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Isn’t Regulation Such A Lovely Thing

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We must, of course, have a fully regulated economy. For if people could just do as they see fit then where would we be?

More than half of Europe’s fastest growing technology start-ups are struggling to cope with EU bureaucracy, a new survey has found.

Most of the members of Digital Future for Europe, an association of 100 start-ups including Wise, King and Klarna, complained that they struggle with new regulations in the region.

Some 53pc of start-ups surveyed said they struggled to overcome layers of EU bureaucracy, which can slow down fast-moving businesses.

More than 90pc warned that badly designed regulation would make it more difficult for them to operate.

The political economy here, rather than the economics, is that incumbents rather like regulation. It produces a barrier to entry, those new to the sector don’t know quite how that system all works. Plus, the larger companies among the incumbents can carry the overhead to pleasuring the regulators with a special department while the three blokes in a garage cannot.

Finally, there’s the simple truth that incumbent businesses actually exist and therefore create a political constituency. Those start ups that are dissuaded from doing so equally do not exist and are not a political constituency.

So, the political economy of all this is ever increasing regulation.

The economics of this is that advances – in products, inventions, productivity and so on – tend not to come from large companies or incumbents. The economy advances as science does, through the death of the incumbents. It is the churn, the old going bust, the new arising – although the timing of that is reversed – that advances matters.

The end result being that politics and economic interacting leads to an economy growing slower than it otherwise would do. We’re poorer that is.

There’s no real answer to this, no cute trick that reverses matters. It requires constant effort to battle back against the mountains of paperwork. Proper Augean Stables stuff too. Sad but there it is.

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  1. That’s the way the competition have dealt with nuclear power. If the regs were as mild as for gas or coal, nukes would by now generate most electric power. Instead we have the Fessenheim power station shut down and replaced by gas.

    All the fuss about Green power would be entirely moot.

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