May 18, 2017

Regulation and Economic Growth

Applying Economic Theory to Public Policy
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Government regulation is a double-edged sword. By restricting the inputs—capital, labor, technology, and more—that can be used in the production process, regulation shapes the economy and, by extension, living standards today and in the future. Applied effectively, regulation can foster a thriving, competitive marketplace where innovation and technological progress flourish. Executed poorly, regulation can stifle creativity and learning and limit opportunities for all citizens.

In this brief but authoritative work, James Broughel lays out a basic theoretical framework for understanding how regulations affect economic growth. He provides a useful starting point for researchers of regulation and growth by reviewing what economists have learned about growth over the past 60 years and by describing the puzzles yet to be solved.

The book includes a unique classification system for distinguishing among the various “shocks” induced by regulation and tracking how these shocks translate into “effects” in terms of economic growth. It should prove helpful to academic researchers, advanced undergraduate and graduate students, policymakers, and anyone else who wishes to assess with greater precision the repercussions of the complex web of rules that governs our lives.

Praise for the Book

“In an age of slow growth, this book is one of the best guides to thinking about why regulation matters, how to incorporate growth considerations into policy analysis, and what we should do more concretely.”

Tyler Cowen, author of The Complacent Class: The Self-Defeating Quest for the American Dream and general director of the Mercatus Center

“James Broughel’s new book, Regulation and Economic Growth, presents a clear review of the economic growth models that have been offered over the past 60 years to explain the factors that affect productivity. I highly recommend it to policymakers and students seeking to understand the sources of, and constraints on, productivity and innovation. Readers will find not only a valuable macroeconomic foundation in this well-written volume but also important insights on the impacts of public policy and regulatory institutions.”

—Susan Dudley, director of the George Washington University Regulatory Studies Center and distinguished professor of practice in the Trachtenberg School of Public Policy and Public Administration

“Until recently, most economists have not examined regulation—and more specifically, regulatory accumulation—as a determinant of economic growth. . . . Whatever the cause, the effect is similar to the proverbial search for car keys under a streetlight. If regulation is a major cause of slower growth, then a search for answers using models that fail to consider regulation’s role will continue to be fruitless. Broughel’s book, along with recent innovations in quantifying regulation to produce tractable data for use in growth models, has effectively built a new streetlight.”

—from the foreword by Patrick A. McLaughlin