Here's to Win-Win Regulatory Reform!

The word “regulation” can be a pretty loaded one in the world of public policy. To some, it means health and safety protections necessary for a well-functioning economy and society. To others, it means unnecessary bureaucratic restrictions that kill jobs and favor large, established businesses.

What just about everyone can agree on, however, is that there’s room for improvement in the existing regulatory system. Today, we’re talking about the idea of “win-win” regulatory reform. Or, put differently, how policymakers can approach improving the regulatory system to make sure it works better for everyone.

To do that, we asked our distinguished panel of regulatory experts to discuss what to do with the long laundry list of unnecessary or outdated rules:

• Laura Jones, Executive Vice-President and Chief Strategic Officer of the Canadian Federation of Independent Businesses and a regulatory economist who has written for the Mercatus Center. 
• Kevin Falcon, Former Minister of Finance and Deputy Premier for British Columbia, who has worked in the trenches as a policymaker on regulatory reform efforts in Canada. 
• Patrick McLaughlin, Director of the Mercatus Center’s Program for Economic Research on Regulation, and former Senior Economist at the Department of Transportation.

Download this episode and subscribe to the Mercatus Policy Download wherever you listen to your favorite podcasts.

Looking to connect with a scholar you heard on the Download? Email Kate De Lanoy at [email protected].

Note: While transcripts are lightly edited, they are not rigorously proofed for accuracy. If you notice an error, please reach out to [email protected].

REESE: The word regulation can be a pretty loaded one in the world of public policy. To some, it means health and safety protections necessary for a well functioning economy and society. To others, it means unnecessary bureaucratic restrictions that kill jobs and favor large, established businesses.

What just about everyone can agree on, however, is that there's room for improvement in the existing regulatory system. Today, we're going to talk about the idea of win/win regulatory reform, or put differently, how policymakers can approach improving the regulatory system to make sure that it works better for everyone.

To do that, I'm joined by a distinguished panel of regulatory experts. First up, Laura Jones is Executive Vice President and Chief Strategic Officer of the Canadian Federation of Independent Businesses, and a regulatory economist who has written for the Mercatus Center. Thank you for joining us this afternoon, Laura.

JONES: Thanks for having me.

REESE: Next, we have Kevin Falcon, Former Minister of Finance and Deputy Premier for British Columbia, who has worked in the trenches as a policymaker on regulatory reform efforts in Canada. Welcome to the show, Kevin.

FALCON: Great to be here, thank you.

REESE: Last but certainly not least, we welcome our very own Patrick McLaughlin, director of the Mercatus Center's program for economic research on regulation, and former senior economist at the Department of Transportation.

MCLAUGHLIN: Thanks, Chad. Good to be here.

REESE: I want to start with what I think is probably the easiest and hardest question for people thinking about regulation. You all have deep experience both as researchers and policymakers.

In about 30 seconds, explain to me what we're really trying to accomplish when we talk about regulatory reform. What's the end goal look like?

FALCON: Smarter regulation. I'm done.

[laughter]

JONES: We're trying to give people back precious time and money, and there's a difference between...You talked at the beginning about necessary rules.

I always think that a large part of the rules are necessary and important rules, and we want to protect those rules. I make a distinction between the necessary rules and red tape.

Red tape are those rules that are either duplicative, or they're just very, very costly for the benefits they deliver, or indeed, can deliver no benefits or even negative benefits, because sometimes, they get in the way of complying with the good rules.

By getting rid of red tape, what you do is you free up people's time and energy to focus on what's really important. Sometimes that means growing the economy. Sometimes it means things that are really practical, like just spending more time with friends and family.

My mother was a small business owner, and I will never forget her cursing. It was probably the first time I learned some of these swear words.

[laughter]

JONES: She was usually pretty good, but she'd be filling out some of her sales tax remittance forms. It wasn't that she had to file taxes that was the problem. It was that she didn't understand the forms. Because she didn't understand the forms, that was taking precious time from us because she was doing it after work hours.

We really as kids wanted her to be hanging out with us. I think actually that's when my passion for cutting red tape begun way back in those days.

REESE: At an early age.

JONES: At an early age, when I saw how destructive it could be even to family life. There's huge economic reasons for doing it, but I also just wanted to make the point. There's also some very personal reasons, that it makes people's lives better if you can get rid of the unnecessary rules. Keep and protect the good rules that are important for human health safety and the environment.

MCLAUGHLIN: That's such a great summary. I think I'll just echo that. [laughs] That really is very, very true.

REESE: Sure. People talk a lot about...maybe this gets to the idea of red tape that you were mentioning, Gloria. People talk a lot about the burdensome cost of regulation to the overall economy, the burdens of business as a major reason for needing reform.

I think a lot of folks hear that and think, "You know, I don't mind if companies have to spend a little bit more money or companies have to hire an extra attorney, if it makes sure that they're complying with regulations," especially if those are the important regulations that you mentioned. Should we really be worried about the cost side of things?

MCLAUGHLIN: Chad, I think a few people would say we shouldn't worry about the cost side of things. It's broadly recognized that any policy in regulation as just one of many options we could talk about, is going to have consequences, is going to have costs, but hopefully, will also have benefits.

You need to be considering both sides of that if you're going to have efficient policy, in this case, efficient regulation. One of the themes of my career has been to better understand the hidden consequences, and that could be positive or negative by the way, the hidden consequences of regulation.

By doing that, by exposing those hidden consequences to better understand what we are facing in terms of tradeoffs, what we're giving up, and understand then and form our choices then, about what we were going to pursue in regulation and regulatory reform.

FALCON: I think I would add to that by saying that nobody, at least most of the people I have ever met that have been in public life, goes into public life to say how can we make things less safe, worse for the environment, or worse in people's health? They generally don't.

[05:10] What we do believe though is that you can have smarter more effective regulations by focusing on the outcomes you are trying to achieve, as opposed to fixating on the processes that some people like to insist need to be there to get to a certain outcome. I think that's where the confusion lies, that you can often, by focusing on the outcome you want to achieve, incent and dis‑incent behaviors to get exactly what you need.

We know there are bad players out there. We shouldn't pretend that everyone that runs a business is going to want to follow all the rules and create the best outcome.

Most of them, the vast majority want to, but some don't. You need to have tough regulatory repercussions for those that don't follow the rules properly, and you need to incent those that do. That's the balance that we tried to achieve in British Columbia.

JONES: A lot of people make that mistake of not focusing on the outcomes, and instead substituting, "Well, more rules has to be more safety."

FALCON: Exactly.

JONES: If we double the rules, we double the safety." In fact, that's not true at all. In fact, that once you get beyond a certain number of rules, you actually are undermining the very things that you're trying to achieve and accomplish.

We heard about an example this morning where we were talking about the Dodd‑Frank rules, 17,000 rules. The problem for small banks, for example, that you have here in the US, is they can't possibly read and understand all of those rules to comply.

The same is true with safety measures. You ignore all of them because you don't know where the important ones are.

MCLAUGHLIN: A final point here, echoing what Laura said, good intentions doesn't mean good outcomes. Even if every regulation individually is well crafted and well designed, it still may not work.

Rarely, if ever, do you see an analyst inside a regulatory agency, or a policymaker, thinking, "What about all of these regulations together?" You can be overwhelmed, as Laura said, by the number of regulations you have to comply with. What consequences does that have on your ability to comply? That's rarely considered.

REESE: That's a great segue, actually. I wanted to bring up...The elephant, or maybe actually the moose in the room, is that we have a couple of Canadian regulatory experts.

That's not an accident, because as I mentioned at the top, you all have both worked on regulatory reform in a really real meaningful, productive way. I'm curious if one or both of you can walk me through your experience on the policy reform side.

Going back to what Patrick said about being concerned about that the quantity of regulations themselves is an issue, why did Canada decide that that was an issue? What did Canada do to address that?

FALCON: Maybe I can start just by giving you a context. We got elected in 2001, when I was first in government. We were following a government that had been in place for 10 years, and it was a government that was very much on the more regulation, higher taxes, bigger spending, etc.

They got themselves and the province of British Columbia into a real challenging situation, because the personal taxes were already the highest in North America. We had regulatory challenges, very burdensome.

The small business community was in an uproar, capital flight, business flight, the whole realm of things that can happen. We had to, to a certain degree, almost provide shock treatment response to get things back into line.

That was coupled with a number of public policy initiatives that included personal income tax cuts, and re‑looking at government services and what we deliver, and why we deliver it, and should we deliver it, etc, those fundamental questions. Ultimately, regulation was a big part of the negative feedback we were hearing.

That's why we decided to focus in on this area, and to working with industry, business, associations, not‑for‑profits, folks that were impacted by government regulation, to try and get their input as to what the challenges were in the front lines, if you will, and how we could try and change government behavior to derive better outcomes.

It takes time. It required us putting principles into place to guide us so that the public understood what we were trying to achieve, that the bureaucrats also understood the principles by which we would govern our red tape reduction efforts, and the private sector would also understand. That combination worked fairly well.

JONES: I can speak to the same story, because I'm with the Canadian Federation of Independent Business. As a small business stakeholder at the time, it certainly was the case that British Columbia hit a wall with respect to high taxes and a heavy regulatory burden.

In fact, the previous premier was actually quoted in the paper as saying, "Well, we were an old‑fashioned activist government with no more money to spend, so that left regulation."

REESE: Wow.

JONES: That tells you how bad it was. I remember some of the examples you used, Kevin, as minister of deregulation, talking about some of the stories. One of my favorites was that even the kids weren't exempt because they required not one but two permits to take a tadpole to show‑and‑tell. I think it was one to transport...

FALCON: Or garden stake.

JONES: And one to show it.

FALCON: Yes, that's right.

JONES: You got rid of that, and I want to reassure you that the tadpoles in British Columbia ‑‑ the tadpoles are just fine.

[laughter]

JONES: They survived your deregulating.

But it was really important to take this on. I think Kevin's being modest, that the British Columbia model has really become a model for many jurisdictions, many states and other countries. I think it's better‑known outside of British Columbia, actually, than it is inside British Columbia, for basically its simplicity and its longevity and its effectiveness.

It's been going for 17 years, and it has reduced to date 48 percent of regulatory restrictions with no negative impact that one can point to as a result of this. In fact, Kevin, I know you've got some stories of where it led to some positive impacts in terms of improving safety in the forest industry.

FALCON: Just on that note, the forest industry, there was another minister of the previous government. Keep in mind, this was a minister of the government of the day that introduced a whole bunch of these regulations on the forestry sector.

He acknowledged in a rare moment of candor that they had added a billion dollars in cost to the industry with no public benefit. That's a pretty shocking statement, if you think about it. That's how out of control things got within that particular sector.

When we came into government and we had to make changes to the forestry sector, as an example, this is where public safety becomes a real issue. It's top of mind. The logging industry can be very dangerous if there's not appropriate rules and regulations in place.

But what had happened was, to Laura's earlier point, they were judging the industry outcome based on the size of the regulation book. Guess what? After it hit over seven feet, nobody was actually reading or understanding or caring to try and appreciate what all those rules were.

When we finally said, "No, we're going to eliminate a lot of that nonsense and we're going to focus on the outcomes we want, which is less accidents ‑‑ certainly, less unnecessary accidental deaths in the industry." We had very tough penalties that we put in place to ensure that doesn't happen.

But we didn't get down to telling them how to, for example, build a bridge over a creek that got into what size nails they should be using and what type of wood, etc, which is what the previous government had done.

We just said, "Your job is to make sure you don't impact the environmental things that we're trying to take care of in creeks. If you do, watch out because we're going to be all over you and you're going to be hit with big fines. It won't be worth your while, believe me."

Guess what? The industry says, "We certainly don't want that result so we're going to be more careful in how we do these kind of things."

We got, I would argue, better environmental outcomes, and certainly better public safety outcomes, because from a measurement point of view, the number of accidental deaths that took place in that particular sector went down dramatically by high double‑digits.

MCLAUGHLIN: This is such an important point, Kevin, because I used to work in a regulatory agency, as Chad mentioned before. The goal is, of course, to actually fulfill the mission of the agency. The normal way of doing that is to make more rules, make more regulations.

But what you just described was a way of achieving the mission of a safety‑oriented agency by eliminating regulations, by having fewer regulations on the books and making the ones that are on the books work better.

FALCON: Absolutely, and it's hard, because you have to understand, if you're in government and you're a professional civil servant, you want to make sure that you're going to be able to point to something that said if something goes wrong, that you're able to point to, "Well, we had all these rules."

But rules for the sake of rules aren't going to be effective if the people that are supposed to be following those rules can't possibly get through the sheer volume of them.

Really, you have to take a leap of faith to say, "How can we ensure that the folks at the front line understand the kind of safety and environmental things that we want to make sure are protected, while at the same time, not layering on a wet blanket of government regulation that is going to smother all initiative and all good thoughts and ideas that can come out of people that know probably best how to get to the right result?"

JONES: I think the other thing that's important to point out is I think sometimes people would really love to live in a world ‑‑ I think we'd all love to live in a world ‑‑ where we could get risk down to zero and we could have no unfortunate events ever take place anywhere at any time.

You're not going to get there with excessive regulating. I think that that's the mistake people make, is they think, "We can just add more regulations." But actually, you subtract from that. But I think we also have to acknowledge that even with the optimal level of regulation, there are going to be accidents. Accidents do happen.

I think that's really tough, particularly in high‑income countries, where our tolerance for risk has just gone down. We want to spend money to avoid risk. But more regulating isn't always the answer, and there is some base level of risk that we have to accept.

MCLAUGHLIN: One other thing to interject here. We've mentioned many times the quantity of regulation ‑‑ more regulation, or less regulation. But it's also the quality, right?

FALCON: Absolutely.

MCLAUGHLIN: You mentioned some specific regulations and saying how you have to build a bridge and what nails you should use. Sometimes those can stand in the way of safety, too, if there's a better design or if there's better nails that could be used, but hey, you're stuck using the ones that regulators required. That's holding back progress, as well.

FALCON: Absolutely. That happened all the time. The other thing I would say, too, Chad, is that if we're really honest about it, often regulation is an anticompetitive measure, too. It can be used by different industry groups or sectors of the economy to keep out potential competitors.

That's something that we stumbled across all the time, because we would often ask ourselves...In British Columbia, for example, we had rules governing the size of television screens that could be utilized in restaurants.

You may to yourself, what would be government's interest in saying you can't have a screen more than 14 inches in a restaurant? Of course, that was the days of Planet Hollywood, had just become a big deal and they wanted to move to Vancouver. This was when it became very real. Do you remember this, Laura?

JONES:  I do.

FALCON: Of course, their whole thing was about having huge screens, showing the Hollywood movies with Sylvester Stallone and all the owners of Planet Hollywood.

They ran right into the wall of regulation of British Columbia under the previous government that said, "No, no, no. You can't have those screens. They can be no more than 14 inches," and I think it limited the number of the screens you could have in a restaurant, too. This went made their business not even viable.

I happily raise that issue as another example of really dumb regulation. But the reason was, why? Why was that rule there? The rule was there because if you roll back the clock and go back in time, in the history of British Columbia in the 1950s, we had a premier that was very much against drinking. He didn't like public drinking at all and he was a teetotaler.

One of the things he did was made sure that drinking could only be restricted to hotels. You had to go into a hotel and you could drink. In fact, they used to have separate entrances for men and women back in the days. You could still see some old hotels where you couldn't possibly allow men and women to mix when they're going to be drinking alcohol. This is all true.

What happened is eventually, he moved on. Other leaders came into place, and they said, "That seems silly to restrict it just to hotels, but we don't want wild, wanton drinking in this province of British Columbia, so we'll expand and allow pubs.

"We'll have a special designation for pubs where they can allow people to drink, and to watch big‑screen TVs," because that's something the pubs wanted to give them a leg up on restaurants.

Eventually, the restaurants started saying, "We should be able to serve alcohol." The government said, "OK, but we better control this, because we don't want it getting out of control. If you're going to serve alcohol, you can't be like a pub.

"We're going to limit the size of the television screens you have, and you have to serve food with your drinks, too. Because if you're just allowing alcohol, well, that makes you too much like a pub."

All these crazy, at the time, seemingly sensible add‑on regulations eventually got to a point where we just had a crazy regulatory system, regime governing the whole food and beverage industry. When we came into power, we looked at that and said, "This makes no sense."

I want to tell you here and now in front of everyone that when I came up with a sensible idea of saying, "Well, let's just get rid of that rule altogether," we heard from the industries, believe me.

The pub industry suddenly said, "You're going to destroy our industry." The hotels had some concerns, too.

The restaurants were like, "You're killing our industry, but not letting us be like it is in the United States and other provinces in Canada, by letting people come and have a glass of wine if that's all they want to have in our restaurant."

They all went to battle, trying to get government, for their own different reasons, to either get rid of the regulation, or keep the regulation in place, or strengthen the regulation, whatever the case may be.

REESE: I was going to ask a question on that point. It sounds like there are a lot of examples we can pull out and say, "This regulation doesn't make sense," or, "That regulation only exists because of these weird historical political quirks."

I'm guessing that the answer is not to just have one poor person sit in a windowless room and read through every regulation, and say, "Well, this one can go. This one can stay."

For US policymakers in particular, how do they actualize that? How do you get the kinds of results that you saw in British Columbia?

JONES: In my view, there were some key ingredients that were present in British Columbia that had been missing from previous reform initiatives. Some of them came together by accident.

Once you zoom out and you look at what happened, and it was effective, and it stood the test of time, what were those ingredients?

You had political leadership. You had strong political leadership. You're hearing it now from Kevin.

The premier also at the time was very committed to this. Kevin, it was your only job for a while to make good on the political commitment to reduce regulation by one‑third in three years. That's the second key ingredient.

You had a very concrete and specific target. Kevin, to your credit, you went away and came up with a very simple, clear measure that people could understand in the form of regulatory restrictions.

Your first count was something like 380,000 regulatory restrictions. We knew one‑third of what, one‑third of 380,000. Then, stakeholders like our group could hold the government accountable.

In fact, you were issuing quarterly reports by ministry saying what those counts were. We could say who's on track, who's not on track. We could ask questions. I know there were questions being asked at the cabinet table.

The stakeholder engagement was another key ingredient, and stakeholder engagement not just at bringing forward the television examples or the tadpole examples. Stakeholder engagement saying, "Yes, here are some examples of things that can help you meet the one‑third target."

Also stakeholder engagement at a deeper level, saying, "Structurally speaking, you need reforms that are going to carry us through so that we don't have this problem every year once your government is gone." That measurement was key to that.

The final key ingredient was a cap on regulators. It was no longer the case that you could just regulate. In fact, you had a one‑in, two‑out policy for a number of years, followed by a one‑in, one‑out policy, to keep a lid on regulatory creep setting in again.

Those are things you can pull out from what happened. The fact that it survived 17 years and is still going, remains to be seen whether it will continue, I hope it will, but that's a long time in the life of regulatory reform. The current reduction is 48 percent. Think about that.

REESE: Wow.

JONES: BC has cut its rules in half just about, and the sky hasn't fallen. We still have very high health, safety, environmental standards and outcomes in the province.

Small businesses are feeling better about things. The economy is a lot stronger, was a lot stronger after your initiative than before.

FALCON: If I could just quickly, I want to talk about outcomes. For the listeners here that might not know a lot about British Columbia, it's important for them to know a few things.

One is that we have surplus budgets now. We have had for years. We've got a AAA credit rating, which is not us saying that, but the credit rating agency Standard & Poor's, and the others that have all acknowledged AAA credit rating.

We've got very competitive tax rates. We've got no unfunded pension liabilities. We've got a very good health and safety record, maybe one of the best in the country of Canada.

It's not a case of, we did these things, and now, we're getting bad outcomes. In fact, quite the opposite. The combination of the one‑third cut in unnecessary red tape, coupled with the tax changes, and coupled with some of the other initiatives we've put into place have put British Columbia in very good stead.

MCLAUGHLIN: Chad, to go back to your original question here, some poor soul who would be reading through all regulations here in the US and figuring out which ones don't make sense and which ones do, it's, of course, an impossible task. Let me put some numbers on it.

Just this morning, I went to quantgov.org and clicked on what we call the QuantGov Regulatory Clock, which told me that if some poor soul were to try to read through all of the code of federal regulations, the body of regulations at the federal level that are in effect today, and that poor soul were reading as a full‑time job 250 words per minute, which is a pretty good clip. It's what you read a fiction novel at, on average.

REESE: As we all know, regulations are that much of a page‑turner, as well.

[laughter]

FALCON: That's right.

MCLAUGHLIN: Just like Dickens. It would take that person 3 years, 28 days, 7 hours, and 8 minutes to get through it all.

REESE: Wow.

FALCON: [laughs]

MCLAUGHLIN: It's an absurd and obviously impossible task, but there is a solution. British Columbia has really navigated it.

Laura hit on all the ingredients. The last one is one of the most important. By capping regulators, you're changing the incentives of regulators.

Regulators, of course, like I said before, they want to achieve their mission. Now, in order to achieve their mission, they've still got to make more rules when they see a problem. They have to also find all rules that they can get rid of.

You're harnessing the incentive of these regulators. You have an army, if you will, working on finding those obsolete rules that don't need to be there anymore, the ones that aren't effective.

REESE: What most people probably think of is Executive Order 13771, which President Trump has signed. That's a one‑in, two‑out rule like you're describing.

Is that a step that you all think is inline with the British Columbia model? Is it a good first step, right direction, wrong direction?

MCLAUGHLIN: It's got some of the same ingredients. It's also different in a lot of ways.

The same ingredients, or similar ingredients, are it is putting the emphasis on the regulatory agencies themselves, if they wanted to make a new rule, recognizing, "OK, you do want to make a new rule, but just go back and find some old ones that can be modified or eliminated to offset the cost of that new rule."

Some differences, and Laura's done some research on this, the target setting is a difference that we're seeing. The current administration here in America has been changing the target and adjusting it.

In fairness, I think they said going into this that they're going to try to figure out how this is going to work going forward. They had some goals in the first year, and now, we're going into the second year. British Columbia had a much more concrete target from the beginning.

JONES: I would point to a couple of differences. The first would be that the two‑for‑one federally here in the US applies on a narrower scope, technically speaking, in terms of the way the executive order is being actually executed.

Ideally, that doesn't mean that that's going to stay that way, as Patrick said. Ideally, that would be expanded to include more rules. Right now, the scope is a bit narrow, technically speaking.

I do think, though, it's being applied more broadly than the technical terms of the way the executive order has been laid out to be executed. That's good news.

The second big difference is that in British Columbia's case, they set a concrete reduction target, one‑third in three years. We knew what the total territory was, what the total stock of rules was.

That hasn't happened federally in the US. We couldn't say, "Well, what is the total cost, or what is the total count of regulatory requirements?"

Patrick has done some great work, where he can tell you what the total count is. That hasn't been yet part of the administration's approach to say, "OK, we know we have, like in British Columbia's case, we have 380,000 regulatory restrictions. We're going to cut that by one‑third, and then we can clearly track it."

I would say that that's still a bit of a missing ingredient. I'm hoping that that's an ingredient that will come. Admittedly, quite a challenging and daunting task to take on federal rules in the US. It's a big, big job.

FALCON: It's a big job, but it's important. We used to have a saying that you can't manage what you can't measure. it's very true in government.

In fact, one of the first things I did when I was the Minister of State for Deregulation in British Columbia was look around the world and say, "Well, who does it best?" I'd rather not have to invent these ideas myself if I can steal them from someone else that's already been through this exercise.

What I discovered early on very quickly was that nobody really seemed to be able to demonstrate how they had reduced it. They had lots of...

I remember that Al Gore, who was the Vice President at the time when the United States did a big announcement on, "Look at the red tape we've cut," and he had a big clear plastic bag full of paper that was to demonstrate all the regs they had cut.

Maybe they had. I don't know. The more we and our staff was digging into it, we couldn't find how they'd done that and where they'd come from.

It was really important to me that if we were going to make a commitment like reduce by one‑third within three years, I knew that I had to have some way of measuring that. Not only so that we would internally know we had met that target, but that external, the media and the critics, and even our supporters would be able to say, "Well, yeah. There's no doubt they hit their target."

That was really important to me, and we're able to say that today. Nobody will argue with it. You will not find one media person in British Columbia that's covered our government that will say, "No, that's not true," because they know it's true. They can look up at the numbers themselves.

MCLAUGHLIN: Another virtue of the numbers that were used in the British Columbia approach is their simplicity, and how that does make it impossible for someone to say, "Well, I disagree with you. You didn't actually eliminate those regulatory requirements." It's pretty straight‑forward.

REESE: [laughs]

MCLAUGHLIN: On the other hand, the complexity of the economic analyses that go into rulemaking here in the United States, and also into the Executive Order 13771, it makes it a little bit harder for any outsider, or even people inside the government to say for sure whether there is indeed some offsetting of the cost of the new rules.

JONES: A simple measure that people can understand is key. Some of the critics will say, "Oh, that's too simplistic. It doesn't capture everything you want it to do," but it does a lot.

It doesn't have to be perfect. There's no measure that's perfect. GDP isn't a perfect measure. Unemployment rates, you can point to the problems with it.

I also think that when it comes to some big rules, cost benefit analysis is appropriate and important, but it doesn't have to be either‑or. You don't have to substitute one for the other. That's a mistake people think, "Why not use cost benefit analysis when you're looking at a big rule?"

To capture the whole territory of the number of rules that you have overall that your government is overseeing, and then to capture them by industry or by department, you can find a simple measure like the regulatory requirements measure in British Columbia, or the regulatory restrictions measure that Mercatus has developed.

That can be very, very powerful in helping make something that's otherwise a hidden tax much more transparent for people.

MCLAUGHLIN: Technology can be deployed here. There's lower cost ways to do this than back when British Columbia started this in 2001.

FALCON: Boy, is there ever.

MCLAUGHLIN: Now, computer programs can accomplish what you had to use an army of interns to accomplish.

FALCON: That's right. It's true. We literally had to hire a bunch of interns across departments to do a lot of the counting to figure out what all those regulatory requirement numbers were.

REESE: I don't want to let you guys out of here just talking about US federal policy, because a lot of the regulatory work that's being done right now is happening at the state level, as well.

Laura, when you talk about the challenge of addressing federal regulation as a serious problem, states might be a little bit more approachable. Is that the case, or am I barking up the wrong tree?

JONES: There have been a lot of states that have really been inspired by British Columbia. In fact, it's been inspiring, Kevin, for you and for me to see the appetite for a good model.

Kentucky would be the leader of that pack. I think they looked at what British Columbia...They did exactly what you did, Kevin. They looked around and said, "Has someone else done this in a reasonable, approachable, manageable way? Is there a roadmap here?"

They had the roadmap in British Columbia. That doesn't mean they're implementing it exactly the same way, but it's given them a direction.

I know Illinois has been interested, Missouri. Lots of state ‑‑ Virginia ‑‑ have taken elements of what British Columbia has done, or have looked to British Columbia, as well as other countries.

It has inspired states, and for a good reason at the state level, because resources are more limited with which to approach regulatory reform. British Columbia is not a big province. What's the population now?

FALCON: Four and a half million.

JONES: Four and a half million people? It's about the state of Louisiana. You didn't have tons of resources to bring. Yet, you still did a baseline count, which many bigger jurisdictions say they don't have the resources for.

You made that possible, and you came up with something simple and clear, and that has delivered results and stood the test of time. That's really inspiring for a lot of states.

MCLAUGHLIN: There's other states that are following the model, too. I should point out that it's not like states haven't been interested in this before. There were states that tried to go through regulatory reform, red tape reduction efforts before they knew about the British Columbia model.

What we've learned in looking at some of those is they just weren't all that effective. It's a great idea. We've seen this at the federal level, too, where every president going all the way back to Jimmy Carter has said, "There's too much red tape on the books."

FALCON: [laughs]

MCLAUGHLIN: Let's identify it and cut it," but it's easy to say, hard to do. States figured out the same thing until...

Jury's still out, but until now, they've learned that there's a simpler way than having maybe some full‑blown commission identify the benefits and costs of all these different rules, or have some poor soul read through all regulations and say what's good and what's bad.

There's ways to establish a baseline and then work from there, and harness the power of your regulatory agencies that already has expertise in all this stuff. Use them to see if they can cut back some of the red tape.

FALCON: What a great point. The more we can make this a bipartisan effort that everyone can sign onto, and the more we can use external validators, whether it's Mercatus, or in our case the Canadian Federation of Independent Business, which was a great advocate for red tape reduction, and in fact has gone beyond that to award recognition for governments that have done a good job.

They actually rate the governments like a report card right across the country in terms of how well they've been working to reduce unnecessary red tape for small business. That's a beautiful thing, because it gets it on government's radar.

There is nothing government wants to see less than a fail rate on a report card like that, that's going to give them negative coverage and stuff, especially if they see other provinces like British Columbia getting an A.

Then they want to immediately know, "What have they done in British Columbia? What can we do to mirror that?"

It creates a virtuous cycle of people wanting to do the right thing, regardless, hopefully, of ideology. You can start to implant some of these principles we've talked about here into a hopefully permanent government policy.

JONES: The nonpartisan point is really, really important. This is just good public policy. This isn't about right or left.

This accomplishes all kinds of goals, from reducing income inequality to keeping prices reasonable for consumers, to giving small business owners more time to spend with their families or their customers, or on their business plans, to then some bigger goals like economic growth and standards of living.

It's really hard to argue with any of that, whether you're coming from the left or the right.

FALCON: Consumers love it. If you can get great wins for consumers, they love it, too. They hate red tape more than anyone.

MCLAUGHLIN: I'm an economist, and economists are often focused on entrepreneurship. We think about that in the private sector, but of course, there's policy entrepreneurs.

This makes me have some hope that the good governance policies explored and shown to work by British Columbia will be emulated increasingly in other jurisdictions. We're seeing it happen now.

If it bears fruit at the state level, if these things work, if there's red tape that's removed and the sky doesn't fall in these states, as well, then maybe that will be showing the path, pioneering the path ‑‑ Kentucky will appreciate if I use the word pioneer ‑‑ pioneering the path for the federal government to follow.

REESE: As a native Kentuckian, I certainly appreciate it.

[laughter]

REESE: I'm going to go ahead and stop there, because it's so seldom that you can get a bunch of economists around a table and end on an optimistic, hopeful, forward‑looking, actionable note.

[laughter]

REESE: I don't want to risk jeopardizing that. Now that we've definitely solved every challenge posed by regulatory reform in the span of about 30 minutes, we can call it a day.

For our listeners who want to keep up with your work, what's the easiest place to follow what you're up to online? I'll just start to my left with Patrick.

MCLAUGHLIN: Quantgov.org, that's where we put all of our data that my team and I...We have some interactive data visualizations, a lot of charts and visuals that will also link you to mercatus.org, but all of the stuff that we're producing that's a little bit more techie, so to speak, data‑driven, all on quantgov.org. QuantGov ‑‑ quantified governance is what it stands for ‑‑ dot org.

REESE: Laura?

JONES: Cfib.ca is the website for the Canadian Federation of Independent Business, where we have a lot of research reports and other great information about small business issues. My Twitter handle is @cfibideas.

REESE: Kevin?

FALCON: I'm out of government now. I probably should have mentioned this at the beginning of the talk. I was in the government of British Columbia from 2001 until I retired in 2013. I want to emphasize, I retired. I wasn't retired by the voters.

[laughter]

FALCON: I retired as the Deputy Premier and Finance Minister. It was a wonderful time that I had in government.

I just want to applaud the work of CFIB and Mercatus for really...It can seem like a nerdy subject, but it is really important. I'm just so thrilled and honored to see that some of the modest changes that we made in British Columbia are being showcased a little bit, and perhaps emulated in the United States.

Typically, we always tried to copy a lot of great ideas we saw happening in the United States. It's nice to see it in some way going the other way.

REESE: Cheers to international cooperation, then.

FALCON: [laughs]

REESE: As always, I'm happy to hear your questions, comments, complaints, or episode ideas. You can email me at [email protected], or find me on Twitter @chadmreese. Thanks for listening. We'll see you next time.