I am an old insurance executive and I often find myself defending Obamacare in chatrooms and on Facebook. If I’m having a discussion with a business person who is opposed to it, sooner or later the discussion will turn to the topic of regulations as such. They will bring up the two people (it always seems to be two) whose small businesses were ruined and forced to shut down because of Obamacare regulations. It’s hard to argue against this, since here the argument shifts to the plight of the failed business person.
It’s perfectly natural that people would resent having to go through the expense and effort of following regulations for things that they don’t think are necessary or for things they are doing already. I’ve been in the business world myself for more than three decades and I have known quite a few people whose businesses have failed. With the exception of a very few who had to close shop because of some health issue, most claimed to have been victims of the crippling costs of regulations. I’ve heard many of these stories, but the story I have never once heard is how the business person was simply “out-competed”—how their competitors had lower prices or more efficient business models. It’s true that regulations create costs and these costs seem especially high if a business is in decline. But these costs affect everyone equally in any particular business sector. And were they to be eliminated, they would be eliminated for everyone in that sector, and the business’ relationships among one another would remain unchanged. If regulations are the cause of so many business failures, why do other businesses in the same sector continue to survive and prosper?
We live in a political environment where “regulation” is defined as oppositional to “freedom” and where something called “small government,” not well defined, is a social virtue. It’s true that the governmental bureaucratic apparatus (and its power) comes from the number and strength of the regulations it supports. And in theory it does follow that decreasing regulations should decrease the size and power of government. But what are regulations for?
Regulations exist to keep people and businesses from transferring risks and costs from themselves and onto other people and the public at large. There are good regulations that do this effectively and efficiently, and bad ones that don’t. There are social costs to regulation, and it could be argued that a bad regulation is one whose social cost exceeds its benefits. But the distinction isn’t between regulation and freedom. It’s between regulation and making the public responsible for someone’s private risks and costs.