Economist: Rules have unintended consequences

Regulations, while well intended, often do more harm than good in the business world, according to renowned economist Elliot Eisenberg.

“Regulation is someone telling you what to do,” he said. “We don’t like it.”

Eisenberg, president of GraphsLaughs LLC, mixed humor with examples of why regulations are bad to keep his audience laughing yet informed Tuesday night at the Williamsport Country Club.

His appearance before members of the area business community was sponsored by the West Branch Susquehanna Builders Association.

Eisenberg said it’s no coincidence that stringent housing regulations in Washington, D.C., Boston, Los Angeles and even Boulder, Colo., lead to higher home prices in those cities.

People not only want to live in these more desirable locations, they are willing to pay the higher costs.

After all, they can afford it and even are willing to absorb price increases.

The unintended consequences are that many of the costs for such housing get passed on to builders and everyone else.

By contrast, people in less expensive cities – Houston, Louisville and Oklahoma City – are not as regulated and live in more affordable housing.

What’s more, they tend to balk at even small increases in prices often brought by more regulation.

Sellers have no choice but to keep prices down and, as a result, people there are not priced out of the market as are those in the nation’s more affluent areas.

“You cannot get something for free when you regulate,” he said.

Eisenberg said government agencies too often don’t consider the consequences of a regulation.

Politicians need to be held accountable when proposing laws.

“All sorts of solutions are out there,” he said. “They are quirky and weird. And people don’t want to think about them.”

If, for example, government is looking for ways to prevent homeowners from emitting greenhouse gases into the environment, a law should not outline specific measures to follow. That will impose too much expense.

Instead, allow the homeowner to come up with a way to successfully achieve the outcome. Provide some incentive in the way of a tax break if they successfully do so.

Eisenberg said he’s optimistic about the nation’s economic climate. Housing prices no longer are falling, which can work to solve employment problems.

Labor costs, he said, are decreasing and productivity is way up. A big reason, Eisenberg said, is that America is competing better than it has in recent years with overseas markets.