In a World Without Regulations, Imagining Our Prosperity

“Back off! What perfect advice!” I thought. The New York Times had opined that prescriptive rules imposed on children can arrest their creativity. Regulations by our paternalistic state have the same effect on adults who have emerged from the gantlet of childhood to become the creators and entrepreneurs behind our prosperity. The Small Business Administration reported a few years back that regulations cost our economy close to $2 trillion per year. That’s bad enough, but the same report went on to discuss “knock-on effects” that are harder to quantify. One of these is that regulations cause creative people to misdirect their efforts in costly ways. Consider Tesla Motors, which arguably wouldn’t exist but for environmental regulations. It also benefits from government subsidies of its “green” technology and tax credits for its customers – and loses money anyway. As if the need for such “incentives” weren’t proof enough that no real demand for electric cars exists, the company has been lobbying for tougher Corporate Average Fuel Efficiency (CAFE) standards even as traditional automakers seek relief from the onerous 54.5 mpg 2025 target. Setting aside Tesla’s blatant rent-seeking — a problem in itself — one can only imagine what their engineers might have achieved had the government not crafted a regulatory sandbox to confine their efforts.