TALES OF OUR TIMES: Prosperity Builds On Regulation

Tales of Our Times
New Mexico Citizens
for Clean Air & Water

Prosperity Builds On Regulation

A popular sound bite says “kill regulation” so prosperity will rise. Regulation is likened to a stalking horse brought out to snatch away property rights. Yet in history, property rights are created by regulation. Why do these stories sound so conflicting?

As usual, the message heard depends on which scraps of the whole story are told. Huge amounts are left out in boosting policy preferences.        

The pride of our nation is the rule of law. “Rule” means regulation. Rules and laws are set in public venues, with the participation of all interests. 

Property rights are built on standardizing. How big is an acre of gullied land and an acre-foot of water? What does a dollar mean? Until buyers and sellers have the same answers, building business with distant strangers is not possible.    

So government standardizes and property rights take hold.    

Businesses find new customers. Along about the fourth or fifth transaction, a sharp deviance in measured weights salts the story. To clarify property rights, government standardizes more … and adds scale checkers.    

About the 21st transaction, a buyer orders “12 big pigs,” but the seller swears he heard “10 piggies.” People think property rights need clearer definition. In response, the contract is conceived.

Government venues define legal contracts in volumes of rules. Government creates a giant system to catch cheaters. We know it as the court system. The system has courthouses, judges, trials, rulings, oversight and penalties. More government role gives property rights more clout.

Once government assures that contracts can be enforced, prospects soar for business. 

Affirmed property rights undergird new engines of prosperity. The engines take many forms, such as loans, credit, collateral, insurance, partnerships, companies, and national markets. All depend on records of reliable ownership that are made trustable by a court system.    

The large design has great power to raise personal and national wealth. Again the irony. A steady hand of government is key. Firm regulation is the bedrock.     

As time goes on, the business interests that depend so heavily on government rules call the concept a killer of prosperity. Politics decides which parts of the picture are forgotten and which are brought to mind.    

All sides, not just one, miss most of the picture by staring at a patch or two.    

My text differs from the patch pieces, so which picture is truer? A way to find out is to look at the world. Look at nations that are much poorer than the U.S., whose citizens are so much poorer than Americans. Think about the Republic of the Congo, Myanmar and Zimbabwe. They are poorer not because they have more regulation than we do. It is that they have less. 

Citizens cannot prove what belongs to them. They cannot protect their property from thievery, fire or pollution. The central rule of law, the pride of our country, is too weak.   

When property is chancy, the credit and insurance that are vital to business grow iffy. Don’t take my word. Ask an economist or entrepreneur. Less rule of law, enforced less, does not give people and businesses more opportunity. It gives less. Less developed regulation does not yield more freedom. We find less.

Don’t get me wrong: more regulation does not assure more prosperity. This idea is just as foolish as the frequent line that regulation kills prosperity. The crux is in the whys and hows.

The political words today are, “Focus where some regulation, at the moment, seems to help another interest more than mine.” 

Left out of the debate is, “Keep in mind that prosperity for me and you is built on the bedrock of government rules.”    

The effect on market goods is a dying demand for bumper stickers that proclaim, “Regulation Requires Judgment.”