Innovation vs Regulation

Alex T has some interesting things to say about innovation and regulation:

There are good regulations and bad regulations and lots of debate over which is which. From an innovation perspective, however, this debate misses a key point. Let’s assume that all regulations are good. The problem is that even if each regulation is good, the net effect of all the regulations combined may be bad. A single pebble in a big stream doesn’t do much, but throw enough pebbles and the stream of innovation is dammed.

Building in the United States today, for example, requires navigating a thicket of environmental, zoning and aesthetic regulations that vary not only state by state but county by county. If building a house is difficult, try building an airport. Passenger travel has more than tripled since deregulation in 1978, but in that time only one major new airport has been built: Denver’s. That airport is now the fourth busiest in the world. Indeed the top seven busiest airports are all in the United States, not so much because we are big but because without new construction we are forced to overcrowd our existing infrastructure. The result is delays and inefficiency. Meanwhile, China is building 50 to 100 new airports over the next 10 years.

It would appear that regulations intended to keep life from getting worse might also keep life from getting better. I wonder if someone has suggested a way of prudently judging the regulation/innovation trade offs.

No Regulations - Do as you please!

Image by Flying Cloud via Flickr

There must be some idea more nuanced than “all regulation is good” or “all regulation is bad”. Today, it looks like we’re flying by the seat of our pants.


One response to this post.

  1. There definitely needs to be a balance. Regs can lead to innovation and even create industries where there were none. Catalytic converters for example. Clean Air Act regs actually led to a whole market for production of these additions to car exhaust systems. Power plant emissions regulations led to a whole market for smoekstack scrubbers with American companies providing products globally.

    I’m not saying all regs lead to job creation but their implementation are hardly ever as disastrous as many industries predict. There does need to be on going review of regulations to keep them updated and make changes based on efficiency.

    I guess the keyword here is “Balanced”.


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