Wednesday, October 28, 2015

Davis on Regulation and More

Steve Davis has a thoughtful speech on regulation, policy uncertainty, and above all the need for simplicity.  (On the policy uncertainty website).  A few excerpts:
... the Code of Federal Regulations (CFR), which compiles all federal regulations in effect each year...grew nearly eight-fold over the past 55 years, reflecting tremendous growth in the scale and complexity of federal regulations. At 175,000 pages, the CFR contains as many words as 130 copies of the King James Bible.  While Ten Commandments sufficed for the Hebrew God of the Old Testament, the CFR contains about one million commandments in the form of “shall,” “must,” “may not,” “prohibited,” and “required.”...
The size and complexity of the U.S. tax code also grew dramatically in recent decades. As of 2011, it takes 70,000 pages of instructions to explain the federal tax code (McCaherty, 2014). The code has about four million words and 67,000 sections, subsections and cross-references. It’s all crystal clear if you read the instructions carefully. ...
And the best paragraph:
The good Catholic Sisters who saw to my moral instruction in primary school devoted many hours to the Ten Commandments. They wanted my classmates and me to avoid sins. Their success in that regard is in doubt. But at least the Sisters could be confident that we did not sin out of ignorance or uncertainty. How they would have instructed us on one million commandments, I do not know. The delinquents in my school found it hard to absorb a mere ten....


  1. Hey, if it were up to me, we would go to a national sales tax (perhaps exempting food bought in grocery stores and medical), Pigou taxes, and heavy gasoline taxes. And cut federal agency spending (that excludes Social Security and Medicare) by half.

    No tax code. Just some consumption taxes.

    That said, I do have a complaint about the use of page-counts to denigrate something one does not like.

    So on the Department of Defense, should we mention the number of pages in their budget, to exemplify gross complexity or bureaucracy?

    Did you know there is a publicly held company that reports it has more than 1,000 contracts with federal security agencies? They are Mantech (MANT).

    From their release:

    "We provide support to critical national security programs for approximately 50 federal agencies through approximately 1,000 current contracts. ManTech's expertise includes cyber security; command, control, communications, computers, intelligence, surveillance, and reconnaissance (C4ISR) solutions and services; information technology (IT) modernization and sustainment; intelligence/counter-intelligence solutions and support; systems engineering; healthcare analytics and IT; global logistics support; test and evaluation; and environmental, range, and sustainability services. ManTech supports major national missions, such as military readiness and wellness, terrorist threat detection, information security and border protection."

    Okay, do you wonder how many pages are in 1,000 contracts? I am sure the feds are keeping on top of all of it. In 50 national security agencies? We have 50 national security agencies?

    MANT just won a $6 billion contract from the feds.

    "The Defense Intelligence Agency (DIA) awarded ManTech International Corporation (Nasdaq:MANT) an Enhanced Solutions for Information Technology Enterprise (E-SITE) contract to provide worldwide coverage for IT requirements and technical support services for DIA and other members of the Intelligence Community (IC). This multiple-award, indefinite delivery, indefinite quantity (IDIQ) vehicle has a 5-year period of performance, with a potential value of $6 billion.

    E-SITE is replacing the former Solutions for Information Technology Enterprise (SITE) IDIQ vehicle where ManTech was previously a prime. ManTech will have the opportunity to win task orders that require services including systems design, development, fielding, sustainment of global intelligence, and command and control (C2). Ultimately, this contract will design and maintain a worldwide enterprise IT infrastructure to support the DIA's critical mission."

    1. And if it were up to me I would tell foreign creditors of the United States - you don't pay taxes in the United States, you have no voting rights in the United States, and so you don't get paid back by the United States government, it's central bank, or it's taxpayers.

  2. Aside from the perversions of asset/capita/resource allocation attending (infallibly ignorant) government interventions, the more laws and regulations the greater opportunity for graft.

  3. You people are lucky! This is the image of the brazilian tax code,

    The story (in portuguese):

  4. This is all intended. These are the best regulations money can buy. Corporations paid up for every line in the Federal Register. Private industry literally writes every one of tax codes.

    Sandbagging economic competition and growth is the entire purpose. What he is describing is the system's success, not any failure. Creation of high economic barriers to entry is the entire point.

    I like the technocratic good-faith analysis, but there is ZERO hope for regulation and tax simplification after Citizens United v FEC. None. Write that off. It's locked in essentially forever. The Trans-Pacific Trade agreement will lock it all in yet further.

    US real growth will have to get very, very, bad before investment in reform yields a return: politicians are cheap to buy, and the return to regulation is quite high. Or raise the cost of regulating: a tribune of the plebes? Guillotine? Wear donors's badges on your lapel?

    Actually, what I like is simple: political representatives can 1) only accept direct money from living breathing citizens (in any amount after taxes); and 2) only those living breathing citizens within the bounds of your district. Ties the money and the representation together very nicely.

  5. I have young colleagues - very bright, numerate people - who see no problem in an extraordinarily large body of regulation. In their view, as technology advances, society is becoming vastly more complex than it was, and they fully expect that regulation should grow exponentially too - not just in line with GDP, but in line with complexity (which probably goes more like GDP squared).

    I have suggested, in response, that they think of regulations as boundary conditions on society, i.e., as constraints that have to be satisfied. The more there are that need to be satisfied, the fewer the possible states of society. The danger lies in winding up with so many constraints that innovation becomes difficult or impossible, and even the current states of society may be technically illegal - and the code may be so complex that no-one will be able to figure out which constraints can safely be relaxed.

    This argument won, at least, a pause. But in the end they reiterated their point, with a variation. Technology is vastly increasing the possible state space. Regulations can increase enormously, and as long as they do so more slowly than the growth of the possible state space, they see no problem - after all, as the possible states of society expand, the number of socially undesirable states grows equally as fast, requiring a very rapid expansion of regulation.

    I found myself unable to respond. I'm pretty sure they're wrong, but I can't prove it.

    1. Regulations define the boundary of what is permissible. Consider that the surface of a sphere grows in area more slowly than the volume. Similarly the rules separating permitted states from prohibited states should grow much more slowly than the total number of states. Not every possible state will lie on, or even near, the boundary.


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