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Waste and Cost

Jan 27, 2011 • Economic Debates, Environment, Regulation, Thinking Economically • 186 Views    No Comments

Who could possibly have disagreed with President Obama when, in his State of the Union address, he said we have to eliminate wasteful regulations? 

Some very important people.

Emory University economics professor, Paul Rubin, explained in a WSJ article that the key opponents are the agencies that currently oversee the rules.

Which rules? The President referred to duplications with salmon oversight. The NY Times cited rules about highways signs and sweeteners and dry cleaning machines. For example, highway signs can have no more than one upper case letter in a word. It took 7 years for the E.P.A. to coordinate with the FDA on whether saccharin was a toxic substance.

You can see where this is going. At each agency, once you take away a responsibility, they have less to do. Less to do means diminished power, a lower budget, fewer employees. Will regulators support their own demise?

The Economic Lesson

Again, it is all about opportunity cost, cost and benefit. For tax payers, the benefit will probably exceed the cost when deciding whether to eliminate redundant or seemingly minor regulations. For regulatory commission employees, the opposite is true according to Professor Rubin, who cited his Reagan administration experience at the Federal Trade Commission and the Consumer Product Safety Commission.

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