The need for government regulation

Every time that we get into an election season, one aspect of the debate between the parties that never fails to appear is the divide between Democrats who want more regulation of business and Republicans who want less. Strangely, in all of the talking points that get spouted, there are few involved who speak about better regulations rather than the quantity of the regulations enacted. For the most part, this is because discussion of the quality of regulation requires those taking part to understand the industry being regulated, the effect of proposed regulations, the downside to enacting the regulations and the benefit, if any, that will follow from enactment. It is just a lot easier to let the supposed "experts" write the regulations and to argue instead about the quantity of regulations. Sadly, this is a big mistake.

Let me give you an example: For many years, New York City has been perhaps the regulatory capital of the USA. If there is anything that can be regulated, either New York City or New York State does so. One area is the licensing of certain types of businesses. Home improvement contractors are one such type of business. Decades ago, the City of New York decided that it would require all companies doing home improvement work in the city to be licensed. This requirement was said to be put in place to protect the public from unscrupulous contractors who just wanted to take advantage of unsophisticated homeowners or apartment dwellers. In order to enforce the rule, the law provided that an unlicensed contractor could not recover for his work.

So how did that rule work once put in action? First, contractors' licenses were available to anyone who wanted them so long as one registered with the City and paid the required fee. There was no check on the quality of the work done or the competency or honesty of the contractor. As a result, the license requirement changed from a method to protect the public into one that penalized the unsuspecting contractor. Many times contractors from suburban towns did work in the city only to find out that they were in trouble for having done so without a license. The courts in New York ruled that an unlicensed contractor could not recover for his work and they stuck to that ruling. In one case, a lawyer who knew the law and knew that the contractor with whom he was dealing had no license hired that contractor to do a major job. When the contractor was finished and asked to be paid, the lawyer told him that since he was unlicensed, no payment was owing. When the contractor sued, the court threw the claim out and assessed court costs against the contractor. That is correct: the lawyer lured the unsuspecting and unlicensed contractor into doing work without a license and then refused to pay, a move that the courts found perfectly proper. In short, the regulations were allowed to be used to cheat the contractor out of payment for the work he performed.

This kind of regulation is not at all uncommon. There are many instances of conflicting or vague regulations that cause all types of problems. Sometimes those who write the regulations have no idea of the havoc they will wreak.

Let's hope that in the next election cycle there is a voice for the idea of better regulation. Obviously, there need to be certain types of regulation in our society. Those who argue against all regulation are fooling themselve. By the same token, it is time for those on the other side to realize that many if not most regulations do not accomplish their intended purpose. Instead, they just function to drag down the economy.