The Economist Botches the Economics of Regulation By Recycling Discredited Proposals

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http://mediamatters.org/blog/201202240009

February 24, 2012 4:18 pm ET by David Lyle

The Economist's recent series on "Over-regulated America" (which it admits "draws on the ideas of Philip Howard," a top Washington DC corporate lawyer) gets regulation wrong by proposing "solutions" that won't work and would jeopardize the safety, health and prosperity of all Americans. It also recycles a gravely flawed study that has been thoroughly debunked by experts, but nevertheless continues to provide aid and comfort to the enemies of effective regulation.

For decades, critics of regulation - many of them funded by regulated industries who would prefer to have the option to pollute the environment, sell unsafe products and unclean food, or take advantage of consumers - have put forth a variety of justifications for sweeping deregulation. That a world economic crisis brought on by massive corporate misconduct in a deregulated industry continues to ruin lives across the globe deters them not at all.

In fact, good regulations are essential to the functioning of a complex, modern economy, and there are no simple-as-pie solutions to the difficult problems regulations address. Moreover, the arguments The Economist puts forth in support of deregulation frequently conflict with reality, and often even with themselves. The Economist gets three big things wrong: a misplaced and dangerous confidence in "simplicity;" reliance on a wildly inaccurate study of the costs of regulation; and a series of proposed solutions that would make regulation worse, not better.