The Cost of Regulation

In my Mises Daily “A End to Austerity” I refer to a study that estimates that eliminating the job of one regulator causes a surprising large number of job to be created and a large increase in GDP. Here is a link to that study.


Abstract: With a sluggish economy, high unemployment, and unprecedented
deficit spending, growing the economy and curbing federal spending are top
priorities in Washington. A now-popular target for reform is regulation, which
even President Obama claims to have “stifled innovation” and to have had “a
chilling effect on growth and jobs.” In this POLICY BULLETIN, we use fifty years
of data and modern econometric methods to provide an estimate of the
relationship between government spending on regulatory activity and economic
growth and job recovery. We estimate that reducing the size of the regulatory
bureaucracy may grow the economy and invigorate the labor market. Even a
small 5% reduction in the regulatory budget (about $2.8 billion) is estimated to
result in about $75 billion in expanded private-sector GDP each year, with an
increase in employment by 1.2 million jobs annually. On average, eliminating
the job of a single regulator grows the American economy by $6.2 million and
nearly 100 private sector jobs annually. Conversely, each million dollar increase
in the regulatory budget costs the economy 420 private sector jobs. Accordingly,
as Congress and the President struggle with the difficult decisions of how to
shrink federal spending, an excellent place to start would be to investigate
responsible cuts in the size of the federal regulatory budget. That said, while
regulation imposes costs, regulation may also have social benefits, and this fact
should be considered.

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