The Real Purpose of Economic Regulations

The sheer number of federal regulations is staggering. The Obama administration added over 81,000 pages in 2016 alone.  And that is just federal regulations, not included are the myriad of state regulations added each year.

If you listen to bureaucrats and politicians, as well as the people who make excuses for them, these regulations are necessary to protect consumers and the environment. Without government intervention, we’re told, we couldn’t possibly expect greedy businesses to play fair and not exploit their customers.

Unfortunately, the truth is a lot less flattering. Most of the time, economic regulations are a written to protect crony industries and businesses at the expense of consumers and their tastes.

Take this story from FEE out of Wisconsin.  Kerrygold, a very popular brand of grass fed butter, is being taken off the shelves due to an old and largely forgotten state regulation requiring any butter to be sold commercially to be approved by a state panel of “butter experts.” No, I’m not making that up.

What’s the problem with Kerrygold butter? It seems the only problem is that Kerrygold is a successful and popular foreign company, uncontrolled by the very powerful and politically connected Wisconsin dairy industry. For their part, Kerrygold is working with the state to get their butter back in stores. This means revamping their processes to comply with the regulations; an expensive process that assuredly will be passed along to the consumers in the form of higher prices. And that’s the point of economic regulations: protect politically connected local industries from external competition.  In this regard, regulation and licensing laws work hand in hand.

Years ago, economist Henry Hazlitt wrote that one has to judge an economic policy not by it’s intentions, but by it’s unseen, unintended consequences. It’s time to start seeing government economic regulations the same way.

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