Minnesota needs to reduce its regulatory burden

We at the Center write a lot about taxes and their impact on the state’s economy. We write less often about the impact of regulations. As we noted in our report ‘The State of Minnesota’s Economy: 2020‘:

Tax rates and, to a slightly lesser extent, their actual burdens, are, by their nature, relatively easy to quantify. But how do we quantify a regulatory burden? A great deal of work has been done to quantify the burden of federal regulations but much less work has been done on calculating the burden of state regulations.

A sin common to many economists is to avoid talking about things they can’t quantify. I confess that I am guilty of talking about regulations less than I should for exactly that reason. This is a mistake because regulations are important, and understanding their impact on economic growth is as important now as it has been in a long time because of inflation.

I quoted Milton Friedman a while back, saying that:

Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.

This quote is often truncated to exclude the reference to output, but that is a mistake. If inflation is, simply put, ‘too much money chasing too few goods,’ then one way to bring it down is to increase the amount of goods (and services). This calls for supply side measures to expand the economy’s productive capacity, and regulation is an important part of that.

What estimates we do have of the state’s regulatory burden suggest two things: first, we are about average and, second, in areas like occupational licensing, our burden is among the fastest growing. We need, then, to hold the line on further regulations and get rid of some of those we have.

Joseph Pacovsky, a member of the Freeborn County DFL, proposes the following in the Albert Lea Tribune:

I propose establishing a state commission whose purpose would be eliminating unnecessary rules and regulations. I understand the skepticism of creating another state commission. I believe that with clear direction it would be effective in controlling Minnesota’s level of regulation and maintaining necessary regulations. The commission would have authority to eliminate unnecessary rules and regulations either by its own initiative or as the result of evaluating citizen petitions. The commissioners appointed would be selected from all areas of the state, including rural areas and would be selected based on their expertise to judge the need and value of retaining specific regulations. 

This is not a million miles from the recent suggestion of my colleague, Martha Njolomole, that we reinstate the Sunset Advisory Commission. Regulations and the agencies that spawn them have a tendency to hang around. They should both be made to justify their existence once in a while.