Friday, January 28, 2011


Regulatory agencies will quite often become a tool of the very people they regulate. They will use the agency to add another source of revenue to their bottom line. Specifically, it will allow them go make money not only by selling goods and services on the open market, but by the use of government force to take it from others.

The simple reason for this is that the regulators will have the full and undivided attention of those who they have the power to regulate, and will be ignored by everybody else.

Let's say you and I are a part of a community of 100,000 people. I'm doing something that you and others don't like, so you appoint somebody to watch over me and regulate my activities.

Five years from now, you and 99,950 other people won't even be able to remember that regulator's name. You'll have some vague idea that his job is to watch over me, but that's it. You'll be off doing other things. Of the rest, half of them work for me in the Department of Regulation Compliance and Lobbying.

Meanwhile, I – or some particularly likable lobbyist type that I have hired - will be talking to this regulator on a daily basis. I will know his likes and dislikes. I will know his family and their likes and dislikes. We'll go to dinner. I’ll send him a card when his kid gets sick. I'll invite him out to a ball game or two.

I won't buy the tickets - that will look bad. However, this regulator is a human being and values more than tickets. He values company, praise, good friends, a sense that he is accomplishing something.

You're ignoring him. You don't even know his name. He's not going to get any of that from you.

What I might try to do, since I know the regulator quite well, is show support for some of his interest. Is he interested in promoting medical research on diabetes? Well, my company can make a $25,000 contribution to that particular cause. Will we make the same contribution next year? Well, that depends on how profitable we are next year.

I'm not going to say, "Adopt this regulation or adopt that interpretation of the other regulation to keep the money going."

I won't have to.

This process doesn’t even require the conscious thought that my contributions to this cause is tied to his decisions on regulation. He will FEEL the relationship, even if he doesn’t consciously think of it. The idea of doing something that would threaten those contributions will make him FEEL uneasy. If he is like most of us, he will use these feelings to weigh the evidence for and against the regulation. From this, his feelings will convince him that the regulations are a bad idea. He will honestly believe this – because it feels better to believe this than to believe the alternative.

Seriously, when it comes to beliefs, everybody, to some extent, evaluates their beliefs by 'feeling' whether or not the claims are true or false. This is not to say that they fail to base their beliefs on the evidence. Rather, this is something that they take to be evidence. "Intuition", "Gut feeling", "Divine revelation", "Faith", whatever you want to call it - these are beliefs that people adopt because it feels good to adopt them.

It is possible to influence what other people believe - what they actually think is true and false - by influencing what they want to believe. If you can make certain ideas feel uncomfortable, you can make people believe they are false. If you make them feel right, you can make people believe they are true.

The regulator is going to act so as to fulfill his own desires, given his beliefs. Every intentional action that the regulator performs is the act that best fulfills the agent’s desires, given his beliefs. One of those desires will be a desire to serve the public good. He will have an aversion to breaking the rules and a desire to keep promises. Still, he will act to fulfill all of his desires given his beliefs.

Knowing this, I can manipulate which option best fulfills the most and strongest of those desires.

I will also be able to heavily influence the flow of information relevant to the regulator’s decisions. I will have a staff of people collecting “data” and presenting it to the regulatory agency so that they can make an “informed” decision.

I am not going to do anything that would be called a lie in court. I will simply present information to the regulators the way the energy industry presents information to the public on global warming. I will offer them an interpretation, muddy the waters as much as I can, and hire the best speakers and public relations firms to put my ideas in the best packaging.

It pays for me to do these things.

You are not even going to know that the regulation is being considered, let alone put any effort into providing data relevant to that decision. If you do hear about it, it will be 2 minutes worth of information on a nightly news broadcast. One minute of that will come from my office because the news organization is going to try to live up to its obligation to “present both sides”.

If that is not enough, I have a list of reporters and talk-show hosts that will accept and repeat whatever I send them, and a few million dollars in the advertising budget, and the same marketing and packaging department that I mentioned above to make sure that the material is presented in a way that is “convincing”.

Oh, we can’t forget the fact that I have a vice-president’s position that comes with a corner office and stock options waiting for the regulator when he leaves public office. It’s going to pay a lot more than his government salary ever made. Furthermore, his experience as a regulator in the department of regulation means that he will be worth every penny to my company.

What is he going to get if he refuses the job offer? What else is he qualified to do that would justify as much money as I am willing to pay him for his expertise in regulations?

I will also be buying his friendship with other people who are still in the department of regulation – the fact that he knows them, he knows their families, he knows their likes and dislikes, he knows what charities they support and what churches they go to.

And if the regulator actually does intend to get in my way, then I still have the prospect of going to various politicians and seeing to it that he is replaced with somebody who is more cooperative at the first available opportunity. I have an edge with the politicians as well. If the politicians are disposed to push the regulatory agency in a direction that I find useful, then I have reason to give that politician a great deal of support. After all, his help is worth a great deal of money to me.

However, if the politican does not support me, he will get nothing. You are not going to base your vote on this one issue. You will not even know the politician's stand on this issue. You do not even know the name of the person responsible for this particular set of regulations, let alone what his policies will be. You can't be bothered.

And it's not because you are lazy, either. At the level at which I am talking about there are probably thousands upon thousands of regulators. You simply can't keep track of them all - even if you made it a full-time job. Neither can I. However, I can get to know those few who has the power to make decisions governing the flow of millions - perhaps billions - of dollars through my company's bank accounts.

If I can't pick the regulator, I can use the legislators to change the rules. You know . . . those hundreds of little amendments that get tacked onto bills that have nothing to do with the bills they are tacked onto. I get a friendly legislator to tack one of those onto a bill. Let's say, it's a bill expanding the rules for regulating sex offenders. This way, if any politician votes against the bill that has my amendment or any president vetoes the bill, we can say that he "voted against registering sex offenders, and I can get somebody more cooperative in the next election.

So, if you want the government to regulate Industry X, then you should ask whether it is a good idea to give the power to make and interpret those rules to Industry X. Because, a couple of years down the road, after the rest of us have moved on to other things, the industry that you have decided to regulate will be at work manipulating that body of regulations to its own advantage. And you simply will not have the time or the resources to prevent it.

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