It’s not that this view of regulation is wrong, it’s that it’s incomplete:
The hi-tech startup with a new drug that, say, relieves Parkinson’s disease or a piece of kit that diminishes the toxicity of car exhausts will grow faster if the company can assure its buyers that its products have been tested and have passed the regulatory standard. They will grow even faster if they can assure European and American buyers they conform to European and American standards.
This is true as far as it goes. Assuming that there is a new piece of kit then being able to sell it into wider markets is of benefit.
But the basic insight of economics is that there are no solutions, there are only trade offs of varying levels of desirability. What’s being missed here is that regulation at the earlier stages of that development process will lead to less development of new kit.
From a project that has been floating around for some time - a new method of separating rare earths. Something that would be fairly useful in the present industrial environment. To test - using modern tech and knowledge - a supposition from the 1950s. No, don’t worry exactly what it is, but one of those things that in theory will work, has been shown to work on a lab bench and now needs to be tested in the tens of to hundreds of kilos at a time. So-called “pilot-plant” stage.
The cost of buying the kit to do the testing, running the test, about £250,000. The cost of gaining the relevant permissions to be allowed to run the test? About £250,000. Under certain interpretations of the REACH regulations it’s not possible to faff about in a lab, to that pilot-stage, to see what happens. Instead it is necessary to gain full environmental permissions for every experiment that is done.
This undoubtedly reduces the amount of interesting experimentation that is done on things that might work out, might not. For we’ve just doubled the cost of doing that experimentation.
Yes, regulation has a value. So does the absence of regulation. Any flat-out statement that regulation is worth it is wrong. As is any flat-out statement that regulation is not worth it. It depends upon which regulation, stating what, then a calculation of what is not happening as a result of the regulation. Yes, of course, less pollution has a value - but so also does experimentation into what can be done. It’s the balance - as with everything else in a world as complex as this one - which matters, not the insistence that “this” or “that” is good all on its lonesome.
That one of the examples used by Willy Hutton - for of course it is he - is a new pharmaceutical adds to the piquancy of the statement. For it not only costs some $2 billion to get a new drug to market these days it is also true that America’s FDA adamantly refuses to allow approval elsewhere, to other standards, to influence its decision. Each and every drug must be separately approved by they themselves. It’s one of the major proposals to make the world a better place that the Americans actually accept European - or UK, or Japanese etc - drug licensing rather than insisting upon their own system.
If only those who would rule our world actually understood our world.