Very short article on impact of red tape

 

Red tape grounds our flying cars

worksinprogress.co

If it weren’t for meddling, shortsighted regulators preventing innovation in fields such as aviation, energy and nanotechnology, we would by now all have a flying car sitting on our drives – and a household income more than three times what it is to boot. That is the essential argument of J Storrs Hall, in his 2021 book Where’s My Flying Car? Is he right? wonder Ryan Murphy and Colin O’Reilly.

The claim, if true, would “blow most practical concerns out of the water”. Defenders of regulation argue that it serves legitimate and important social purposes. But the most important issue of the day, and the one deemed to make the case most strongly for the need for tough regulation, climate change, would “simply not exist” if Storrs Hall is correct. (He argues that innovation in alternative energy technologies would long ago have replaced fossil fuels if they had not been held back by excessive concerns over safety.) And even if the absence of the regulatory state caused unforeseen problems, an income three times higher for the median household “can paper over an awful lot”.

Reaching Storrs Hall’s conclusion from the evidence in the academic literature on regulation and growth does rather demand that we ignore those studies’ limitations and make some heroic assumptions. Still, even if Storrs Hall overstates his case, there remains a strong one that a culture of “anti-growth safetyism” – not simply rules that restrain capitalism for political reasons or that impose compliance regulations on firms – really is holding us back.

The most relevant paper is from 2013 in the Review of Economics and Statistics by Renard Bourlès et al. It focuses on industries in 15 countries in the OECD, and finds that product-market regulation is indeed “preventing true innovation on the frontiers of economic growth” – that is, not just holding poorer countries back, but genuinely slowing down the rate at which we discover things like cutting-edge battery technologies. The paper estimates that regulation as a whole is cutting US GDP growth by one percentage point per year. If growth had been one percentage point higher since the late 1940s, median US household income would be about $117,000 today, compared with its actual level of about $70,000. That’s a remarkable result and suggests that “big, bold policy reforms” have the potential to “put an end to economic malaise and stagnation”.