Comments on: Regulation – the world according to Lateral Economics http://clubtroppo.com.au/2007/08/27/regulation-the-world-according-to-lateral-economics/ Fearlessly dispensing political, legal and economic analysis (and some whimsy) since 2002 Thu, 24 May 2012 12:13:01 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: Nicholas Gruen http://clubtroppo.com.au/2007/08/27/regulation-the-world-according-to-lateral-economics/#comment-174114 Nicholas Gruen Thu, 30 Aug 2007 05:15:27 +0000 http://clubtroppo.com.au/2007/08/27/regulation-the-world-according-to-lateral-economics/#comment-174114 Kevin, These are nice ideas but I think you need to provide specific and preferably quite details examples of what you're talking about. I also think it may be part of the problem to think of regulation as a set of 'prohibitions'. I think a lot of regulation is more like standard making - which of course is often collectively organised by competitors in an industry long before governments become involved. Kevin,

These are nice ideas but I think you need to provide specific and preferably quite details examples of what you’re talking about.

I also think it may be part of the problem to think of regulation as a set of ‘prohibitions’.

I think a lot of regulation is more like standard making – which of course is often collectively organised by competitors in an industry long before governments become involved.

]]> By: Kevin Cox http://clubtroppo.com.au/2007/08/27/regulation-the-world-according-to-lateral-economics/#comment-173539 Kevin Cox Wed, 29 Aug 2007 18:27:39 +0000 http://clubtroppo.com.au/2007/08/27/regulation-the-world-according-to-lateral-economics/#comment-173539 Nicholas there is another approach to regulation and that is to remove the need for it. Why do we have regulations? We have them because people "cheat" in their dealings with others and when people cheat we need to punish them otherwise we can never have agreements. Another approach is to build systems that do not require explicit regulations that define cheating because regulations are a clumsy way of solving the problem. Our current systems are built so that it is advantageous to "cheat" or to find loopholes in the regulations. We then try to stop cheating by blocking the loopholes (more regulations) and by fining people when we can prove they have breached the regulations. This is extraordinarily difficult to do when people do not feel obliged by their social contracts to obey the spirit of the rules and where the payoff is great for finding loopholes. We can however modify our systems so that it is not worth while to cheat because if you do then you are almost certain to be discovered. We prove someone has cheated because their actions have resulted in certain outcomes NOT by proving they disobeyed the rules. If the outcomes are not as agreed then we do not care why they occurred It is much easier to prove that something happened rather than that a person has not followed a set of rules. We make sure that it is to people's advantage to be part of the system and we punish by not allowing people to participate in the particular activity where they cheated. This not only punishes but removes the problem people. Nicholas there is another approach to regulation and that is to remove the need for it. Why do we have regulations? We have them because people “cheat” in their dealings with others and when people cheat we need to punish them otherwise we can never have agreements. Another approach is to build systems that do not require explicit regulations that define cheating because regulations are a clumsy way of solving the problem. Our current systems are built so that it is advantageous to “cheat” or to find loopholes in the regulations. We then try to stop cheating by blocking the loopholes (more regulations) and by fining people when we can prove they have breached the regulations. This is extraordinarily difficult to do when people do not feel obliged by their social contracts to obey the spirit of the rules and where the payoff is great for finding loopholes. We can however modify our systems so that it is not worth while to cheat because if you do then you are almost certain to be discovered. We prove someone has cheated because their actions have resulted in certain outcomes NOT by proving they disobeyed the rules. If the outcomes are not as agreed then we do not care why they occurred It is much easier to prove that something happened rather than that a person has not followed a set of rules. We make sure that it is to people’s advantage to be part of the system and we punish by not allowing people to participate in the particular activity where they cheated. This not only punishes but removes the problem people.

]]> By: Club Troppo » Missing Link - graphical edition http://clubtroppo.com.au/2007/08/27/regulation-the-world-according-to-lateral-economics/#comment-173468 Club Troppo » Missing Link - graphical edition Wed, 29 Aug 2007 12:28:57 +0000 http://clubtroppo.com.au/2007/08/27/regulation-the-world-according-to-lateral-economics/#comment-173468 [...] At least the economists are fighting over music that matters…still. Nicholas Gruen discusses regulation [...] [...] At least the economists are fighting over music that matters…still. Nicholas Gruen discusses regulation [...]

]]> By: backroom girl http://clubtroppo.com.au/2007/08/27/regulation-the-world-according-to-lateral-economics/#comment-173272 backroom girl Wed, 29 Aug 2007 03:06:43 +0000 http://clubtroppo.com.au/2007/08/27/regulation-the-world-according-to-lateral-economics/#comment-173272 I don't know what it is Fred - a combination of all of the above, really. Perhaps it's just a need to be seen to be doing something. I have also observed in my years in the bureaucracy that there are many people who seem to feel that it is their role to make simple ideas much more complicated. I think we pretend that greater complexity equals better 'targeting', but I suspect most of the time it just means greater complexity. And there are also usually equity trade-offs as well. I can tell you from experience, though, that once something is really complicated and significant numbers of people are benefiting from that complexity, you have Buckley's chance of changing it to make it more simple. So usually you just add on another layer of complexity. I don’t know what it is Fred – a combination of all of the above, really. Perhaps it’s just a need to be seen to be doing something. I have also observed in my years in the bureaucracy that there are many people who seem to feel that it is their role to make simple ideas much more complicated. I think we pretend that greater complexity equals better ‘targeting’, but I suspect most of the time it just means greater complexity. And there are also usually equity trade-offs as well.

I can tell you from experience, though, that once something is really complicated and significant numbers of people are benefiting from that complexity, you have Buckley’s chance of changing it to make it more simple. So usually you just add on another layer of complexity.

]]> By: Fred Argy http://clubtroppo.com.au/2007/08/27/regulation-the-world-according-to-lateral-economics/#comment-173117 Fred Argy Wed, 29 Aug 2007 01:01:00 +0000 http://clubtroppo.com.au/2007/08/27/regulation-the-world-according-to-lateral-economics/#comment-173117 Interesting statistics, BG. But one needs to ask why the volume of regulation and legislation has increased in the social security area. If it is to better target the disadvantaged, that's fine. If it is to more effectively weed out social security cheats, it might make sense if the extra administrative costs are reasonable. If it is just to make life more difficult for welfare recipients and shame them into employment (good or bad) for which they are barely suited, it may have both a net economic cost and a and social cost. Interesting statistics, BG. But one needs to ask why the volume of regulation and legislation has increased in the social security area. If it is to better target the disadvantaged, that’s fine. If it is to more effectively weed out social security cheats, it might make sense if the extra administrative costs are reasonable. If it is just to make life more difficult for welfare recipients and shame them into employment (good or bad) for which they are barely suited, it may have both a net economic cost and a and social cost.

]]> By: Chris http://clubtroppo.com.au/2007/08/27/regulation-the-world-according-to-lateral-economics/#comment-172743 Chris Tue, 28 Aug 2007 10:17:16 +0000 http://clubtroppo.com.au/2007/08/27/regulation-the-world-according-to-lateral-economics/#comment-172743 I have an extremely good Italian bicycle helmet that is not legal in this country because getting the testing done to pass the special testing required under Australian legislation is too expensive. There's little doubt it would pass given that it passes all the US and European tests. I work in the chemical industry, the legislation seems specifically designed to make it impossible to compete on products we would like to make and export. What do we do? We have them made by an overseas branch of the company. The rules we have to comply with are far more onerous than both the EC and US laws. Here's a thought. In terms of regulation, why not steal most of the legislation from the US and EC, then modify a little to suit? I have an extremely good Italian bicycle helmet that is not legal in this country because getting the testing done to pass the special testing required under Australian legislation is too expensive. There’s little doubt it would pass given that it passes all the US and European tests.

I work in the chemical industry, the legislation seems specifically designed to make it impossible to compete on products we would like to make and export. What do we do? We have them made by an overseas branch of the company. The rules we have to comply with are far more onerous than both the EC and US laws.

Here’s a thought. In terms of regulation, why not steal most of the legislation from the US and EC, then modify a little to suit?

]]> By: Nicholas Gruen http://clubtroppo.com.au/2007/08/27/regulation-the-world-according-to-lateral-economics/#comment-172668 Nicholas Gruen Tue, 28 Aug 2007 06:16:55 +0000 http://clubtroppo.com.au/2007/08/27/regulation-the-world-according-to-lateral-economics/#comment-172668 It won't - by then we'll have passed the enabling legislation to allow legislation to be published electronically only. And I haven't done the work to break regulation into pre and post 1996 election, but it's clear the current government has regulated (measured in this crude way) more than it's predecessor. It won’t – by then we’ll have passed the enabling legislation to allow legislation to be published electronically only.

And I haven’t done the work to break regulation into pre and post 1996 election, but it’s clear the current government has regulated (measured in this crude way) more than it’s predecessor.

]]> By: Sacha http://clubtroppo.com.au/2007/08/27/regulation-the-world-according-to-lateral-economics/#comment-172665 Sacha Tue, 28 Aug 2007 06:11:01 +0000 http://clubtroppo.com.au/2007/08/27/regulation-the-world-according-to-lateral-economics/#comment-172665 An exercise for the reader: at the end of which decade will the amount of new Australian legislation require the logging of all old-growth forests? An exercise for the reader: at the end of which decade will the amount of new Australian legislation require the logging of all old-growth forests?

]]> By: wilful http://clubtroppo.com.au/2007/08/27/regulation-the-world-according-to-lateral-economics/#comment-172617 wilful Tue, 28 Aug 2007 02:57:24 +0000 http://clubtroppo.com.au/2007/08/27/regulation-the-world-according-to-lateral-economics/#comment-172617 Without reading the report, is the graph presented broken up into pre and post 1996? Without reading the report, is the graph presented broken up into pre and post 1996?

]]> By: Backroom Girl http://clubtroppo.com.au/2007/08/27/regulation-the-world-according-to-lateral-economics/#comment-172609 Backroom Girl Tue, 28 Aug 2007 02:44:12 +0000 http://clubtroppo.com.au/2007/08/27/regulation-the-world-according-to-lateral-economics/#comment-172609 That graph reminded me of an interesting example from the field that I am most familiar with - social security. In the early 1980s the then Department of Social Security produced a very valuable little guide to all the changes that had been legislated in Australian social security since the introduction in 1908 of age and invalid pensions. All in all, including tables of contents, index, and a variety of handy summary tables, this came to a little under 170 pages to cover the period 1908-1982. The Commonwealth Department of Families, Community Services and Indigenous Affairs has now issued a follow up to cover the period since 1982. This comes in two parts - Part 1, which covers the period 1983-1993, is over 300 pages of actual description plus an index of almost 100 pages, while Part 2, covering 1994-2000, is of a similar size. That graph reminded me of an interesting example from the field that I am most familiar with – social security.

In the early 1980s the then Department of Social Security produced a very valuable little guide to all the changes that had been legislated in Australian social security since the introduction in 1908 of age and invalid pensions. All in all, including tables of contents, index, and a variety of handy summary tables, this came to a little under 170 pages to cover the period 1908-1982.

The Commonwealth Department of Families, Community Services and Indigenous Affairs has now issued a follow up to cover the period since 1982. This comes in two parts – Part 1, which covers the period 1983-1993, is over 300 pages of actual description plus an index of almost 100 pages, while Part 2, covering 1994-2000, is of a similar size.

]]> By: Invig http://clubtroppo.com.au/2007/08/27/regulation-the-world-according-to-lateral-economics/#comment-172564 Invig Mon, 27 Aug 2007 23:43:46 +0000 http://clubtroppo.com.au/2007/08/27/regulation-the-world-according-to-lateral-economics/#comment-172564 Maybe we should give the wikipedia treatment to all our legislation... Be interesting to see what it eventually becomes ;) Maybe we should give the wikipedia treatment to all our legislation…

Be interesting to see what it eventually becomes ;)

]]> By: Sacha http://clubtroppo.com.au/2007/08/27/regulation-the-world-according-to-lateral-economics/#comment-172532 Sacha Mon, 27 Aug 2007 21:27:45 +0000 http://clubtroppo.com.au/2007/08/27/regulation-the-world-according-to-lateral-economics/#comment-172532 I should have read the whole article. I should have read the whole article.

]]> By: Sacha http://clubtroppo.com.au/2007/08/27/regulation-the-world-according-to-lateral-economics/#comment-172531 Sacha Mon, 27 Aug 2007 21:23:12 +0000 http://clubtroppo.com.au/2007/08/27/regulation-the-world-according-to-lateral-economics/#comment-172531 Nicholas, apart from the 2000s (is that an estimate or the number of pages so far?), the graph looks like a very nice exponential curve! Let's go for 12,000 pages by the end of 2010. Nicholas, apart from the 2000s (is that an estimate or the number of pages so far?), the graph looks like a very nice exponential curve! Let’s go for 12,000 pages by the end of 2010.

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