The Canadian Independent

The ethics of regulation: a cost-benefit aggression approach

Posted in Fuzzy Philosophical or Moral Issues by dave on April 2, 2010

[Editor: I wrote this piece a few years ago, my views have changed somewhat but it is worthy for a repost.]

Government is involved in every aspect of Canadian life. It is involved in regulating what we eat, who we do business with, who we do and do not associate with, who we can become intimate with, what kind of car we can drive, just to name a few examples. Do we have the freedom of association in Canada, and what does that mean? Do we have freedom of religion in Canada, and what does that mean? What is the case for these regulations? And how should we evaluate their effectiveness? The purpose of this paper is to construct a philosophical framework for the evaluation of the ethicacy of government actions, particularly regulation, and to apply that framework to some current Canadian issues.

First we should begin by defining regulation. A regulation is a legal restriction promulgated by government authority. It is a law that says that you can’t do something, or it is a law that says that if you do something, you will incur a punishment. A regulation can be as simple as a fine for disposing of lawn trimmings in the wrong manner, or as complicated as an international carbon trading market enforced by international intergovernmental cooperation. One source defined regulation as:

    “A rule or order prescribed for management or government; prescription; a regulating principle; a governing direction; precept; law; as, the regulations of a society or a school.” [1]

A regulation seeks to create an incentive structure. It seeks to create negative incentives to keep individuals from pursuing actions that the regulators don’t want them to do. You are fined for disposing of your lawn trimmings in the wrong way because the regulator presumably does not want you to dispose of your lawn trimmings that way. In the case of the carbon trading market, you are fined or rewarded based on your level of carbon dioxide output as a nation because the goal of the regulator is to decrease carbon dioxide output. These fines create negative (or in the case of the carbon trading market potentially positive) incentives to act one way and not another way. A regulation is an incentive whose goal is change the behavior of people.

Who sets these regulations is an important question. Regulation can be created at many different levels. The local level government may pass and enforce the fine for the lawn trimming. The national government may pass and enforce the fines and rewards for the carbon trading market. A provincial or regional government may pass and enforce laws on speeding on the highways. International bodies like the World Trade Organization may pass and enforce standards on trade. The key fundamental similarity between these groups is that they are in positions of authority over individuals. Your local government can enforce the laws they have created because they have authority, or power, over you to compel you to comply. Same with the national and provincial governments. Why international organizations often fail, is because they do not have the power to compel nations to comply. They may have legal authority, or theoretical authority over a nation like the United States or China, but they have no actual authority, because they have no power over them to make them comply.

This really is the central issue of this paper, the ability to compel compliance of individuals to regulation. This is the fundamental mechanism upon which all regulation operates. Regulation as a tool of government operates on the principle of coercion and force. Coercion can be defined as “force or the power to use force in gaining compliance, as by a government or police force.” [2] Regulation, and really all government action, uses coercion and force as a mechanism in the enforcement of its actions. A government that passed laws and regulations and had no enforcement mechanism in order to ensure those laws and regulations were passed would not be an effective government. In order to ensure that regulations and followed, the government has to enforce those regulations, and the mechanism that government uses to enforce those regulations is force or coercion. If an individual were to dispose of her lawn trimmings the wrong way, she is punished by the fine. The fine serves to coerce her into disposing of her lawn trimmings in the way that the regulators want her to. If she was a rebellious minded individual, or believed the lawn trimming regulation was unjust she could ignore the fine. However, there again we see when individuals ignore fines in our society, more coercion is used to obtain compliance. The local government may cut off her water or hydro. The local government may increase the size of the fine. If she continues to ignore fines, the end result is the confiscation of her property or her imprisonment. If she actively resists either of these consequences, she is met with force on the behalf of the regulators. The enforcement of regulation in our society is based on the coercion of use of force, and it has to be, otherwise there would be no incentive to follow regulations.

We don’t accept coercion or the use of force from other actors in our society. We don’t accept the use of coercion or force from private individuals against other private individuals, or by groups of private individuals who have formed businesses. We consider it unethical when someone uses force against someone else for arbitrary reasons. We consider it unethical when someone coerces another into something she would rather not do for arbitrary reasons.  We understand that when people coerce each other, or use violence or force against one another, for no good reason or for arbitrary reasons, that it is unethical. The initiation of force against another person is immoral if it can’t be rationally justified. The use of coercion against another person is immoral if it can’t be rationally justified. If government uses coercion or force against people, we must as a matter of logical and ethical consistency, consider that action immoral if it can’t be rationally justified.

Here one might ask if every mechanism within our society is based on the coercion or force principle. Are we just grasping at straws in this exercise, suggesting that government is worse when everyone coerces uses violence? The answer is simply, no, we aren’t, and there are mechanisms and systems in our society that don’t rely on coercion or force as their central operating principle. The mechanism of the free marketplace is based on the voluntary cooperation of individuals for perceived self-benefit. The free and operating market, through a free price system, coordinates the efforts of billions of individuals, voluntarily, to provide goods and services for society. Most people believe that the free marketplace is based on competition as its central operating principle, however while competition is important, voluntary cooperation is the central mechanism within a free market. This principle can best be described with an example, take a steak in Toronto as an elementary example of the voluntary cooperation mechanism. Why does the steak get to Toronto, and what is the principle behind it. The steak isn’t in Toronto because any bureaucrat at a central office ordered it. The steak isn’t in Toronto because people have used coercion and force to get it there. The steak isn’t even in Toronto because people are kind hearted and love the people of Toronto. The steak is in Toronto because of thousands of independent individuals cooperating with one another, often unknowingly, to bring it to Toronto. These people include ranchers, truckers, packers, butchers, retailers, wholesalers and thousands of different people in hundreds of different occupations. The rancher raises his beef because he can make money doing it. The trucker ships the beef because he gets paid to do it. The butcher cuts the beef because there is a demand and a price associated with the beef and she can do well for herself. The packer packs the beef because there is a demand for it, and he has been hired to do so. The retailer and wholesalers sell the beef because they can do well for themselves in doing it. All of these people are chasing profit. All of these people are acting independently, but all of them are also cooperating with one another at each step of the process to bring a steak to Toronto.[3] This is an example of a mechanism which is very subtle, and sometimes hard to see, but the fundamental basis of our economy. This is the voluntary association mechanism.

So far we have established that regulation operates on the basis of coercion and force, we have established that the use of coercion and force within our society on an arbitrary basis is considered immoral, and we have established that there are alternatives to the force and coercion mechanism already operating within our society. If we accept that these established principles are indeed true, then we must conclude that regulation for spurious reasons is immoral.

Obviously our society needs to have regulation. This author and few others are arguing for anarchy (Even the Anarchists don’t really want anarchy). So what is the justification for these regulations, what is the case that makes them justified and not arbitrary or spurious?

[Editor: I’ve read some excellent Anarchocapitalist pieces by Murray Rothbard since then.]

One principle that is brought up often as the justification for regulations and policies is the idea of approve of the majority. It has been argued that the existence of the Canadian Broadcasting Corporation (CBC) as a public entity is justified simply because a majority of Canadians support it or don’t want to see it abolished. This is a fine and democratic principle, however it is also a particularly immoral principle. We don’t accept in other cases the rule of the majority as being a justifying factor for regulations, and we shouldn’t in this case. Take the Jim Crow laws in the American south. They were supported by healthy majorities in the states that had them. However, the laws were unjustified and immoral, even though majorities supported said laws. Majority approval of a regulation does not make the regulation justified, it may however make it politically convenient to pass. The CBC isn’t justified as a policy or regulation simply because a majority approves of the CBC, there must be other reasons for the CBC to be justified or else it isn’t justified at all, and should be abolished.

The real justification for the use of force and coercion is when the costs of government non-action, in terms of force and coercion, far exceed the costs of government action. This sounds confusing, but it is very simple. An obvious example would be the government prohibition of murder. Laws against murder are based on coercion and force, because the law says that if you murder someone else, we’re going to take you by force and lock you away against your will. However, it is reasonable to argue that the laws against murders, even though the employ the use of force and coercion, prevent a larger evil in the form of a murder. We must accept some small evils in order to prevent the big evils from occurring, and that’s the logical basis for regulation.

If the ethical basis for force and coercion is the prevention of larger evils, then there is an intimate connection between the efficacy of a policy and the ethicacy of that same policy. Can a regulation be ethical if it’s not effective? And how should we evaluate the effectiveness of that regulation? If we are operating on the assumption that in order for a regulation to be ethical, it must stop a larger evil, and the regulation fails to stop that larger evil, then how can the regulation be ethical? If the only basis for the ethicacy of a regulation is the cessation of a larger evil, and the regulation fails in that goal, then there is no ethical basis for the regulation, and that regulation is therefore immoral. In order to evaluate the efficacy of a regulation, we must cut past the intentions, we must put aside “feelings” and demagoguery, and focus only on the results of that regulation, and if the results of that regulation do not match the high minded intentions of that policy, it must therefore be immoral because it is not effective, and be abolished.

We have established the principles involved in whether or not a regulation is ethical. If a regulation is not effective, it is not ethical. If a regulation does not prevent a greater evil than the evil the regulation causes, it is not ethical. Unethical policies by government should be abolished. This is a very theoretical proposition, so how can we apply it to some contemporary issues in Canada? This paper will briefly apply this philosophical rubric to three contemporary issues in Canada: Gay Marriage in Canada, Marijuana Prohibition, and David Miller’s Proposed Hand Gun ban.

The gay marriage issue is one that clearly does not pass the litmus test for an ethical policy. The Canadian government used to define marriage as being between only one man and one woman, and barred other arrangements from receiving the benefits of marriage. The government did not recognize the voluntary associations of other individuals. What was the basis for this policy? There was no basis for this view other than arbitrary tradition. Is there any big evil that was prevented by disallowing certain people from associating? Were there any positives to the policy? The simple answer is no. The reason that governments were lobbied to keep homosexuals from marrying was the belief that if homosexuals were allowed to marry, it would break down the social fabric of the society and damage the institution of marriage. There is no real evidence for this view. Take Denmark as a perfect example, they legalized same-sex marriage in 1989. For many years before then, marriage and non-marital childbirth rates soared, and the trend did not accelerate after 1989. In fact, the trend slowed, and the marriage rate increased and the divorce rate decreased. [4] That’s not necessarily because of same-sex marriage, however it is evidence that same-sex marriage did not accelerate the trend of the “break down” of the “family.”

It may have been convenient for a long time for politicians to disallow homosexual people from voluntarily associating and calling it a marriage, because public opinion was against the idea. A majority of Canadians may have disagreed with allowing same-sex marriage. However, a majority approving or disapproving of a policy is not what makes the policy ethical. What makes a policy ethical are real, rational arguments based on evidence that show that such a policy prevents a greater social ill from occurring. In the case of same-sex marriage, there is no such evidence. If the goal of keeping same-sex marriage illegal for many years in Canada was to prevent the breakdown of the family, then such a policy failed, and since it was not effective it could not have been ethical. We should celebrate its passing on.

Canada still has prohibition on marijuana. This is an example of a policy where real force and coercion is used to enforce it all the time. People go to prison for possessing marijuana, and people are fined heavily for smoking marijuana. Presumably we have created this incentive structure surrounding marijuana because we want to keep people from smoking marijuana. The regulators think it’s a dangerous drug and think we shouldn’t use it. If we closely evaluate this policy, we can see that it’s not ethical either.

There are two sets of problems with the policy, the first is that it is inconsistent with other regulations and laws on our books. Is marijuana a dangerous drug? Is it more dangerous than alcohol or other legal drugs? According to a 2007 student in The Lancet, it is not:

“Heroin and cocaine were ranked most dangerous, followed by barbiturates and street methadone. Alcohol was the fifth-most harmful drug and tobacco the ninth most harmful. Cannabis came in 11th, and near the bottom of the list was ecstasy.” [5]

If we have a policy which allows for the legal use of a drug which is far more dangerous than an illegal one, that is an inconsistent and arbitrary policy. Such a policy would suggest that the bias against marijuana one is based on arbitrary feelings or social mores surrounding the drug, not real scientific evidence. It is likely marijuana is prohibited because a majority of people feel that it should be, not because it is really dangerous. In order to make the law consistent, either alcohol should be banned or marijuana should be legalized.

The second sets of problems with the policy surround the effects of the prohibition itself. Canada, and its neighbor the United States have been practicing prohibition of one sort or another for well over 100 years. The most shocking case of prohibition was the prohibition of alcohol in the United States in the 20s. The prohibition didn’t work, people consumed alcohol anyways and organized crime moved into the sale and distribution of liquor instead of regular businesspeople. The policy created more unintended evils than allowing the substance to be legal. According to a Fraser Institute study, 23% of Canadians have used marijuana at one point in their life [6], and 7.5% of Canadians report that they use it regularly. [7] On the issue of organized crime, the Fraser Institute’s Study commented:

    Consequently, the broader social question becomes less whether or not we approve or disapprove of local production, but rather who shall enjoy the spoils. As it stands now, growers and distributors pay some of the costs and reap all of the benefits of the multi-billion dollar marijuana industry while the non-marijuana-smoking taxpayer sees only costs. Alcohol prohibition in the US expanded organized crime in North America. Removing alcohol prohibition generated many problems, but none like those afflicting society in the days of Al Capone and his ilk.” [8]

Marijuana prohibition in Canada doesn’t work. It is an arbitrary law which is inconsistent in principle with our other statutes. It gives profits from the marijuana industry to organized crime rather than businesspeople. We cannot say with certainty that the policy has created less marijuana use, or that repealing the policy would create more marijuana use, however the problems the policy have created outweigh the costs of having marijuana legalized. The policy is employing force and coercion to keep individuals from smoking marijuana without a great deal of efficacy, and thereby should be abolished as being unethical.

Toronto’s Mayor David Miller wrote to Prime Minister Stephen Harper on March 25th of 2008:

    Handguns have become more than just a violent threat to the safety and security of Canadians. These deadly weapons have scarred our neighbourhoods with the loss of too many lives and increasingly endanger the health and vitality of proud communities across Canada. It is time to banish handguns from our nation.” [9]

Mayor Miller has a prominent figure in a growing movement of Canadians to ban handguns in Canada. They believe passionately that banning handguns will lead to less shooting in Canada. They want to impose a regulation through government making sure legal citizens can’t own handguns, a regulation that works on the force and coercion mechanism. Canadians might face heavy fines or jail time for owning a handgun if they got their way. Unfortunately for Mayor Miller and his friends, the evidence is that banning handguns hasn’t led to less crime where it’s occurred, and the actual evidence is that there is no correlation between the amount of firearms within a society and the crime within that society. In the United Kingdom they banned handguns in 1997. In the 2 years that followed, the use of handguns in crime rose by 40%. [10] The Coalition for Gun Control in Canada has shown that 75% of handguns used in crime in Toronto are smuggled, they are not obtained legally or stolen from legal owners. [11] Since the late 80s, the U.S. has been moving to looser gun laws, and crime has not increased, its decreased. Between 1987 when Florida started the liberalizing trend and 2005, the homicide rate in the United States has fallen 32.53%, from 8.3 murders per 100,000 people, to 5.6 murders per 100,000 people. [12] Don B. Kates of the Independent Institute observed:

“In 1973, the American firearm stock totalled 122 million, the handgun stock was 36.9 million, and the homicide rate was 9.4 per 100,000 people. At the end of 1992, twenty years later, the firearm stock had risen to 221.9 million, the handgun stock had risen to 77.6 million, but the homicide rate was 8.5–or 9.5 percent lower than it had been in 1973. The percentage of murders committed with firearms decreased as well. In 1973, 68.5 percent of murders were committed with guns. Fifteen years later, after Americans had purchased almost as many new firearms as they had in the preceding seventy-three years, 62.8 percent of homicides were committed with guns..” [13]

There is no relationship, correlative or causal between the amount of firearms and firearm crime. There is no data to suggest that banning handguns will decrease crime. If the goal is to decrease shootings and crime, like Mayor Miller suggests it is, then banning handguns is not the way. Such a policy, given the evidence, would not decrease the number of shootings in Toronto. It would be coercion and force with no positive effects, solving no larger evils, and such a policy would be immoral and should not be passed.

We have all kinds of regulations in our lives. We have regulations that tell us where to get healthcare, what to eat, what not to eat, what kind of car to drive, what we can do with our own bodies, what kinds of property we can and can’t own, who we can and can’t associate with. Without a rational way to evaluate these regulations, without rational ways to argue about whether or not these policies are successful, we will be doomed to follow a road, a road of arbitrary rule by majorities based on feelings and whims, not facts and evidence. A road to serfdom.

Endnotes:

[1] “Regulation”, Accurate & Reliable Dictionary, 2008. http://ardictionary.com/Regulation/3164.

[2] “Coercion”, Dictionary.com, 2008.http://dictionary.reference.com/browse/coercion.

[3] Read, Leonard and Friedman, Milton. “I, Pencil”, Foundation for Economic Education, 2006. http://www.fee.org/pdf/books/I,%20Pencil%202006.pdf

[4] Eskridge, William and Spedale, Darren. “Who’s Afraid of Gay Marriage?”, ABC News, June 2, 2006. http://abcnews.go.com/US/Story?id=2034478&page=1

[5] “Alcohol, tobacco worse than pot, ecstasy: study”, AP, March 23, 2007. http://www.cbc.ca/health/story/2007/03/23/alcohol-tobacco.html

[6] Easton, Stephen T. “Marijuana Growth in British Columbia”, Fraser Institute, June 1st, 2004. http://www.fraserinstitute.org/commerce.web/publication_details.aspx?pubID=2974

[7] Easton, Stephen T. “Marijuana Growth in British Columbia”, Fraser Institute, June 1st, 2004. http://www.fraserinstitute.org/commerce.web/publication_details.aspx?pubID=2974

[8] Easton, Stephen T. “Marijuana Growth in British Columbia”, Fraser Institute, June 1st, 2004. http://www.fraserinstitute.org/commerce.web/publication_details.aspx?pubID=2974

[9] Miller, David. “Letter to the Prime Minister”, March 25, 2008. http://www.toronto.ca/handgunban/index.htm

[10] “Handgun crime ‘up’ despite ban”, BBC News, July 16, 2001. http://news.bbc.co.uk/2/hi/uk_news/1440764.stm

[11] Cukier, Wendy D. “Toward a Fact-Based Strategy to Reduce Gun Violence”, Coalition for Gun Control, January 1st, 2004. http://www.guncontrol.ca/Content/New/Toward_a_Fact-Based.pdf

[12] “Crime in the United States 2005”, Federal Bureau of Investigation, Sept. 2006. http://www.fbi.gov/ucr/05cius/data/table_01.html

[13] Snyder, Jeffery R. “Fighting Back: Crime, Self-Defense, and the Right to Carry a Handgun”, CATO Institute, Oct. 22, 1997. http://www.cato.org/pubs/pas/pa-284.html

Bibliography:

Friedman, Milton. “Capitalism and Freedom”, 1962.

Friedman, Milton and Rose, “Free to Choose”, 1979.

Hayek, Friedrich. “The Road to Serfdom”, 1945.

Smith, Adam. “The Wealth of Nations”, March 9, 1776.

Rand, Ayn. “For the New Intellectual: The Philosophy of Ayn Rand”, Decemeber 1, 1963.

Rand, Ayn. “Capitalism: The Unknown Ideal”, July 15, 1986.

Mises, Ludwig von. “Planned Chaos”, July 1981.

Snyder, Jeffery R. “Fighting Back: Crime, Self-Defense, and the Right to Carry a Handgun”, CATO Institute, Oct. 22, 1997. http://www.cato.org/pubs/pas/pa-284.html

Easton, Stephen T. “Marijuana Growth in British Columbia”, Fraser Institute, June 1st, 2004. http://www.fraserinstitute.org/commerce.web/publication_details.aspx?pubID=2974