January 10, 2018

How the Administration Gets the “Three R’s of Deregulation” Exactly Backwards



In a recent short post for the Harvard Business Review,  I proposed that regulatory reformers should be guided by “Three R’s”:

  • Retain regulations that support the basic rules of a market economy. Those include regulations that protect property rights, ensure that contracts are honored, and protect against common law harms like fraud, negligence, and nuisance.
  • Replace regulations that have legitimate aims but also have harmful unintended consequences.
  • Repeal regulations that are motivated primarily by the manipulation of public policy for private gain (rent seeking).

An article by Lisa Friedman in today’s New York Times illustrates how the Trump administration has gotten the three R’s exactly backwards. It details efforts by coal baron Robert E. Murray, a Trump mega-donor, to overturn a broad array of regulations on the coal industry. Be sure to read the full text of Murray’s wish list, which the EPA and the Department of Energy are systematically implementing.

Rather than retaining regulations that support common law property protections against harmful pollution, Murray wants to repeal them outright. His recommendations do not stop at carbon emissions but also include harmful local pollutants like ozone. To compete the picture, he wants to get rid of mine safety regulations.

Some of the regulations that Murray objects to are open to legitimate criticism. For example, he does not like Obama-era support for clean coal technology, about which many environmentalists also express skepticism. He also does not like subsidies for wind and solar energy. My own recommendation, in line with my second “R,” would be to replace the clean coal requirements and renewable energy subsidies with a simpler, more effective carbon tax.

Finally, rather than seeking repeal regulations that are motivated primarily by rent seeking, Murray indulges in open rent seeking of his own. Can it be viewed as anything other than rent seeking when an energy producer seeks to lower his own operating costs by insisting that downwind property owners absorb his output of noxious wastes without compensation?