What made Milton Friedman so famous was not just that he was
smart, but that he had a way with words that made his views on market economics
so clear and easy to understand (often using pithy quotes), and once understood
they are very hard to argue against. Here is my attempt at a useful pithy
Regulations are a
force of destruction. A business seeks to provide a product or service for
a price. Anything that drives up costs must be passed on to customers, or taken
out of profits. No profit, no business. If you are running a business, a
regulator can fine you, imprison you, or shut you down. All of those reduce your
productivity, meaning it destroys value.
Defensive actions in an effort to ensure compliance, such as hiring a CPA to
make sure the accounting is done right, hiring ANY sort of P to make sure Q is done
in accordance with the law that no normal person can know all of, destroys
productivity. Any decision to not
pursue a productive action because regulations will kick in forcing other
actions that will make the whole thing profitless or worse, is the corrosive
destruction of regulation.
That is where we are today. Regulations restrict, suppress,
repress, confine, compel, confuse, hold back – so many regulations that
business is stifled, dragged down, and killed. Why?
Cronyism – business with “friends in high places” shutting
out less connected folks who could provide a better deal, by “helping”
legislators write the regulations to favor them.
Protectionism – companies seeking regulations to block
others in the same business, or to block entry into the business by “grandfathering”
all the existing businesses.
Regulations as a business weapon – in too many places, it’s
not the company with the best product, or best price, but the best legal
departments to sue competitors, win.
When a company says the highest
ROI of any business investment is lobbying
congress, it’s time to start cutting back on the number of laws and
But, perhaps worst of all, Legal and OK get confused – Too many companies are so buried in regulations that
they get to the point where if the lawyers say something is legal to do, they assume it must be OK to do; they no longer have their conscious
constraining their actions, but only the technical letter of the law, and there
is a HUGE pressure to keep the business alive and profitable (kids, mortgage,
etc). This erodes and destroys two essential components of a free market
economy and a free society: trust and respect. So, not only does many regulations
destroy businesses, they destroy people and any culture of freedom and enterprise they have.
To be sure, some regulations are
needed – but I’m pretty sure we are well past the point of the necessary
minimum to ensure an operational economy and thriving culture.