as it is deemed inhabitual.

Now let’s say the assessment is used on the other 23 homes on the block. If 75 percent of them failed then it seems that the review checklist is too stringent. The regulator are basically saying to its own constituents that their standard of house maintenance are inadequate and they must move. (How do you think that would go over?)

Think of how this came about. The property regulators were trying to do right by the tenants, trying to get rid of the slumlords. They developed a tool that would allow them to put a handful of bad actors out of business. They get little community objection. Even very acceptable landlords are going to stay quiet when heavy handed regulation is in the mix as they are fearful of retaliation. But by setting a standard well above the average accepted living conditions, the regulators have raised the cost of providing housing. Since cost is reflected in rents, this causes undo pressure on affordable rentals.

Indexing off a general-population-standard may not be the end-all-be-all, but it would provide a starting point for the group. If analysis showed reasons for regulators to require more out of a subgroup (rental property), than at least this could be publicly discussed and agreed upon. But forcing the landlords to provide housing units at a higher standard than the average, and hence places undue costs on the provision of housing, avoids a proper accounting. This leads to endless circular discussions about the lack of affordable housing and whose to blame and whose to pay.

Furthermore when regulations don’t match the populations expectations, people resort to go-arounds until the formal rules are disregarded entirely. The highway speed limit debate that started in the early seventies left the public conversation once States set their driving limit to how fast motorists tended drive.

As a part of the system, development, implementation and enforcement of regulations need to be influenced by all actors. When a bureaucracy takes on an agency of their own, which allows them a power position which in effect rebuffs feedback from the general population. Using an indexing method for the group would at least reveal an average standard. It would provide an initial means of analysis. Ideally, even in situations of complex issues there could be a greater transparency with all the costs at hand. And in this way the average citizen could participate in a continual feedback loop while they assess their costs. Without this participation we are simply creating a power void ready to be filled by bureaucratic czars.

We’ve lost track of regulation by allowing it to jump out of the mechanics of the entire system. Lack of transparency and convoluted agency keep any meaningful accounting of the tradeoffs. In the same way that the business community’s opinion of the issues at hand are tainted by the money motive, so are the bureaucrats. They are incented to build their agencies, find new safety concerns, beat back business with zeal. So why are we surprised when they do so?

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