The Latest Installment

Dealburt’s Retirement

S.Crow Collateral Corp. announces the retirement of Dealburt, our long-time editor of The Latest Installment. Dealburt has been the alter ego of Stan Crow, who now takes over the editorial responsibilities for The Latest Installment, first hand. For possible alter-ego analogies (or contrasts or similarities?), one may think of "Bunbury" in Oscar Wilde’s play, "The Importance of Being Earnest," or "Harvey" in the play of that name by Mary Chase. (James Stewart later starred in a film version of "Harvey", and both Art Carney and he starred in television versions.) We thank Dealburt for his great service and wish him a long and enjoyable retirement.

Regulatory-Risk Aversion and a Slower-Growth Economy

I believe that economists and commentators have largely missed a very significant factor that will have much to do with whether the U.S. economy returns to strong growth, or merely muddles along (or worse). That factor is this: Will we continue down the path of becoming a "regulatory-risk" economy, in which businesses large and small are increasingly unwilling to make any move until they receive a permission slip from some government official or agency?

From personal observation, I can say this: The reason why business people are substantially immobilized from trying new activities or methods without governmental permission is that without that blessing they believe they can’t be certain whether doing the new thing would get them into trouble.

Government by Agencies and Officials

Underlying this uncertainty is the perception that the federal government is becoming, more and more, a government by agencies and officials rather than a government of laws.

It’s not that there’s a shortage of statutes on the books—far from it. It’s that the usual practice now is for government agencies and officials to be granted—either by statutory text or by accretion—so much discretion in making decisions that what really counts, as far as business people are concerned, is often not what the law actually says, but what some official may later decide the meaning, scope and particular applications of the law are, whether or not foreseen by the legislators.

To this uncertainty about what the official or agency may decide that the law means, one can add uncertainty about how long it would take to find out and the cost of lawyering up even to ask the question. Then one can understand why there is a growing regulatory-risk aversion on the part of business people today.

I Was a Regulator Once

I once served on a regulatory body, many years ago. As a free-enterprise guy, I was caught by surprise, when I began to think that I could accomplish great things with the imposition of additional regulations. When I was the one who wrote the regulations, I found it easy to mandate that other people do things the way I thought best. When I realized, somewhat late, what was happening to me, I resigned that position, having learned an invaluable lesson.

The propensity to regulate (the government’s side of things) is the direct cause of regulatory-risk aversion (the private-enterprise side of things).

It’s a Big Deal

Our economy is struggling now against many headwinds, but regulatory-risk aversion is one which, as far as I can tell, most economists have not taken into account. They should. It’s a big deal.—Stan Crow