LONDON, ENGLAND - APRIL 18: A face mask is placed on the statue of Nelson's Column by Greenpeace protesters on April 18, 2016 in London, England. The demonstration was to highlight air pollution in Britain and targeted other statues in the city including Queen Victoria opposite Buckingham Palacea and Eros at Piccadilly Circus. (Photo by Dan Kitwood/Getty Images)
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There are many good reasons to have regulations. They create the standards and rules that govern a marketplace, give consumers confidence, keep rogue traders at bay and make sure things that should fit together — like plugs and sockets — do just that.

Regulation prevents a “race to the bottom” in environmental or labour standards and can make sure one person’s incompetence does not harm another. Even things as banal as the chimes of an ice-cream van benefit from regulation — how can they be loud enough to advertise the van’s presence without being so loud they create a rude intrusion?

It is common to call for a bonfire of regulations as if they serve no purpose, only to discover that they do.

However, regulators do sometimes overreach themselves or make basic conceptual errors. Here are seven sins:

NEW YORK, NEW YORK - SEPTEMBER 23: Bags of heroin are displayed before a press conference regarding a major drug bust, at the office of the New York Attorney General, September 23, 2016 in New York City. New York State Attorney General Eric Scheiderman's office announced Friday that authorities in New York state have made a record drug bust, seizing 33 kilograms of heroin and 2 kilograms of fentanyl. According to the attorney general's office, it is the largest seizure in the 46 year history of New York's Organized Crime Task Force. Twenty-five peopole living in New York, Massachusetts, Pennsylvania, Arizona and New Jersey have been indicted in connection with the case. (Photo by Drew Angerer/Getty Images)
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1 Compliance fallacy

When governments prohibit or over-regulate something that people want, it does not cease to be sold. The biggest example is drug prohibition. Prohibition is a perturbation of the supply chain, not its elimination. The result for illicit drugs is a $400bn global criminal enterprise regulated by violence. Thousands are in jail. Products are impure and untaxed and a public health problem is inadequately managed by the criminal justice system. The policy itself causes more harm than the problem it is supposed to address.

Across the country, one in 10 vendors made a loss on their home sales in 2016
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2 Unintended consequences

Well-intentioned regulation can make matters worse once everyone has responded to new incentives. A statutory minimum wage might boost pay for some but increase youth unemployment. Rent controls may seem like a good idea until there is nowhere to rent because landlords have taken their properties off the market. Famously, the economists Steven Levitt and John Donohue presented evidence that the legalisation of abortion lead to decreased crime 18 years later. The theory was that more children born unwanted grow into delinquency. That theory remains controversial.

A photo illustration shows the Uber app logo displayed on a mobile telephone, as it is held up for a posed photograph in central London, Britain October 28, 2016. REUTERS/Toby Melville/Illustration
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3 Disrupting the disrupters

Regulators have a bad habit of treating innovation as a threat rather than an opportunity, often at the urging of threatened incumbents. Is Uber a contractor, an employer or an online marketplace? Get that wrong, and a completely new business model, adored by passengers, could be throttled at birth. Does banning advertising of ecigarettes stop kids vaping, or does it protect the established cigarette trade from a potentially much safer and disruptive entrant?

SAN ANSELMO, CA - NOVEMBER 23: Antiretroviral pills Truvada sit on a tray at Jack's Pharmacy on November 23, 2010 in San Anselmo, California. A study published by the New England Journal of Medicine showed that men who took the daily antiretroviral pill Truvada significantly reduced their risk of contracting HIV. (Photo Illustration by Justin Sullivan/Getty Images)
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4 Reckless precaution

Regulators can be obsessive about the risks they are responsible for but indifferent to the risks for which they are not. Do medicines regulators protect us too much from the possible side-effects of novel medicines but not enough from the diseases that new medicines could treat if they were not awaiting regulatory approval? Do regulators worry too much about possible environmental risks of genetically modified crops but not enough about the Vitamin A deficiency and exposure to excess pesticide use that GM can address?

EAST KILBRIDE, SCOTLAND - JULY 17: Wind turbines are seen at Whitelees wind farm on July 17, 2015 in East Kilbride, Scotland. According to a trade body Scottish councils could lose out on an estimated ?44m of income over the next 20 years if changes are made to wind farm subsidies. (Photo by Jeff J Mitchell/Getty Images)
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5 Regulation by arbitrary numbers

In 2007, European nations signed up to a target to have 20 per cent greenhouse gas reductions, 20 per cent of energy from renewables and 20 per cent energy efficiency improvement — all by 2020. Notice anything? Were these the right targets? Of course not. They formed a pleasing cadence in a gesture-prone Brussels bubble but are resulting now in irrational distortions to energy supply.

Workshop run by Dutch company Bloomon
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6 Barriers to entry

Regulation can harm the public by creating and nurturing oligopolies, closed shops or restrictive practices. All these are likely to push up costs, reduce innovation and breed complacency. We might be glad a surgeon is qualified and licensed but does it make sense to extend licensing to hair braiders, florists, and interior designers — now the practice in some American states? At some threshold of risk, “buyer-beware” is a better approach: the consumer takes responsibility and does not look to a regulator for assurance of the quality of a good or service.

Pictures of the headquaters of RBS on Bishopsgate, London.
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7 Losing an arms race

There is often an inevitable asymmetry between regulators and highly paid and motivated creative rule-dodgers. A guiding principle should be the transfer of cost and responsibility for failure to the regulated industry rather than focusing on rules to stop them ever going wrong. Regulation failed to prevent banks blowing up the economy in 2008. The focus should have been on protecting socially valuable “narrow banking”, but deeming “casino banking” never too big to fail.

Clive Bates is a former UK civil servant holding senior advisory roles at the Prime Minister’s Strategy Unit, Environment Agency and Welsh government. He now runs his own advisory business, Counterfactual Consulting

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