Does the highway safety act promote reckless driving? Does the disabilities act disemploy the disabled? Does the endangered species act promote clear cutting and encourage suburban sprawl? Over the last few decades Sam Peltzman, University of Chicago economist, has answered or helped to answer questions like these in the field of regulation. In this paper, given for the 2004 AEI-Brookings Joint Center Distinguished Lecture Award, Peltzman provides a review of the evidence for the above questions—showing that people adjust their behavior to a regulation in ways that counteract the intended effect of the regulation. That is, “regulation creates incentives for behavior that offsets some or all of the intended effect of the regulation.”
But Peltzman does not end the analysis there. He further inquires about how such counterproductive regulation can survive politically. His answer is that “progress can often hide the bad effects for a long time and thereby immunize the regulation politically.” Or, as Adam Smith may have put it, the natural progress of opulence protects counterproductive regulation.
Comments