Monday, April 18, 2005

Is Regulation a Drag?

Is regulation a drag on innovation?

Here's an example to explore. Following the ChoicePoint scandal, there have been some proposals in the USA to tighten privacy.

Adam Shostack writes: "A number of smart people (for example, Jim Harper writing on Politech) critique the drag on innovation that such a regime entails. I'm very sympathetic to this critique."

Innovation often generates risk, not just for the innovators but for other parties within the ecosystem. Some campaigners oppose some kinds of innovation altogether, on the grounds that the risks are unbounded and unacceptable. This argument has been used against nuclear energy and GM food.

But if we think a particular innovation should go ahead, there is still a question of risk management and governance. There is no reason why unnecessary and foreseeable risks should be taken, and it is surely appropriate to ensure that innocent bystanders are not unduly put at risk. This principle is now widely accepted in many domains.

There were many historical innovations that seriously endangered or poisoned the engineers and their neighbours. If present-day Health and Safety legislation and Anti-Pollution regulations had been in force, the industrial revolution might never have happened. Perhaps some engineers hanker for the old days of reckless entrepreneurial experiment, but I don't want to live next door to someone who is developing a new kind of explosive in his garden shed, thank you very much.

That doesn't mean I think regulation is the best mechanism for governing risk. And I don't for one moment imagine that we can remove all risk and uncertainty from our lives. But where innovation involves serious and obvious risk of loss, especially to other people, I think it is reasonable to insist on some kind of governance mechanism.

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