The list could go on, but the point is simple — in all these areas, there are huge opportunities for growth that are being hamstrung by rules that protect existing companies at the expense of new ones. A bonfire of regulations like this would be entirely wholesome for the American economy and also help to eat away at some of the hyper-inequality that is generated by these forms of crony capitalism.
Unfortunately, this is not the kind of regulation that the Trump administration has been attacking. Instead, it has been sharpening its knives for precisely the kinds of regulation that, far from distorting markets, help to improve them. In particular, regulation is often necessary to a properly functioning market when, in its absence, businesses can make a profit by pushing costs onto others, in effect forcing others to subsidize their bottom line. In two areas, the environment and finance, these are exactly the sorts of market-improving regulation that the administration has put in its cross hairs, with the effect of increasing profits via freeloading.
The classical justification for environmental regulation is that without properly designed rules, businesses do not have to pay the true costs of their economic activity (what economists call “externalities”). If a company was making money by parking vehicles in all our driveways without paying, it would be obvious, and individuals would have a remedy in the form of trespass laws. But the costs that companies generate through pollution are widespread and hard to trace. Environmental regulations, by making companies absorb the costs they would otherwise impose on the rest of us, reduce market-distorting subsidies to polluters.
One recent example of wrongheaded deregulation is the Bureau of Land Management’s proposed loosening of Obama-era rules on methane leaks from oil pipelines. Methane is a particularly nasty contributor to global warming, but pipeline companies have insufficient incentives to prevent leaks adequately. Without regulation, their profitable move is to pad their bottom lines at the expense of the global climate. In this case, deregulation is just another word for the protection of ill-gotten gains.
Finance is another area where supposed deregulation can be a scheme for allowing a favored few to profit by pushing costs onto others. The challenge in financial regulation is to protect the public from market meltdowns while not also allowing businesses to take excessive risks with the knowledge that the government will pick up the tab if they fail. The