Do Regulators Accomplish Much?

The universe conspires in strange ways.  I recently read two interesting articles on regulation and within an hour a colleague, unbidden, put two more on my desk.  What follows is a synthesis.

MFDA hands out $8 million in fines, probably won’t collect, and

OSC collects $11 million in sanctions, will spend $83.5 million on salaries and benefits

I would quibble a little with the headline on the second one.  The OSC does not fund itself entirely with fines but mostly with fees.  The salaries are used in many more ways than enforcement.  Their coming budget is $116 million and it may be well spent.  I don’t know.

The first is more troubling.  $7 million of the $8 million in fines were imposed on a person whose was sanctioned in Alberta in 2000 and banned for life.  The other $1 million was assessed on her ex-husband. That another scam in Ontario netted millions, begs the question, “How did this person get a license?”

Perhaps the regulatory system is more for the benefit of politicians and the regulators than the public.

Consider a recent article Government Regulators Are Unregulated.

The author claims that market forces work better than government regulation.

In government, the regulators themselves are in practice unregulated. Their accountability goes the wrong way — upward to politicians rather than downward to the public.

When you think about it, you see regulation is about accountability yet accountability does not apply to the regulators.  Without accountability, how can they become more capable, agile and efficient?  They cannot.  Why?

Another article by the same author points out why. 

Government Regulators are Monopolies

His simple observation:

Monopolies provide poor quality at high cost. Everybody knows this. A monopolist does not have to keep improving the quality of the good or service it produces or keep its price down, because its customers have nowhere else to go. When a monopoly is a monopoly by law – and those are the only kinds of monopolies that last – customers have nowhere else to go because no other enterprise is legally permitted to offer the good or service in question.

We see similar outcomes with education, health care, the post office and the EPA.  Regulatory monopolies are incentivized in ways that do not work.  They have no limit on their definition of doing good and they have whatever resources than can reasonably argue for.  They report to others who have no vested interest in solving the problem and those who do care are shut out.

Appearance matters more than substance.  While they may be well-meaning and skilled, there is no way that can work when they are unaccountable.

The monopolies article asks an important question.

Why do we let monopolies provide the service of assuring product quality and safety?

Why indeed?

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario.  In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you.  don@moneyfyi.com  866-285-7772

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