Engendering immorality by regulating behavior...

Anyone who has read Patrick Maclagan's Management and Morality knows that one unintended outcome of managers increasing the number of rules and regulations to avert immorality on the part of subordinates is that these managers unwittingly encourage their subordinates to become increasingly clever about how to maneuver their ways around new rules and regulations.

The Motley Monk would note that this is not a new phenomenon.  Just consider why Congress has continuously expanded the size and scope of the Federal Income Tax Code since its inception.  Crafty tax attorneys and taxpayers spend a lot of time trying to figure out ways around the new rules and regulation that were designed to stop tax evasion.

In light of this general observation about human nature, one would wonder why any manager---or administrator---would ever increase the number of rules and regulations that subordinates must comply with.

Yet, they do.

Worse yet, a study published by the Mercatus Center found that as Congress expands regulators' mandates, regulators write increasingly more highly detailed and specific rules to cover perceived gaps in the law.

And, guess what?

Lo and behold!  When it comes to protecting the health and safety of workers, all of these rules and regulations make people less safe as businesses are forced to and, subsequently don't (or can't), comply with them.

According to the Mercatus Center report, when it comes to regulating workplace health and safety, many managers believe it impossible to keep up with the expanding number of detailed rules and regulations.  In turn, this increased regulation stifles innovation as many managers must spend increasing amounts of time and energy trying to abide by the rules.  Then, too, uncertainty about the future regulatory landscape makes many managers hesitant to invest in workplace health and safety.  Most important of all, managers cite regulations as one of the greatest factors in their decisions not to hire, and this can cause economic paralysis.

The latest analysis by the Small Business Administration (completed in 2008) calculates that compliance with the 81k-page Federal Register costs a $1.75T annually.  But, lest it be forgotten, that figure does not include the 75 new major rules generated by the Obama administration during its first 26 months, at an additional burden of $40B, according to a Heritage Foundation study.  That also doesn't include the the impending clean air rules from the EPA, new derivative rules, net neutrality rules, the new CAFE fuel mandates, and the avalanche of rules mandated by Obamacare and the Dodd-Frank legislation. The Obama administration admits there are 4.2k new rules or revisions currently in the pipeline.

Would it not make more sense for the federal government to require businesses to develop firm-specific rules and regulations, to develop compliance metrics, and to report them?  In short, to increase morality in businesses?

As Patrick Maclagan notes, psychology, economics and organizational science evidence the answer is "Yes."

Yet, the "centralized government" statists stamp their feet and say "No."

Why?

Ideology always trumps facts and human nature.


Let the discussion begin...



To read the Mercatus Center study, click on the following link:
http://mercatus.org/sites/default/files/publication/More-Regulations-Less-Safety.pdf

To read the 2008 Small Business Administration study, click on the following link:
http://archive.sba.gov/advo/research/rs371tot.pdf

To read the Heritage Foundation study, click on the following link:
http://blog.heritage.org/2011/07/27/morning-bell-tangled-up-in-washingtons-red-tape/