Business Regulations: Your Thoughts?

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If you watch Last Week Tonight, you've probably seen this week's main segment about North Dakota's oil industry:

www.youtube.com/watch?v=jYusNN…

North Dakota's oil boom has brought business, jobs, and revenue to the state, and these things are all very positive.  However, the majority of Oliver's segment is about the bad behavior in the industry due to lax regulations.

An oil or chemical spill can render farmland useless for years.  In one oil field, the average death rate is one death per six weeks.  Workers can work for almost three days without rest performing life-threatening procedures.  An explosion that left at least one dead and three injured had an independent contracting company paying damages instead of the company hiring the contractors.  And to make matters worse, a total of eight inspectors are responsible for making sure regulations are upheld at oil fields in both Dakotas.

The oil companies in North Dakota are not investigated meticulously, fined any more than a slap on the wrist, and not pressured to increase safety standards.  Regulations in North Dakota are very loose, but the companies do not comply with the existing ones all the time, which has led to many worker deaths.

This story is not a positive one: humans have lost their lives, the environment has been damaged, and the companies responsible have not been forced or encouraged to change their behavior.  In light of these facts, I am genuinely curious to see what the financially conservative viewpoint is of these incidents going further.  If these companies are inclined to shady practices that can result in the loss of human life, then why is an increase of regulation and oversight not a good solution?

This segment highlights the importance of protecting lives and preserving the environment; and may also provide incentive to gravitate towards renewable energy.  However, it seems that the major take-away from this week of Last Week Tonight is the essential nature of ethical behavior.
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PyrrhusiVictoria's avatar
I honestly don't know where the modern Republicans came up with their "kill all business regulations" because it's bad for business narrative. They idolize Adam Smith, because Smith wrote a book titled The Wealth of Nations, which was really the first scientific look at how economies run, what makes them better, and what ruins them. Smith sees the European royalty as a stumbling block to economic prosperity because they deliberately get in the way of entrepreneurship and stifle it, rather than allowing the "invisible hand" of markets dictate supply and demand. And the conservatives seem to constantly come around this point to point the finger at "government" interference of natural market forces via regulations. But that's not at all what Smith was talking about. For starters, the royals weren't regulating markets, they were greedily manipulating them - actively killing competition to their cronies and family members. Conversely, Smith talks quite a bit about corporations and enterprises that get so huge they defy any legal system and warp natural market forces because of their power. Smith was quite familiar with the malignant practices of uber-powered monopolies, such as the East India Trading Co. or the Royal African Co. Therefore, Smith always suggests that there needs to be a powerful and impartial arbiter, and given that the corporations can amass so much wealth, usually the only body capable of being an arbiter is a duly-elected government. This part, the conservatives seem to actively ignore.

The killing of all regulations is also something that isn't taught in real economics classes. In fact, there's a concept in economics called "externalities". These are adverse effects suffered by a party that does not actively participate in a market. So for example, let's say there's a company that makes lead-acid industrial batteries (the suppliers), and there's a robotic manufacturing company that buys and uses those batteries (the consumers). These two are the market participants. This battery company is profiting immensely because their batteries are so cheap. However, it turns out the reason the batteries are cheap is that the company is dumping all its industrial waste into a nearby river, instead of using a costly toxic materials disposal company. Now consider the people and other companies of that town - their water supply is ruined. They do not participate in this battery market, and yet they have to pay costs for something they have no stake in - they pay hospital bills when they get sick, they pay for costly water transportation from other cleaner sources, they pay to clean up the river when the battery company won't do it, and so on. These externalities are considered the worst factors for warping natural market forces, in part because they are so unfair - the original company is in essence being unwillingly subsidized by everyone else who has nothing to do with their industry. This is in turn draining resources that would otherwise go to other market sectors, more deserving of the funds according to rules of supply and demand.

So basically, getting rid of regulations only really benefits certain lobbyists and the companies who hire them - but it is definitely *not* in the best interest of the market as a whole, quite unlike the picture that conservatives paint. Their entire argument is total bullshit to begin with, and not at all supported by free market economics.