Old Regulations Never Die: Featherbedding and Maritime Safety After the Titanic
1 The Criterion Journal on Innovation 201, 2016
27 Pages Posted: 31 May 2018
Date Written: 2016
Is regulatory reform inevitable? Or does an inefficacious regulation more plausibly endure until it is no longer a binding constraint? Experience leads me to believe that regulation normally outlives what it regulates. I propose here the folk theorem that “old regulations never die.” It extends the standard predictions of public choice theory when a regulation directly benefits a discrete faction while burdening a diffuse and unorganized constituency. Once installed, such a regulation will endure, regardless of its demonstrated inefficiency, until the regulated activity becomes irrelevant or obsolete because of exogenous changes in demand or production technology.
In October 1987, when I was the young and earnest deputy general counsel of the Federal Communications Commission (FCC), a question concerning an obscure regulation landed on my desk. Still on the books was a statutory mandate — section 353(b) of the Communications Act of 1934, which expanded legislation first enacted in 1912 in response to the sinking of the Titanic — that required that any U.S. cargo ship with a radiotelegraph auto alarm also carry a radiotelegraph operator possessing six months of experience acquired aboard a U.S. ship. The FCC in 1981 began to interpret section 353(b)’s six-month experience requirement so as to exclude a radiotelegraph operator’s experience acquired onboard a U.S. Navy or Coast Guard ship, because U.S. government ships were typically not equipped with (obsolete) radiotelegraphy equipment. The absurdity of the FCC’s interpretation was breathtaking. By the 1980s, section 353(b) was obsolete. The U.S. maritime industry was necrotic, and a U.S. cargo vessel’s safety — and its ability to function as a potential lifeboat for another vessel in distress — no longer depended on radiotelegraph communications. Even in 1937, when Congress enacted section 353(b), the principal effect of this provision was to create a barrier to entry in the market for radiotelegraph operators under the guise of promoting maritime safety.
It is the nature of public choice that the specifics of this particular regulatory intervention are likely to interest only the discrete factions benefiting or suffering from that intervention, along with the legislators and bureaucrats whose handiwork empowers the process of rent creation and income transfer. But one could say the same about the plethora of equally obscure rules that fill nearly 200,000 pages of the Code of Federal Regulations. In the aggregate, that multitude of regulatory commands can significantly impair social welfare and make it worth considering, in microcosm, something as obscure as the federal licensure of radiotelegraph operators on U.S. cargo ships in the century following the sinking of the Titanic in 1912.
Keywords: Federal Communications Commission, FCC, Regulatory Reform
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