Death by Regulation

By Dan Mitchell.

"As Frederic Bastiat sagely observed nearly 200 years ago, a good economist considers the indirect or secondary effects of any action.

For instance, a politician might claim we can double tax revenue by doubling tax rates, but a sensible economist will warn that higher tax rates will discourage work, saving, investment, and entrepreneurship.

And those changes in behavior (along with increases in evasion and avoidance) will result in less economic activity, which means lower taxable income. So tax revenues will not double. In some cases, they might even fall.

This analysis also applies to regulatory policy.

In an article for the Competitive Enterprise Institute, James Broughel explains how red tape actually causes needless death because of less economic growth.

Regulations can contribute to an increased death toll by imposing costs that eat into disposable income. As spending power dwindles, so too does the potential for spending on risk management and health-related expenses. This argument, known as the “wealthier is healthier” hypothesis, complements the idea that warmer is healthier. In fact, spending on energy is potentially a critical channel that can explain the frequently observed relationship between financial health and physical health, including mortality. Two of my own research papers include estimates of the level of cost sufficient to produce one expected death in society. Depending on the study method, my coauthors and I found that for about every $40 to $115 million in costs imposed on American society, we can predict one death will occur by virtue of individuals being made poorer. …the death toll from the regulatory state is not trivial. My CEI colleague Wayne Crews has estimated that the total cost of federal regulations was just under $2.0 trillion in 2022. Other studies put the cost even higher… If we take just the two low-end estimates of cost, at $80 million per expected death there are roughly 25,000 to 50,000 deaths annually that can be attributed to federal regulations (and this doesn’t count state and local regulations).

By the way, this type of cost-benefit analysis is universally accepted by economists. There are disagreements about magnitudes, of course, but even folks on the left recognize that “wealthier is healthier.”

P.S. In addition to the adverse overall impact of red tape, there are specific forms of regulation (FDA drug approval, anti-vaping rules, gun control, bans on organ transplants, etc) that lead to needless death.

P.P.S. As always happens when he addresses and issue, Thomas Sowell makes excellent points."