Saturday, April 8, 2017

GDP of Regulation

Come out of things unsaid
Shoot an apple off my head, and a 
Trouble that can't be named
A tiger's waiting to be tamed

Study by the Mercatus Center at GMU estimates that the cost of regulation in the US amounts to about -0.8% of GDP annually. Might not sound like much, but the cumulative drag from 1980 thru 2012 adds up to about $4 trillion, or a loss of about $13,000 per capita.

That $4 trillion would have made the regulatory state the 4th largest economy in the world by 2012.

Because the study focused on the cost of lost investment for productivity/innovation purposes as resources are diverted for regulatory compliance, my sense is that the study's estimates are conservative. They may not adequately capture, for example, the effects of lower entrepreneurial entry into industries with high regulatory hurdles, or transfer of productive resources to less fruitful countries to avoid high regulatory regimes.

The actual cost of regulation could be double these estimates.

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