Regulatory Irony

An old man turned ninety-eight
He won the lottery and died the next day
It's a black fly in your chardonnay
It's a death row pardon two minutes late
--Alanis Morisette

Nice rant by Peter Schiff on the stifling nature of government regulation. He makes a major point just past the three minute mark. The primary impact of industry regs is to shield major firms from competition. That competition comes from smaller firms and potential entrants.

Regs levy an outsized burden on small firms and often suffocate them. Regs discourage entry from entrepreneurs.

Unfortunately, a stack of research suggests that small firms and new entrants supply the lion's share of innovation to an industry (e.g., Christensen, 1997).

This is the irony of regulations. It is often said that regulations are necessary to 'protect' the consumer. But it is easy to argue that the primary protection consumers get from regs is protection from a major source of innovation that could improve standard of living.

Reference

Christensen, C.M. 1997. The innovator's dilemma. Cambridge, MA: Harvard Business School Press.