Friday, March 4, 2011

What makes regulators tick?

Peter Foster takes a look at the regulator mentality:

Psychologist Abraham Maslow is famous for formulating a personal “hierarchy of needs” that stretches from breathing and eating at one end to conspicuous commitments to Save Africa at the other. He is also credited with the insight that if you are a hammer, the world looks like a nail. Regulators are perhaps more like another implement: a shovel. When they find themselves in a hole, they are inclined to keep digging (intriguingly, just like proponents of using aid to save Africa).
A recent paper by the University of Kiev’s Slavisa Tasic, Are Regulators Rational?, analyzes this mental peculiarity of regulators via the burgeoning field of cognitive science. He suggests that if regulators appear congenitally incapable of grasping that regulation creates more problems than it solves, it’s because they are congenitally incapable.
... we — and they — are (among many other cognitive shortcomings) as dumb as doorknobs when it comes to comprehending how economies work. Worse, regulators, by definition, have no idea how dumb they are. They suffer from “illusions of competence.”
... Their fundamental problem is not that they are trying to use a shovel to craft a chronometer. What they are attempting is even more impossible. The economy isn’t a machine built by humans, even though it builds lots of machines. It is an organic “natural order” that we mess with at our peril. In fact, Mr. Tasic’s paper barely skims the surface of that vast ocean of what Friedrich Hayek called the “fatal conceit” of interventionists.
... Regulators may look to cognitive science to make “smarter regulation,” but don’t expect them to express too much interest in being told they are on a fool’s errand. They aren’t fools. They’re shovels.
Alongside Peter's excellent column is a fascinating tale of escape from Canuckistan's hyper-regulated dairy industry:
... Money and freedom were the reasons for our decision. We moved our dairy cattle and machinery south of the border, but sold all Canadian immovable assets. The land, quota and farm buildings came to $45,000 per cow, while 20 miles away we purchased a more modern state-of-the-art operation for $5,200 a cow.
... If one simply Googles Census Canada and the Canadian Dairy Commission they will find that Canada’s population has more than doubled since supply management started in 1967 and that — shockingly — the Canadian actual total milk production per year has not changed, other than slightly dipping, over those four and a half ­decades.
... Diversity, because of freedom, is prevalent in New York’s Franklin county’s dairy sector. Farmers range from a 2,100-cow producer to the Old Order Amish man who milks 17 and is raising nine children. Or the legal, small raw-milk producer and retailer making incredible profits, who would be arrested if living two miles to the north.
Knowing your farming operation is in a nation where, unlike Ontario, some semblance of property rights is installed in law, gives one the freedom to invest for the future. ...


Alain said...

If I may throw out just a few thoughts on this topic, I would first say that these people, and there is no shortage of them nowadays, abhor diversity and cannot stand the idea of individual freedom and liberty. Therefore they are above all control zealots, determined to make everyone behave and even believe as they do. More times than not they do not practise what they preach, or in other words they want the freedom to do as they like but do not extend the same to others.

Free from state interference I am confident that most of us are willing to make certain compromises in order to work cooperatively. This falls down once people realise they can rely on the state to regulate or force others to behave according to their own self-centred agenda. This is the reason I am opposed to NGOs and all lobby groups having a say in government policy.

JR said...

All good thoughts, Alain. Thanks. Regulators are control feaks at heart. Bad news for all concerned especially when they attempt to 'control' something beyond their (anyones's) rational capability to control.

I agree with you on NGOs. While I don't like what most of them do (interferring do-goodism for the most part) what really gripes me is that most are also tapped into government funding which they then use to lobby the government - which is something governments should stop allowing.