A friendly critique of Steve Coast’s critique of rules

We stumbled upon this excellent essay (“The world will only get weirder”) by Steve Coast via the hyper-productive Tyler Cowen at Marginal Revolution (our second-favorite website, by the way). In summary, Mr Coast argues that there is an inverse relation between innovation and the number of rules in a given society: 

The worry should be we end up with so many rules we become sclerotic like Italy or France. We effectively end up with some kind of Napoleonic law – everything is illegal unless specifically made legal. Luckily we’re far from that in the US. * * * To paraphrase Peter Thiel, new technology is probably so fertile and productive simply because there are so few rules. It’s essentially illegal for you to build anything physical these days from a toothbrush (FDA regulates that) to a skyscraper, but there’s zero restriction on creating a website. Hence, that’s where all the value is today.

Although Coast acknowledges that “it used to be that rules really helped,” his critique of rules goes too far. We would argue instead that there is an optimal number of rules. Too many rules may stifle innovation and productive pursuits by increasing the costs of doing business, but at the same time too few rules might likewise deter people from engaging in productive pursuits, especially if there are no effective property rules protecting innovators and investors alike, allowing them to reap the rewards from their risky ventures. (By the way, while we’re on the subject of rules, we really recommend Richard Epstein’s book “Simple Rules for a Complex World.”)

This entry was posted in Cooperation, Economics, Law and tagged . Bookmark the permalink.

One Response to A friendly critique of Steve Coast’s critique of rules

  1. Typhoon Jim says:

    Clearly, the optimal number of rules is reached one rule before the one I personally find inconvenient or cumbersome.

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