Rick Akin: Government creates problems
July 25, 2010
"If you put the federal government in charge of the Sahara Desert, in five years there'd be a shortage of sand."
— Milton Friedman
I have represented businesses for more than 25 years, and I can tell you that in my experience when the government sets out to regulate a new area or revamp existing regulation, the appropriate question is not, "Will they mess it up?" but, "How will they mess it up?" As Ronald Reagan put it, "Government is not a solution to our problem, government is the problem."
This is the second point at which I think the liberals make a fundamental mistake. The far-reaching and comprehensive regulation with which they want to address almost every problem causes more problems than it solves.
First, the government simply is not competent to regulate most areas. The people involved simply do not possess sufficient knowledge of many industries to know what sort of regulation is prudent. For example, despite all the political chest-beating about the BP blowout in the Gulf, have you heard any engineering analysis from the government concerning either how to fix the existing problem or prevent similar problems? Also, with respect to the market collapse of 2008, have you heard any sensible explanation from anyone in the government about what a derivative is or why they are used? I certainly have not. What I have heard is a lot of grandstanding from folks with absolutely no background or knowledge in the field. This is the norm, not an exception.
This kind of shallow understanding also leads the government to affirmatively create problems. Take the collapse of the mortgage market as an example. At the urging of Congress, Fannie Mae and Freddie Mac had been overleveraged for quite some time and were going to extremes to encourage unsound lending practices. The Wall Street Journal editorial page had been trumpeting warnings about the impending disaster for years for anyone who would listen. Congress did not listen. Easy mortgage financing just is a little too popular to rein in those quasi-governmental agencies that the taxpayers ended up bailing out.
This shallow understanding leads to a corollary problem in that the government's comprehensive regulation is likely to stifle innovation. Before the light bulb was invented, the idea of sending electricity through a filament and making the filament so hot that it produced light probably sounded pretty dangerous. Thankfully, there were no regulations blocking the way.
And then there is what Ayn Rand refers to as "The Aristocracy of Pull." There is a reason why there are so many lobbyists in Washington (and Denver for that matter). The more regulation there is, the more ability to gain advantage in the market. This is why many big players don't really have a problem with extensive regulation. It weeds out competitors, particularly small ones. This limits competition and innovation. That might be fine if you are established in the market, but it comes at the expense of the rest of us.
Is this to say that all regulation is a bad idea? Certainly not. Regulation laying out broad parameters and prohibiting activities creating known, serious danger are appropriate. The real answer here, though, is that the flip side of freedom is responsibility. If you engage in an imprudent or dishonest activity and people are injured, you are responsible for the damage. The legal system of the United States, and the predecessor system of Great Britain, has been doing this job for centuries.
As Thomas Jefferson observed, "Men by their constitutions are naturally divided into two parties:
Those who fear and distrust the people, and wish to draw all powers from them into the hands of the higher classes.
Those who identify themselves with the people, have confidence in them, cherish and consider them as the most honest and safe depositary of the public interests."
It's as true today as it was more than 200 years ago.
Rick Akin is an attorney practicing in Steamboat Springs, Denver and Austin, Texas, a former member of the Steamboat Pilot & Today Editorial Board, and vice chairman of The Steamboat Institute. He holds a Bachelor of Arts in Letters from the University of Oklahoma and a doctorate from the University of Texas.