Weekly Updates
Weekly Updates
- There is a general assumption that any government deregulation will be a positive for economic growth. This is not automatically true. Reducing government regulation can be positive for growth, but it may also just be redistributive.
- Regulation restricts economic activity directly or indirectly. Environmental regulation is a direct short-term restriction on economic activity (although it may bring long-term economic benefits). Deregulating may increase economic activity—although companies will have to make a calculation about the risk of reregulation in the future, and whether there may be reputational risks.
- Indirect restrictions on economic growth come from the fabled “red tape” of bureaucracy. This is (presumably) an unintended consequence of regulation, causing companies to spend time complying with regulatory requests or to experience delays. Reducing red tape should increase growth by lowering costs, but regulation per se does not have to be reduced. Streamlining procedures while retaining regulation will also boost growth.
- Regulation that seeks to rebalance power in the economy, like consumer protection measures, is not necessarily negative for growth. Such regulations aim to ensure the rights of one group relative to another. Deregulating here is less likely to boost economic activity, although it might redistribute economic benefits (for example, increasing profits).
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