If there is one thing that bugs me it is the emotional resonance the anti-regulation loon-bin has with your average punter. The current media regulation debate is just one example. Regulation = bad. Don’t ask any more question please.
Very few of the loudest voices grasp that the economy is fundamentally built on regulation. Maybe if I took away the word regulation and simply used the term ‘enforceable common customs’ we might go some way to understanding the nature of coordination and the way regulations are ENABLERS of large scale coordination of production.
What do we think basic property laws are anyway, if not regulation? Private property is a foundation regulation of capitalism. In fact we could easily scrap large amounts of regulation by eliminating private property rights.
In the media debate the freedom of press is itself a product of regulation – for example journalist and media organisation exemptions from the Privacy Act, and State level Acts enforcing journalist privilege.
We can go further. How are contracts enforced? Well we have regulations of contract. How are companies formed as separate entities from the individuals who run them – well, we have regulation for that.
Money itself is pure regulation. Nothing more than a set of rules to facilitate the exchange of value.
The best way to think about regulation is like rules in sport. Without rules there would be no sport. Without regulation there would be no economy.
You might be thinking that the economy came before regulation. But as I said earlier, regulation is simply the formalised way of expressing enforceable common customs. No one would say that any human society, from the most primitive tribes to the largest modern metropolises, has functioned without enforceable common customs. These days we just need to write these customs down and have them approved by parliament if we wish to enforce them.
So how should we debate the merits of new laws and regulations? In the same way we debate the merits of new rules in sport. What is their purpose? Is their evidence that such rules give the expected results to fulfil their purpose? What are the costs? Can they be enforced?
Take the new rules in rugby league this season. Referees (a regulatory body) need to tell the video referee (to borrow a term from the media debate, the footy tsar who oversees the regulator) their decision, and the video referee needs to find evidence to overturn the decision. To me this seems like a different, and perhaps more lengthy, regulation was needed to get a better outcome for the game.
And what would the ‘sport economy’ look like if we all were anti-regulation for the sake of it? Well, no new sport (read: industries) would evolve, because after all, they would need new rules (read: regulations).
If a new sport was created with minimal rules teams would push the boundaries until the sporting community came together to expand the rulebook to control these behaviours.
Without rules, the private sector will compete through means that society finds offensive – mergers and monopoly formation, creating negative externalities. Think of the coal seam gas boom. The laws were unclear about rights and responsibilities of miners. There was plenty of worry in the community that miners would start to push the boundaries of what society deemed acceptable and create externalities for others in the area. Some form of regulation to clearly enunciate the rights and responsibilities of various parties was required. One hopes that in the process of drafting such legislation each party affected had some say, and the possibility of mutually beneficial outcomes was addressed.
As sports teams become faster and stronger, new rules might be required to curb the effects of that strength on others – banning spear tackles, shoulder charges and other things in rugby league is one example. The same kind of regulation to curb powers of business may be required as firms become larger and more dominant in their industries.
Regulations can be good and bad – they are the rules of the game. Let’s break through the fear and debate the facts.
Please share this article. Tips, suggestions, comments and requests to [email protected] + follow me on Twitter @rumplestatskin