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7 Regulation 12 (1983)
Bootleggers and Baptists - The Education of a Regulatory Economists

handle is hein.journals/rcatorbg7 and id is 122 raw text is: VieWpoint
Bruce Yandle

Bootleggers and Baptists-The
Education of a Regulatory Economist

HE SEARCH FOR regulatory relief is as
young as the Reagan administration, and
as old as man. When the American Medi-
cal Association chafes under Federal Trade
Commission oversight, it feels the same frus-
tration Adam must have felt at the menu regu-
lations he faced in Eden. But often people want
relief not from regulation but through the pro-
tections regulation can provide. Today, some
airline executives want succor from the un-
certainties they confront in a world without
regulated (uniform) pricing. The London weav-
ers felt that same way about their trade in the
thirteenth century and obtained relief through
a provision in the Magna Carta requiring all
cloth woven in the realm to be of uniform di-
mensions-conforming to the London standard.
Nothing is new under the sun.
Economists from Adam Smith on (and in-
cluding Karl Marx) have realized that govern-
ment regulation is a sword that cuts in both
directions, and all have called for reforms to
improve the good regulations and prune the
bad. But desiring reform and achieving it are
obviously two different things. What we want
to find out here is under what circumstances
they can coincide. When can we achieve regu-
latory reform?
Regulation and Murphy's Law
In my studies of the relationships between gov-
ernments and business, my attention was first
attracted to the unbelievably costly things that
governments do when attempting to control
Bruce Yandle is executive director of the Federal
Trade Commission. The views expressed here are
his own.

businesses. It seemed, as Murphy might have
said, that if there was a wrong way of doing
something, the regulators would adopt it. I
found countless cases where rules and regula-
tions imposed tremendous costs while deliver-
ing little if any benefit.
* Freight rates for one class of shippers
were subsidized by another class of shippers.
As a result, factories were located on the basis
of false signals, real costs were hidden, and
goods were shipped great distances at lower
fares to be processed in higher-cost plants.
* Catalytic converters were installed on
automobiles for the purpose of reducing emis-
sions. But, for the converters to operate prop-
erly, unleaded gas had to be used-and it is
more expensive than regular. So cost-conscious
drivers put leaded gas in their tanks, which
turned the converters into so much junk and
added more emissions to the environment than
there would have been had engines been even
slightly modified or some other plan intro-
* Petrochemical plants were required to
reduce emissions at each and every stack by
the same percentage. If instead managers had
been given plant-wide targets and left free to
attain them efficiently, the same degree of pol-
lution control could have been achieved at much
lower cost.
* Petroleum companies that found oil on
Alaska's North Slope and sought to bring it to
the lower forty-eight states by way of the West
Coast were barred from doing so by complex
environmental rules. Logic would then have dic-
tated that the oil be shipped to Japanese re-
fineries, which could have returned the refined
product to the United States. But that was
against federal law too. Instead, the crude oil


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