Actuarial news and views from Cape Town and beyond

“Common sense” solutions and the impact on regulation

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“Common sense” is a buzzword that politicians like to throw around, but one man’s common sense is another man’s burden. Countries all over the world go through periods, usually during times of great economic growth, where regulation is viewed as a sin that inhibits economic growth instead of an attempt to force businesses to recognize the costs they might displace onto their workers, communities, the environment, and so on.

During these times, people advocate for “common sense regulation.” However, the result is undermining all regulation and negligence by regulators.

So what is “common sense regulation?”

When Chile experienced an earthquake 500 times more powerful than the devastating 2010 tremor that leveled Port-Au-Prince weeks earlier, the world was forced to face the reality that the poor are more likely to die in a natural disaster than the rich. Chile suffered far less devastation thanks to better construction and stronger regulation. Unlike Haiti, Chile has strict building codes. However, a wave of anti-regulationism may lead to many newer buildings collapsing during a future powerful quake.

Buildings are technologies composed of several little technologies. Like all technologies, their quality depends largely upon the business models behind their design, marketing, and distribution. During the 2009 Padang Earthquake, as well as the 2008 Sichuan Earthquake, the most modern buildings collapsed, leaving only older structures standing.

From Chile to China, good economic times have lead to deregulation and weak regulatory oversight, just as it has in the United States. While a push for better regulation of the banking industry in the face of the Great Recession resulted in reforms and the Deep Horizon oil spill lead to a review of policies, the rotten fruits of weak regulation have not been realized in the US construction industry, so far.

The tendency of governments to rely on reactionary policies based on “common sense” regulation leaves the fate of many Americans in the hands of business interests. Unfortunately, trends in business have been to focus on short-term profits without regard to the long-term needs of human beings. This short-sighted view has lead to faulted, lower-quality products that are designed to last a very short period of time, at best.

Meanwhile, the functional of products and technologies must account for environmental conditions, such as the possibility of a strong earthquake, and available resources, yet current business models push one-size-fits-all blueprints. When regulation fails to address these shortcomings of business, the cost is far greater for far more people, instead of those who profited the most.

When the economy is good, those against regulation and government influence step up their campaigns to push for deregulation. Although they supposedly target unhealthy and nonsense regulation, these activists generally show no regard for “common sense” regulation until devastation strikes, thus the consequence of this sentiment on a national scale is deregulation and weak applications of regulations across the board.

After crises like the Great Recession fueled by the cost of Wall Street’s sins and the Deep Horizon oil spill, people suddenly wanted massive regulation.

The resulting vicious cycle of too little than too much regulation ultimately hurts society while unnecessarily endangering lives. Moreover, people must learn to define what is meant by “common sense” regulation before communities can break this viscous cycle.


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