Regulation Tribulation: The Monster Eating Our Pizza

A local pizza joint had a big audit by the State Labor Department, receiving a seal of approval, and even plaudits for excellent record keeping. Nevertheless, it was slapped with a $5,535 fine – because employees didn’t get enough fresh uniform shirts.

It seems regulations stipulate a fresh shirt every day someone works, even if only for a few hours.

As the local paper’s story makes clear, this kind of nitpicking and over-punitive regulation is actually very typical, with painstaking detail when employees wear uniforms, including different requirements for dry-clean outfits versus wash-and-wear. Of course, that’s not the only aspect of a business subject to such complex state regulations, not to mention county, city, and federal ones.

 Here’s the basic problem: we want regulation of businesses to prevent abuses. Even the most rabid free-marketeer agrees they should be barred from conduct that harms people – just as laws ban such behavior by individuals. But in the real world, business regulation has a tendency to metastasize far beyond that, into regulation for regulation’s sake.

Shouldn’t it be enough for the state to ensure pizza shops don’t poison customers or abuse employees? Do we really need government supervising such minutiae as dry-clean versus wash-and-wear uniforms?

But a basic tropism of “progressives” is that if something is desirable, it should be required. It’s a mindset that itches to make every nook and cranny of the world conform to its judgment of what’s good and proper. So if a daily fresh uniform shirt would be nice – why, let’s require it!

We see this everywhere. Progressives judge it would be nice for health insurance plans to cover contraception – so let’s require that – and much else. This makes simple basic health plans, affordable for the less affluent, unavailable. It also caused the recent kerfuffle about forcing Catholic organizations to fund practices they oppose. But lost in that debate was the more basic question: why force such detail on all health plans? Why not let people shop for themselves among divergent plans, to best meet their needs?

Similarly, innumerable housing regulations make all sorts of niceties and amenities required – thus, simple cheap rooms cannot be offered (adding to homelessness). And likewise day care facilities must meet a zillion requirements – making them unaffordable to many parents – who resort to cheaper unlicensed day care where all the high-minded regulations are simply ignored.

Recently, some pinhead in the federal Transportation Department decided it would be nicer if street signs didn’t use all capital letters. So the requirement was imposed nationwide! After an uproar about the excessive cost of needlessly replacing millions of signs, the regulation was apparently shelved, but not before huge sums were already wasted. (And the new signs in Albany I find less legible than the old ones.)

In all these examples, some do-gooder was trying to make society better but actually made it worse. Yet another case in point is the Sarbanes-Oxley law, aimed at Enron-like corporate abuses. And it may prevent a few. But meantime it imposed massive, costly paperwork requirements on all large businesses, and thus makes it a lot harder for small businesses to become large ones. Almost surely a cure worse than the disease.

Dodd & Frank

Dodd-Frank worsens this, another 848 page regulatory behemoth creating monumental compliance and paperwork costs for financial institutions and other businesses. We’re talking many many billions. Businesses can’t just eat such costs, they ultimately fall upon consumers somehow. Meantime, this regulatory overkill stifles innovation, distorts how the economy functions, and inhibits competition by handicapping new or smaller businesses unable to cope with burdens like the big boys.

Dodd-Frank’s basic thrust is to stop financial institutions from taking undue risks. But do we really want loans and business investments inhibited by concerns that they’ll be ensnared in a tangle of punitive government regulations? Isn’t risk taking integral to a vibrant economy? And it’s far from clear that the law will achieve any countervailing good; its huge complexity inevitably creates unintended loopholes that the wily can exploit to frustrate its objectives and even twist them to their advantage.

Sarbanes & Oxley

Back to our pizza joint, of course the cost to the owner is $5,535. What is the cost to society? A weaker economy – because over-regulation like this (and Sarbanes-Oxley, and Dodd-Frank, and Obamacare) makes it harder for any business to operate and eke out a profit. With today’s unemployment, we can ill-afford such regulatory excess. It’s way more important to have pizza parlors that stay in business and employ people than for them to get a fresh shirt every day.

This is serious. In a recent examination of regulation in America, The Economist concludes that it’s suffocating our economy, undermining America’s character as the land of free enterprise, and making it a less attractive place to do business. (For more detail, see this link, and this too.)

 Again, regulating businesses to prevent genuine abuses is entirely appropriate. But “progressives” don’t know when to stop – if regulation is good, more is better. And so we get the likes of Sarbanes-Toxic and Dodd-Frankenstein — a vicious regulatory monster eating all our lunches. That being the reality, we’d actually be better off with no regulation at all. Literally. Yes, some harm would occur. But the overall greater economic vitality would more than compensate.

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6 Responses to “Regulation Tribulation: The Monster Eating Our Pizza”

  1. S. Robinson, MD Says:

    It is highly likely that regulation is causing rolling shortages of life saving cancer drugs and anesthetics. The FDA has been upgrading regulations on manufacturing, packaging, and transporting generic drugs since 2003. The current controlling set of regulations dates back to 1985 (bar codes may not have been in existence). We don’t even have a complete set of regulations, but producers are hamstrung because they don’t know what new regulations may bring. So we can’t get drugs we need to care for our patients.

  2. mark greene Says:

    “Everything not forbidden is compulsory”
    ― T.H. White, The Once and Future King

  3. Allen Brower Says:

    Just think! Glass-Steagall was but 34 pages long, and it effectively protected us for 65 years.

  4. Death of the Middle Class? « The Rational Optimist Says:

    [...] I have written about a local pizza joint fined heavily for breaking an obscure government rule. Just recently a nearby family-owned pharmacy was cited for inadvertent paperwork mistakes. The fine? $1.46 million. The local paper’s story makes clear that protecting the public is merely camouflage for the state regulatory agency’s true mission of filling New York’s revenue coffers by draconian application of a byzantine rulebook. This is extraction. This is Economy II sucking the blood of Economy I. [...]

  5. Rats and the Law of Unintended Consequences « The Rational Optimist Says:

    [...] right this time? I have written about the Dodd-Frank disaster. Here, in fact, the bad consequences were foreseeable from the start. The unforeseeable [...]

  6. Motown Blues and the Bonfire of Liberal Vanities | The Rational Optimist Says:

    […] wages” as if you could somehow have them without good businesses making good profits. (See my past post about over-regulation harming small […]

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