Excessive regulation costs

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By TP

Delgadola regulation wonders is a fundamental tool for the functioning of any modern society. When well designed, it establishes clear rules that reduce uncertainty, protect rights and facilitate economic activity. They can eliminate market failures by correctly establishing the rules of the game or property rights and can avoid the generation of externalities. A society without regulation would collapse on itself. However, when the regulation becomes excessive or too complex, it can become a burden that hinders economic and social development. Spain offers a particularly relevant study of this phenomenon. On this issue, the economist Juan S. Mora-Sanguinetti is dedicated to his research and that according to some of his results they show that in the more than 40 years of democracy the Spanish administrations have approved more than 411,000 new norms, with a rhythm that It does not stop accelerating: only in 2021 12,704 additional standards were approved. These norms, mostly as far as we know, generated by Autonomous Communities, end up weaving a network that, like a web, slows down and ends by killing any desired growth impetus. By putting a current example, we can mention the regulation on the building. Several studies have already indicated that, among other causes, the regulation that is specified in the procedures necessary for the management and development of urban and building projects is one of the great factors that determine the shortage of offer. This regulation would raise prices and reduce the ability of many families to access a home. And it is that Spain suffers from regulatory inflation that would be ballasting its economy and competitiveness according to various studies such as those of the aforementioned Mora-Sanguinetti and that, for example, shows That for each 1% increase in the regulation volume, the number of companies at the local level is reduced by 0.05%. Regulatory excess especially affects limited societies and larger companies, which are limited their capacity to expand between different autonomous communities due to normative fragmentation, disastrous and derived consequence not only of regulatory expansion but also of the territorial delimitation of its effects normative, which establishes a clear rupture of what we would call the single market. In concrete, and following these studies, we could argue that regulatory complexity in Spain has three main dimensions. The first is purely quantitative: the high number of norms and its origin of multiple administrative levels (state, regional and local) that accumulates one on the other making its follow -up almost unfeasible. The second is linguistics: the increasingly complex and technical writing of the standards, which hinders their understanding and generates high costs of assimilation for those who must follow them. The third is relational: the norms make cross references to other provisions, with an average of 11 links by new norm. Unless we adopt the culture of simplification and text fusion, follow a regulation for a particular issue can become an exercise that would undoubtedly lead us to flirt with madness. But the effects go beyond business. Regulatory complexity also negatively impacts productivity and slows the functioning of the judicial system. A less efficient judicial system, in turn, reduces the proportion of rental housing, access to credit and business investment, among other issues. In general, an inefficient judicial system introduces distrust by agents in the legal system, which introduces uncertainty and acts as corrosion for growth. We could say that we are aware of this cost. Thus, and for example, since the 90s, Better Regulation initiatives have emerged to improve normative quality. In the Spanish case we have Royal Decree 931/2017 that establishes requirements to analyze the impact of the new standards, although experts consider that there is still margin of improvement. Among the proposals include the need to reduce cross references between norms, develop clearer writing guides and better evaluate the weight of each new standard in the legal system. In some administrations, such as Andalusian, they have developed actions to simplify and reduce the normative load. But it is not enough; Spain needs a regulatory diet. If well a certain level of regulation is necessary for market operation and the protection of rights, current normative excess is generating significant costs for the economy and society. The simplification and rationalization of the regulatory framework should be a priority to improve the country's economic competitiveness. However, the challenge is not just to reduce the number of rules, in fact it should not be the first of the objectives. The main task must be directed towards the improvement of the quality, clarity and coherence of the regulation. Only in this way can a balance between the necessary regulation of economic and social activity be achieved, and the flexibility required by a dynamic and competitive economy.

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