Drones, Dangerous Animals, and Peeping Toms: Impact of Imposed vs. Organic Regulation on Entrepreneurship, Innovation, and Economic Growth

Abstract

This paper categorises regulations of economies and societies as either imposed or organic. Imposed regulations - federal, state and local statutes, regulatory agency promulgations and executive orders - rest on top of and interact with organic regulations - social customs, markets, private agreements and common law. We show how organic regulation, with its many distributed control points (courts, markets and individuals) and near-continuous decision making (by individuals and judges), better reflects the complex systems nature of and more closely evolves with economies and societies. Imposed regulations offer efficiencies and uniformity, but their fewer, more-indirect design and control points (legislatures, agencies and officials) are less accountable and invite public-choice concerns unrelated or counter to public welfare. As a result, imposed regulations are more prone to error, corruption and unintended consequences and are less predictable long-term. Greater reliance on organic regulation correlates with greater entrepreneurship, innovation and long-term economic growth. We consider case studies of self-driving vehicles and unmanned aerial vehicles ('drones') and conclude with recommendations for regulators, lawmakers and policy makers.