Robert Wo Crandall

In recent years, it has become increasingly fashionable to attribute a myriad 0f our economic and social difficulties to excessive government regulation. If we are to believe the rhetoric, government regulation is partly or largely to blame for soaring inflation, lagging growth in GNP, declining productivity growth, the decline in the value of the dollar, and even general reductions in the animal spirits ot~ entrepreneurs. While many of these claims may eventually be shown to have some validity, the evidence linking regulation to these various national economic maladies is presently very weak. The reaction against regulation which has developed in the past few years reflects the confluence of two different forces: (i) a growing concern that "economic" (rate-setting, entry-restricting) regulation overly restricts competition and protects regulated firms from new technologies and new competitors; and (ii) the view that newer ’°social" (health-safety-environmental) regulation directs too many resources to controlling various hazards, excessively reducing privately traded goods and services. These newer forms of regulation are generally the inspiration for the charge that business is overregulated and thus unable to discharge its function of aggressively exploiting new technologies and bringing flew products to the market as it once did. The result is declining productivity, a stagnant economy, and perpetual inflation. It is not very difficult to see how this connection between stagflation and regulation has developed. Prior to the 1970s, the economy managed to grow at a rather satisfactory rate without bouts of major peacetime inflation. While we are discovering that productivity growth may have been declining throughout the post World War II period,~ it did not begin its catastrophic decline until 1973.2 Inflation surged in 1974 after the relaxation of price controls only to decline briefly, but then to surge ahead to double-digit levels by 1979. Given that the Occupational Safety and Health Administration, the Environmental Protection Agency, the National Highway Traffic Safety Administration, the Consumer Product Safety Commission, and the National Environmental Policy Act had their origins between 1969 and 1972 it is not surprising that many observers see a link between pervasive regula-