The uses of regulation

One of the things about being an Enemy of the Working People is that you start thinking about stuff like regulation. It tends to be supported by well-meaning liberal folk, who think that it will tame the wilder excesses of entrepreneurs, but its effects may not be those that were intended.

Consider, to take an example well away from Irish waterways matters, the study discussed here by Aaron Carroll of the effects of telling folk about the numbers of calories in their meals. The regulators’ idea was that, if fast-food eateries told consumers how many calories were in their food, fat folk would eat less (and the social and economic costs would be lower, I suppose). Some researchers decided to check. To quote Aaron Carroll:

Researchers approached 1121 McDonald’s customers both before and after calorie posting began in New York City. Each had a random chance of being handed (1) information that described the recommended calories a man and woman should eat each day, (2) information that described the recommended calories a man or woman should eat each meal, or (3) nothing. The hypothesis was that giving people information about recommended intake would help them to make better choices about how much to order. After all, the whole menu labeling thing is based on the idea that giving people calorie information will reduce obesity.

The result?

Giving people calorie recommendations didn’t change what people offered.

I think “offered” should be “ordered”. But the point is that the regulation, requiring that menus show calories, doesn’t seem to have had the effects that the regulators desired.

In a sense, though, that’s a fairly neutral outcome. At worst, as Carroll says,

[…] although the result was not statistically significant (p=0.07), people who were given more calorie information ordered more calories.

But there are outcomes than can be much worse than that, especially in regulatory capture, a topic that should be of interest in Ireland. One way of looking at the state is to see it as a tool or machine that can be used by powerful gangs to advance their own interests. In Ireland it is used by gangs of insiders (especially operatives in the state-protected industries: moneylenders, legal operatives, teaching operatives, body plumbers, enforcers and so on) to protect both their earnings and their status. The Troika has, alas, struggled in vain against them.

But I digress. Another way of using the power of the state might tempt folk who have commercial competitors (AKA “the enemy”). You could find a regulation or two that your opponent has broken: the more regulations there are, the more certain it becomes that your enemy has broken something or other. You can then use that breach to attack him or her.

Suppose, for example — and I realise I am in the wilder realms of the imagination here — you ran a business in the marine leisure sector which, if the decline in Shannon traffic is any guide, may be suffering from declining demand. And suppose you had several competitors in the same geographical area, and offering roughly the same services, as yourself. You could compete in the standard ways, perhaps using Jerome McCarthy’s Four Ps [Product, Promotion, Price, Place] in your marketing mix. But if your product and place were more or less the same, and if promotion were of little use in a declining market, you might be left competing on price, which might have its own drawbacks.

But there might be other weapons available to you: weapons that the innocent Mr McCarthy did not dream of. Suppose, for instance, that you found that one or more of your competitors had breached one or more of a body of regulations — there are lots of such regulations, mostly incomprehensible to the layman. You could cause or encourage the state (or one or other of its arms) to investigate your competitor. And, even if you didn’t have your competitor’s business shut down, you would have increased the costs to that business and forced its management to spend hours, nay days, as well as large fees, on trying to escape from the net. And perhaps a sympathetic politician might take up the matter, questioning ministers about it.

Given the general saintliness of the Irish people, and the high moral and ethical standards that have always prevailed, I am quite sure that nothing of the kind has ever happened, or could ever happen, but it does make me wonder whether regulation should be regulated.

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