Economic activity happens naturally because people find it easier to get what they want when they trade for it. 
In trade, the buyer has a certain range they are willing to buy and the seller has a certain range in which they are willing to buy.  If the two ranges intersect then the exchange happens and both parties are better off.


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Now let’s add government regulations and taxes into the equation. Now there are three parties involved. The buyer and seller still have their ranges, but the government now has its own range.  All three ranges must intersect in order to have an exchange.  Naturally there are less exchanges because the government's range often does not intersect with the other two.

Let’s look at some of the ranges the government creates that often stop economic exchange, starting with taxes. Whatever the tax rate is, the other two ranges must overlap with that amount.  Therefore if the buyer and seller are only at a ten percent overlap, any tax rate above ten percent will stop the exchange.  At the current 50+% tax rate (all taxes) on the high income many ranges simply do not overlap to the amount, thus causing lower exchanges to happen.

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Regulations also have major effects.  If regulations call for an employer to pay a certain amount to an employee that range limitation forbids by law, employment of those that are not worth the wage mandated by the law to that employer.  The minimum wage of zero is often the result.  

Other regulations might mandate certain environmental controls that take the cost of manufacturing out of the range of a business owner from starting a project that would have resulted in many exchanges and could have enriched many.  While some controls are worthwhile, the balance is crucial because oftentimes we acquire the same products from overseas where the controls are much weaker and results in more pollution and less exchanges (jobs) here.

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Other regulations in health care and health insurance is all about stating what cannot happen and oftentimes stating what has to happen (which excludes all other things from occurring. This severely limits new business models from emerging and forces most business models. The range of the buyer and seller only overlaps but so much and these regulations creates a range often outside the other two ranges.  Quite simply many health care exchanges do not happen because the third range forbids by law two willing people from exchanging, thus they are worse off because of the regulation.    

The FDA regulations very often create a range of acceptable exchanges that the two sides are not even come close to.  Let’s look at orphan drugs as example.  Even drugs that are approved and made are so costly that the ranges often do not meet.

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A major example of the government's range stifling development would be energy regulations. People in the USA often get their oil from other countries that are far less concerned with the environment thus are balance is costing US jobs and harms the environment.

 


Comments

08/24/2015 2:00am

The range of the buyer and seller only overlaps but so much and these regulations creates a range often outside the other two ranges.

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04/22/2016 2:42am

We are hearing or read something new rules which are almost daily amendment by the officials. You are performing nice job. You always providing us latest updates and news related to our tax issues. I read your pot it’s a noble.

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    Bill Haley

    Bill Haley started Haley2024 in the spring of 2013 in an effort to his part of restoring freedom to America.

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