A Swing Towards More Regulation

A Swing Towards More Regulation

Trusting the marketplace is “out” and regulation is “in.” So suggests a front-page Wall Street Journal story on March 24. “The idea that less regulation is better for the economy has held sway in Washington since the Reagan administration,” the story begins. “Now that consensus is crumbling ….”  The writer points to the housing “crisis,” turmoil on Wall Street, and safety challenges involving food, drugs, and toys as the driving forces for more regulation.


Of course, political pendulum swings are inevitable. The reason it swung towards more market freedom in 1980 is the same reason it will eventually swing back: Americans realize that government “solutions” and political oversight don't necessarily equate to higher living standards. Brian Wesbury, chief economist at First Trust Advisors, points out in his "Monday Morning Outlook" on realclearmarkets.com that politicians and regulators often screw things up. For example, the Fed’s keeping interest rates at surreal levels through the early 2000s was central to the housing bubble that just burst. And, as manufacturers well know, restrictive and costly energy and environmental regulations are a significant reason for today’s high cost of fuel in this country.


Is our free enterprise system perfect? Of course not. But competition, property rights, and a trustworthy legal system that punishes misconduct and negligence are a more proven recipe for long-term prosperity and increased living standards than more economic regulation.

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