Excessive Regulation Has a History of Absurdity

It is fairly common knowledge that many regulatory policies are arbitrarily instituted and enforced. While the existence of burdensome regulations is fairly well recognized, the specifics of just how excessive certain regulations can be is worth noting. This is especially true for new technologies and businesses that threaten entrenched interests.

At face value, the stated purpose of most regulations is to prevent some kind of harm. However, the question itself really hinges upon how regulators define the term harm. Some regulations do have a genuine intent against preventing actual harm, such as the widespread ban against driving while intoxicated. But unfortunately, the history of regulatory policy has a long history of excessive and even laughable rules.

While regulatory excesses have come in all sorts of contexts, there is a historical trend of new technologies often receiving the special ire of regulators. For instance, in the early 1900s, the advent of “horseless carriages” (better known today as cars) led to calls from some that all cars be required to follow rules that would be considered laughable today.

One such rule read: “automobiles traveling on country roads at night must send up a rocket every mile, then wait ten minutes for the road to clear. The driver may then proceed, with caution, blowing his horn and shooting off Roman candles, as before.” In addition, the proposed rules also required that cars change their paint colors every season to blend in with the scenery and not scare horses. While such rules seem comical at best in our modern context, the Pennsylvania state legislature approved the rules. The rules would have become settled law if the governor had not had enough common sense to veto them. If these rules had been enacted, there is little chance that the high speed interstates and highways of today could have become a reality.

Also in the early 1900s, the new technology of electricity had just started to become mainstream. Thomas Edison invented a form of electrical transmission to power his lightbulbs that became known as Direct Current (DC). Meanwhile, his rival, Nicholas Tesla, had developed an alternative type of current. This current was more effective at carrying electricity at long distances that became known as Alternating Current (AC).

Thus began the “War of the Currents.” Outraged at the prospect of AC current threatening the patent royalties he received from the use of DC current, Edison began a campaign to place AC current under the condemnation of regulators. He used the powers of the mainstream newspaper media as a platform to spread a hysteria known as the “Electric Wire Panic.”  He put on a series of public electrocutions of animals using AC. Edison even funded the invention of the first electric chair (using AC, of course) as another platform to place AC current in a bad light.

Edison got close to his goal of stoking enough public hysteria for regulators to ban AC current altogether, but he was never fully successful. In fact, AC current eventually won over the electric industry as a safer and more efficient current, causing Edison’s DC current to fall out of widespread use. Yet, the power of government regulation almost eliminated the technological innovation found in AC current that allowed for electricity to travel at high voltage for long distances.

Yet the excessive regulations of yesterday were not restricted to new technology alone. Much like today, businesses were restricted as well. For instance, from the 1860s to the 1920s, several states had restrictions on the ability of banks headquartered within a state to open multiple branches. In this way, expansion was impeded, and existing interests were protected from new competition. On the national level, banks that wanted to operate across multiple states had to go through an onerous process of state-by-state restrictions requiring specific government approval for expansion. In some states, national banks could not open branches at all.

Finally, with the passage of the McFadden Act in the 1920s, banks were able to have more freedom, and today we see banks freely operating across multiple states. Someone from Mississippi vacationing in Georgia can often find a branch of their home bank with little trouble. This might not be the case if regulations had not been repealed. 

While it is easy to point fingers at the past, similar regulatory absurdities exist today as well. Modern examples abound, such as excessive regulations on Bitcoin transactions and the absurd Certificate of Need laws that require new health care providers to get permission from competitors. The error of excessive regulation is no less real in 2021 than it was in 1901 or 1921. Instead of protecting old technologies and entrenched business interests, policymakers should learn from the lessons of the past and ensure that illogical regulations are placed in the dust bin of history where they belong.


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