Unintended Consequences

Sometimes the cure is worse than the disease. A common response to a manifested risk is often more government regulation. The resources required to regulate can often be just as great or greater than the underlying risk. Jonah Norberg points out

"The estimated cost of the bailouts of and guarantees to the American financial system is $1.9 trillion dollars. That´s a horrible number. Perhaps it even leads you to demand regulation to make sure it "never happens again"?. Until you realise that the federal regulatory compliance cost for American enterprises is $1.17 trillion - every year."

Every year is the key phrase in that sentence.   The cost to regulate risk across its broad spectrum must be enormous.  From financial to tranpsort to food safety to public safety.  The list goes on.  All individually worthy possibly but collectively out of proportion to the underlying risks we face.

Opponents of this view will point out that the risks will be even greater if these regulatory systems are not in place.  Fair comment.   A proper risk assessment will not take that on good faith. It has got to be backed up by evidence rather than supposition.   Maybe looking at the costs as a whole will shed new light on what we gain and what we lose.  Compliance is like insurance. It spreads the risk and the cost across society but it also requires its own margin and that can be measured in lost opportunity, reduced entreprenurial activity and an increased expectation that the Government is responsible for protecting us from every risk. Good regulation is risk based and not a blanket for all.