August 26, 2011
In Law and Almost Everywhere Else, Reduced Regulation Is Not Deregulation
The Wall Street Journal recently ran an op-ed: Time to Deregulate the Practice of Law: Every other industry that has been deregulated, from trucking to telephones, has lowered prices without sacrificing quality. An interesting premise, and there are certainly some valid points. But it jumps out at me that there is an overall sense that all regulation is "bad." Plus, I see this as a fundamental overstatement of what "deregulation" is.
Trucking and telephones are not unregulated; the industries are certainly much less regulated than they were, but that is different than being unregulated. Reducing regulations often will increase competition by increasing market participants, and that can be a good thing. But this is true for every regulated industry.
If we reduced regulations on doctors and surgeons, there would be more and cheaper option for their services, but it's not at all clear it would a make health care better. The WSJ article states that "the medical field created physician's assistants to deal with less serious cases, [and] the legal profession can delegate less serious tasks. I agree. There is a difference between delegating diagnosis of a rash to a physician's assistant and delegating open-heart surgery. But physician's assistants still have a base level of education and expertise, in a way that unregulated lawyers would not, as I understand the proposal. Plus, it's not as though the era of physician's assistant has stemmed the tide of rising health care costs or dramatically increased access to medical care.
If we really hate legislation, we could eliminate usury laws, which would increase access to captial. We could remove speed limits, stop signs and stoplights, thus reducing regulations on the flow of traffic. We could elimate child labor laws, increasing the available workforce. And we could eliminate the FDA and kitchen inspections, thus making food cheaper and more accessible. All of these things have a downside, of course, but we could do it.
Regualtions are often overblown, intrusive, and unnecessarily restrictive, and that is a problem. And modifying and reducing some of the regualtions in my examples above may very well lead to a more efficient market and greater access to the relevant goods and services. But we need to keep in mind that there is often value in some regulation so that we can have some sense of safety and reliability, which also has value.
I'm open to reducing some regulations on lawyers, and I agree that the market for legal services could be improved in a number of ways. But "deregulation" is not the answer. Rethinking and reducing regulation may well be.
The global assessments of the costs of regulation almost inevitably assign the vast majority of the cost to environmental regulations like that Clean Air Act that affect only a very small number of energy producing utilities (most utilities actually buy energy wholesale and simply act as brokers) and a small number of major manufacturing companies. These big businesses can very effectively coordinate policy with reality on the ground since they have such a large market share making collective action issues relatively modest and make dispute resolution when non-compliance is alleged highly efficient. Your local power and natural gas company has no effective ability to escape the consequences of non-compliance so they have to be responsible.
Other industries are far less intensely and less expensively regulated.
Posted by: ohwilleke | Aug 26, 2011 4:07:35 PM
I appreciate and agree with your thoughts but here is some advice: if you plan to try to respond to every absurd misstatement on the editorial page of the Wall Street Journal, you should probably quit your day job.
No one takes the Wall Street Journal seriously anymore anyway. All of the good reporters have left and it's been turned into another Murdoch rag.
Posted by: Frederic | Aug 29, 2011 11:33:15 AM