Regulatory Accumulation

What is Regulatory Accumulation?

Check out a new Mercatus paper about the impact of regulatory accumulation on operating costs

Depending on how you count, there are somewhere between 80 and 200 federal regulatory agencies.  These agencies were created by Congress over the past century and delegated with the authority to make “administrative laws,” which most people know as regulations. Federal regulatory agencies represent the center of lawmaking in the United States—every year, far more law comes out of regulatory agencies than Congress.

Regulatory agencies take actions that affect the stock of regulations via a process called rulemaking.  A rulemaking is simply an action taken by an agency that adds to, subtracts from, or somehow modifies the stock of regulations that is on the books in the Code of Federal Regulations—the set of books that contains all regulations that are in effect at a given point in time. 

For most of the 20th and 21st centuries, the overall stock of federal regulation has steadily increased. New restrictions frequently compound on top of old ones, narrowing the range of compliant behavior and sometimes becoming redundant or contradictory.

 
 

Regulatory accumulation—that is, the build-up of regulations over time—remains a pressing policy issue despite broad recognition of the problems it creates. In part, this is because a collection of many accrued rules has a burden that is greater than the mere sum of the individual rules’ burden. The sheer volume and complexity of interlocking requirements and exceptions is itself a challenge to decipher. Individuals and businesses face the task of identifying, reading, and understanding regulations before they can even get to the point of complying with the substance of the restrictions. This complexity creates economic barriers to entry, which produce a business environment that favors established large businesses at the expense of startups and other potential new competitors.

Mercatus scholars have long measured regulatory accumulation and studied both its causes and consequences. Explore below to see some of our wide selection of visualizations, papers, and policy briefs related to regulatory accumulation.

Visualizations:

 
 
Accumulation of Fed Reg Restrictions.png
Finance Insurance Sector Regs Trends.png
Growth in Pre Crisis Financial Reg Restrictions.png
Growth in Pre Crisis Reg Restrictions.png
Income Tax Code Growth.png
Manufactring Sector Reg Trends.png
New Restrictions Added by President From Carter to Obama.png
Number of Retrictions in the ECFR by Year.png
Reg+Restrictions+in+State+Admin+Codes.jpg
State Level Reg Restrictions.png
The CFR is the Ultimate Longread.png
Time to Read CFR.png
What if US Regs Were a Country.png
Reg Accumulation by Agency.png
 

Articles and Papers:

+ The Impact of Regulatory Growth on Operating Costs

BY: Tyler Richards, Richard Fullenbaum
DATE: September 9, 2020

Abstract: “We investigate the effect of recent regulatory growth on operating costs per unit of output across a variety of US industries. Using an Augmented Mean Group estimator approach, we find that regulations in the current year and four to five years prior have statistically significant upward effects on operating costs per unit of output. This suggests that the most pronounced effects of regulations occur when a regulation is passed and when compliance dates arrive. Our results imply that the average level of annual regulatory growth (3.55 percent) increases operating costs per unit of output by 3.3 percentage points per year relative to a baseline of no regulatory growth.”

+ Legislative Impact Accounting: Incorporating Prospective and Retrospective Review into a Regulatory Budget

BY: Jason J. Fichtner, Patrick McLaughlin, Adam N. Michel
DATE: December 2017

Summary: “Congressional decision‐making suffers from scarce information about the scope and economic consequences of legislative actions. This paper proposes a better method to overcome congressional information scarcity. Our proposal relies on the premise that regulations have similar economic effects as taxes and spending, and therefore should be scored and tracked as part of the budget process. Our proposed system of legislative impact accounting (LIA) builds on the concept of a regulatory budget by developing a system for both prospective and retrospective review to create an effective feedback loop to better communicate information about economic effects of regulations to Congress."

+ The Cumulative Cost of Regulations

BY: Bentley Coffey, Patrick McLaughlin, Pietro Peretto
DATE: April 26, 2016

ABSTRACT: “We estimate the effects of federal regulation on value added to GDP for a panel of 22 industries in the United States over a period of 35 years (1977–2012). The structure of our linear specification is explicitly derived from the closed-form solutions of a multisector Schumpeterian model of endogenous growth. We allow regulation to enter the specification in a flexible manner. Our estimates of the model’s parameters are then identified from covariation in some standard sector-specific data joined with RegData 2.2, which measures the incidence of regulations on industries based on a text analysis of federal regulatory code. With the model’s parameters fitted to real data, we confidently conduct counterfactual experiments on alternative regulatory environments. Our results show that economic growth has been dampened by approximately 0.8 percent per annum since 1980. Had regulation been held constant at levels observed in 1980, our model predicts that the economy would have been nearly 25 percent larger by 2012 (i.e., regulatory growth since 1980 cost GDP $4 trillion in 2012, or about $13,000 per capita)."

 

Policy Briefs:

+ Regulatory Overload

BY: Richard Williams, Mark Adams
DATE: February 8, 2012

Summary: “Regulations are supposed to keep Americans safe, but a growing rulebook may actually be making us less so. The vast number of rules alone overwhelms businesses and individuals, diverting attention away from regulation’s end goal—improved safety—and placing the focus on compliance. Regulators can make Americans safer by writing clear, simpler rules and eliminating ineffective regulations. Instead of telling businesses how to solve problems with prescriptive regulations, regulators should define outcomes and let businesses devise their own solutions."

+ The Impact of Regulation on Investment and the U.S. Economy

BY: Richard Williams
DATE: January 11, 2011

Excerpt: “The total cost of regulation in the United States is difficult to calculate, but one estimate puts the cost at $1.75 trillion in 2008. Total expenditures by the U.S. government were about $2.9 trillion in 2008. Thus, out of a total of $4.6 trillion in resources allocated by the federal government, 38% of the total is for regulations."

+ Regulatory Accumulation and Its Costs

BY: Patrick McLaughlin, Nita Ghei, Michael Wilt
DATE: November 14, 2018

Excerpt: “Research by the Mercatus Center at George Mason University indicates that the accumulation of rules over the past several decades has slowed economic growth, amounting to an estimated $4 trillion loss in US GDP in 2012 (had regulations stayed at 1980 levels). The accumulation of regulation has disproportionately disadvantaged certain groups, such as unskilled workers and low-income households. Unless Congress and agencies pursue substantive reform, regulatory accumulation will continue to stifle economic growth."

+ Regulatory Review Commission + Regulatory Budget = A Diet for Better, More Effective Regulations

BY: Patrick McLaughlin, Tyler Richards
DATE: November 12, 2019

ABSTRACT: “All regulations, however well intended, create unintended consequences. Regulatory accumulation (that is, the buildup of rules over time) leads to slower economic growth and fewer small businesses, and it deepens wealth inequality as the burden of regulatory accumulation is disproportionately borne by low-income households. Furthermore, organizational and political incentives inherent to bureaucracies lead regulators to tirelessly create new rules while paying little attention to past regulations that are outdated, overlapping, or simply ineffective—not to mention that they rarely address the general growing mass of regulations. Addressing this excessive regulatory accumulation by identifying and removing costly regulations as well as limiting regulatory growth to only the most beneficial regulations would be a significant step in managing the social costs of regulations."

+ How Regulatory Overload Can Make Americans Less Safe

BY: Patrick McLaughlin
DATE: November 14, 2018

Summary: “Even after the net decrease in the amount of regulatory restrictions on the books that has occurred since January 2017, the time required to read the CFR today remains ludicrously long: three years, 108 days, and four hours. As the number and length of regulations have grown, so has the challenge in understanding and complying with them. State regulations add another layer of complexity to the regulatory landscape. This regulatory accumulation—the piling of rules on top of rules—is not a benign phenomenon. Its unintended consequences can have far-reaching and negative effects, not just on our economy but on our health and safety too."

+ Regulatory Accumulation: The Problem and Solutions

BY: Patrick McLaughlin, Michael Wilt
DATE: September 27, 2017

Excerpt: “Regulations are created one by one. By design, each new regulation contains obligations or prohibitions—regulatory restrictions that policymakers hope will deliver benefits that justify their costs. Over time, however, the buildup of more and more regulatory restrictions distorts and deters the business investments that drive innovation and economic growth. These dynamic effects of regulatory accumulation can hinder economic growth considerably, on top of the many other consequences often associated with regulations, such as higher unemployment, higher prices, and lower wages, particularly for lowincome households...Mercatus Center scholars have identified several solutions to the problem of regulatory accumulation."

+ The Unintended Consequences of Federal Regulatory Accumulation

BY: Patrick McLaughlin, Robert Greene
DATE: May 8, 2014

ABSTRACT: “The rapid growth in the number of federal rules has likely hindered the struggling labor market. An increasing regulatory burden can harm workers in various ways."