Creating Rules to Encourage Better Regulation in California

This report should stimulate the demand for economists!  If you read the main report, take a look at page 25. In a nutshell, this report wants California to hire a “Cass Sunstein” as our regulatory czar.   If  regulators anticipated that a  wise man such as  Mr. Sunstein (or Dr. Kahn?) will be taking a close look at the regulations that are proposed, they would be more likely to only propose cost effective regulation.   If California had a consistent and logical process for evaluating the economic consequences of its regulations, then we would make “better” decisions and some Republicans might be more pro-intervention.

My hope is that such a change in the “rules of the game” would lead regulators to be pro-active in considering both the costs and benefits of the regulations they are proposing and to anticipate any nasty unintended consequences.  I want to see greater regulator honesty about the “known unknowns” when new regulations (such as California’s AB32) are rolled out.   We need to encourage pilot programs and running experiments to help regulators learn about what works and doesn’t work in the real world.

Author: Matthew E. Kahn

Professor of Economics at UCLA.

7 thoughts on “Creating Rules to Encourage Better Regulation in California”

  1. I am no enemy of rationality, but is it rational to believe that a rational evaluation of intervention would cause “some Republicans [to] be more pro-intervention”? There used to be Republicans like that–skeptical of intervention, but persuadable. Those Republicans now constitute the right wing, and maybe the center, of the Democratic party.

    If you are a modern Republican, you are either an oligarch or a stewing mass of ressentiment. Oligarchs are rational, but–having access to Montana ranches–might use a different environmental cost-benefit analysis than the rest of us. The ressentiment brigade is opposed to rationality as a matter of principle.

    1. Wait, but how could job-killing, big government regulation be “cost effective”? That’s jest keerazy.

  2. The unstated premise of Prof. Kahn’s post is that those who propose new regulations, or defend existing regulations, have typically not thought through the costs.

    This is a canard.

    Those *cough*movement*conservatives*cough* who oppose regulation are, by-and-large, opposed to regulation in principle; no improvement in outcomes is adequate in their eyes to justify the existence of a regulation that produces that improvement. They may hide behind talk of “cost-effectiveness”; but their actual goal is almost always the complete removal of the regulation itself. One can see this in their lack of enthusiasm for measures that only mitigate the enforcement and compliance costs of regulation, and their utter lack of support for increasing the outcome value of regulation — either of which would improve cost-effictiveness.

  3. he regulations that are proposed, they would be more likely to only propose cost effective regulation.

    Costs to whom? And measured when?

    Come now. I saw what you did there.

  4. Absent a constitutional amendment that tosses California’s ballot initiative process and all the chaos it’s already engendered out the window, a regulatory czar is not merely pointless; it’s absurd beyond the ability of language to describe how absurd it is.

  5. “…and some Republicans might be more pro-intervention”

    For this to occur, Republicans would have to accept that regulation has both costs and benefits. Which group(s) on the right do you believe will be making this argument? It won’t be talk radio or Fox News. The experience of Bob Bennett suggests it won’t be the politicians. What about conservative think tanks? I don’t see any recent evidence that they are willing to advocate on behalf of regulation, ‘good’ or otherwise.

    Could any of these groups change their perspective? Perhaps, but I don’t see why they have any incentive to do so. The largest financial backers of the conservative movement directly or indirectly bear the costs of regulation while only seeing incidental benefit.

    Dr. Kahn, like every economist you have certainly heard the old jokes about assuming a can opener. In many of your posts you make exactly this mistake. We are (unfortunately) at a point where you can no longer just assume a reasonable and influential partners on the right. You have to make the case for exactly who would provide this support and why.

    If you think I’m being too cynical, here is an easy one:
    After a decade of cuts, the federal government desperately needs additional revenue.
    There are currently deficit reduction talks taking place between the two parties.
    Name the conservative leaders (at ANY LEVEL) who have expressed a willingness to negotiate honestly over revenue increases.

    If you can’t answer the real world example for revenue, why would the hypothetical of regulation be any different?

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