Government regulation and entrepreneural dynamism

May 26, 2018 2:40 PM

Libertarian economist Alex Tabarrok set out to discover to what degree increasing government regulation was responsible for the 40-year decline in economic dynamism in the United States. Turns out it isn't. Washington Monthly has a celebratory article about the study. Reason asks if he's the most honest economist in academia. Tabarrok says there's nothing to get worked up about.

From the Washington Monthly article:

The premise that regulations come at the expense of economic activity is so pervasive that even the American left tends to accept it, defending regulations as necessary evils to promote other social goods. Yet there has never been strong evidence that these trade-offs actually exist.

posted by clawsoon (23 comments total)

And the dynamics of academia weigh against publishing findings that fail to support a researcher’s original hypothesis. But Tabarrok published his study anyway. That makes him something of a rarity.

Isn't that how science should work?
posted by octothorpe at 3:10 PM on May 26, 2018 [26 favorites]

Economics is a science?
posted by armoir from antproof case at 3:14 PM on May 26, 2018 [15 favorites]

Economics is usually practiced as a religion.
posted by eustacescrubb at 3:30 PM on May 26, 2018 [13 favorites]

I recall a number of interesting contributions from economists on a recent economics thread talking about how people's impression of academic economics tends to be way off. It might be worth reading some of those contributions before repeating the same "economics sucks" arguments so soon again here.

I thought that the actual result about economic regulation was pretty interesting in itself.
posted by clawsoon at 3:35 PM on May 26, 2018 [20 favorites]

Economics is usually practiced as a religion.

They don't call it Capitalism for nothing.
posted by rhizome at 3:36 PM on May 26, 2018 [2 favorites]

I used to work with this woman from the Farm Bureau who'd go off on tirades about how the government was killing her business by making her paint her fuel and water tanks different colors.
posted by The Underpants Monster at 3:37 PM on May 26, 2018 [22 favorites]

On a similar theme, I thought Bryan Caplan's description of how he self-polices his own economic biases had some interesting techniques:

Rule #6: If someone says you mischaracterized their work, you almost certainly did. Experts are often wrong, but at minimum they know what they meant. Fortunately, even researchers who strongly disagreed with me gave me high marks for my reading comprehension. But whenever they had a nit to pick, I rewrote.

Rule #7: Be ready to bet on your beliefs. When you do bet, pay attention to the results so you can find out how accurate you are.

posted by ntk at 3:38 PM on May 26, 2018 [11 favorites]

I followed Marginal Revolution until Tyler Cowen came out in favor of ending net neutrality and I was like, is this guy actually clueless? Also, if a GMU economist comes out in favor of regulation does he need to go into protection before the Koch brothers show up to give him concrete galoshes?
posted by Query at 3:45 PM on May 26, 2018 [4 favorites]

I used to work with this woman from the Farm Bureau who'd go off on tirades about how the government was killing her business by making her paint her fuel and water tanks different colors.

Yeah, Farm Bureau is basically like every shitty right wing Chamber of Commerce. Farmers Union, National Farmers Organization, now they're worth listening to.
posted by jason_steakums at 3:52 PM on May 26, 2018 [5 favorites]

One of the clearest sentences I've ever read in an economics article:

"The reason is essentially simple, the decline in dynamism is widespread and exists across highly regulated and less regulated sectors of the economy"

I wish every paper had a one-sentence answer to "why" that was as clear as this!

My vote is on consolidation and student debt
posted by The Ted at 4:40 PM on May 26, 2018 [14 favorites]

It's not bookmarked on this device, and a quick google doesn't seem to turn it up, but a few years ago I read an article about a thriving culture of entrepreneurship in Norway. The authors made the case that it was Norway's socialist institutions that made it possible - workers and entrepreneurs were healthy, highly-skilled, and not dependent on employment-based programs for healthcare or basic security so they could afford to take risks. Taxes were a little higher for successful businesses, but they seemed to feel it was worth it.
posted by The Underpants Monster at 4:51 PM on May 26, 2018 [35 favorites]

Economics is a science?

The dismal one.
posted by Thorzdad at 5:32 PM on May 26, 2018 [6 favorites]

Isn't that how science should work?

That's exactly the point he makes in the fourth link. And, yes.
posted by Edgewise at 9:37 PM on May 26, 2018

[Tabarrok] doesn’t think much of government’s ability to spark innovation through setting standards; the first thing he did when he last bought a new shower head, he said, was remove its federally mandated flow restrictor.

And rather than recycle the box, he used it as kindling to ignite the pile of leaves he had paid a neighborhood child to rake at below-market rates, thus treating the neighborhood to the nostalgic scent of partially-combusted particulates. "You're WELCOME," he thought benevolently.
posted by Johnny Wallflower at 10:14 PM on May 26, 2018 [19 favorites]

the first thing he did when he last bought a new shower head, he said, was remove its federally mandated flow restrictor.

Yeah, that pretty much tells you everything you need to know about this guy. Nose, face, spite, etc.
posted by prismatic7 at 11:02 PM on May 26, 2018 [4 favorites]

That an academic social scientist is publishing research in tension with their ideology is not surprising at all. That's because, for many of us, ideology is not the motivating factor, being right and showing people how right you are and how you found out in this very cool and rigorous way how you are right.

Anyway, I'm glad we have a go-to thread now to nip the 'economists chicago boys models r wrong not a science dur hur' in the bud before a new thread gets going.
posted by MisantropicPainforest at 3:42 AM on May 27, 2018 [3 favorites]

"Increasing government regulation."

lol cool story
posted by turbid dahlia at 5:18 PM on May 27, 2018 [1 favorite]

Wow, you didn’t even fail to read the paper, you didn’t even read the abstract!
posted by MisantropicPainforest at 4:34 AM on May 28, 2018

The premise that regulations come at the expense of economic activity is so pervasive that even the American left tends to accept it

There's at least some amount to which regulations are just free guidelines on how to best run a business, it's definitely true.
posted by ambrosen at 4:45 AM on May 28, 2018 [1 favorite]

> ...remove its federally mandated flow restrictor
Yeah, that pretty much tells you everything you need to know about this guy

That's some facile bullshit right there.
posted by jklaiho at 5:17 AM on May 28, 2018

I followed Marginal Revolution until Tyler Cowen came out in favor of ending net neutrality and I was like, is this guy actually clueless? Also, if a GMU economist comes out in favor of regulation does he need to go into protection before the Koch brothers show up to give him concrete galoshes?

I still read him but have found since he started writing on Bloomberg every single column is a contrarian 'actually' hot take to the extent that it almost seems like a recurrent SNL skit. I do still like his cultural commentary and he interviews interesting people but everytime I read something on Marginal Revolution that I think is really intelligent and well written it's Tabarrok.

I suspect the Koch brothers will put up with some counter findings because they will lend credibility to the overall economic libertarian stance.

[also there was a co-author on this paper so it is not all down to Tabarrok's personal integrity]
posted by srboisvert at 5:48 AM on May 28, 2018 [1 favorite]

The trend of declining dynamism since 1980—along with wage stagnation, rising inequality, and a host of other ills—has tracked a parallel rise in monopolization, as the economy becomes increasingly consolidated in the hands of a few giant businesses. As New York Times columnist Eduardo Porter put it recently, “By allowing an ecosystem of gargantuan companies to develop, all but dominating the markets they served, the American economy shut out disruption. And thus it shut out change.”

Google is now the case against monopoly.
posted by Brian B. at 9:05 AM on May 28, 2018

There's at least some amount to which regulations are just free guidelines on how to best run a business, it's definitely true.

Indeed! And it's not just the running of businesses, it's other things too. Mr Elizilla and I built a house, and we have become huge fans of the building inspectors. Lots of that stuff, we would not even know to check for, but whenever we dug deeper into anything they required, it was a good and valuable requirement. The building inspectors were the good guys, even when they inconvenienced the tradespeople we hired. They are on our side, and not everyone has a builder as trustworthy as ours.

IMHO, when a tradeperson asks if you want them to pull a permit, the answer should be YES PLEASE.
posted by elizilla at 10:37 AM on May 29, 2018 [3 favorites]