Regulation can create corruption


Looking beyond Abramhoff to the laws and regulations that made him possible
Evan Coyne Maloney makes some great points about how government regulation can encourage corruption.

One problem with big government is, the larger government gets, the more it manages the economy, the more incentive it creates for corruption. For example, Jack Abramoff was a Washington power broker for, among other things, Indian casino concerns. But the reason he had power in Washington wasn't because casinos have a lot of money, it's because casinos have a lot of money and are subject to the regulatory whims of government.

Because government regulates gambling, the market for gambling becomes constricted. If you want to gamble, you can go to Las Vegas, Atlantic City, a few other localities, or to an Indian reservation. The entire nationwide demand for gambling therefore becomes funneled into an artificially small number of markets. Those markets, in turn, collect artificially huge amounts of revenue. Some of that revenue, we now know, was sent to Washington to try to get the government to manipulate the industry in a way that would favor some players and disfavor others.

Like all businesses, casinos would love it if they could shield themselves from competition. Government provides them with a mechanism to do that. Money is just the way to get government to operate that mechanism to their advantage.

Since government regulation is what prevents competition in the gambling market, regulation is therefore the reason that casinos spend money to influence government. In other words, the very existence of big government itself is what creates the environment that encourages corruption. If you get government out of a given market, you've just removed the incentive for the businesses in that market to pay to influence government.

When government grants special privileges and powers, freedom suffers.

As counterintuitive as it seems at first, monopolies can't exist without government sanction. And the more tightly regulated an industry becomes, the fewer players who can afford to put out a product, and the more influence their money has.

— NeoWayland

Posted: Wed - January 11, 2006 at 05:01 AM  Tag


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