Whether or not the regulations are well-intended or even essential, they are a barrier to growth. But is it possible to determine just how much of a barrier they are?
According to a new study by George Mason University's Mercatus Center, it is possible. Here is what the study found:
It's easy to intuitively understand that the more burdened a business is by regulations, the more difficult it is for that business to thrive.
Resources must be allocated to understanding and following the regulations, and those resources must be pulled from more economically productive activities. That means a loss of jobs, investment, or other value-producing activity; hiring compliance officers and attorneys is not a productive activity.
The way that Mercatus did the research was particularly genius: they used a text analysis program to count the number of words such as “required,” “prohibited,” “may not,” “must,” and “shall,” - the holy grail of regulatory speak - that are in the Code of Federal Regulations and compared applicable industries. They then used data from the Bureau of Labor Statistics regarding production efficiency.
The conclusion is crystal clear: The more a business is regulated, the lower its growth.
As the federal leviathan continues to grow and prosper, regulations are increasing rather than decreasing. For significant economic growth to be unleashed, this trend must be reversed.