Why Are Business Regulations Bad for Consumers?
No matter your view on regulations, there’s no denying that they come with a cost. Regulations increase operating costs for businesses because businesses must devote resources (time and money) to compliance. Higher operating costs then translate to higher prices for consumers. All of which leads to a question: Are all 94,000 of Missouri’s regulations really worth paying for? Even the one that prohibits dental hygienists from receiving temporary licenses, and the one that dictates the placement and the type size used on that tags that go on mattresses?
A paper released last month by the Mercatus Center calculates how much regulations actually increase operating costs. The authors look at federal regulations in 28 industries and find that a 1 percent increase in industry-specific regulatory restrictions in one year is associated with a 0.2 percent increase in operating costs per unit of output in that year. Perhaps that seems like a small amount, but federal regulatory restrictions grew at an average annual rate of 3.55 percent from 1998 to 2017. This means that if nothing else affected operating costs, these regulations alone would have increased operating costs per unit of output by 17 percent over the past 20 years.
The Mercatus paper addresses federal-level regulations, but it’s safe to assume that Missouri’s numerous state and local regulations also bring about significant cost increases. Over time, these regulations mean increases in operating costs for businesses, and therefore increases in costs for consumers.
All regulations come with costs, so why are Missourians paying for needless ones? It’s been months since Missouri responded to the COVID-19 crisis by waiving regulations like the one prohibiting hospitals from establishing alternative sites of care, and the one that requires Missouri real estate brokers to keep a brick-and-mortar site open during business hours. Now, we should ask why these regulations existed in the first place and why we had to bear the cost of them. Isn’t it time for lawmakers and bureaucrats to get rid of all needless regulations? Cutting the red tape can lower costs for consumers and promote growth across the state.