Platt Perspective on Business and Technology

Considering a cost-benefits analysis of economic regulatory rules – 14

Posted in in the News, macroeconomics, outsourcing and globalization by Timothy Platt on July 3, 2012

This is fourteenth installment in a series on the cost-benefits analysis of economic regulatory rules (see Macroeconomics and Business, postings 64and scattered following for Parts 1-13.) And I turn in it to consider the sometimes invisible participants in the room when regulatory law is proposed and framed, challenged and developed in finalized detail – and with restrictions and exceptions added in that can in and of themselves effectively make or break the resulting law as an effective and fair mechanism for managing overall risk and its distribution.

I stated at the end of Part 13 that:

• Bad regulatory oversight can be empirically, objectively evaluated as bad if it creates special exceptions and windows of opportunity for risk/benefits asymmetry.

The goal of the lobbyist is to persuasively argue the case to those who would develop and enact regulatory law, to draft and enact law that explicitly supports their position, and even preferentially so. Lobbyists argue in favor of strategically skewed playing fields and shifts in the distributions of risks and benefits faced, in favor of their clients. And they argue against shifts and changes that would go against the interests of their clients, and against law that they see as starting out at odds with their client’s specific needs.

I do not argue or seek to argue against lobbying or lobbyists per se, as lobbyists do bring the perspectives and voices of affected parties into the discussions that go into framing these laws. But I do argue against the allowance of opacity of process or secrecy as to when and how lobbying is done.

This means, among other things:

• Legally mandated transparency as to who is lobbying and on behalf of whom.
• Legally mandated transparency as to what positions those lobbyists are promoting and to whom.
• Legally mandated transparency as to what if anything is offered by those lobbyists and to whom, with that including any gifts or other sources of value provided and to whom and with very strict limits on permitted monetary value. Personally, I do not think a lobbyist should be offering as much as a purchased cup of coffee to a legislator they are lobbying too, or as much as that cup of coffee to a member of their staff or to a member of a legislator’s or staff member’s family.
• And as the largest and most significant source of lobbyist giving comes as campaign contributions for reelection, I add legally mandated transparency and openness as to who donates what and on what terms towards political campaigns, and either directly to specific candidate’s election campaigns, or indirectly to pooled political party funds.
• All paid lobbyists should be required to register as such and to state both who they are lobbying for and paid by, and who they are lobbying too. And lobbyists and their organizations should be on open and public record wherever they offer anything of monetary value to either specific politicians or their staff or families, or to political parties.

Depending on where you are and the legal systems in place in your legal jurisdiction, some or even many of these restrictions might be in place, and at least as a matter of general principle. But in most if not all countries that in some way seek to regulate lobbyists and their activities, there is always push-back in favor of opacity and secrecy, and opportunity to take actions to influence and even skew regulatory decisions made. In this regard, I cite one of my more recent postings: Entrepreneurship and Freedom.

My area of focus in that posting was on recent changes in political campaign finance law and in how it has been reinterpreted through US Supreme Court decisions so as to foster election funding opacity and the skewing of election results. One immediate outcome that can be expected of this and both going into the 2012 elections as candidates campaign for office, and coming out of them as candidates are elected will be increased pressures against robust and consistent regulatory law and its enactment. Right now in the United States, the Republican Party has come to take a stridently anti-regulatory position, and with the incoming flood of corporate campaign financing that Citizens United v. Federal Election Commission now allows, we all face significant risk that the regulatory lessons learned from the Great Recession and from earlier avoidable massive economic downturns will be forgotten again.

And as an exercise in wistful thinking I will add one more point to my above list of lobbyist oversight guidelines, though this is also a guideline for legislators and their staffs too.

• Lobbyists should not be writing laws, or providing key wording needed to flesh out legislative proposals into working law.

The argument in favor of this practice is that the issues that laws deal with can be so complex and specialized that the legislators and their staff members do not understand them, themselves. But this simply means their rubber stamping legislative wording that they do not understand, or understand the ramifications of.

• If you do not understand the issues that would go into a law and its wording, find and bring in disinterested, uninvolved third party experts, and not partisan lobbyists or others with a specific stake in the issues involved.
• And if you do bring in a partisan stakeholder with a specific interest in a proposed law such as a lobbyist, clearly identify any contributions they make to the final wording you submit for committee approval or for a vote as to where that wording came from. Identify it as having been provided by a paid lobbyist and identify who that is and who they are paid to lobby for.

To the best of my knowledge no legal system mandates or even suggests this level or type of legislative process transparency, but it would be interesting to see its impact, and certainly on more extremist lobbying ventures and their impact.

At least as of now I am finished adding to this series, though I will definitely be coming back to this complex topic area again. Meanwhile, you can find this and related postings at Macroeconomics and Business and also at Outsourcing and Globalization. See also Ubiquitous Computing and Communications – everywhere all the time.

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