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Government spending may be slowing but regulatory output is not. The number of regulations passed the one million mark in 2010, and their volume continues to rise. What does the continuing growth of so many rules mean for the U.S. economy and individual industries?
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Regulation University: The Consequences of Regulatory Accumulation
February 28, 2014
Patrick A. McLaughlinSenior Research Fellow
Mercatus Center at George Mason University
What is regulatory accumulation?
Why is it a problem?1. Blocks innovation and
entrepreneurship2. Diverts attention from new and
important risks3. Wastes scarce agency resources
Less innovation = less growth
Actual GDP Potential GDP0
10
20
30
40
50
60
$15.1 trillion
$53.9 trillion
What would GDP have been in 2011 if regulations had stayed at 1949 levels?
in t
rillio
ns
of
real d
ollars
1949
1952
1955
1958
1961
1964
1967
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
Actual and Alternative Growth Paths
Hypothetical Economy
Actual Economy
in b
illion
s of
dollars
Example: Design standards
Design standards on trains, automobiles – prevents innovation domestically and trade internationally
Example: Logan City, Utah
Why does it occur?1. Incentives of agencies2. Incentives of politicians3. Incentives of incumbent firms
Aren’t there already requirements for review?1. Exec. Order 128662. Presidential initiatives
Current process ineffective at review
No Independence = No Results
Can we solve this?
1. Independent review2. Focus on risk and outcomes3. Overcome groups with vested
interests in keeping nonfunctional rules
Independent review
1. BRAC2. Scientific peer-review
First test of functionality: Risk
Significant riskNonsignificant risk
Current risk Functional Nonfunctional
Noncurrent risk Nonfunctional Nonfunctional
Second test of functionality: Outcomes
Achieving outcome Not achieving
Necessary to maintain outcome Functional NonfunctionalNot necessary to maintain Nonfunctional Nonfunctional
Overcome groups with vested interests in keeping rules1. Agencies2. Incumbent businesses3. Special interest groups
Questions?