Proponents of regulation often look primarily at the “benefits” of such regulation, but in every aspect of regulation there is a trade-off between pushing people towards a “desired” behaviour and the price of doing so, be that the cost of enforcement or unintended consequences in terms of desirable behaviours which are accidentally discouraged and undesirable behaviours which are accidentally encouraged.
We have previously discussed how government intervention is not just wrong because the very idea of having the government coercing us towards certain behaviours is anathema to libertarian philosophy, but also because government intervention is not able to improve on voluntary economic decisions.
But that, of course, does not mean that everything the government does should be left without “regulation”: a justice system, for example, is necessary for any society to function. This, therefore, provides a good starting point for our discussion: let’s look at the “regulation” of killing our fellow citizens. In all civilisations, the unjustified taking of a life is deemed so undesirable a behaviour that it is outright prohibited and heavily sanctioned (leave aside for now what is “justified”, this is a whole other can of worms where a libertarian “hard property rights” position is somewhat outside the mainstream). But of course, there are costs: that of policing, maintaining a system of justice and executing punishment of offenders, not to mention the occasional wrongful conviction – a heavy cost, especially if you value the individual above the collective. The UK spends about £34bn on public order and safety, 4.5% of total government expenditure (add to that private security), and politicians constantly argue over how best to punish convicted criminals to balance financial cost, reoffender risk and victims’ need for retribution. Criminal justice is an area where cost/benefit analysis is constantly considered, despite the obvious difficulty in quantifying the benefits of crime reduction.
Alas, much of government intervention is not so. An example is environmental regulation, currently a topic where some politicians call for a dismantling of our entire economic system in order to stave off a “climate emergency”. With swathes of the population clamouring for draconian changes to the way we live, forced on us by government regulation, generally missing from the debate is any serious discussion of how much it would cost to achieve rather arbitrary ambitions like the Paris Accords “2 degrees” goal. But the work by Bjoern Lomborg’s Copenhagen Consensus group suggests that environmental regulation is a monstrous mistake, yielding very little actual benefit at huge cost. Environmental campaigners suggest we can’t afford not to do act, as people’s lives are at risk. While this is, largely, almost certainly a massive exaggeration, it is of course also not an excuse not to look at the cost. Because the trade-off between saving money and saving lives is one that is having to be made every day, by governments as well as by corporations.
This is perhaps most glaring when it comes to arguably the most destructive government “regulation” of all: the war on drugs. Enacted to protect those who are weak of will from falling prey to addiction, the list of drawbacks is endless. For starters, no better example exists of how the existence of laws breeds crime: the illegal drugs trade is a business worth several hundred billion US dollars, which is fought by spending other hundreds of billions. But it is the human cost which is the worst: countries – most famously Columbia and Mexico – have seen whole communities destroyed by drug related crime and cities like today’s Chicago have neighbourhoods that are literal warzones due to drug gang turf wars. Incarceration of millions, alienation of users, the list of damaging unintended consequences goes on. But politicians simply ignore the disastrous secondary effects in order to be able to claim to be doing something about drug use.
Most corporation apply the “as low as reasonably practicable” principle to reduce risk, meaning that risk is managed to where the cost of further reduction is disproportionate to the benefit. But implementing such a system requires a clear definition of risk appetite and thorough cost/benefit analysis, to strike the right balance between too much and too little regulation – and for most government policy this analysis is simply skipped or considered only fleetingly, because the real benefit of regulation is the electoral appeal of being seen to deal with behaviours which are deemed by the general public as being undesirable. Easy talking points about being firm on policy wins out over detailed risk/reward analysis. The losers are the very populations that are gullible enough to elect politicians who promise to deal with problems they don’t understand.