World's Worst Regulations!

There is a long history of regulation and deregulation where big scandals provide the catalyst for new rules, and then the realization that the rules are possibly excessive has caused them to be rolled back.

In finance the 1933 Glass-Steagall provisions came in the wake of the 1929 Crash. The 2002 Sarbanes-Oxley Act was a reaction to the Enron and WorldCom scandals. Dodd-Frank was enacted in 2010 after the 2008 financial crisis.

Good regulation can bring all sorts of benefits, but excessive regulation, does little to serve the public interest, and creates financial costs and frustration for businesses and the public.

Elon Musk has vowed to dismantle thousands of federal regulations as the co-head of the Department of Government Efficiency, or DOGE, saying the nation’s financial security depends on it. Is he right, and if so, what rules need to go first?

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[sarcasticundertones]

A good example of bad regulations are the US's CAFE standards that set very high efficiency requirements for small vehicles, but made exceptions for larger vehicles and trucks. The result? Car companies are pushing their big vehicles and slowly discontinuing their much more efficient sedans, wagons, and hatchbacks. Fuel consumption in the last decade is higher than it's ever been.

[macattack]

The first regulations that should always be removed are the ones that no is able to properly enforce. Rules that are easily broken are just taxes on honesty and incentives for corruption.

[rexxpowercolt]

You better believe I'm going to suspiciously take my salmon somewhere else!

[smacktacticstrading]

As a Canadian, I am offended. Clearly "ironic" means to be "like rain on your wedding day, " or "a free ride when you've already paid."

[wgowshipping]

Your description about the Jones Act is a bit flawed.

1. 14:33 The act was a national maritime strategy and not passed just to protect the American shipbuilding industry. It was a reaction to the First World War where US international trade was controlled by the British and Germans and when war was declared, the economy suffered with a recession in 1914. The thing that saved the US was having a domestic merchant marine involved in coastal trade and a shipbuilding infrastructure.

2. 14:44 The Jones Act was directly responsible for maintaining a domestic merchant marine and shipbuilding base that was essential for victory in World War Two. What was missing was reform post-World War Two to deal with the changing nature of global shipping. It was not until 1970 that another merchant marine act was passed.

3. 14:53 The section of the act you are referring to - Sec 27 - only deals with cabotage. The international trade fleet could purchase ships built overseas, which was done up until the 1980s. However, it was the Reagan administration decision to end the construction and operational differentials passed under the Merchant Marine Act of 1936 that led to the largest decline of the US merchant marine into the 1980s. The Jones Act Sec 27 maintained the domestic trading fleet, but it hurt the US shipbuilding base as private shipyards shifted to building solely for the US Navy and government contracts.

4. 14:58 There is no evidence that US ships cost 6 to 8 times more. The usual number used by opponents of the Jones Act are 2 to 4 times. However, those numbers have to be qualified as the largest shipbuilding nation in the world today, China, which builds over 50% of all ships uses large direct and indirect subsidies to offset costs.

5. 15:10 Your statement that it is cheaper to move goods by rail or road because of the cost of ships is not accurate. The higher cost for ships are amortized over the life of the ship. The biggest reasons for the reduction in the number of ships in coastwise trade was the introduction of the interstate pipeline and highway systems in the 1960. Plus the advent of jet airliners, freed up space on rail for freight. Today, it costs about $2/mile to move freight by road. Even if you allow foreign ships to move cargo between US ports, it will still be faster and probably cheaper (due to double freight costs in US ports) to move cargo via road or rail.

6. 15:30 There are forms of cabotage in the road, rail and aviation sectors also. These also contribute to the higher costs of transportation within the US and it is not merely an issue of water transportation.

7. 15:40 The issue about Alaska, Puerto Rico and Hawaii are the ones that need the most direct action to lower costs of transportation. However, the Jones Act does ensure regularly scheduled delivery of goods, something not guaranteed by foreign shipping as demonstrated by Maersk's recent decision to ending service to Alaska.

8. 15:51 US shipping firms are complying with IMO standards and are in the process of introducing LNG fueled ships which are more environmentally friendly than road or rail. It will not be easier or cheaper to move goods around the US by water expect in some rare occasions due to the geography of the nation.

9. 16:10 Your example of Hurricane Fiona in Puerto Rico in 2022 was a false narrative created by BP, who happened to have a tanker off the coast and wanted to offload it. I was talking with American mariners at the time and they were turned away from ports in Puerto Rico because the diesel tanks ashore were full. The issue during the hurricane was the internal transportation system in Puerto Rico collapsed and they could not deliver fuel via the roads.

10. 16:33 US shipbuilding finds itself in this situation because of the end of the construction differentials in the 80s, something that used in Korea, Japan and China today to offset the cost to build ships. When the US stopped building ships for international trade, this impacted ships that were built for the coastal trade. The Jones Act today maintains a core of domestic shipbuilding. Without, there would be no construction of large deep-draft commercial ships in the US. It is interesting that you omitted tankers from your average age of the Jones Act fleet as they make up the majority of the fleet, and they are the newest built ships in the fleet.

Check out What's Going on With Shipping

[EtienneFortin]

There is a regular clean up of regulations that should be made. But for me regulations is a repository of past experience. Something to not make the same mistakes over and over again. These regulations should always have an introduction about when it was first put into effect and what event made the regulation necessary.

[ashroskell]

“Many people feel that this law has lead to the people of Canada being confused about the meaning of the word, ‘ironic.’” 😂🤣😂🤣🤣

[CainXVII]

Sweden also has the rule about art in new buildings (only state funded ones). About 1% of the budget has to go to art, but sometimes it ends up being architectural things too. It's pretty neat actually. It ensures work for a lot of artists in the country and makes the buildings, new parks, even new roadways much nicer. Yes, even the new tunnel around Stockholm city has to have art in it.

[PedroOjeda]

"The Cumulative Cost of regulation" paper missed a point however, that not all the benefits are measured in economic growth. So we may have dampened growth but did we improve quality of life and health? Some of those are measurable such as medical expenses. But how do you measure the economic benefit of not polluting a National Park's water or preserving land? Or they didn't include the benefit of consumer protection on inelastic demand products such as air travel and medicine.

[Thestuffonmainstreet]

The largest, most burdensome, and radically corrupt regulations in the US are local zoning laws.

In over 99% of the United States it’s illegal to build a duplex. Unless someone wants to de-regulate zoning loss then they’re not serious about deregulation.

[HendrikaWoudman]

Another great episode. I keep running back because I constantly learn a thing or two.
Thanks for featuring Katherine Ann McGrath in one of your videos. I took your advice and contacted her for investment and budgeting opportunities. The results have been incredible. Started with slightly less than $40k, and now I’ve paid off my $529k loan in 6 months. Now totally debt free with 2 paid off rentals, having no debt for the last 12 months. Thank you Katherine Ann McGrath!

[hgdolder]

The regulations in Argentina have only one purpose: that you can't comply, so you need to pay bribes.

[alfbarbolani]

Quick note: Madrid is not exactly a good example of deregulation working well.
- One of the lines in Madrid’s metro was built with so much disregard to the geological conditions that it has caused an entire neighborhood to literally crumble down, with thousands of people losing their homes. Yes, political pressures combined with lax regulation.
- Restaurants no longer need a fire safety inspector before opening, just a “responsible assesment statement” made by the owner . A fire killed dozens of people when one burden to the ground when a waiter set the roof plastic decoración on fire accidentally when serving a “flambeé “ dish.
I am all against removing stupid rules, but too lax regulation in the name of economic development kills people.

[lite]

Thank you for bringing up the Jones Act. We need to repeal this law in its entirety. There's a large Puerto Rican population where I live (not in PR), and the argument that the Jones Act prevents Puerto Rico from becoming affluent is pretty solid.

[muzykaml]

What would Milton Friedman say about the ultimate result of the EUR's cap and trade initiative? And how so many "carbon offset" credits turned out to be disingenuous at worst and fraudulent at best?

Also, why wouldn't he reference the Love Canal debacle? That happened during his lifetime. The whole reason the EPA superfund site program started was because a company avoided any financial liability for its toxic pollution by selling the land to the municipal government for $1. The town obviously couldn't afford to clean it up and stop poisoning school children - so what would his argument be? To have the town stop public education? Raise taxes on the locals to obscene levels to pay for a new school to be built?

An ounce of prevention is worth a pound of cure; why mitigate when you can prevent?

[tobyCornish]

But the real question is: is rap over regulated?

[doctorlolchicken]

As someone who has to work with the fallout of Dodd-Frank, it's not the spirit of the regulation that is the issue, it's the letter. Part of the reason for D-F was ineffective models and executives ignoring model results. The reality is that executives don't want to pay attention or pay for model development. Consequently, D-F has become a box checking exercise. It won't shield the country from bad bank actions. Independent bodies are meant to examine bank models and processes and point out problems that need to be addressed. These people are often understaffed and under qualified. They are incentivized to find issues, but not issues that executives don't want to deal with. Instead, they constantly nitpick minor issues that make no difference to the end results. A model may underpredict by $50 million, but the model risk examiners are focused on "statistical" elements that maybe account for $1 million. Why? Because those issues are easy to deal with and they don't require executives to make changes or spend money. Effectively, the letter of the law is being followed but not the spirit.

[frankb]

😆 "The safer skydiving gear becomes, the more chances skydvers will take, in order to keep the fatality rate constant." That is funny.

[vonwux]

People might laugh at the salmon act but my uncle worked on the docks and did 16 years prison time after he did a "shifty" walk while holding a crate of salmon.

[agodelianshock]

The real issue is regulations that were put in place to be used in extreme cases, and then get used regularly in later years by new people who weren't aware of the historical context and precedent of such regulations.