Legal & Regulatory

Regulatory Costs Stifle Economic Growth

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December 10
6:51 PM 2016

Agricultural scientists and smaller companies have expressed their dismay over the "burdensome regulatory costs." The cumulative effects of the regulation have been pointed accountable for the slow economic growth of the United States since 1980.

Among the industries affected is plant biotechnology or genetic engineering. The cost of discovery, development, and regulatory authorization of a new trait introduced via genetic engineering between 2008 and 2012 averaged $136 million.

Americans have worried about the country's slow economic growth, reflecting the need for major revisions in the government regulation in order to start innovation and job creation. The excessive regulatory requirements have caused economic burden, according to a commentary.

The effect of regulation on economic growth has been the subject of various studies that rely largely on the regulatory indexes measuring subsets of all regulation. Studies have also often looked on country-to-country comparisons within short period, and on surveys that reflect experts' views on how regulated their industry is.

Earlier this year, a study from the Mercatus Center at George Mason University reported on the cumulative costs of regulations.

Based on a 22-industry dataset that span from 1977 through 2012, by the distortion of investment choices that lead to innovation, regulation has created a considerable drag on the economy.

This amounts to an average reduction in the annual growth rate of the country's GDP of 0.8%, or $4 trillion smaller than it otherwise would have been.

The study said that the economy would have been about 25% larger than it was in 2012 if regulations had been held at constant levels.

The country's federal regulations have accumulated over the decades, with regulators often adding more rules to the pileup. This buildup on regulations has resulted to duplicative, obsolete, conflicting, and contradictory rules.

Such regulatory constraints have complicated the decision-making processes of firms, prompting them to alter their plans for research and development. The regulations also have impact on their plans for expansion, and updating equipment and processes as they have to comply to the regulations.

President-elect Donald Trump during his campaign questioned whether the regulations were sensible. He expressed his intention to eliminate or refine the current regulations in order to promote economic growth

"By altering investment decisions and disrupting the innovation that comes from investment in knowledge creation, regulations have a cumulative and detrimental effect on economic growth-and, over time, have a real impact on American families and workers," the study concluded.

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