The Cumulative Cost of Regulation

A recent study out of George Mason University concludes that “[b]y altering investment decisions and disrupting the innovation that comes from investment in knowledge creation, regulations have a cumulative and detrimental effect on economic growth—and, over time, have a real impact on American families and workers.” The key findings:

  • If regulation had been held constant at levels observed in 1980, the US economy would have been about 25 percent larger than it actually was as of 2012.
  • This means that in 2012, the economy was $4 trillion smaller than it would have been in the absence of regulatory growth since 1980.
  • This amounts to a loss of approximately $13,000 per capita, a significant amount of money for most American workers.

Check it out.

2 thoughts on “The Cumulative Cost of Regulation”

  1. You seem to be perpetuating the myth of trickle down economics by implying that it would be 13k more in the average American’s pocket. If we’ve learned anything since 1980, it’s that trickle down doesn’t work. The bulk of economic benefits of non-regulation go to the wealthiest 1%.

  2. I think the biggest question is: did you read the study? If you’re going off of nothing more than the footnotes or even the summary page, then this is going to be rather pointless.

    “You seem to be perpetuating the myth…”

    Actually, I’m reporting the findings of a brand new study done by economists from Duke and GMU. You’re welcome to dispute their findings.

    “…trickle down economics…”

    “Trickle-down economics” has become nothing more than an economic bogeyman: “No such theory [i.e. trickle-down] has been found in even the most voluminous and learned histories of economic theories…Yet this non-existent theory has become the object of denunciations from the pages of the New York Times and the Washington Post to the political arena…It is a classic example of arguing against a caricature instead of confronting the argument actually made” (Sowell, “Trickle-Down” Theory and “Tax Cuts for the Rich”. Stanford: Hoover Institution Press, 2012, 1-2).

    “13k more in the average American’s pocket”

    Well, per capita is the average per person, though we shouldn’t interpret this to mean that everyone’s paycheck across the board would go up by $13,000. This is about economic growth. Regulations are expensive. Those costs impact businesses and, consequently, people. The costs of regulations can prevent small businesses and entrepreneurs from getting off the ground, thus preventing job creation and stifling the often price-reducing, quality-improving benefit of competition. Bigger businesses tend to pass these costs on to both workers and consumers, resulting in stagnant wages, job loss, and/or higher prices. This study in particular deals with the effects on firm investments, efficiency, and innovation.

    “If we’ve learned anything since 1980…”

    …it’s that increased economic liberalization and growth has lifted millions of people out of poverty worldwide.

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