This was originally posted on PoodleRose on July 18, 2013. Comments have not been migrated.
Opinion polls regularly find that banks, insurance companies, pharmaceutical companies, and oil companies are among the most reviled businesses in the nation. But these companies have more in common than widespread contempt from the public; they are among the most heavily regulated companies in America. These two facts are more than a mere coincidence.
By their very nature, government regulations stifle innovation and competition. Consider the pharmaceutical as one example. It is estimated that 85 percent of the cost of developing a new drug is a result of the mandates imposed by the FDA. With the cost of developing a new drug averaging more than $800 million in 2003, and the cost of a new drug discovered in 2003 reaching nearly $2 billion by the time it gets to the market twelve years later, it is little wonder that the cost of drugs and medicines is soaring. Pharmaceutical companies must recover their investments and the additional costs imposed by FDA mandates, or they will have no motivation to continue such risky ventures. If government regulations add 85 percent to the cost of developing a new drug, it makes sense that those costs are then added to the price of the medicines you buy.
Similarly with oil companies. As one example, opening the Trans-Alaska Pipeline required the owners to obtain 515 federal permits and 832 state permits over a ten year period. The cost of obtaining these permits is added to every gallon of oil transported through the pipeline, and those costs are ultimately paid by consumers at the gas pump.
The delays imposed by the regulatory process mean that every innovation takes years to reach the market, and only then if government bureaucrats approve. How many innovations fail to reach the market because some petty bureaucrat denies permission? How many potential innovations are never pursued because companies do not want to invest millions or billions of dollars only to have their plans stymied by a government official?
Lest you think that I exaggerate, consider the fact that the computer industry—which is one of the least regulated industries—is one of the most admired industries in the nation. Consider further the innovations that pore out of that industry. These facts too, are not a mere coincidence.
It is easy to blame large corporations for the problems that we experience as consumers. But they are nothing more than the messengers who deliver the costs and frustrations of government regulations. They are the true victims.