Wednesday 3 June 2015

Regulatory disobedience?

If the state can award costs against the unsuccessful defendant, this just doesn't work:
[Charles] Murray’s proposal is less dramatic and more ingenious. The regulatory state has two related weaknesses, he explains: It relies on voluntary compliance, and its enforcement capabilities are far inferior to its expansive mandate. So he proposes a private legal defense fund — the “Madison Fund,” honoring the father of the Constitution — that businesses and citizens can rely on for representation against federal regulators. By engaging in expensive and time-consuming litigation on behalf of clients that refuse to comply with pointless rules, the fund drains the government’s enforcement resources and eventually undercuts its ambitions. The state can compel submission from an individual or company with the threat of ruinous legal proceedings, Murray writes, “but Goliath cannot afford to make good on that threat against hundreds of Davids.”

The result Murray foresees is a “no harm, no foul” system, in which violations that cause no disruptions or injuries go ignored by regulators, because punishing them is too troublesome. He also imagines the rise of “occupational defense funds” in which trade groups pool resources to serve as a sort of insurance against regulators. In the unlikely event of a federal inspection of a particular business establishment, such funds could cover the fines.

Who pays for all this? Pointing to the emergence of “many billion-dollar-plus private fortunes over the last three decades,” Murray suggests that the Madison Fund could get started “if just one wealthy American cared enough to contribute, say, a few hundred million dollars,” or if “a dozen wealthy Americans cared enough to share the initial costs among themselves.”
I don't know the relevant American legislation, but first move of any government against this kind of initiative would be to allow the judge to award legal costs against the unsuccessful regulatory civil disobedient. Regulatory enforcement becomes a profit centre for the government rather than costly, and the state then turns libertarian-minded donors into money pumps.

Charles Murray must have something in his book showing how this wouldn't happen.

HT: Kiwiblog


  1. Even without that issue, how does the fund avoid being captured by rent seeking groups which benefit from existing regulations? The licensed hairdressers union might very well argue against the removal of regulations permitting any moron to practice hairdressing without a licence, lest they hurt somebody with their careless scissors.

    Even if the fund were selective about who it defended, it would be a big task to explain the difference between a rent seeking lobby group and a pro competition upstart looking to unwind existing rules. The public doesn't easily get this distinction, and are often just as easily co-opted by those incentives too (that is, taxi medallion owners are voters too). And without being able to win this battle of ideas, the fund won't realise broad support either.

  2. It does seem ripe for causing all sorts of perverse incentives. These funds would probably also be a public relations nightmare for business. What happens when they defend companies blatantly breeching environmental regulations or endangering staff through deliberately ignoring health and safety regulations?

    A better approach might be to spend this money researching and showing evidence of what regulations, and level of regulation, are optimal for providing the maximum social benefit for the least amount of cost on business.

  3. His proposal is that the Madison Fund would cover any fines and all costs for the defendants. So Mum and Dad Smith being picked on by the local bureaucrats could fight all the way, without risk to them.

  4. Sure. And the donors to the Fund have all their money go to the prosecutor's office

  5. In case you are still using it, Hola has been the subject of some serious security concerns recently. Worth checking into them if you do still use it.

  6. I think he is talking about a billion dollar fund and the cases involved would have damages in the thousands. The money would go on sending in 20 lawyers to make life so hell for the bureaucracy involved that they would give up.

  7. The money would also go on the 20 dedicated lawyers the government hires to handle everything in that case, once they lose and legal costs are awarded. It wouldn't be damages in the thousands, it would be costs in the millions.