U.N. bureaucrats and the people running our financial institutions were not elected by anyone. Why should they be governing us?
The government's overregulation is bad enough.
C ritics of Chevron deference say it gave regulators too much power, by giving them too much leeway to interpret rules, and thus fueled the growth of the administrative state. The recent Supreme Court ruling in the Loper Bright case that overturned it will put more agency regulations at risk of being struck down by judicial review.
How much federal regulation does the typical business even face? Unfortunately, that important question is nearly impossible to answer. The Code of Federal Regulations is so large — more than 100 million words — that it would take years for anyone to read it.
But a computer algorithm can read it quickly. The Mercatus Center at George Mason University has an AI tool that counts the number of federal regulatory restrictions. It estimates that there were 1,091,860 restrictions as of January 2023.
Since there is so much regulation already, we should also ask why we need something like the environmental, social, and governance (ESG) investing movement. It is an effort led by the United Nations and some major financial institutions to create additional de facto regulations beyond what the government already does.
One of the motivating factors for ESG is that firms supposedly do not consider environmental factors when making decisions. Yet the Environmental Protection Agency (EPA) is the most prolific regulator, issuing on average more than 3,000 new restrictions each year. In total, there are 170,000 EPA restrictions that firms must consider, regardless of whether corporate managers care about the environment. ESG proponents want even stricter regulations.
Most new businesses do not survive five years. Not every idea is a good one. In a market economy, a bad idea makes the business owner poorer, so she stops putting resources toward that end.
In contrast, if a regulator enacts a regulation that does more harm than good, the regulator does not suffer any loss. Nor does he have an incentive to remove a once-beneficial regulation that has outlived its usefulness. That’s why once regulations are enacted, they are difficult to remove, and the federal code keeps growing.
The cost to a business of a single restriction may be low, but a million-plus regulatory restrictions can combine to create substantial costs. That, in turn, leads to fewer jobs, goods, services, and innovation. We get a less dynamic economy and slower economic growth.
Regulators are human and thus look out for their self-interest. That means growing the agencies where they work and expanding their authority. Regulatory agencies don’t typically ask Congress to limit their authority or reduce their funding.
Regulators are likely to believe strongly in their agency’s mission, which is why they work there. And regulators with a strong sense of mission tend to issue more regulations.
So, given all this, could anything curb the growth of the administrative state?
One helpful change would be to require regulations to be reauthorized, say, every five years. When an agency proposes a new regulation, it conducts an analysis to show that the estimated benefits outweigh the costs. But regulators, like everyone, do not have perfect foresight. Once a regulation has been on the books for five years or longer, its costs and benefits should be more understandable. Although some regulations are likely beneficial to society, others could fail their subsequent cost-benefit analyses and be discontinued.
We can also do without the parallel administrative state ESG advocates are trying to create. Institutions that issue ESG ratings are not required to conduct cost-benefit analyses and show that their favored causes improve shareholders’ — or society’s — well-being. Nor are the people issuing ESG ratings experts on the numerous issues they are attempting to influence.
Most importantly, as the Loper Bright decision asserts, regulators must answer to elected officials. U.N. bureaucrats and the people running our financial institutions were not elected by anyone. Why should they be governing us?