Remedies for Harmful Regulation

On this page, we have listed possible remedies for harmful regulation that others have proposed or that have been implemented in different jurisdictions at different times to some degree or other. As with other pages on this Iron Law of Regulation website, this page is a work in progress and we welcome suggestions and experimental evidence—including from natural experiments—that contribute to knowledge on how harmful regulation can be reduced and avoided.

  1. Do nothing
    Technological change and social innovations tend to facilitate trade between willing buyers and sellers making existing regulations irrelevant or unenforceable. Jobs and wealth tend to flow states and nations with fewer regulations. This process is, however, likely to be slow and patchy in providing results. 
  2. Educate citizens on the effects of free markets on welfare
    A widespread understanding of the principles of economics and an appreciation of the importance of experimental evidence from tests of multiple reasonable hypotheses should help to inoculate citizens against the allure of regulation. In practice, most students are taught “folk economics,” which Rubin (2003) defined as “intuitive economics of untrained people”. Rubin (2014) proposes that the antidote for “emporiophobia” is to teach students about the fundamental role of cooperation in markets and the essential moral character of free markets. 
  3. Follow a constitution that limits the role of government
    A constitution that makes it illegal for governments to restrict individual freedoms and restricts law making to elected officials seems feasible. We know from the U.S. experience that success depends on the courts and legislature consistently supporting the constitution, and that support is unreliable. For reference, please see Reason‘s “The Tyranny of the Administrative State” (link)
  4. Provide legal support and appeal rights for victims of harmful regulations
    Start with cases where people of all political beliefs agree that a regulation is ridiculous. The Institute for Justice, among other institutions, has used this strategy successfully. 
  5. Insure against fines and prosecutions for failing to observe bad regulations
    Charles Murray proposes the Madison Fund to insure organizations that act responsibly but that are nevertheless fined or prosecuted for contravening ridiculous or harmful regulations. Logic suggests this is a promising approach, but we are unaware of any tests. 
  6. Require evidence that a regulation improves general welfare
    Require compelling experimental evidence that shows that a specific regulation substantively increases net general welfare, while avoiding harm to individual liberties, relative to no regulation. To avoid bias, reviews and challenges should be independent of the regulator. Conditions change and new evidence emerges, so it is also important that regulations are subject to challenge at any time.