Plenty of optimism these days about the American economy over the next year or so. Among the reasons: lots of pent-up demand, a flood of federal stimulus money, and maybe even some productivity gains from the pandemic forcing businesses to work smarter. But what about after the blip, after the boomlet? I worry about a regulatory onslaught over the next few years from the new Biden administration.
Now the optimist in me hopes Washington will have learned some key lessons about the cost of regulation during the pandemic. As Cato fellow Thomas Firey has noted, “One of the better policy responses to the COVID-19 emergency has been federal and state governments suspending regulations that impede the market from responding to consumer demand. Many of these suspensions concern health care specifically, from loosening regulations on medical testing to permitting certified health care workers to work across state lines, to permitting telemedicine. Others help the economy generally, like easing limits on freight trucking.”
It’s one of the foundational principles of economics that people face trade-offs when making decisions. No free lunches out there. That includes regulation. The costs to regulation don’t mean we shouldn’t regulate, just that we should strive to understand and factor in these costs when deciding whether and how to regulate.
So here’s another principle to consider and, preferably, reject: The “precautionary principle” is the notion that innovations should be limited until the innovators prove they are safe. “Where there is uncertainty about future risks, the precautionary principle defaults to play-it-safe mode by disallowing trial-and-error progress, or at least making it far more difficult,” writes Mercatus scholar Adam Thierer writes in his excellent 2019 analysis, “How Many Lives Are Lost Due to the Precautionary Principle?” A classic example of the dangers of the precautionary principle cited by Thierer is how anti-GMO activists delayed the diffusion of Golden Rice, genetically engineered to combat vitamin A deficiency, a cause of childhood death and blindness in underdeveloped countries. Maybe bad health rules will now be added to the roll call of bad regulations driven by the precautionary principle.
And the alternative to the precautionary principle? For Thierer, it’s “permissionless innovation.” He outlines this approach in his book Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom:
1. Society is better off when innovation is not preemptively restricted;
2. Trial-and-error experimentation, the evolution of norms, and the development of educational solutions and coping mechanisms should be the initial responses to new technologies and the risks they pose;
3. Accusations of harm and calls for policy responses should not be premised on hypothetical, worst-case scenarios;
4. and policy remedies for actual harms should be narrowly tailored so that beneficial uses of technology are not derailed.
I see permissionless innovation as built upon (a) the historical recognition that human progress was long inhibited by forces that fear innovation and the disruption it inherently generates and, relatedly, (b) the humble recognition that it is impossible to understand and predict where innovations will lead and all the good value they might create. Another spin on this sort of thinking is the proactionary principle, which holds that the “freedom to innovate technologically is highly valuable, even critical, to humanity.” That’s one freedom many of us, perhaps even now waiting patiently for a jab of a breakthrough vaccine, understand better today than we did before the coronavirus outbreak.