October 15, 2013

A Shutdown Silver Lining: Fewer Regulations

Sherzod Abdukadirov

Former Research Fellow
Summary

The government shutdown may choke the flow of federal regulations, but looking at some of the rules on the books, this might not be a bad thing. While there are regulations that provide great benefits to people, more than a few do not. To the contrary, they waste resources by duplicating market efforts or needlessly restricting market activity in order to deliver targeted benefits to special interests.

The government shutdown may choke the flow of federal regulations, but looking at some of the rules on the books, this might not be a bad thing. While there are regulations that provide great benefits to people, more than a few do not. To the contrary, they waste resources by duplicating market efforts or needlessly restricting market activity in order to deliver targeted benefits to special interests.

Take, for example, a recent U.S. Department of Agriculture rule revising deadlines for cherry growers to submit their plans to comply with production quotas for tart cherries. In a bizarre nod to the Soviet Gosplan (a committee responsible for producing the USSR's infamous five-year economic plans), the Cherry Industry Administration Board annually approves a central plan for national tart cherry production. All cherry growers must comply with the plan or seek the board's approval to deviate from the plan. The USDA sanctions any grower that does not comply.

Cherries are not the only agricultural product whose production the USDA regulates. The Agricultural Marketing Agreement Act of 1937 granted the USDA powers to regulate the production volume for many other "agricultural commodities with a national public interest." It had little economic rationale back when it passed and it certainly makes no sense today. Can anyone identify what national interest tart cherries serve?

As with any cartel, especially one enforced by the federal government, the regulation's main purpose is to deliver targeted benefits to the cartel members. In this case, it favors cherry growers at the consumers' expense by limiting production volumes and keeping prices artificially high.

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