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Why Regulation Is Ruining the U.S. Economy

Tyler Cowen, a professor of economics at George Mason University, says old regulations are holding back much-needed job growth and innovation.
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On Thursday, Oct. 31, 2013, the Federal Aviation Administration announced that airplane passengers do not have to turn off their electronic devices for takeoff and landing anymore--a small win for all those perpetually-distracted folks who find it hard to part with their gadgets for more than a few minutes. But Tyler Cowen, a professor of economics at George Mason University, says this victory is actually a sign of a problem plaguing the U.S economy.

"Our new Kindle freedoms, however minor they may seem, show how hard it is to clear away the old, unnecessary regulations that are impeding the economy," Cowen writes in The New York Times. "After all, the previous restriction on electronics during flights was broadly unpopular in a way that cut across partisan lines. Yet, for many years, the public's complaints did not bring concrete change, mostly because of regulatory inertia."

Cowen says this tiny regulation should be seen in the larger picture of over-zealous government regulation over business and how it hurts the economy. With the number of federal regulatory restrictions topping one million, many of them are simply hamstringing businesses. Cowen suggests the U.S. start "pruning away rules we don't need" to jumpstart an economy with more jobs and stronger growth. He says one FDA rule banned a few successful asthma treatments because of their "slight negative impact on the ozone layer." Although some rules seem to have good intentions, Cowen says, when taken all together the sheer number of restrictions chip away at potential job growth and innovation.

"When the number of rules mounts, it can become hard for a business to know whether it is operating within the law's confines," Cowen writes. "The issue is all the more problematic when federal, state and local constraints all apply."

The number of start-ups in the U.S. has steadily decreased each decade since the 1980s, and although overregulation isn't public enemy number one, Cowen says the "regulatory burden" has increased the number of obstacles for small-business, and is "very likely contributing to the problem" of a downtrodden economy.

The White House's Office of Information and Regulatory Affairs is ill-equipped to review unnecessary regulations, as its budget has shrunk 27 percent since the 1980s. On the opposing side, regulatory agencies have seen their budgets grow 225 percent.

Cowen doesn't want to banish all regulations in the name of start-ups; instead, he wants to see more concise rules. An incentive for deregulation wouldn't hurt either:

"The point isn't that we should eliminate all regulation or give up on clean air and water. In fact, we may need tougher guidelines--albeit simpler ones--to govern what is permissible for activities like financial risk-taking or burning coal," he writes. "Still, a paring back of regulation in many areas, based on clearer priorities, seems in order."

What do you think of Cowen's ideas? Let us know in the comments section below.

IMAGE: Andy Holt/Flickr
Last updated: Nov 19, 2013

WILL YAKOWICZ | Staff Writer | Reporter, Inc.com

Will Yakowicz is a staff writer for Inc. magazine. He has covered business, crime, and local politics for The Brooklyn Paper and was the editor of Park Slope Patch. He has also reported in the West Bank and Moscow for Tablet Magazine. He lives in Brooklyn, New York.




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