Regulatory Friction is Slowing Growth

The Mercatus Center at George Mason University is the world’s premier university source for market-oriented ideas—bridging the gap between academic ideas and real-world problems. They publish a weekly newsletter highlighting current research. This week the newsletter highlights a paper by Antony Davies an associate professor of economics at Duquesne University and Mercatus-affiliated senior scholar at George Mason University on Regulation and Productivity.


A new metric provided by RegData counts the number of “binding words”—“shall,” “must,” “may not,” “prohibited,” and “required” —that appear in the Code of Federal Regulations, and cross-references those word counts with the industries to which they apply. A comparison of the RegData data to production-efficiency measures provided shows that industries that are subject to less regulation have significantly higher production-efficiency measures than do industries that are subject to more regulation. Over the period 1997 through 2010, the least regulated industries experienced 63 percent growth in output per person, 64 percent growth in output per hour, and a 4 percent decline in unit labor costs. Over the same period, the most regulated industries experienced 33 percent growth in output per person, 34 per- cent growth in output per hour, and a 20 percent increase in unit labor costs.

Does this apply to California? I downloaded AB-32 and used Adobe to find the keywords in the document using the list of binding words above:

Shall = 55
Must = 0
May not = 1
Prohibited = 1
Required = 9

This is just one of the regulations that are slowing economic growth in California. As each new regulation is published, we should apply the above protocol and see what the impact is. One of the big challenges to the Green Gang of Four Supervisors was Measure D which would require and economic analysis of all proposed regulations in Nevada County. Unfortunately Measure D was defeated.  But, I still support an economic analysis of all regulations.

The full text of Davies paper is here:Davies_Regulation&Productivity_v1

About Russ Steele

Freelance writer and climate change blogger. Russ spent twenty years in the Air Force as a navigator specializing in electronics warfare and digital systems. After his service he was employed for sixteen years as concept developer for TRW, an aerospace and automotive company, and then was CEO of a non-profit Internet provider for 18 months. Russ's articles have appeared in Comstock's Business, Capitol Journal, Trailer Life, Monitoring Times, and Idaho Magazine.
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