By Laura Jones and Patrick McLaughlin
Governments affect our lives in three ways: they tax, they spend and they regulate. Taxes and spending get a lot of attention. Look no further than the federal budget to remind yourself just how much publicly available data are available to fuel healthy debates, from the state of the deficit to whether carbon taxes are a good idea.
But what about regulation? Compared with taxes and spending, regulation is a distant afterthought, playing the role of Robin to the far more popular Batman. This is largely owing to a dearth of good data and accounting in this area. Fortunately, this is starting to change for the better.
The Mercatus Center – a university-based research centre at George Mason University, just outside Washington – has just released the results of its first study of regulatory restrictions in Canada’s provinces. The data are part of the centre’s RegData project, which was created to introduce an objective, replicable and transparent methodology for measuring regulation. It uses software to quantify regulations based on the content of regulatory text, identifying, among other things, words that create obligations or prohibitions – words like “shall,” “must,” “may not,” “required” and “prohibited.”
It is not the only way to measure regulations; some provinces, most notably British Columbia and Manitoba, have other measures that they are tracking. One can argue the merits of different approaches, but the release of the Canadian data – called, appropriately enough, RegData Canada – is exciting. Incredibly, for the first time, we have enough data to compare provinces’ regulatory burdens with each other, using the same yardstick.
The data show a remarkable range in how much provinces regulate. Ontario is a heavyweight, with more than 77,000 restrictions, while British Columbia and Prince Edward Island have substantially fewer for their citizens to contend with. This raises a number of interesting questions and observations.
Starting in 2001, B.C. focused on regulatory reduction and maintenance, with a target to reduce its red tape burden by one-third by 2004. The province followed this up with a sort of “regulatory budget,” where one regulatory requirement had to be eliminated for every new one added. The province has cut its regulatory requirements virtually in half compared with 2001, getting rid of piles of unneeded rules such as those dictating what size televisions were allowed in restaurants or how many par-four holes golf courses were allowed. Individually, each of these rules can seem trivial. Collectively, complying with them is a huge drag on prosperity. The province cut its rules in half, turned its economy around and, importantly, it did this without sacrificing health, safety and environmental protections.
Until now, there was no way to understand how this focus on regulatory reform affected B.C. relative to other provinces. Would Albertans, for example, be surprised to hear that their neighbours to the west have half their number of regulatory restrictions? Would Ontarians think that having five times as many restrictions as B.C. makes sense? Let the healthy debates begin.
Like any broad comparison, there are caveats and limitations to consider when comparing provinces. First, the regulatory restrictions compared here come solely from government regulation. Many more restrictions can be found in legislation, guidance documents and forms – in effect, any government rule that must be complied with. For practical purposes, these have not been included, but they represent a good opportunity for further research. Including these other sources could cause the provincial picture to look a bit different.
The second word of caution is that provinces have different sizes and industry mixes. To pick the most dramatic example, it would be important to keep this in mind when considering the restriction count for PEI, Canada’s smallest province with a less diverse industry mix, to Ontario, the largest province with far more diversity. Still these data are a starting point and they’re so much better than what we had to compare before, which was no data.
Like government taxes and spending, regulation has a profound impact on our lives. Up to a certain point, the benefits of regulating outweigh the costs, but like over-taxation, too much regulation undermines things we care about. Excessive regulation raises prices, lowers incomes, exacerbates income inequality and poverty and frustrates entrepreneurship.
Regulation deserves the spotlight – it deserves to be treated more like Batman and less like Robin. Better data and reporting will help us get there.
Laura Jones is chief strategic officer for the Canadian Federation of Independent Business.
Patrick McLaughlin is director of policy analytics and senior research fellow at the Mercatus Center at George Mason University.