By Brigham McCown, former PHMSA Administrator
Ask anyone to picture the word regulation and the first thing that will come to mind is red tape. Costly, excessive, restrictive red tape, and an unresponsive government that doesn’t understand that time equals money.
Much has been written on the topic, and a few have even suggested self-regulation is all that is needed. While perhaps working for the majority, there is certainly a need for industry regulation. One need only look to various industries to see where good companies seem to have veered off course. In many instances regulations do ensure public safety, conservation of resources, and in very rare cases, efficiency. Regulations are the “rules of the game” which also provide a level playing field for competition. There is a fine line, however, between reasonable regulation and business-crippling micromanaging. What often starts out as a well-intended exercise, can turn into inefficiency. Even worse, an overly prescriptive and top-down regulatory environment can cripple innovation. As a former federal regulator, I know only too well the delicate balancing act.
For example, how do we ensure regulations covering the movement of goods, people, and services move safely and securely while also being efficient and effective? How do we balance these costs and benefits in a regulatory environment?
The answer is as simple as not creating costs in the first place. Imagine if we could extract all the benefits of regulation and at the same time defray the costs by ensuring both public safety and efficiency. Can you have your cake and eat it too? Yes, but only if we dare to reimagine everything we know about regulations.
Traditional regulation starts out with a premise or statement specifying how things must work. This is well-intentioned, because it ensures a consistent – a known and safe – outcome for all users. But holding to the safe because we know it keeps us from discovering new, safer, cheaper, and better alternatives. Regulatory oversight by its very nature has always been methodical, slow, purposeful, and conservative.
Today’s regulatory environment is the equivalent of an innovation tax. It limits the available avenues for creativity by hamstringing entrepreneurs and making their work more costly. Industry disruption and innovation is occurring all around us, and the pace of that change is accelerating constantly. Gone are the days when your television looked pretty much the same as your parents’ tv. Yet we regulate to the status quo, seeking minor advances or incremental improvements at a time of great achievement. So instead of wading through molasses and dictating what the method should be, regulation should be reimagined into a framework for the desired outcome.
By shifting the paradigm, we should be freeing innovators to find the best way to achieve certain desired outcomes. Rather than telling a designer the exact materials, parameters, and procedures to create something, we should tell them what we want and let them experiment.
Here is an example, think of the difference between: ”Vehicle headlights must be within this size, shape, color, and brightness” versus “Vehicle headlights must effectively illuminate this area.“
The first represents the traditional approach to regulating, and it gets us predictable but slow-evolving results. The second unleashes innovation but safeguards consumers by ensuring the objective of the regulation is still met. Not every regulation works the same way, and an overhaul of every type of regulation might not be practicable in the short run. But moving toward performance-based regulations and away from prescriptive regulation will rejuvenate innovation and ultimately improve the lives of Americans.
Written by Brigham McCown, Chairman and Founder
The Alliance for Innovation and Infrastructure (Aii) is an independent, national research and educational organization. An innovative think tank, Aii explores the intersection of economics, law, and public policy in the areas of climate, damage prevention, energy, infrastructure, innovation, technology, and transportation.