Wednesday, June 02, 2004

Creating a Better World

Most readers, on both the Left and Right, are likely to be shocked that I could be outraged by the fact of regulation. The need for government regulation seems to be profoundly and widely accepted across the political spectrum. A suggestion that there be less regulation seems to signal a failure, on my part, to take certain issues seriously.

What such a perspective fails to understand is that there are legitimate alternative to regulation and that a strong case may be made that those alternatives would result in a better, happier, cleaner, healthier society than is possible by means of a regulatory society.

Politics is war by other means. Political solutions often sustain conflicts and attitudes of mutual hostility. It is hard to envision a better world based on endless conflict. Our approach to solving social and environmental problems ought to be to reduce conflict, rather than to increase it.

Pollution trading rights are an effective alternative to regulation for the control of pollution. Pollution trading rights passed in 1990 were described as "one of the most successful programs that Congress has ever put together in the environmental area" by a senior attorney from the Environmental Defense Fund. Although there will be conflict, sometimes bitter conflict, over the initial level at which pollution trading rights are set, once the rights have been set up the result is a system that encourages corporations to invest in creative technologies that constantly reduce pollution. There are better and worse ways to set up such systems; I would not claim that all pollution trading systems are equal. That said, a well-designed pollution trading right system reduces pollution more effectively, with less conflict, than do regulations. Idealists need to educate themselves on strategies like these that will allow for endless positive gains instead of endless battles.

Creativity, innovation, and entrepreneurship have improved human life far more than anyone has ever thought possible. Life five hundred years ago in Europe was similar to life in the third world today: poverty, disease, pain, and misery were the day-to-day norm for most people. Creativity, innovation, and entrepreneurship have utterly transformed everyday life for millions of people in the first world. With wisely designed institutions, all remaining social, health, and environmental problems may be solved by the same powerful formula. What people don't realize is that institutional frameworks determine which problems are amenable to creative, entrepreneurial solutions - and which are not.

"If it can't be abused, it's not freedom." The freedom to create implies the freedom to destroy. It is frightening. People will be hurt. But the net gains are dramatic. As an educator, I can create schools that will ameliorate social problems and poverty to a significant extent. But in order to do this, I would need radical educational freedoms that would, necessarily, result in crazy, whacko schools as well as mine.

Advocates of regulation are especially horrified at the notion that the drug industry would be unregulated. They envision a nightmarish world in which greedy corporations spawn a new generation of thalidomide babies. Meanwhile, the FDA has delayed or blocked drugs and devices that could save the lives of heart attack victims. Because of the FDA, between 20,000 and 40,000 people have died unnecessarily because they did not have access to medical treatments that are widely accepted in Europe. Unlike AIDS activists, who aggressively pushed the FDA to approve life-saving drugs more rapidly than usual, these heart attack victims were dispersed and often were not aware of their risk, thus preventing them from lobbying the FDA to save their lives.

Any evaluation of the value of regulation has to include not only the harms that have been prevented, but also the goods that have been prevented. Both quantities are difficult to estimate. But an overall opinion concerning regulation that does not consider both the gains and losses due to regulation is not an well-considered opinion. When, in a recent issue, Scientific American argued for the regulatory state, they failed to include the costs of regulation. 20,000 - 40,000 deaths is an enormous cost to ignore, and it is but one among many.

Upper class people spend large sums of money to go mountain climbing, which has a higher death rate than almost any activity or substance from which we receive government protection. Our entire approach to risk is highly paternalistic: Educated elites seem to believe that the kinds of high risk activities that they pursue are legitimate somehow, whereas allowing the poor to expose themselves to much lower risks is considered to be immoral.

When my charter school is damaged by regulation, or when fathers in their prime die becaue they are not allowed access to medical treatment, the harms, while relatively invisible to the public, are still available to us at the level of anecdote and statistic. Innovations that have not occurred due to regulations are completely invisible. There is reason to believe that the stillbirth of such innovations, invisible though they may be, is much, much greater than the subtle harms described above.

Auctioneers in France must be licensed. As a consequence, Ebay was initially not allowed to operate in France. Had a similar law existing in the U.S., Ebay would not exist at all. After starting out as sort of global garage sale, Ebay has become a major force in business-to-business commerce as well. Ebay has saved millions of people millions of dollars; it has allowed many thousands of people to create businesses from their homes; it is one of the most democratic marketing mechanisms on earth. Who would have imagined that a small law requiring that auctioneers be licensed would prevent a major force for global market democracy from coming into being? Even the most imaginative of us lack the imagination to envision the ways in which regulations harm us.

In order to create a better world, we need to find ways in which health, wellness, community, happiness, spirituality, transcendent experiences, and other wonderful things may be more effectively made available to more human beings. The elimination of regulations, licensing, and other obstacles is essential in order for us to find creative solutions to life's problems.

Thus my outrage at the existence of regulations is not because I am blind to social problems; it is because the regulations inadvertently prevent wonderful solutions to social problems from coming into existence.