The Regulatory State

I saw an editorial cartoon that listed the financial melt-down, the coal mine deaths, and the deadly oil rig explosion and leak with the caption "How's that handsy offy thing going for you?" (sorry, I couldn'f find an on-line copy).

I'll ignore the slam at Sarah Palin, and look at the real issues implied by the cartoon. The message is that the government took an hands-off approach and things fell apart. If you believe this then the obvious fix for everything bad that has happened is more government. There are problems here.

To start with, I hope that no one actually believes that banks, coal mines, and oil rigs are not regulated. So the real question is "How is that regulation thingy working out for you?"

I'm going to skip over the coal mine disaster. The results of the investigation are not in. The mine operators had been cited for lots of safety violations prior to the deaths.

What about the oil rig that exploded? The MMS, the federal agency that inspects these rigs is supposed to do monthly inspections. At least a quarter of these were skipped over the last five years. There are allegations of a too-cozy relationship between the MMS and the oil industry.

Then there is Wall Street. I doubt that there is another portion of the economy that has more regulations but the regulators were too busy watching porn to regulate. Congress didn't cover itself in glory here, either. Prior to the crash, Barney Frank insisted that there was nothing wrong with the sub-prime market and that more sub-prime loans be made.

The point to all of this is that the regulators we have did a terrible job. There is not reason to think that adding new regulations will help prevent future disasters.