1\ A random thread on "Rent Seeking", a phrase often used but seldom pinned down
The example I'll use is electrical products, because I'm doing a project on them
I'll argue electrical safety regulations are too stringent and that, paradoxically, this leaves consumers less safe
The example I'll use is electrical products, because I'm doing a project on them
I'll argue electrical safety regulations are too stringent and that, paradoxically, this leaves consumers less safe
2\ What kind of ogre is against safety regulations on cables? Who can be against fires and electric shock?
It seems obviously good that we have legal restrictions on safety in cabling, and obvious that consumers or their well meaning proxies asked for these protections.
It seems obviously good that we have legal restrictions on safety in cabling, and obvious that consumers or their well meaning proxies asked for these protections.
3\ But it turns out to be a myth that consumers have anything to do with the process. If you dig into the history of safety regs for electrical products, consumers have little to do with it. The reason is obvious: had they wanted it, the market would happily have provided it.
4\ I've spoken to CEOs at a dozen cabling companies around the world, and to numerous members of standards accreditation bodies. Without hesitation, they will tell you a prime competitive strategy is to lobby for local "safety" regs that keep out imports. They say this with pride
5\ In solar, in mining, in construction, the story is always the same: "Our cables aren't functionally different from the imports, but we managed to rewrite the safety rules so that it's expensive or impossible for imports to jump through the hoops"
6\ The first result is that consumers are forced to pay for more safety than they want, which leaves them less able to buy safety elsewhere. All life is tradeoffs, and if you don't believe there's such thing as "too much" safety, ask yourself why you ever get in a car.
7\ The 2nd result is that the market is balkanized into many regulatory fiefdoms. Smaller markets means less scope for division of labor, which means less scope for innovation, which means fewer safety innovations. Consumers are forced to be too safe, which leaves them less safe!
8\ Why do legislatures and accreditation bodies acquiesce? Because the benefits from protective regulation fall on a concentrated minority, while its harms fall diffusely on the populace
A small interest group can keep you in office
This is the insight from Public Choice Theory
A small interest group can keep you in office
This is the insight from Public Choice Theory
9\ I made this about cables because it's a space I know well enough to speak authoritatively. But the same pattern plays out in other consumer products, in airplanes, in drug safety, etc. The Pure Food And Drug Act of 1906 being a good example re: imports.
10\10 If there is one thing to remember, it is that economics is about tradeoffs, and if someone forces you to be more safe than you'd like, this can leave you *less* safe, both by taking away choice, and by impeding the innovations of the market.
