Friday, February 17, 2012

It's Not the Regulation, It's the Complexity

From the Economist:
More important, rules need to be much simpler. When regulators try to write an all-purpose instruction manual, the truly important dos and don’ts are lost in an ocean of verbiage. Far better to lay down broad goals and prescribe only what is strictly necessary to achieve them. Legislators should pass simple rules, and leave regulators to enforce them.

Would this hand too much power to unelected bureaucrats? Not if they are made more accountable. Unreasonable judgments should be subject to swift appeal. Regulators who make bad decisions should be easily sackable. None of this will resolve the inevitable difficulties of regulating a complex modern society. But it would mitigate a real danger: that regulation may crush the life out of America’s economy.
I'm retired now, so maybe it's softened my brain.  Furthermore, I've never been the entrepreneurial type; I've mostly worked for big companies, and my stint in a startup wasn't as a biz guy but as an engineer.  But occasionally I toy with starting a business.

I wouldn't even know where to start.  The number of things you have to know to avoid running afoul of somebody's government is so large that you'd have to research your startup for months or years if you actually wanted to comply with the law.  Hell, just licensing and employee payroll requirements are daunting.

Of course, real entrepreneurs ignore most of this stuff and hope that they can grow their business fast enough that they can hire somebody to deal with compliance before they get caught.  But that assumes that they're not competing a little too roughly with an established business, who has all this stuff figured out and, more importantly, knows an inspector or two in the local government.  This is where regulation becomes a weapon, because it's much easier to bury your upstart competitors in red tape than it is to actually outperform them.

The three or four of you who actually read this blog know that I'm a huge fan of complexity in natural systems (like the economy).  Complexity that evolves to adapt to real environmental conditions is the most efficient mechanism to produce healthy economies, healthy societies, and healthy individuals--in addition to being the single coolest thing ever.  But regulatory complexity, which constrains natural adaptive complexity, can bring everything to a halt.