Too much regulation? Blame the crony capitalists

Over at Mother Jones, Kevin Drum has a piece where he says, essentially, companies may complain about complex regulations but the truth is that they love them, because they can use complex regulations to their advantage when competing with other businesses. In fact, Drum argues, companies lobby hard to turn simple rules into complex ones:

“Businesses don’t like simple rules, because simple rules are hard to evade. So they lobby endlessly for exemptions both big and small. This is why we end up with tax subsidies for bow-and-arrow makers. It’s why we end up with environmental rules that treat a hundred different industries a hundred different ways. It’s why financial regulators don’t enact simple leverage rules or place firm asset caps on firm size. Those would be hard to get around and might genuinely eat into bank profits. Complex rules, conversely, are the meat and drink of $500-per-hour lawyers and whiz kid engineers. If the rules are complicated enough, smart lawyers can always find ways around them. And American corporations employ lots of smart lawyers.”

Keep this firmly in mind the next time you hear someone from the Chamber of Commerce complaining about how many thousands of pages of regulations they have to comply with.

Drum’s possible over-generalization is nonetheless a sad truth about the way many companies interact with regulators. Yes, companies are trying to get stuff from the government, and this ends up making regulations more complex than they would otherwise be. I would even argue that there are regulations that only exist because companies lobbied for them (the same way Warren Buffet is asking for his taxes to go up).

Obviously, this flies in the face of complaints about complexity and uncertainty brought about by the regulatory regime. But we often forget the other side of this equation. The fact that these companies manage to get what they want from regulators also flies in the face of the notion of independent regulatory agencies. It takes two to tango: Some regulators are more than happy to grant exemptions and special rules to given companies that will benefit from the resulting complexity.

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Read more at National Review Online HERE.