Monday, 20 March 2017

A regulatory flexibility act?

The law focuses on “small entities” -- not only small businesses but also small nonprofits and small governmental units such as towns and school districts. It recognizes that small entities often bear no responsibility for health and safety problems that give rise to regulation; that regulation deters potential entrepreneurs from innovating; that treating small entities the same as large ones impairs productivity; that regulation is often a barrier to entry; and that it can be easy for big companies, and tough for small ones, to comply with expensive federal mandates.

To reduce the problem, the Regulatory Flexibility Act directs federal agencies to identify and reassess existing rules that have “a significant economic impact upon a substantial number of small entities.” The legal requirement is simple: Ten years after rules are finalized, agencies have to determine whether they are having such an impact, and must decide whether they should be amended or rescinded.
Sunstein notes that the law hasn't had much effect as yet, but provides some recommendations for President Trump in order to make it more effective:
With a memorandum issued in 2011, President Barack Obama explicitly drew attention to the requirements of the law, directing agencies to offer flexibility to small entities unless they justified their failure to do so.

That was a start, but the Trump administration could go further. For example, it could make explicit provision for public outreach to small entities whenever it appears that they will be adversely affected by an expensive regulation. It might require agencies to respond, in writing, to serious objections from the Office of Advocacy (and thus give greater power to that occasionally important office). It might state that the Office of Information and Regulatory Affairs will not approve significant rules unless the most adverse effects on small entities have been eliminated, reduced or justified.

To be sure, small entities are not entitled to automatic exemptions from regulations. Whether large or small, companies should not be allowed to impose serious health risks on their workers. But it always makes sense to ask whether the arguments that justify regulation – for example, those in favor of increased energy efficiency – really apply to small companies, or whether the costs of burdening them outweigh the benefits.
It's fun to imagine consequences of this kind of rule in New Zealand. Maybe somebody in the system would have been forced to stop and think about the compliance costs they were layering on tiny iPredict in pursuit of money launderers.

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