Data Justice Uncategorized Do Regulations Have to Be Costly?

Do Regulations Have to Be Costly?



With the Supreme Court decision striking down a portion of the Environmental Protection Agency’s carbon regulations, some are advocating that all federal regulatory actions be subject to clear congressional approval before being issued. Such a policy would limit the federal government’s ability to regulate business activity, requiring a much higher burden of proof that a proposed regulation is needed to serve a legitimate societal purpose. This would impose an unnecessary and restrictive burden on the country’s economy.

Clearly, there are circumstances in which government should regulate business activities even though such measures may have costs for some firms and individuals. Providing consumers with important information, such as nutrition labels or ingredient lists on food products, is an example of a government-imposed cost for a firm but provides significant benefits to society and customers. Government-imposed rules to prevent insider trading or disclosure of information about companies’ operations can also benefit society even as they impose costs on individual businesses.

Weak or absent regulations can be a direct threat to the economy and employment, as financial markets may collapse (with substantial economic costs) or environmental disasters occur (with even greater economic costs). On the other hand, well-designed and strong regulations can facilitate market functioning and are often necessary to produce stable and flourishing job markets.

Opponents of regulation frequently argue that the costs of a particular rule outweigh its benefits. This claim reflects a tendency to focus on the most identifiable and immediate effects of a specific regulation. However, such an approach neglects the fact that many other factors can play a role in the economy and job creation.

The truth is that while some regulations impose costs, in most cases they do not do so to an unreasonable extent and the costs are offset by the broader economic and employment benefits. For example, the environmental regulation of power plants to reduce emissions is a costly measure for some energy companies but it benefits the public by reducing acid rain and other pollutants and by helping people breathe easier.

Similarly, the Food Safety Modernization Act’s requirement for stricter inspection of the food processing industry is a costly measure for some companies but it benefits the public by ensuring that they receive safe, quality foods. Likewise, the minimum wage increases that many states have implemented are costly to employers but they benefit workers by making it easier for them to support themselves and their families.

In short, the evidence shows that for decades the value of societal benefits from regulations has substantially exceeded their costs. The facts suggest that an emphasis on deregulation could have catastrophic results, and we must heed the lessons of the Great Recession and previous experience.