Regulatory Experimentation

Late night thoughts. In England, when the government passes regulations those regulations almost always apply across the country. There are lower governments, councils and the like, which pass more local laws but all the most important laws, ranging from taxation to regulation of goods and services to policing, are passed at the national level. One problem with this is that we don’t experiment with different ways of doing things. We can only have one policy at a time and it’s decided by the national level convergence of interest groups, voter views etc…

What would a better world look like? It would have a consistent legal framework but would still allow for variations in regulation across different geographic regions. Some regions could be libertarian, some more statist. Some could be harsh on crime. Some more focused on rehabilitation. The advantage would be simple. More approaches tried meaning more information on what works and what doesn’t.

Why wouldn’t this be a good idea? A few reasons:

  • Unfairness. A rapist in region A may get 5 years. In region B they may get 2.
  • Noise. Regions differ. A lot of factors influence success or failure. It’s hard to narrow down the effects to a single policy.
  • Corruption. Firms could lobby local governments for favorable regulation and then base themselves there. Local governments may be easier to corrupt because they are smaller compared to large MNC’s. They may also be harder to bribe because they are closer to the people who elect them. (Although given how little people I meet know about their local gov’s, I doubt it). Conversely, more powerful local governments could rent seek more effectively from businesses.
  • Collective Action Problems. Races to the bottom in taxation or other kinds of regulation. Nimbyism.

It’s hard to know what works in the real world and what doesn’t. You can escape the need for empiricism.

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