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Regulatory Complexity and Policy Uncertainty: Headwinds of Our Own Making

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  • Steven J. Davis

Abstract

The U.S. regulatory system has grown increasingly expansive, intrusive and complex in recent decades, its tax system has become ridiculously complicated, and its economic policies have become less predictable. I present several pieces of evidence related to these developments and discuss some of their costs. I then sketch some ideas to arrest or reverse these developments. In this regard, I stress the importance of simplicity in regulatory design, the advantages of policy designs that foster predictable regulatory responses, and the need for new institutions to restrain ineffective, excessively burdensome and capricious regulations.

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  • Steven J. Davis, 2015. "Regulatory Complexity and Policy Uncertainty: Headwinds of Our Own Making," Economics Working Papers 15118, Hoover Institution, Stanford University.
    • Handle: RePEc:hoo:wpaper:15118
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    References listed on IDEAS

    as
    1. Martin Feldstein, 2015. "Raising Revenue by Limiting Tax Expenditures," Tax Policy and the Economy, University of Chicago Press, vol. 29(1), pages 1-11.
    2. Steven J. Davis & John Haltiwanger & Ron Jarmin & Javier Miranda, 2007. "Volatility and Dispersion in Business Growth Rates: Publicly Traded versus Privately Held Firms," NBER Chapters, in: NBER Macroeconomics Annual 2006, Volume 21, pages 107-180, National Bureau of Economic Research, Inc.
    3. James Liang & Hui Wang & Edward P. Lazear, 2018. "Demographics and Entrepreneurship," Journal of Political Economy, University of Chicago Press, vol. 126(S1), pages 140-196.
    4. Congressional Budget Office, 2013. "The Distribution of Major Tax Expenditures in the Individual Income Tax System," Reports 43768, Congressional Budget Office.
    5. Scott R. Baker & Nick Bloom & Steven J. Davis & John Van Reenen, 2012. "Economic Recovery and Policy Uncertainty," CEP US Election Analysis Papers 002, Centre for Economic Performance, LSE.
    6. Lee E. Ohanian & John B. Taylor & Ian J. Wright (ed.), 2012. "Government Policies and the Delayed Economic Recovery," Books, Hoover Institution, Stanford University, number 6, December.
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    9. Congressional Budget Office, 2013. "The Distribution of Major Tax Expenditures in the Individual Income Tax System," Reports 43768, Congressional Budget Office.
    10. Daniel P. Kessler, 2010. "Regulation vs. Litigation: Perspectives from Economics and Law," NBER Books, National Bureau of Economic Research, Inc, number kess09-1, March.
    11. Simeon Djankov & Tim Ganser & Caralee McLiesh & Rita Ramalho & Andrei Shleifer, 2010. "The Effect of Corporate Taxes on Investment and Entrepreneurship," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(3), pages 31-64, July.
    12. Scott R. Baker & Nicholas Bloom & Steven J. Davis, 2016. "Measuring Economic Policy Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(4), pages 1593-1636.
    13. Kenneth E. Scott & Thomas H. Jackson & John B. Taylor (ed.), 2015. "Making Failure Feasible," Books, Hoover Institution, Stanford University, number 9, December.
    14. Congressional Budget Office, 2013. "The Distribution of Major Tax Expenditures in the Individual Income Tax System," Reports 43768, Congressional Budget Office.
    15. Art Fraas & Randall Lutter, 2011. "The Challenges of Improving the Economic Analysis of Pending Regulations: The Experience of OMB Circular A-4," Annual Review of Resource Economics, Annual Reviews, vol. 3(1), pages 71-85, October.
    16. Steven J. Davis & John Haltiwanger, 2014. "Labor Market Fluidity and Economic Performance," NBER Working Papers 20479, National Bureau of Economic Research, Inc.
    17. Benjamin Pugsley & Aysegul Sahin & Fatih Karahan, 2015. "Understanding the 30 year Decline in Business Dynamism: a General Equilibrium Approach," 2015 Meeting Papers 1333, Society for Economic Dynamics.
    18. Scott R. Baker & Nicholas Bloom & Steven J. Davis, 2012. "Has Economic Policy Uncertainty Hampered the Recovery?," Book Chapters, in: Lee E. Ohanian & John B. Taylor & Ian J. Wright (ed.), Government Policies and the Delayed Economic Recovery, chapter 3, Hoover Institution, Stanford University.
    19. Congressional Budget Office, 2013. "The Distribution of Major Tax Expenditures in the Individual Income Tax System," Reports 43768, Congressional Budget Office.
    20. Scott R. Baker & Nicholas Bloom & Steven J. Davis, 2012. "Has Economic Policy Uncertainty Hampered the Recovery?," Book Chapters, in: Lee E. Ohanian & John B. Taylor & Ian J. Wright (ed.), Government Policies and the Delayed Economic Recovery, chapter 3, Hoover Institution, Stanford University.
    21. repec:aei:rpaper:26009 is not listed on IDEAS
    22. Kenneth E. Scott & John B. Taylor (ed.), 2012. "Bankruptcy Not Bailout," Books, Hoover Institution, Stanford University, number 5, December.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Giovanni Caggiano & Efrem Castelnuovo & Juan Manuel Figueres, 2020. "Economic Policy Uncertainty Spillovers in Booms and Busts," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 82(1), pages 125-155, February.
    2. Naudé, Wim, 2020. "From the Entrepreneurial to the Ossified Economy: Evidence, Explanations and a New Perspective," GLO Discussion Paper Series 539, Global Labor Organization (GLO).
    3. Balázs Égert, 2021. "Investment in OECD Countries: a Primer," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 63(2), pages 200-223, June.
    4. Naudé, Wim, 2019. "The decline in entrepreneurship in the West: Is complexity ossifying the economy?," MERIT Working Papers 2019-030, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    5. Taylor, John B., 2016. "Slow economic growth as a phase in a policy performance cycle," Journal of Policy Modeling, Elsevier, vol. 38(4), pages 649-655.
    6. Adam Jørring & Andrew W Lo & Tomas J Philipson & Manita Singh & Richard T Thakor, 2022. "Sharing R&D Risk in Healthcare via FDA Hedges [Bank lines of credit as contingent liquidity: Covenant violations and their implications]," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 11(4), pages 880-922.
    7. Wim Naudé, 2022. "From the entrepreneurial to the ossified economy," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 46(1), pages 105-131.
    8. Kaviani, Mahsa S. & Kryzanowski, Lawrence & Maleki, Hosein & Savor, Pavel, 2020. "Policy uncertainty and corporate credit spreads," Journal of Financial Economics, Elsevier, vol. 138(3), pages 838-865.

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