The Regulation Talk: Not All Regulations Are Bad, Mad, And Dangerous

John Derbyshire once wrote about the necessity of sitting your kids down and having a talk about the black problem. In keeping with tradition, I’m broaching another uncomfortable subject: the regulation problem. But, of course, I’m not going to be writing about it as stylistically pleasing as did Derbyshire. Instead, it’s going to be a bit of a slog through.

Let’s start from the sometimes-adopted-view that we should eliminate all regulation because of the positive selection effects that would occur. The idea is that the dumbs, failing to look before they jump, will over time slowly select themselves out of the gene pool, thus allowing for positive attributes to slowly sweep through the rest of the population. I can’t think of a more apt term for this view than the naïve selection hypothesis.

The naïve selection hypothesis places a little too much trust in selection environments to get the job done—the kind of job you actually want done, the kind of job that’s desirable.

Smart people occasionally do stupid things, so to argue that selection effects are robust enough to take care of the problem just seems to miss the mark. This arrangement doesn’t necessarily select for intelligence at all. What this would select for may be extreme caution and stifled creativity—to pick just two overly apparent examples. On the other hand, regulation doesn’t save everyone. It won’t save the unsaveable, but it may save the overall intelligent who happen to slip up once—and I might point to comorbidity to explain why the hyper, high verbally intelligent tend to have competing influences which drive them away from strait-jacket Asian behavioral and mental predispositions. They’re the creatively intelligent, not simply cogs in a machine to churn out above average, yet blind, dull, and uninspiring thinkers. The side effect, of course, is sometimes self-destructive tendencies.

In other words, the naïve selection hypothesis isn’t at all satisfactory as a means to the desired end, and it fails at an exhaustive explanatory paradigm. There’s something that seems to be pervasive about behaviors that should’ve been selected out. If selection effects at first seem a little too good to be true in how they naturally have built-in mechanisms to eliminate deadweights, that’s because it is too good to be true.

Over-reliance on the naïve selection effect hypothesis (NSEH) assumes the imperviousness and stasis of the right kind of selection environment that consistently selects out the bads. In reality, bads have their own counteracting survival strategies. And there are also multiple competing selecting effects in an environment. And this especially makes sense because a simplistic ‘reproductive selection will sort it out’ view on its own completely fails to explain why there continue to exist high time-preference individuals and other sorts of anti-social behaviors—even anti-reproductive traits, at a non-trivial rate.

Difference in selection effects can be adequately illustrated in the differences between whites and Asians. The paucity of creativity and ingenuity on the Asian side is precisely one of the effects that would be generated en masse, supposing all regulations were abolished tomorrow.

Libertarians always love to have endless pity parties and gloating sessions about why some regulation X is unnecessary, unfair, and dimwitted. And they’re right. But wrong. Regulation isn’t for them, but it’s a burden imposed on them—a tax in order to protect other classes. It’s a form of forced noblesse oblige. If noblesse oblige is shrugged off, the state will step in mandate it, since the state quickly picks up on entropy conditions. Some regulation is to protect the degenerate lower classes, and the upper classes ought to accept the burden.

The reason the free market can’t solve the problem of more effectively protecting the poor is because privatized regulatory schemes require a certain threshold of agent-ability in order to navigate the territory. That is, private regulatory schemes require considerable moxie and IQ to navigate the market and play in strategic games against companies.

This might be philosophically icky and uncomfortable to libertarians, but there’s good precedent in case law, for instance; it shouldn’t be the case that companies can bury you with hundreds of pages of a terms of service agreement, slip in some nasty clause, and then hold you to a fire on it later. Even looking at it from the perspective of economic exchange, there’d be incredible amounts of time lost if you had to read each and every TOS agreement, in order to make sure that the company hadn’t slipped in some horribly onerous point. “But the market will provide!” Maybe, but maybe not.

Ultimately, the proliferation of companies to cover each and every regulatory area just increases transaction costs, since at some point, the buck stops at the individual in assessing which company to go with. In other words, an over-optimistic view of privatized regulation just pushes the problem one step further back to a deeply unsatisfying: “Oh, but we’ll have private regulators to regulate the private regulators.”

This is also a plausible reason for occupational licensing. For some economists, the pat answer is that occupational licensing is a barrier to entry: this is correct. But it’s never the case that the calculation is: barrier to entry vs. no barrier to entry, but rather it’s about the magnitude of the barrier. “But the market will sort it out—underperforming and untrustworthy companies are weeded out of the market.”

Naïve selection effect hypothesis: bad behavior, market selection effects: bad firms. Bad firms continue to exist because there is a clear advantage for them to continue to exist. The environment permits them, and the environment is a combination of a regulatory regime and the fact that there are plenty of individuals wandering around with ‘exploit me’ signs taped on their backs, who don’t always understand what strategies they’re supposed to play in iterative games. Or they’re too addicted to notice or care, anyway.

Moreover, the fact that firms have to take an inordinate amount of time to develop their reputation is inefficient and extremely costly, which is itself a practical barrier to entry. Frustrating and often insurmountable barriers to entry can exist absent the state, and this arrangement will result in fewer firms and less competition.

So why regulation? You have regulation precisely because the poor can’t play strategic games, and as a result of their deficiencies, they are preyed upon by unfriendly companies that essentially addict them to products that don’t substantially increase well-being, but that provide a jolt of utility.

And I don’t identify jolts of personal utility with a more substantial and fuller understanding of personal well-being, not to mention the well-being of society when individuals among the lower classes are tricked into wasting time, energy, and resources on unproductive activities. Lottery tickets, for example. And that’s not even factoring in goods and activities that not only dissipate, but that impose negative costs on others, forcing the rest of society to cover the entropy in grab-bag, patchy fashion.

But there’s a tension: “You say you want to save the poor, but you also want there to be a eugenic effect. Pick one.”

Fair. The permanent poor of the present are emphatically not the permanent poor of 0 A.D. But the point of the regulation isn’t just for the lower classes. It’s to protect the spontaneity and creative potential of the intelligent, so that the environment doesn’t select those attributes out. Just like it’s unwise for criminal punishments to be too low or high (since if they’re too high, that’ll incentivize more crime to make it worth it—after all, if I go to jail for ten years for stealing a loaf of bread, I might as well X, too), it’ unwise for the regulatory load to be too low or too high. Regulatory load, regulatory load, regulatory load.

Regulatory loads should neither be too low nor too high to generate optimal selection and efficiency effects. Trivial cases of good regulation include forcing restaurants to include calorie counts, as well as mandating that airlines include the entire price of the flight upfront, rather than sneaking in taxes and additional fees later. Non-trivial cases include prohibiting non-compete agreements in certain cases and mandating a certain percentage of income being saved in a private retirement account—the latter is especially important in avoiding entropy.

“So what if those individuals don’t save for retirement. It’s their choice and they’ll starve and be selected out.”

First, that it’s their choice doesn’t seem very persuasive to me, especially considering that it’s anti-social behavior. Not saving is anti-social behavior. Second, there’s an assumption that this entire glut of ‘about to be selected out’ anti-savers will just sit on their hands and voluntarily walk the plank. This is a ludicrous assumption. They will not. Entropy will force the hand of the state. Even libertarians have to understand that this sort of intervention could potentially be subsumed in a libertarian framework: liberty now, vs. net-liberty. There’s the facile analysis that the state ought not be involved in minimum wage, in private savings accounts, in marriage, in etc., because it immediately reduces liberty—but again, what it ought to be examined from the perspective  not of liberty vs. no liberty, but magnitudes of liberty?

In other words, a fiscal collapse will probably on net result in less liberty than mandating a percentage of income for private savings accounts. Apply that formula to most everything else, and there’s much more warrant for intervention to cover liberty-reducing entropy conditions from a libertarian perspective, even.

Also: “But what about the regulations that are explicitly and solely oriented towards cronyism?”

Not All Regulations Are Like That.

Lastly: “Supposing you’re right on the economics, you’re still ignoring the institutional aspect as public choice describes it.”

Public choice is contingent based on certain types of institutions. Patience: I’m slow-stepping it.

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