State of Innovation

Patents and Innovation Economics

Washington Post Suggest Producers and Parasites are Interchangeable

Do Government Regulations Really Kill Jobs? opinion November 14,2011 Washington Post by  Jia Lynn Lang, explores the concept that one industry’s losses on overbearing regulations are another industry’s  boon.  Leaving aside the Broken Window Fallacy introduced by Bastiat that’s been around over 160 years for the moment, let’s look into the brilliant mind of Roger Noll, an economics professor at Stanford and co-director of the university’s program on regulatory policy. “Some people identify with the beneficiaries, others identify with those who bear the cost, and no amount of argument is ever going to change their minds.”  This is a leading economist paid by a major university to come up with this explanation to downplay the absolute economic wreck the US regulation and tax policies have had on our country.  You cannot make this stuff up.  By “some people” identifying with the beneficiaries, is the esteemed professor suggesting parasites are interchangeable with producers?  Some will identify with thieves, others with the victims, according to the Stanford professor.  Since the author of this article has only plumbed the depths of a few “economists, ”  I’d like to introduce her to some basic facts in from a relatively short snapshot in History.

From 1998-2000, the US saw 4470 IPOs or Initial Public Offerings.  From 2001-2010, that number fell almost 4/5th in ONE DECADE.  What the heck happened??  A little beauty  of a regulatory law, just under 60 pages, sponsored by legislators Sarbanes and Oxley in 2002.  What about that horrible tech bubble that caused the stock market to tumble in 2000?  That “bubble” was the strongest contributor to the U.S.’s position as the undisputed economic and technological leader of the world.  It resulted in disruptive technologies that changed the world and every one of our lives and is still doing so today.  Then we passed SOX.  This was supposed to stop bubbles from occurring.  Fast forward to 2008.  Well, there weren’t many IPOs for your money to invest in-which left real estate all by its lonesome.  Hmmm, that SOX sure did work on real estate.

Today, we are getting ready to face the regulatory tsunami of Dodd-Frank.  This nifty law is over 2300 pages.  What sane US company wants to stay on this island?

Well, it’s possible Sarbanes, Oxley, Dodd and Frank might cook up a new law to force them to stay here.  Slavery, 2012 style.


November 15, 2011 Posted by | -Economics, Regulation, Regulatory bill of Rights | , , , , , , , , | Leave a comment

Sarbanes Oxley: Relief May Be on the Way

I wrote about the damaging effects of Sarbanes Oxley in my book, The Decline and Fall of the American Entrepreneur.  It appears that the Republican presidential candidates have read my book.  See this video, J. W. Verret Discusses Sarbanes-Oxley on Fox News, which shows the candidates explaining that we need to repeal SOX.  Let’s hope that they don’t just tinker around the edges with SOX and while they are at it they need to repeal Dodd Frank.  This would be a big step toward restoring innovation and getting the economy growing again.


November 1, 2011 Posted by | Innovation, Regulatory bill of Rights | , , , , , | 2 Comments

Regulatory Reform: REINS Legislation

Federal regulations take up 81,000 pages and annual compliance costs are now $1.75 Trillion or 12% of U.S. GDP.  This is enough money to hire a quarter of the U.S. workforce.  (For more information see Episode Two: Economic Freedom in America Today).  Note that this does not include the cost of tax compliance, which is estimated at $431 Billion per year.  There is now a very modest proposal to put a halt to excessive and unnecessary and unconstitutional regulations called the REINS ACT, introduced by Congressman Geoff Davis.  This piece of legislation requires an up-or-down vote on all new proposed rules with an economic impact of over $100 million by both the House and the Senate and the signature of the President before they can be enforced on the American public.

I have written on this issue before, see Regulatory Bill of Rights.  Regulatory rules are used to circumvent not only Congress’ rights under the Constitution, but used to circumvent your rights under the Bill of Rights.  The penalties for regulatory infractions can include severe financial penalties and jail time.  Our Founding Fathers did not intend that the Bill of Rights to only apply to so called criminal laws.  Our government circumvents the Bill of Rights by pretending they are enforcing a civil law instead of a criminal law.  The only true civil law in the U.S. is between private citizens not a law between the government and the people – those are criminal laws.

The REINS Act is a very modest piece of legislation and does not go nearly far enough in curtailing the power or regulatory agencies, but it’s a start.


October 24, 2011 Posted by | Regulatory bill of Rights | , , , , | Leave a comment

Regulatory Bill of Rights

As the regulatory state has increased the rights of citizens have been ignored.  The regulatory state avoids the limitations of the Bill of Rights by categorizing the regulations as civil laws, as opposed to criminal laws. Notice and hearing provisions of the Administrative Procedure Act do not provide protection for individual citizens who cannot monitor all areas of the government and who do not have the budget to engage in these activities. Thus, there exists a need for a regulatory bill of rights for citizens.


Regulatory Bill of Rights[1]

A) It shall be a defense to any regulatory action that the goal of the regulation can be achieved in a less intrusive manner or in a more cost efficient manner.

1) The relevant regulatory agency shall not define more than two non-contradictory goals for every regulation.

2) Any person subject to a regulatory action in which the regulatory agency has failed to undertake a reasonable analysis for less intrusive manners or more cost efficient manners of achieving the goals of the regulation shall be entitled to attorney fees.

3) Any person subject to a regulatory action can appeal to either a state court in which the alleged action occurred or federal court.  They shall have to the right to a trial by a jury of their peers and shall not be required to post a bond to appeal.


B) No person shall be subject to any regulation or law that is contradictory to any other regulation or law of the United States.


C) All regulations shall be interpreted strictly against the regulatory agency, any indefiniteness shall be interpreted in favor of the public.


D) Any person shall have the right to petition any regulatory agency to consider an alternative, less intrusive or less costly version of any given regulation to achieve the stated goal(s) of a regulation.

(1) Any person who prevails under this section shall receive 10% of any savings for the government for the next ten years.

(2) Any person who prevails under this section shall receive 2% in any increase in tax revenues above the growth in GDP from companies’ affected by the regulation for 7 years.

(3) The regulatory agency shall have six months to act on any such petition.  Failure to review a petition within six months by the regulatory agency shall be interpreted by a court of review as a presumption that the petition is correct.

(4) Any person’s petition that is rejected by the regulatory agency shall have the right of review by any federal court.


E) Any person shall have the right to petition any regulatory agency to consider an alternative, less costly manner of conducting the regulatory agency’s business.  The petition must show at least a 20% saving in regulatory agency’s manner of doing business, without reducing the work force of the regulatory agency, the salaries and benefits of the work force, and without reducing the effectiveness of the regulatory agency’s state goals.

(1) Any person who prevails under this section shall receive 10% of any savings for the government for the next ten years.

(2) The regulatory agency shall have six months to act on any such petition.  Failure to review a petition within six months by the regulatory agency shall be interpreted by a court of review as a presumption that the petition is correct.

(3) Any person’s petition that is rejected by the regulatory agency and shall have the right of review by any federal of state court.


F) No regulation shall be valid or enforceable that Congress, or the federal government do not have to comply with the regulation in question, with the exception that Congress or the federal government do not have to comply with the regulation in question during a National Emergency.


(G) Any regulation, law, or spending provision that does not have a clear national purpose or disproportionately favors or disfavors a particular sector of the country shall be invalid.

(1) Private citizens shall have a right to enforce this Right in State or Federal court.

(2) All taxpaying citizens of the United States shall have the have standing to enforce this Right.

(3) Any private citizen that prevails in an action to enforce this Right shall have the right to 1% of all monies that would have been spent under the regulation, law, or spending provision plus attorney fees.


Why is this needed?

There is almost nothing that a regulatory agency cannot do to you and for most cases you are not protected by the Bill of Rights.

Although criminal penalties tend to be more severe than civil and regulatory remedies, perhaps only the death penalty is unique to the criminal law. Property is taken by taxation, civil fines, civil forfeitures, and compensatory or punitive damages; individual liberty may be denied by such civil procedures as quarantine, involuntary civil commitment, and the military draft. Thus, what principally distinguishes the criminal sanction is its peculiar stigmatizing quality, even when sentence is suspended and no specific punishment follows conviction. (Emphasis added) Read more

This article then points out that in criminal cases strict subject to strict standards under which the government may act.  It has to comply with strict due process, search and seizure rules, and issued of unconstitutionally vague statues.  None of these is true if the agency characterizes the penalty as a civil penalty.[2] As the article explains

The U.S. Supreme Court has had some difficulty in determining which of these various civil-criminal hybrids (in particular, involuntary civil commitment of dangerous persons, civil fines, civil forfeitures, and occupational disqualifications) are subject to constitutional criminal procedures. After some vacillation, the Court, in a series of cases decided in the late 1990s, seemingly held that constitutional criminal procedures are either fully applicable or do not apply at all; such procedures will be deemed applicable only to offenses that are labeled as criminal or which are overwhelmingly punitive in purpose or effect (Klein).  (Emphasis added)
Read more

This means that government can avoid constitutional protections in most cases just by “deeming” then civil instead of criminal.  Clearly, the regulatory state has made most constitution protection irrelevant.


History of Citizens Demanding Government Respect Their Rights

England and it colonies have a history of demanding that their government respect their rights.  This excellent article, A Brief History of the Bill of Rights,traces the history of our Bill of Rights.[3]

The Bill of Rights, ratified in 1791, was the result of more than a century of experience with rights in America and many centuries before that in England. The major British precursors to the Bill of Rights are:

The Magna Carta (1215) In 1215, a group of English barons, tired of heavy taxes and arbitrary actions by the king, forced King John to sign the Magna Carta (Latin for “great charter”). It guaranteed such fundamental rights as trial by jury and due process of law, a requirement that government be fair in its actions. Originally, these rights applied only to noblemen, but over time they were extended to all English people. The Magna Carta established the principle that the monarch’s power is not absolute.

Petition of Right (1628).The monarchs of England did not always respect the Magna Carta in the 400 years that followed its signing. Parliament, the English legislature, gradually grew in influence. In 1628, Parliament refused to approve more taxes until King Charles I signed the Petition of Right, which prohibited the monarch from arresting people unlawfully and housing troops in private homes without the owners’ consent.

Bill of Rights (1689).Before William and Mary could take the British throne, a condition of their rule was agreement to an act of Parliament in 1689 known as the Bill of Rights. It guaranteed the right of British subjects to petition the king and to bear arms. It prohibited excessive bails and fines and cruel and unusual punishment. This British Bill of Rights protected far fewer individual rights than the American Bill of Rights adopted a century later. Also, the British Bill of Rights was a statute, part of everyday lawmaking — and could be changed easily — rather than America’s constitutional amendments, part of the most important, most fundamental legal document of the land.

It is time for all common law countries to remind their governments that their power is not absolute and governments work for the citizens not the other way around.  This regulatory bill of rights is a step in changing the balance of power between governments and their citizens.  It demands, at the least, government regulations not be contradictory and that they be effective, efficient, and as in obtrusive as possible.



I would appreciate any input in improving the Regulatory Bill of Rights.

[1] My good friend, entrepreneur, and economist Rodney Preisser provided me the inspiration for this idea.

[2] This article points out that a few rare exceptions, such as regulatory takings.

[3] There is no such thing as “positive rights” and “negative rights.”  Positive rights are an attempt to require slavery and are complete nonsense.


December 2, 2010 Posted by | Regulatory bill of Rights | , , , | 2 Comments