A Truth about Regulations

Oct 25, 2011

Eric Schmidt, Executive Chairman of Google, noted an important truth about regulations:

"Regulation prohibits real innovation, because the regulation essentially defines a path to follow," Mr. Schmidt said. This "by definition has a bias to the current outcome, because it's a path for the current outcome."

In his latest Wall Street Journal column, Gordon Crovitz noticed this comment and went on to observe, "Washington is always slow to recognize technological change, which is why in their time IBM and Microsoft were also investigated after competing technologies had emerged."

Blinded by red tapeThis is something to remember when EPA is tossing around potential new rules that would cost industry billions of dollars and the regulatory agencies implementing Dodd-Frank create an uncertain financial environment.

Innovation, while giving us more goods and services, often makes regulations obsolete. Some regulations will always be necessary, but what is important is an effective process that develops effective rules and doesn't leave businesses wandering in the dark.

Reforms like cost-benefit analysis and checks-and-balances can make sure appropriate rules are in place that don't limit innovation.

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