Regulation is Correlated with Slower Revenue Growth
All markets are regulated. The question is whether a market is regulated by government or by consumers. Ideally, governments regulate when the market cannot. The problem, some might say, is that the government regulates when it does not have to, or should not regulate.
And some would say appropriate intervention, when required, tends to be more effective when antitrust is the focus, not the more-mundane regulation of market entry, consumer protection or price regulation.
In a study conducted by Antony Davies, associate professor of economics at Duquesne University and Mercatus-affiliated senior scholar at George Mason University, the least-regulated industries grew faster than the most-regulated industries.
To be sure, one might argue that perhaps the least-regulated industries were the fastest growing for other reasons.
The most-regulated industries included motor vehicle and parts dealers; oil and gas; securities, commodity contracts, and other financial investments; railroads; transit and ground passenger transportation and truck transportation, for example.
Building construction; scenic and sightseeing transportation; water transportation; air transportation and insurance also were at the top of the list of “most-regulated industries.
Among the least regulated industries were nursing and residential care facilities; electronics and appliance stores; transportation equipment manufacturing; space research and technology; health and personal care stores ; petroleum and coal products manufacturing; building material and garden equipment and supplies dealers; wood product manufacturing and heavy and civil engineering construction.
Telecommunications is about in the middle, and some might note that telecommunications was in a major deregulation and technology transformation between 1997 and 2010.
Still, in 10 out of the 14 years in the study, the least-regulated industries showed greater annual growth than did the most-regulated industries.
Between 1997 and 2010, the 221 least-regulated industries in each year averaged 3.5 percent annual growth in output per hour.
The 221 most-regulated industries averaged a significantly lower 1.9 percent annual growth.
Accumulating the growth rates over all the years, the least-regulated industries experienced a total of 64 percent growth in output per hour from 1997 through 2010 versus 34 percent for the most-regulated industries.
In 12 out of 14 years, the least-regulated industries had greater growth than the most-regulated industries.
Accumulating the growth rates over all the years, the least-regulated industries experienced 63 percent growth in output per person versus 33 percent growth for the most-regulated industries.
Reasonable people will disagree about the wisdom of common carrier regulation of Internet access, mobile services or fixed line services. Economists might simply point out that more regulation is likely to lead to less revenue growth for Internet service providers, even though some believe application providers might grow faster, as a result.