Administrative State • Economy • Energy • Environment • Greatness Agenda • Post • Technology • Trade

Smarter Regs Can Be a ‘Force Multiplier’ for U.S. Research

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.

13 replies
  1. Victor Bolles
    Victor Bolles says:

    The problem is that most people misunderstand the purpose of regulation. The purpose of regulation is to build trust between parties in order to facilitate commercial transactions. A lack of trust creates “friction” between parties and retards economic activity. If you don’t know the producer of a piece of meat, its quality or how long it has been on the butcher’s shelf, you hesitate to make the purchase. But if you know that the product has been inspected, certified and dated you can buy with confidence. Most regulators build barriers to trade because they are afraid that they might make a mistake and allow a defective product onto the market. But they block many beneficial products from reaching the market because of this fear. We need to change the mind set of regulators in order to create your “force multiplier”.

    • kalendjay
      kalendjay says:

      Hard to say this regulation builds trust when we are now permitted to import chicken from China, which is a most untrustworthy actor in food products and fair business practices, in exchange for a long overdue quota of exports to China of US beef, which was unjustly banned from an overplayed Mad Cow scare (the cow was originated from Canada, not the US, and China as usual showed its successful penchant for blackmail diplomacy).

      Trade deals are also the product of regulation, which is necessary, but obviously corrupted by politics and lobby money.

    • Marshall Gill
      Marshall Gill says:

      I do not, and will never trust bureaucrats. Everyone is self-interested but the bureaucrat lies about it. I know that people engaged in the market do so for profit. Government bureaucrats pretend that they do it for society or whatever, rather than admitting that they are self-interested like every other human being that has ever lived.

      I don’t trust people who lie to themselves on that level and never will. You can swallow how taking your money via taxes and then “caring” for you is beneficial all that you like. You are fooling yourself.

      • Victor Bolles
        Victor Bolles says:

        The proper role of government as envisioned by John Locke is to make sure that the social contract works for all citizens in a society. It does this by enforcing the Rule of Law. It is an unfortunate fact that in all societies certain individuals will try to maximize their gain by abusing the trust of others. The purpose of regulation is to assure that the Rule of Law applies equally to everyone. It is also unfortunate that the mechanism necessary to enforce the rule of law requires a bureaucracy and therefore also bureaucrats who, by their human nature, try to maximize their own gain over that of the society they serve. The only thing we can do in a democracy is to periodically reform the system as President Trump is currently doing.

        • Marshall Gill
          Marshall Gill says:

          You are mistaken. There is no need for regulation on top of the rule of law. By definition, the rule of Law applies equally to all. Regulation is meant to assure equality of outcomes, which is much more Marx than Locke.

          • Victor Bolles
            Victor Bolles says:

            Sorry I believe that it you are in error. There is no regulation in a communist system because the owner of the means of the means of production (the communist state) cannot regulate itself. Regulation (and the unfortunate bureaucracy that comes along with it) is an essential element of the rule of law.

          • Marshall Gill
            Marshall Gill says:

            Marx not Locke. One says “society does not need the coercion of Top Men” and the other says “only through government coercion can “equality” be achieved”. You appear to have them confused.

          • Victor Bolles
            Victor Bolles says:

            I do not recognize your quote of Locke or its context.

            From the Stanford Encyclopedia of Philosophy,
            “It is perhaps presumptuous to discuss Locke’s views on coercion, since he very rarely uses the term “coercion” or its variants. But even though he seldom speaks of coercion, he believes like Hobbes that the function of the state is intimately tied to its role in securing individuals against those who would kill, injure or rob them.”

            However this quote from Locke’s Four Letters concerning Toleration seems even more to the point.
            “Where men cannot live together without mutual injuries, not to be avoided without force, reason has taught them to seek a remedy in government; which always places power somewhere in the society to restrain and punish such injuries; which power, whether placed in the community itself, or some chosen by the community to govern it, must still be in the hands of men; and where, as in societies of civilized and settled nations, the form of the government places this power out of the community itself, it is unavoidable, that out of men, such as they are, some should be made magistrates, and have coercive power of force put into their hands, to govern and direct the society for the public good; without which force, so placed in the hands of men, there could be no civil society; nor the ends for which it is instituted, to any degree, attained.”

          • Marshall Gill
            Marshall Gill says:

            My apologies, I did not mean to imply it was a quote of Locke’s. I was using the quotations to distinguish, not imply authorship.

            You see no distinction between law and regulation? It is very simple. Force and fraud should be illegal and include what you describe in the quote above. What is “best” through regulation is not what the above quote is talking about.

            The community above is each individual acting in their own self-interest, not coercive taxation hiring “experts” to decide the proper way that I should buy milk.

            Bastiat says that law is nothing more than justice. Some unionized bureaucrat’s ideas of what is “best” for their fellows backed up with the force of law is tyranny.

  2. Brett baker
    Brett baker says:

    The USDA bureaucrats know that a large number of voters hate modern ag biotech, even as they clamor to have their own genomes modified for self-improvement.

    • Kara
      Kara says:

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  3. Marshall Gill
    Marshall Gill says:

    I know, right?! If the FDA bureaucrats didn’t oversee the local grocery store, that place would sell rotten meat to it’s customers!! Corporations would literally kill their customers without the oversight of enlightened bureaucrats! They would kill ALL of them! McDonalds would literally be in competition with Stalin if not for all caring bureaucrats!! Profits would take the place of social justice!

    Killing your customers is good for business, right? It fascinates how worthless government bureaucrats are certain of the need for them to steal from the productive. If the FDA didn’t regulate meat sales, how could I know if it was fresh or not? Certainly not by looking or smelling it!! You can’t know the safety of food without employing tons of bureaucrats. What do people actually think that human beings evolved without beneficent bureaucrats guiding the way?!!

  4. hamburgertoday2017
    hamburgertoday2017 says:

    Unfortunately, one cannot ‘fix’ a regulatory regime involving biologicals without also correcting problems in the patenting of same. The farmer who does not grow GMO crops but whose field receives GMO pollen is sued by the patent owner for royalties which the patent owner freely gave away. Non-GMO farmers have been ruined by such exploitation of biological patent law.

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