Think before you regulate
As humans, most of us have a general desire to do the right thing. We want to save the world. We want to cure it of all of its ills.
As a result, you may ask yourself questions such as these: “Wouldn’t it be great if those who don’t make very much money could see a raise in income? What about man-made pollution problems; shouldn’t we do all we can to remedy those?” The answer to both questions, obviously, is yes.
However, our error as humans is that sometimes we’re overly simplistic.
In our eagerness to fix things we advocate for government measures that — at face value —look like they’ll solve everything. Regarding poverty, we would increase minimum wage. To decrease pollution, we’d pass laws that American industries can’t exceed a certain level of carbon emissions. Sadly, these things don’t work quite as well as you might think.
While the government can require businesses to pay their workers a higher wage, it doesn’t usually give them the money to do so. There’s no guarantee that revenues — typically the source of the workers’ wages — will increase to match this new pay-rate.
Consider a business with $800 to pay their workers. If everyone works eight-hour shifts and minimum wage is $5 an hour, the company in question can employ 20 workers. However, if minimum wage is raised to $10 an hour the company can only employ half the employees it did before. Surely that’s not what we intended.
As for carbon emissions, what if we did cut them? Businesses, as they comply with the new regulations, will incur larger costs of production. To make up for these costs they’ll have to raise the prices of their goods. After all, if a business isn’t profitable we might as well stop working, and who wants to see higher unemployment?
As costs are raised, corporations will see that the most profitable way for them to operate is actually to outsource production to — you guessed it — countries that don’t have stringent environmental policies and may pollute even worse than the U.S. In the end, despite our good intentions, we exacerbate the world’s environmental situation and hurt American industry while we’re at it.
Understand, I don’t mean to say there’s no solution or to say to the poor or environmentally conscious that this is reality and they need to “just deal with it.” The point I wish to drive home is that before passing regulations, we must consider not only the impact that one believes will happen after having looking at the issue superficially, but also examine the implied and unintended consequences that we may entangle ourselves.
— Levi Henrie is a sophomore majoring in economics and international studies from St. George, Utah. He can be contacted at levi.henrie@aggiemail.usu.edu.