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Fall 1999

ISSN 0890-913X

Volume 15, Number 1

Categories: Fall 1999 | Freedom

Evolution of the Regulatory State : The Mixed Economy Viewed Through a Complexity Lens

Robert L. Formaini, Federal Reserve Bank of Dallas

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EvolutionoftheRegulatoryState:TheMixedEconomyViewedThroughaComplexityLensRobertL.FormainiFederalReserveBankofDallasThispaperexaminestheimplicationsforpublicpolicyofHayek=sconceptionofcomplexity,Prigogine=sconceptionofcomplex,self-organizingsystems,andtheASantaFe@evolutionaryparadigmasappliedtosocialandeconomicrelationships.Itarguesthat,inadynamiceconomicenvironment,thebestregulatorypolicyisflexibleruleswithinwhicheconomicrelationshipscancontinuetopermutate,ratherthanveryspecificregulationswhichconstrain,temporarily,andredirectCoftenerroneouslyCthemarket=sdynamicgrowthpathandfuturedemand/supplyrelationships.Thisconclusionfollowsdirectlyfromtheimplicationsofcomplexityforourabilitytopredictaccurately.LudwigvonMisesusedaninterestinganalogytodiscusstheproblemsfacedbygovernmentregulators.Regulations,Misescontended,werelikeanefforttodamadesert.Immediately,nomatterhowlongthedam,waterwouldrunaroundeachsideuntil,inevitably,theentireexpanseofthedesert(implyingfreedomofaction)wouldhavetobeblocked.Miseswassuggestingthatpeople,likewater,alwaysseekafreepaththatcircumventsobstaclesplacedintheirway.Theevidenceforsuchacontentionsurroundsusandisgrowingalongwithregulationitself.Considerthefollowingrecentdescriptionofthisongoingconflictbetweenthedambuildersandtherecalcitrantwater:Inscope,itwasremarkable.Inlessthantwomonthsofusingthemaneuver,bluechipcompaniesthatneededtoraisemoneyhadputthemselvesinpositiontoavoidbillionsofdollarsinfederalincometaxesbyincreasingthedeductibilityofloan

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Title	Evolution of the Regulatory State : The Mixed Economy Viewed Through a Complexity Lens
Authors/Creators:	Robert L. Formaini, Federal Reserve Bank of Dallas
Year:	1999
Volume:	15
Number:	1
Pages:	67 - 97
Publisher:	The Association of Private Enterprise Education
ISSN:	0890-913X
Document Type:	Articles
Keywords:	Institutional evolution, Government policy, Mixed economy, American history, Complexity, Spontaneous order, Public choice theory, Entrepreneurship, Legislation, Efficiency, Economic development, Cost analysis, Benefit analysis

Citation:
Formaini, Robert L. / 1999. "Evolution of the Regulatory State : The Mixed Economy Viewed Through a Complexity Lens." The Journal of Private Enterprise, 15(1): 67-97.