American Elephants


Ronald Reagan Explains States’ Rights by The Elephant's Child

It is easier to change regulations imposed by a community, a county, or a state than it is to deal with the federal leviathan. Not that it always works, but it is easier to see the results of regulations locally.  And if the imposition of regulation is too dire, you can pick up and move to another state where the market and the people are more free.

The free enterprise system is the on-ramp to economic progress and rising incomes. A Heritage Foundation study on economic progress around the globe finds clear and compelling evidence that the poor are always and everywhere better off in those countries that are economically free countries than in nations that are not free. If we judge society by how well it serves the poor, then free enterprise is far and away the greatest anti-poverty program known to man.   (Stephen Moore: Who’s The Fairest of Them All )

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Reagan was a good communicator, and I agree with most of his remarks in the interview. But, like many of his homilies, his remarks on regulations no doubt played well in Peoria, but gloss over some uncomfortable truths.

I realize that the comments I am responding to are yours, EC, and not the Gipper’s.

It is easier to change regulations imposed by a community, a county, or a state than it is to deal with the federal leviathan.

Generally, but not always. If the regulation has been installed at the request of a special interest (as many are) that is proportionally more powerful in the community, county or state than it is at the federal level, then it may actually be easier to change the regulation at the federal level than at the sub-federal level.

The notion embodied in the U.S. Constitution that all social bodies exist for the sake of the individual so that what individuals are able to do, society should not take over, and what small societies can do, larger societies should not take over, is a good one. (That, by the way, is a paraphrasing of Roman Catholic doctrine.) It is also, by the way, recognized in numerous EU treaties as “the principle of subsidiarity.”

However, the principle of subsidiarity it is easiest to adhere to when the affected activity is by its nature local. When the U.S. Constitution was written, that was the case for the vast majority of commercial transactions. Most manufacturing, and almost all provisions of services, were local.

With the emergence of companies big enough to market goods and services across the whole of the United States, however, differences in local regulations often created barriers to cross-border trade. Meeting a multitude of different regulations adds to costs — both in hiring people to keep track of the changes and in adjusting the design or composition of the product to meet those many regulations in a more fragmented market. Hence the pressure to develop uniform national standards, especially those affecting easily traded products and services. (And the creation of the Organization for Standardization, in which big firms from developed countries are very active.) Publicly, large companies often proclaim how they hate regulations (and certainly there are plenty of badly designed or unnecessary ones). But behind the scenes they are often the chief demanders of them.

There was a good article in the Financial Times a few months back about how some of the same British firms complaining about EU regulations were actually the ones who had pushed for them. I can’t locate the article now, but this blog makes some of the same points:

http://blogs.ec.europa.eu/ECintheUK/are-british-businesses-really-being-strangled-by-eu-red-tape/

And if the imposition of regulation is too dire, you can pick up and move to another state where the market and the people are more free.

Reagan makes a similar point. But the reality is often more complex. If the regulations are on personal freedom, or something that doesn’t affect the value of immobile assets, then I would agree. But many failures of governments do affect, for example, the value of homes or small businesses. That makes it more difficult for people to “pick up and move to another state”.

To use a simplistic example, say a local community decides to dispense with both town planning and nuisance ordinances, and a pig farm is allowed to establish itself upwind of an existing community. The result will be a decline in the value of those homes, and people who want to upsticks will suffer a real monetary loss on their investment.

One of the most important points that is forgotten by politicians at all levels is the “transitional gains trap”.

http://www.libertylawsite.org/2013/09/26/the-transitional-gains-trap/

Because of the capitalization into fixed assets (taxi medallions, land, etc.) of the benefits conferred to incumbents by a regulation (or subsidy), after those assets have changed hands getting rid of the regulation or subsidy will impose losses on those people who paid for the assets on the assumption that the regulation or subsidy will continue indefinitely. It is why taxi reform (a local issue) and agricultural-policy reform (an international issue) has proved to be so intractable.

Comment by Subsidy Eye

That should read, “And the creation of the INTERNATIONAL Organization for Standardization”:

http://www.iso.org/iso/home.html

Comment by Subsidy Eye

Sorry to add one more clarification.

To use a simplistic example, say a COUNTY decides to dispense with both town planning and nuisance ordinances, and a pig farm is allowed to establish itself upwind of an existing community WITHIN THE COUNTY THAT IS TOO FEW IN NUMBER TO BE ABLE ON ITS OWN TO VOTE OUT THE COUNTY LEADERS. The result will be a decline in the value of those homes, and people who want to upsticks will suffer a real monetary loss on their investment.

The same could happen at a state level if, for example, the state decides to no longer require that coal-fired power plants built in the state need to install equipment that captures most of the ash the plants emit.

Comment by Subsidy Eye

The old truism is that “you can’t fight city hall,” which works at all levels, and is why people organize to try. The individual doesn’t have much chance unless he is prepared to organize his neighbors, and be very noisy about it. Businesses are groups of people and have more influence, the bigger the more influence. Which is why the Left is so furious about the Citizens United ruling. Fine for big foundations, environmental organizations and other NGOs to have influence, but a “corporation?”

And yes, in the days of the founders, the corporation was undreamed of — nor were the big unions. Nor have all our presidents been as determined to set a proper example as George Washington. So we have crony capitalism, and a pecking order of who donates the most money to political coffers. Our current president usually puts the unions at the top, except when their wishes conflict with environmental demands.

In the face of the pecking order, the individual doesn’t have much of a chance, and his vote becomes even more important — yet people don’t understand that, fail to grasp the issues, and are easily manipulated. But pig farms aside, you might notice that the states that are being governed badly by Democrats are the ones where there is a big exodus of people and businesses — California, Illinois, New York. See the U-Haul Index.

Comment by The Elephant's Child

The principle of subsidiarity in action:

“The Pennsylvania Supreme Court today ruled that a law restricting municipalities’ ability to exert some control over where drilling facilities could be located was unconstitutional.”

http://www.pennlive.com/midstate/index.ssf/2013/12/post_643.html

Comment by Subsidy Eye




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