Transcript Presentation Title

21st Century Regulation:
Discovering Better Solutions for
Enduring Problems
Why now?
Bruce Yandle
Distinguished Adjunct Professor of Economics
[email protected]
Federal Register Pages: 1940-2007
Federal Register Pages per $Billion Real GDP
1940-2007
Federal Register Pages per $Billion Real GDP
1940-2007
The 1970s’ imprint.
The 1970s

Heydays for major environmental, food, safety, and consumer statutes
that called for technology-based, command-and-control regulation

A time when the U.S. economy was characterized by large smokestack
industries, young and inexperienced workers, and managements with
limited experience in dealing with complex environmental risks

A time when U.S. industry led the world, with significant but still limited
international competition in domestic markets

Economic pressures affecting internal growth predicted a “race to the
bottom” for U.S. developing regions

Regulation provided opportunities for cartelization while satisfying
demand for risk reduction. Centralized, “one suits fits all” regulation
was the order of the day
What’s changed?

In 1970, per capita GDP was $18,391 (2000 chained dollars).
In 2007, $38,475.

“Race to the top” has replaced “race to the bottom.”

In 1970, 205 million people in the U.S. Now, 305 million.

In 1970, 11% of the over-25 population had a bachelor’s degree.
Now, 28.7%. Better informed, higher valued human capital.

30 years of state and corporate experience in dealing with risk
management…and deeply engrained regulatory habits.

Intense, global competition.
Where are we?

More of us.

Better educated.

Better connected to information.

Wealthier & Older.

Firms competing in global markets.
How does this affect the demand and
supply of regulation?
An Information Revolution
Occurred after 1970.
So what?
MICROSOFT in 1978
Wikipedia in 2007
Meet the
Innovators’ Dilemma
Clayton Christensen. The Innovators’ Dilemma. Harvard Business School Press, 1997.
Totem of Human Talents
Human Connectivity
Creativity
Analytical Reasoning
Formulaic Intelligence
Manual Dexterity
Brute Force
Source: Michael Cox. Federal Reserve Bank of Dallas
Let’s talk about where people work!
And how that has changed.
U.S. Sector Employment: 1970
U.S. Sector Employment: 2007
Knowledge-Intensive
Manufacturing
So what?
U.S. GDP by Product Group
1970-2006
The Changing Industrial Scene
From 1970s Smokestacks to
U.S. Industrial Production Index
1919-6/2008
Production-Based Industry Rankings
1972
1980
1990
2000
2004
2007
Iron/Steel
Iron/Steel
Printing
Comp/Elec
Comp/Elec
Comp/Elec
Apparel
Apparel
Apparel
Autos
Autos
Aircraft
Machinery
Paper
Plast/Rubber
Food
Food
Food
Food
Fab. Metal
Food
Fab. Metal
Chemicals
Plast/Rubber
Paper
Paper
Chemicals
Machinery
Iron/Steel
Fab. Metal
Fab. Metal
Food
Iron/Steel
Plast/Rubber
Plast/Rubber
Elec. Mchry.
Chemicals
Chemicals
Fab. Metal
Chemicals
Machinery
Printing
Autos
Printing
Machinery
Printing
Fab. Metal
Chemicals
Printing
Autos
Plast/Rubber
Paper
Paper
Iron/Steel
Plast/Rubber
Plast/Rubber
Autos
Iron/Steel
Printing
Nonmetal minerals
Source: Economic Report of the President, 2005, and Federal Reserve Board.
Are all the jobs going to China?
Percentage
Change in Manufacturing Employment
Percentage Change in Manufacturing Employment
1992-2003
1992-2003
5
Japan
Australia
Germany
China
U.K.
U.S.
Belgium
Netherlands
Rate
-10
Korea
France
Sweden
Italy
Taiwan
Norway
-5
Canada
0
-15
-20
-25
-30
Data for The Netherlands and China are for 1990-2002.
Data for The Netherlands and China for 1990-2002
Source: W.A. Ward, Manufacturing Productivity and the Shifting U.S.,
China, and Global Job Scenes, 1990-2005. Center for International Trade,
Source: W.A. Ward,
Manufacturing Productivity and the Shifting U.S., China, and Global Job Scenes, 1990-2005.
Clemson University, Clemson, SC.
Center for International Trade, Clemson University, Clemson, SC.
Globalization
So what?
Growth in Global Markets Changes Rent-seeking
Behavior & Places U.S. Regulators in Head-to-Head
International Competition
16
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
GDP Share
18
U.S. Exports & Imports,
Share of GDP
14
12
10
8
6
4
2
0
Import Share
Export Share
Racing to the Top
but
Struggling with the Bottom
So what?
Ambient Pollution
Concentration
0
Average Income
Environmental Kuznets Curve: The General Case
Ambient Pollution
Concentration
Race to the top.
0
Average Income
Environmental Kuznets Curve: The General Case
40
60
80
(No evidence of EKC)
20
Over the period 19601980: emissions
increased with
income. No evidence
of EKC.
CO2-GDP Relationship 1960-1980
0

The same set of
countries was
examined over the
period 1960-1980.
Carbon Dioxide Emissions Per Capita

0
20000
co2pc

40000
GDP
Fitted v alues
Over the period 19842002: evidence of
EKC.
Source: Kuheli Dutt, doctoral student, Northeastern University, Boston, MA
60000
CO2-GDP Relationship 1984-2002
0
10
20
30
40
(Clear evidence of the EKC)
0
10000
20000
Gross Domestic Product
CO2pc
30000
Fitted v alues
40000

Federal regulatory agencies are mature, experienced, and
sophisticated.

States and cities have in place sophisticated regulatory
infrastructure.

Huge risk-reduction strides have been made.

The U.S. is generally cleaner and safer. Natural areas are better
protected.

We are in a race to the top.

Information and monitoring costs have plummeted.

Interest groups are results oriented.

Industries seek competitiveness and harmonization of standards.

The search is on for more effective, lower cost, outcome-based
regulation.
Today’s Plan
There are many ideas in today’s papers.
But, alas, we must ration.
Five Key Ideas

Use performance-based regulation.

Require congressional review of significant regulations with
requirement that offsetting saving be found.

Set priorities for regulatory instruments. Least restrictive first.

Treat risk from new technologies the same as risk from existing
technologies.

Encourage private market alternatives before moving to
regulation.
Three Panels

Panel One: Procedural changes that
facilitate improved outcomes

Panel Two: Solutions that fall outside
traditional regulation

Panel Three: A discussion with journalists
led by Tyler Cowen
21st Century Regulation:
Discovering Better Solutions for
Enduring Problems
Why now?
Bruce Yandle
Distinguished Adjunct Professor of Economics
[email protected]