Measuring the costs of regulation

We’re entirely willing to believe that the net result of regulation is positive. Well, of some regulation at least, just as we’d be likely to insist that the net result of some other regulation is negative. However, the thing we would insist upon is that it’s the net price which is the important thing. That is, that regulation does have a cost as well as a benefit and it’s the balance between the two that is the justification.

This particular example is about fentanyl but the point stands more generally:

Wuhan’s lockdown represented a profitable “business opportunity” opportunity for others, say analysts. “Criminal enterprises shift and adapt much quicker than legitimate business or governments,” said Adrian Cheek, a British cyber-threat intelligence analyst and former police investigator who tracks online drugs trafficking. “Lockdown has been an opportunity for many.”

The cost there of regulation is that slowness in shift and adaptation. Which really is a cost, given that the world changes all the time and a slowness in adapting to such change is a price that is paid for the regulatory structure.

To move to a less controversial example than opiates. Recently the entire commercial feeding structure of the country closed down. Office canteens, restaurants, caffs providing the Full English, shut overnight. That significant portion of the nation’s consumption of calories had to be provided through the retail path of supermarkets. All things considered that switch was done blindingly well.

Yet there were costs here, costs which prevented it being done even better. The packaging for that commercial distribution network - more specifically, the food labels upon it - meant that it could not be simply shifted over to the retail channel. Supermarkets were, for a time at least, bereft of baked beans while catering packs of exactly the same product could not be sold in their place.

Food labels might even be a net plus to society but that does not mean they are costless. The same is true of any and every regulation which is why we need to be so suspicious of the imposition of more of them.