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Several years ago, I participated in a colloquium with a title along the lines of “Advancing Technology: Thinking Outside the Box.” My lecture probably was the most mundane: I proposed that smarter and more risk-based government regulation of products, processes, and technologies would act as what the military call a “force multiplier”—a capability, tool, or weapon that increases the effectiveness of your force and its ability to perform a mission.
Excessively burdensome regulation blunts technological innovation, I argued, echoing the conclusions of Progressive Policy Institute economists Michael Mandel and Diana Carew in a 2013 policy memo: “For each new regulation added to the existing pile, there is a greater possibility for . . . inefficient company resource allocation, and for reduced ability to invest in innovation.” The result, they said, is that “the negative effect on U.S. industry of regulatory accumulation actually compounds on itself for every additional regulation added to the pile.”
The economic burden of America’s accumulating mountain of regulations is almost unimaginable. A massive study by the Mercatus Center at George Mason University covering 22 industries between 1977-2012 concluded regulation has created a considerable drag on the economy amounting to an average reduction in the annual growth rate of the U.S. gross domestic product (GDP) of 0.8 percent. That translates to a U.S. economy that is a whopping $4 trillion smaller than it otherwise would have been.
There are numerous reasons for this. For a start, as regulations become more complex and burdensome, prospective entrepreneurs and managers must expend more resources compliance and have less available for innovation and corporate growth. The Competitive Enterprise Institute’s report Ten Thousand Commandments 2016 examines many of the government’s own cost estimates, which are notoriously low, as bureaucrats tend to lowball the costs and overstate the benefits of their rules. Nevertheless, the study found that federal regulation alone costs consumers and businesses at least $1.9 trillion every year in compliance costs and lost economic productivity—or more than 11 percent of current GDP. According to the author, federal regulation is, in effect, “a hidden tax that amounts to nearly $15,000 per U.S. household each year.”
The ‘Next Big Thing’ Will Be Hard to Find
Much existing regulation is either superfluous or not especially cost-effective. Regulatory excesses make it less likely an American will discover the Next Big Thing in any of the sectors where we have excelled—nanotechnology, materials science, nuclear power, pharmaceuticals, medical devices, biotechnology and agriculture, to name a few.
That’s one of the reasons some public policy researchers say excessive regulation contributed to the dismal recovery from the Great Recession of a decade ago.
Others, such as Hoover Institution economist Robert Hall, are not so sure. Speaking about a June 2017 working paper for the National Bureau of Economic Research he co-authored, Hall said, “We worked on trying to quantify the changes in regulations and their effects on productivity, but did not confirm much of a connection.”
The difficulty is it’s nearly impossible to guess what Next Big Things would have come along and significantly boosted the economy had regulation been more scientific and less onerous. Would most of the nation’s electricity be produced by newer, more efficient, safer nuclear fusion power plants? Would new materials revolutionize fields from medical devices to biofuels? Would the flu have been eradicated—thereby boosting productivity growth—by U.S.-produced “universal” flu vaccines that confer permanent immunity to all flu strains?
A recent initiative of the U.S. Department of Agriculture, which since 1987 has unscientifically and excessively regulated genetically engineered crops, severely inhibiting innovation—especially the development of new varieties of specialty crops such as fruits, vegetables, and nuts—perfectly illustrates the ignorance of the critical role that regulatory reform can play. In January, USDA’s National Institute of Food and Agriculture (NIFA) announced that it was seeking applications for its Early Concept Grants for Exploratory Research (EAGER) program, which is
. . . established jointly among NIFA, the National Science Foundation’s (NSF) Biological Sciences Directorate, and the Biotechnology and Biological Sciences Research Council of the United Kingdom to foster the development of breakthrough technologies for advancing crop breeding. Additionally, EAGER addresses the barriers to improving crop varieties, such as producing hybrids, understanding recombination, and epigenetic inheritance. This EAGER opportunity invites proposals to overcome these barriers to crop breeding in highly innovative and transformative ways . . . Emphasis should be on developing technologies that will impact crops or model crop systems . . .
The announcement went on to say that NIFA anticipated having “approximately $3,000,000 in total available grant funds for the program for Fiscal Year (FY) 2018.”
This proposal shows the profound ignorance of USDA bureaucrats, and that one part of the department hasn’t a clue about what goes on in other parts. It’s like driving a car with the emergency brake engaged.
Revising the department’s regulation to make it more scientifically defensible and risk-based would not only achieve budgetary savings down the road, it would also leverage precisely the kinds of research advances EAGER envisions. These are already in the research pipeline and are being funded by other entities in both the government and the private sector. But dismantling the superfluous bureaucracy that is the “Biotechnology Regulatory Services” would amount to a huge boost to the economy in the long run.
A Little Would Go a Long Way
In other words, a reduction in regulatory obstacles for the development of genetically engineered plants would be a force multiplier for many of the grants made under the program (as well as other research).
The refinement of regulation to make it more evidence-based and cost-effective, and less of a drag on R&D, isn’t as sexy as growing crops in the Sahara or developing an app to track objects in space in order to prevent collisions, but it could yield tremendous humanitarian and economic benefits in the near-term and for generations to come. Regulators won’t do it without significant prodding, however, so maybe major health-related philanthropies like the Howard Hughes Medical Institute, Gates Foundation, and Chan-Zuckerberg Initiative should make it part of their agenda. In addition to their direct philanthropy, their grantees would benefit from the “force multiplier” effect of smarter, more streamlined, more efficient regulation. It could be a vivid demonstration that outside the box advances need not occur inside the lab or in the field.