Opportunity and Regulation

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One of the ideas that economists came up with that lay people tend to poo-poo is that of opportunity value. When you think about opportunity and regulations, it becomes very clear why regulations are generally a very bad idea.

Opportunity value is the inherent value of having an opportunity available, whether or not you choose to take it. For instance, it is better for me to have numerous options available for lunch, even though I can only choose one. The more good choices I have to pursue, the more value there is for me.

This isn’t unknown to people who play games. In chess, one general strategy is to try and free up as many pieces as possible, and paint the board with as many possible moves as possible. By maximizing opportunity to move, you are actually improving your likelihood of winning.

If you’re still having trouble understanding why opportunity is so important, then think of the difference it would make to live in a day and age where cancer treatment did not exist, versus today, when it does. Even though we are not likely to get cancer, we would certainly prefer to live in a time and place where cancer treatment options were available for us, because we know that there is a small chance we could get cancer and we’d like to minimize the risk of that possibility.

Regulations are a net drain on the economy. Except for the rare regulation that actually increases the liberty of the individual, they are generally harming us and our economy. To understand why, think of the opportunities that vanish with the stroke of the pen of the regulator.

Imagine you are living in a poor part of the city, as a poor person without a lot of education or money. If the society you lived in was largely unregulated, then you would be free to pursue any number of ideas to make money and improve your life. However, with regulations, your options are diminished. At some point, you aren’t able to understand what is legal and what is not and you begin to believe that everything is illegal and regulated against by default. What a poor trap you would live in at that point! The only options were to commit crime and hope that either it wasn’t really illegal, or you won’t run into the authorities. Doesn’t this sound like the lifestyle that too many children of poverty are subjected to in our society?

It’s time we re-thought how we regulate our society. It’s time we dramatically cut the regulations on the books, and reinstilled in the minds of the people the idea that by default, all activities are legal. By doing this, we instantly create opportunities that didn’t exist, and we instantly create value and wealth where there was none before.

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