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The only real regulation reform is deregulation

By Darren Nelson - posted Friday, 8 June 2018

In my previous article of Regulations Are Down But Not Out, I stated that:

By the standards of competitive free markets, government agencies like the EPA can be made to operate less inefficiently but never truly efficiently. This means that the EPA, as well as other agencies and departments of the Trump Administration, should continue to focus on reducing, not 'improving', regulations in 2018 like they did in 2017.

Reducing means deregulation. Deregulation is about reducing the economic and ethical burdens on businesses and consumers. This is done through removing both elements of, and entire, regulations. The focus is firstly on the unelected executive agencies. The second focus is on the legislation from the elected representatives. The third focus is on giving the judiciary less room to 'interpret' laws and regs in an anti-Liberty manner.


Tools like cost benefit analysis (CBA) and comparative risk assessment (CRA) can help identify existing regulations, in part or in whole, where the costs outweigh the benefits. CBA and CRA can also assist in stemming the flow of new regulations on the basis of net benefits or costs.

In undertaking CBA/CRA and trying to deregulate, it must always be kept at the front of one's mind that every single regulation, currently on the 'books', will be backed by proverbial "Baptists and Bootleggers". "Baptists" will typically include certain activists along with the relevant bureaucrats and politicians; "Bootleggers" will typically include certain lobbyists along with other bureaucrats and politicians. Individuals and groups are, more often than not, a combination of both "Baptists and Bootleggers".

This creates a monetary and moral "Transitional Gains Trap". As Gordon Tullock noted:

Regulated firms often are not unusually profitable, even in industries (such as taxi-cabs) where entry is explicitly limited and prices set at supra-competitive levels. This seeming anomaly occurs because markets capitalize regulatory rents into current firm values. Gains to the first group of owners are merely transitional; later owners' gains are zero.

The implication then for deregulation is that:

Just as the first generation of firm owners expended resources to obtain rents from regulation, so will subsequent generations of owners spend resources to avoid deregulation. These costs are the flip side of the rent-seeking costs. We could presumably compensate the present beneficiaries; but the political possibilities seem to be very small.


The previous two quotes are from Chapter 3 of my 2017 publication entitled the Ten Principles of Regulation & Reform. The focus for the remainder of this article, like in the previous one, is on this book. In particular, the focus will be on the second five principles, which are concerned with the reform of regulation. The first five principles, again, are concerned with the nature of regulation. See below:

1. Regulations seldom solve problems

2. Beware of unintended consequences

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This article was first published on Town Hall.

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About the Author

Darren Brady Nelson is an Austrian School economist, conservative-libertarian and Christian who lives in Brisbane Queensland but is originally from Milwaukee Wisconsin.

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