What is "regulation"?
As the noun "regulation":
1. a law, rule, or other order prescribed by authority, esp. to regulate conduct.
2. the act of regulating or the state of being regulated."regulation." Dictionary.com Unabridged (v 1.1). Random House, Inc. 14 Mar. 2008.
As the verb "to regulate":
1. to control or direct by a rule, principle, method, etc.: to regulate household expenses.
2. to adjust to some standard or requirement, as amount, degree, etc.: to regulate the temperature.
3. to adjust so as to ensure accuracy of operation: to regulate a watch.
4. to put in good order: to regulate the digestion."regulate." Dictionary.com Unabridged (v 1.1). Random House, Inc. 14 Mar. 2008.
Starting with the basics, we regulate weights and measures, minimum-maximum limits such as highway speed, minimum qualifications such as education plus experience plus licensing exams. These forms of regulations most of us would recognize as positive "influences" on the our communities, and we quickly can imagine negative outcomes if they were removed.
The common denominator for positive regulatory outcomes is that each can trust the other to perform as expected in a given transaction ... which dramatically increases the efficiency of transactions, thereby adding measurable to the value of the regulation. If one can process a thousand transactions in the time it would otherwise take to -- let's say -- process ten, the savings per transaction is huge ... adding tremendous value to the use of the regulation.
Take for instance if we now have to examine every child's toy coming into the USA from China for lead, the increase in cost for those toys will become staggeringly high.
When the customer doesn't have to bring their own measuring cups and tapes to the store to assure the accuracy of the amount of goods being purchased; when the driver doesn't have to play bumper cars on the freeway in order to travel; ... and when the borrower doesn't have to wonder if the lender is disclosing the real terms of the loan to the borrower's level of understanding -- in other words, can once again trust his/her local banker without the help of a lawyer.
Yes, the more complex the transaction, then it is conceivable that the regulations should reflect the level of impact the failure of trust will have on the community. It is one thing to have a three shells and a pea game of chance to be taking place in a back alley, and quite another for homes to bought and sold based on a similar shell game.
However, regulations can also interfere with the efficiency of transactions. Some of the most egregious of these negative impacts stem from politically based bureaucracies imposing fees and restrictions with the clear intent to reward a political party/entity ... especially the party/entity that historically benefits most from an increase in government employees, paid for by the increase in fees.
The speed traps along highways that interrupt the smooth flow of traffic to generate the local town's revenue through tickets to non-local drivers.
Here in New Jersey we recently defeated a strong effort by the Governor to pay the costs of a State government engorged with new employees beholden to the Democratic Party with a turnpike asset monetization scheme euphemistically titled "Governor Corzine's Financial Restructuring and Debt Reduction" plan.
One more thought ... for the deregulation tribe ... the most efficient safeguards of the public interest are the rights of the whistleblower to be protected in his/her job combined with an actively vigilant and independent press.
Note: This post was written in response to a discussion I had yesterday evening with a brilliant young college student over free market concepts. I continue to think about the relevancy of the cogent arguments she made. I respect her point of view enough to explain my own in response.
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