The new edition of the Economist has some rather entertaining articles on regulation in the US (the cover story: “Over-regulated America”). Little in the articles will come as a surprise to scholars of regulation. But there are many entertaining examples of regulatory sprawl and complexity. Some examples:
“The Federal Railroad Administration insists that all trains must be painted with an “F” at the front, so you can tell which end is which.”
“Every hour spent treating a patient in America creates at least 30 minutes of paperwork, and often a whole hour. Next year the number of federally mandated categories of illness and injury for which hospitals may claim reimbursement will rise from 18,000 to 140,000. There are nine codes relating to injuries caused by parrots, and three relating to burns from flaming water-skis.”
Or Dodd-Frank: “At 848 pages, it is 23 times longer than Glass-Steagall, the reform that followed the Wall Street crash of 1929. Worse, every other page demands that regulators fill in further detail. Some of these clarifications are hundreds of pages long. Just one bit, the “Volcker rule”, which aims to curb risky proprietary trading by banks, includes 383 questions that break down into 1,420 subquestions.”
The growth in regulation has been moderated in the past three decades, thanks in part to the introduction of cost-benefit-based regulatory review at the Office of Management and Budget’s Office of Information and Regulatory Affairs. OMB review has become far more rigorous and transparent overtime. In many cases, there is clear evidence that benefits exceed costs. However, the review process remains focused on “significant” regulations, ignoring the aggregate significance of seemingly insignificant regulations. Moreover, there is little in the way of systematic analysis of existing regulations, many of which did not meet the significance criteria imposed under the prevailed executive orders (EO 12291 under Reagan-Bush, EO 12886 thereafter).
President Obama’s OMB has called, quite sensibly, for greater efforts at retrospective analysis (e.g., rather than relying solely on the analysis of significant regulations ex ante, when much of the analysis is based on sophisticated guesswork). But there is little to suggest that this will ever become a priority for agencies or that rule revocation—if taken seriously—would be tolerated by Congress, given that most regulations—even the most absurd—have constituencies.