Death by Regulation

From Innovation to Stagnation: The Hidden Costs of Over-Regulation

"Piling rules on rules hardens the arteries of civilization,
and makes you capable of doing less and less."

Elon Musk

In addition to the generalized surveillance we saw in the previous series of articles, over-legislating is a path that more and more nation-states are taking in an attempt not to kill the disruptions that threaten them, but to nip them in the bud, to make them conform, to the point of emasculating them and rendering them harmless... all at enormous cost to society (and in accordance with the 4th principle that history teaches us : States that win temporarily by succeeding in banning or stifling a technology lose in the long term because they do not benefit from the fruits of that technology).

We'll be exploring this trend in detail in this new series.

Because beyond laws, there are regulations. The major difference between the two is that in democratic countries, laws are passed by elected assemblies, whereas regulations are interpretations of laws and their application, decided by government agencies¹ or by national or international authorities.

Regulations are therefore easier to implement in society, as they can be decided by a few high-ranking bureaucrats, outside any democratic process. Even if they remain constrained by the laws that give them this power in the first place.

Arnold Schwarzenegger, who was governor of California from 2003 to 2011, and is known for his commitment to the environment, published this interesting reflection in his newsletter² :

“The Empire State Building was constructed in 1 year and 45 days.

Today, the environmental impact report would take longer. (No, really - the average environmental impact report takes 4.5 years). Once you finished the report, you’d have years of expensive lawsuits. And that doesn’t just apply to skyscrapers and roads and rail, it applies to clean technology that will reduce our environmental impact for decades. You can pass all the infrastructure and clean energy bills in the world, and they don’t mean anything if special interests can use CEQA (the California Environmental Quality Act) or NEPA (the National Environmental Policy Act) to delay every project for years and years and years and make it too expensive to build.

Here are some things I saw when I was Governor of the world’s fifth largest economy: a clean energy transmission line that took 8 years to complete, solar and wind projects delayed over and over, 14 years of work on a 119 mile stretch of high speed rail that won’t be ready for passengers for another 8 years, $2.7 billion in funds for water storage still sitting in the state’s bank account 8 years after voters overwhelmingly demanded solutions for our constant droughts. All over the country, there are similar horror stories.

I guarantee you that we couldn’t build the Pacific Coast Highway today. I think one of the reasons people are so pissed off is that they realize we can’t do big things and they’re frustrated about it. ”

Now, it's clear that laws and regulations are rules, and that every human group needs rules (even the smallest ones need at least some rules, whether implicit or explicit).

But what Arnold describes here is a surfeit of rules, often decided with good intentions, but which end up piling up without any real study of their concrete effects, slowing down innovation and the economy.

And another problem arises when laws and regulations are passed in the heat of the moment, in an attempt to nip a disruption in the bud or control it better, as the Catholic Church tried to do with the printing press, which Protestants used to undermine its power.

The 1st article in this series is one of the first articles published on this site, as it was finished by long before the rest: How KYC and AML are destroying the world, in which I take an in-depth look at two landmark regulations that were supposed to combat drug trafficking, crime and terrorism, and which introduced widespread financial surveillance…

Go and read it now:

How KYC and AML are destroying the world

In the next article, we'll indulge ourselves and look at a few examples of regulations so stupid that it's the people in charge of enforcing them who explain how to get around them :)

In the meantime, feel free to follow Disruptive Horizons on Twitter, and join the tribe of Intelligent Rebels by subscribing to the newsletter : 

1. « What is the difference between laws and regulations », FindLaw

2. Which I highly recommend you follow! Arnold's emails are always of the highest quality, and very motivating. The passage quoted appears in his August 2022 newsletter.