One of the objectives of people who favor deregulation is to design legal institutions that can promote deregulation. I have mentioned one such method in prior scholarship: Congress should establish an agency with the mission of identifying regulations that should be eliminated and the authority to repeal those regulations. For a discussion of this idea, see here.
Another idea, however, is to establish more lenient procedures for enacting deregulations than for enacting regulations.
Many people are worried about increasing levels of economic concentration in United States industries. As a result, they call for expanding the interventionist reach of antitrust law. That would mean encouraging the Justice Department to reject more mergers and bring suits against more companies alleged to have monopoly power.
One difficulty with this approach is that it is difficult to determine whether a company possesses monopoly power, let alone figure out whether a merger will result in more monopoly power rather than invigorate competition. Moreover, attacks on monopoly discourage businesses from trying to obtain monopolies, an effort that itself brings innovation and benefits for consumers.
Three policies would decrease concentration far better than expanding antitrust law: making our trade freer, cutting back on regulation, and getting out of the way of efficient capital markets. Together, these policies would make the monopolization provisions in antitrust law much less needed.
Free Trade: The most powerful competition against domestic firms with market power can come from abroad.
Donald Trump has happily announced that his administration will be dedicated to deregulation. And one very important place to deregulate is higher education. Not only will discarding regulations make education less expensive but it will help temper political correctness. Higher educational bureaucrats, not professors, are the worst offenders when it comes to forging the manacles for impressionable minds. And bureaucrats are hired and empowered in so no small part by federal regulations.
The volume of regulation in higher education is truly astonishing. It is not only conservatives who object. Here is a 2015 summary by the bipartisan task force on higher education:
Focusing solely on requirements involving the Department of Education, the HEA contains roughly 1,000 pages of statutory language; the associated rules in the Code of Federal Regulations add another 1,000 pages. Institutions are also subject to thousands of pages of additional requirements in the form of sub-regulatory guidance issued by the Department. . . . In 2012 alone, the Department released approximately 270 “Dear Colleague” letters and other electronic announcements—this means that more than one new directive or clarification was issued every working day of the year.
But classical liberal and conservatives have particular reason to object to these regulations.
Over at our sister site, the Library of Economics and Liberty, David Henderson has a post taking some issue with my view that the Obama administration’s antitrust division should not have agreed to the US Airways/American Airlines merger. He argues that the better course is not to block the merger and instead to permit the building of more airport landing slots and allow foreign airlines to fly between U.S. cities.
I agree entirely with these deregulatory measures. Indeed in prior posts, I have called for some of them. But the soundness of such policy proposals does not advance the case for this merger. The Justice Department has no power to deregulate airport construction; such zoning is controlled by state and local authorities. Even foreign airline entry is controlled by another agency: the Department of Transportation. By law and competition theory, the Department should take the world as it finds it.
As a matter of law, the antitrust merger guidelines tell competition regulators to consider ease of entry as part of assessing whether an industry is too concentrated to permit a given merger. And these guidelines make sense. If entry is easy, concentration of incumbents becomes less relevant, because they remain price takers, deterred by fear of new competitors from raising prices above competitive levels. But when entry is difficult, that crucial discipline is absent.
More generally, antitrust regulators cannot assume a world that does not exist, because that premise makes the perfect the enemy of the good.
I recently published an essay in Regulation magazine proposing a reform that would promote deregulation. The idea is to establish an administrative agency with the power to deregulate – to identify undesirable regulations passed by other agencies and to repeal those regulations.
Here is the intro:
For those who favor strong limits on regulation, the last 100 years in the United States have been disappointing. During this period, regulation grew almost continually. One of the reasons for that growth is the delegation of legislative power to administrative agencies, which allows those agencies to who write regulations with little oversight from elected lawmakers. To rein in regulation, advocates of limited regulation argue that Congress’s delegation of its legislative authority must be restrained.
Unfortunately, reforms that attempt to eliminate or limit delegation are unlikely to be enacted. The practice of delegation has become a basic aspect of our political system. Its prevalence in the modern world is no accident. It occurs because delegation is popular with so many of the prevailing powers, including Congress, the president, the agencies, and those who favor regulation.
But proponents of limited regulation need not despair. While delegation certainly promotes regulation, it can also be used to promote deregulation. Congress could create an administrative agency that is given the power to pass deregulations – rules that either eliminate regulations or move the country back to a system of property and markets. By employing delegation in an effort to reduce regulation, proponents of limited regulation will not be fighting against one of the fundamental forces of our modern political system, but instead be employing that force for a beneficial purpose.
2016 is shaping up as an election in which one of our parties will emphasize the need for growth and the other will call for greater economic equality. These concepts are often seen in substantial tension with one another. In my view, however, if the government encourages innovation we can have both growth and greater equality in the relatively short run.
As I wrote in yesterday’s Washington Times for the celebration of Liberty Month:
In this age of accelerating technology, there is no more important policy than to encourage innovation. Innovation is the primary source of economic growth. New innovative businesses, like Google and Uber, transform our lives for the better. And innovation builds on innovation, compounding growth from generation to generation. As the Nobel Prize winning economist Bob Lucas once said: “Once one thinks about exponential growth, it is hard to think about anything else.”
Innovation in the modern era also tends to make us more equal. Innovation creates a stream of new ideas that are rapidly enjoyed by the great mass of people. Material goods are scarce, because individuals can by and large not enjoy the same material simultaneously. But ideas can be enjoyed by all. To be sure, some innovations are patented, but these patents expire. And, as better innovations come along, the old patents rapidly become less valuable. That is one reason that smart phones have so rapidly become available to people of modest means. Thus, the greater the supply of innovations, the great the common pool from which almost everyone can benefit quite rapidly.
We thus need to ask all Presidential candidates what they will do to promote innovation.