#173 Simple Rules for a Complex World

#173 Simple Rules for a Complex World | The Christian Economist

God gave Moses only ten rules.  But now, we are drowning in a complex maze of political and economic regulations that cede power to the government.

God gave Moses only ten rules.  That’s a great example of using simple rules for a complex world.  

The title of today’s podcast comes from a 1998 book I used in a class many years ago.  I keep thinking about it, as the regulatory environment gets more restrictive.  Richard Epstein’s point was that simple rules are better.  The original Social Security Act of 1935 contained 32 pages.  The Affordable Care Act of 2010, known as Obamacare, ran just over 900 pages, with an estimated 20,000 pages of explanatory regulations.  

The IRS code is just over 2500 pages, and the supporting rules run to over 9,000 pages.  When you call the IRS, they give you the wrong advice 20% of the time.  This complex set of rules favors the legislators.  They are able to hand out tax deductions to groups they like, who help them get elected. 

The National Football League is a good example of having too many rules.  They now have a fourth TV announcer, who is a rules specialist.  That’s an indication there are too many rules.

Back to the book by Epstein.  He makes a good point: Simpler laws are better.  Complex laws contain all kinds of carve-outs and hand-outs for lobbyists, which moves power to them.  He actually shows a simple two-dimensional graph with a bell curve. He uses the number of lawyers on the X-axis, but you could also use the number of laws.  Lawyers are those who keep laws.  OK.  Production is the vertical, Y axis.  With no laws, production is low.  People don’t want to produce something if the state won’t defend their private ownership of it.  As the number of protective laws increases, people are more productive.  But, much like the Laffer curve, production tops out, then starts to dwindle, as the number of laws and lawyers increases.  In America, we’re clearly on the back side of the bell curve, where each law and lawyer we add, decreases Gross Domestic Product.

This overly constrictive legal environment is not only a violation of justice, but it also throws the economy out of whack.  Labor spent investigating meaningless violations of finicky laws is not a good use of labor.  The investigator would create more value for society by doing something else that creates more value.  And, money paid in bribes increases the cost of doing business and creates inflationary pressure for consumers. 


Biblical Economic Policy

Sergiy Saydometov and I wrote the book by this title, because we searched the landscape of the Christian Economic literature, and we couldn’t find evidence of anyone doing a systematic theology on the subject.  There are many of these, but I tend to like the one by Wayne Grudem.  Instead of just pulling out one verse like, “Whose face is on the coin?” Systematic Theology attempts to look at the Bible and categorize the many teachings into a few, basic concepts.  God gave Moses only ten rules, so we followed that pattern and produced what we call Ten Biblical Commandments of Economics.   The one that has the best application to today’s subject is #10 Honor Those in Power.  We are Biblically commanded to do this, but the assumption is that the laws are rooted in some form of justice.  As the laws become more complex, they create more space for corruption.



In an article in the Epoch Times recently, Jeffrey Tucker explained the phrase “Anarcho-Tyranny.”  Ok, anarchy is the absence of any government, and tyranny is a totalitarian government.  So anarcho-tyranny is arbitrary law as the normal way of conducting public life. No one can count on any rules. Everything is fluid and constantly changing. There’s only one feature we can expect: whatever happens, it will be compulsory; that is, backed by the threat of violence.

It’s when an unruly mob uses its power to take over the rule of law.  Laws might not be used against those who desecrate pregnancy support centers but are actively used to go after parents who speak out at school board meetings.  There are good mobs – think about the “Summer of Love” riots in 2020, and there are bad mobs: Like the Canadian truckers.

There is no “free market,” no “free speech,” no “freedom of religion.”  Only markets, speech, and religion that coincide with the normative whims of the day.  So selling cigarettes is NOT okay, but marijuana is.  Shouting down Clarence Thomas is okay, but disagreeing with Randi Weingarten is not.  Buddhism is admired, but Christianity is denounced as your grandpa’s religion.  These standards that change with the wind are quite dangerous. 

Quoting Mr. Tucker, “The phrase anarcho-tyranny is the opposite of what America was founded to be. We had a republican form of government that established strict limits on government power. The people would be in charge through their elected representatives.”

During the Obama administration, I was astounded to hear the President feeling degraded because he had to follow that old rule of the debt ceiling.  He honestly thought that every government expenditure was so important, that there should be no controls on spending.  That denies the fallen nature of humans and would destroy a national economy.  Without a debt ceiling, why would the government EVER stop spending?  What salary level for a bureaucrat would be too high?  It would never end.  In a fallen world, we have to have control systems and to suggest the absence of a debt ceiling is just ludicrous.  But, now the Biden administration is hinting at it; although when Biden was a Senator, he voted against raising the debt ceiling.


The Fed Wants MORE Rules

A report summing up the Silicon Valley Bank failure states, “The Fed’s regulatory “framework is quite complicated.  Silicon Valley Bank and bank supervisors spent “considerable effort seeking to understand the rules and when they apply, including the implications of different evaluation criteria, historical and prospective transition periods, cliff effects, and complicated definitions,” and SVB “regularly engaged consultants.”

An article in the Wall Street Journal titled “The Fed Failed but Wants More Power,” points out that SVB seems to have been more focused on complying with financial regulation than prudently managing its balance-sheet risks.  But the article quotes Fed officials saying all they need to prevent future bank failures is…..wait for it…….more power. 


Economic Measures

In the economics textbook I use at Dallas Baptist University, a recession is defined as two consecutive quarters of shrinking GDP.  We had that condition in 2022, but it was never declared a recession, because they changed the rules.  OK, so if they’re going to change the rules on that measure, what else will they change?

We really have fallen down this Alice in Wonderland rabbit hole where down is up and up is down.  The mad hatter is giving directions with his famous phrase, “If you don’t know where you’re going, any road will take you there.”

That seems true of this group: They continue to move the goalposts when convenient for them.  The Inflation Reduction Act that increased spending is a good example.  It increased inflation, as even my sophomores at Dallas Baptist University understand.


Prosecutorial Discretion

A friend who is a former county prosecutor describes it as “prosecutorial discretion.”  That means, where there are too many laws to be enforced, the prosecutor can decide which ones to enforce.  That power was never granted to him.

Here’s an example: Illegal crossings of the southern borders are down 90%.  Because they re-named the event.  Illegal immigrants are now termed “undocumented.”  Try walking into the Supreme Court and identifying yourself as an undocumented Supreme Court Judge.  Or, apply for a job with a resume that says you are an undocumented graduate of Dallas Baptist University.

Speaking of choosing which laws to apply, here’s a thought experiment for you.  Go visit the registrar at the University of Texas in Austin, and ask how many undocumented students are studying there.  But, before they look up the number, explain that your question is, “How many students are working toward degrees at UT who have not registered with the registrar?”  I’m thinking the number is near zero.  So, you can cross the border undocumented, but you can’t study at UT without being documented.

You see, when you destroy the documentation system, everything goes to hell.  Think about that piece of linen in your wallet or purse.  Yes, US dollars are made of linen, not paper.  Trying to pass a one-dollar bill as a $10 will get you laughed out of the store, or arrested because they will use their discretion to prosecute that law.  But they will ignore money laundering by the Biden family, where 10% gets paid to the “big guy.” 

In my little book Economics and the Christian Worldview, I wrote a section titled “No Utopia”, or you can listen to Podcast # 34 by the same title.  We know we can’t make perfect rules.  But these folks keep writing more complex rules.  It’s clearly better for the economy to have simple rules for a complex world.  




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