Not All Regulation Is Bad

CITY TRANSPORT REGULATORS have banned or hindered Uber and Lyft from operating, even though the public loves their convenience and drivers find the apps a good way to make money on their own terms. The Food and Drug Administration (FDA) prevents sick people from trying certain drugs that their doctors would like them to try and drug companies would like to sell them; many Americans who can afford it travel to other countries to get medicines the FDA denies them here. Banking regulation in America now prevents community bankers from making loans based on their judgment and knowledge of their would-be borrowers; the rules force lenders instead to follow formulas imposed by the regulators.

Government regulation is a problem. Through restrictions and mandates, it prohibits exchanges that peaceful people would like to make and requires transactions they do not wish to enter into. Thus it interferes with our liberty to interact as we choose.

But what do we do about it?

It won’t do simply to say, “Let’s deregulate,” meaning to get rid of regulation altogether, because everybody wants what regulation is supposed to provide us: regularity and predictability in markets and assurance of quality and safety in the goods and services we buy.

When we get in a taxi or an Uber, we want to know that the driver is peaceable and responsible and that the car is in good condition. When we take a medicine, we want to know that it is safe and effective. When we put our money in a bank, we want to know that it has enough capital that we won’t lose our savings if the institution has a run of bad luck. In short, we want goods and services to be well-regulated.

So it seems that we are stuck: Government regulation almost always denies liberty and usually causes economic harm, but we want the regularity, predictability, and quality assurance that regulation is supposed to provide. Does that mean the best we can do is to accept government regulation but try to rein it in, to limit it, to reduce the harm it does?

No. It is a semantic error to assume that means . In fact, there is no such thing as an