 Good morning and welcome. Chairman Goodlatte is stuck in Washington traffic. That should come as no surprise for those of you Who live here? This happens to all of us. I am Richard Williams. I'm the director of the regulatory studies program at the Mercatus Center at George Mason University It's my honor to welcome you this morning to our educational program and we're going to examine the relationships between regulation and the economy as Most of you all know regulation is a powerful legal and economic tool that touches nearly every aspect of our daily lives The problem is its significance is largely hidden from the public Most people simply don't understand exactly how powerful this is but we hope to shed a little light on this today Policymakers in particular need to be aware of the impact of regulations not just on the national economy But also on individuals and when I'm talking about individuals I mean individuals as consumers as Innovators as investors as business owners as people who want to be business owners and households that are just trying to keep the bills paid The purpose of regulation is to solve problems that people are unable to solve in their own personal life But successful problem solving through regulation requires that Regulators and all decision-makers have access to information and that information basically has to point to does the regulation have a chance to work What's the probability that it'll actually solve a problem and then after we put it in place? What's the probability that it's actually working? We can go and look and see if it's working, but before we even do that first We have to make sure that regulation is addressing a real problem so for example, we need to be aware that the problems that Government used to have to fix was one where consumers had less information about what they were purchasing than the sellers Now in the age of the internet that problem is largely disappearing The problem that we see at Mercatus through our 20 to 30 years of work now On regulations is that a lot of regulars simply don't have good enough information before they decide to regulate They need both good information and good analysis and when they don't have that they end up basically regulating in the dark And when we do that we make this we make decisions on regulations that often don't work and when regulations don't work That means that resources are being spent to comply with regulations that could have otherwise been spent on something productive It also means that we're setting up unnecessary Barriers to innovation so the key is in order to get regulations at work We need good information. We need good analysis and that'll lead to better investment and innovation decisions The title of our program this morning is unleashing an economic resurgence through regulatory reform This morning our speakers and scholars will make some connections between federal regulation and the effects on the economy We will talk about what the effects are and also how can we do better? Eventually we will stop this program when chairman Goodluck gets here and I will introduce him But first I want to introduce my colleague Bill Beach. Some of you may know he used to work somewhere near here I think but right now he is the vice president for policy research at the Mercata Center for George Mason University So bill take it away. Thank you very much. Thank you Thank you, thank you very much Richard It's it's great to be with you on this panel and I'd like to call my fellow panelists for the first panel up Up to the stage now Pietro Pareto and a milsap and Dustin Chambers Three distinguished individuals that I will introduce in just a moment You know, we're here today in this first panel to talk about the question. How can reform help economic growth? How can regular regulatory reform help economic growth? You're going to hear some research announced this morning, which is truly Pathbreaking a constant question, you know all across the country from chambers of commerce to Congress is how can we get more jobs? That's when I worked in the Senate. I wrote every other speech on jobs as Marcus Peacock my former boss knows He edited all of those before we can answer this question We need we need to understand though how jobs are linked to economic growth how economic growth is influenced by government policy Most policymakers in Washington and state capitals have a kind of a basic understanding of the likely effects of higher tax rates on economic growth On the output of capital output of labor and so forth and so on But not so on regulation We've ignored that I think to our peril now I happily the neglect of regulations role in shaping public in shaping economic growth is really sort of slowly disappearing I've noticed that my long years up here more and more lawmakers are recognizing that regulations can for example Raise specific cost direct cost barriers to launching and expanding a business and forced businesses to spend more Then they planned on technology and infrastructure and this is the subject matter of the first panel We're going to really discuss a number of things Long three lines of inquiry and now my panelists may decide to take this in a different direction But we'll be we'll be working in in that area and I'll say a few more words on that when we resume How do you like that? Chairman Goodlatte is here So He's here. That's excellent. How are you sir? To start our program we want to thank the honorable Bob Goodlatte who is the chair of the committee on the judiciary And representative of Virginia 6th district, which I want to point out as the home of the Blue Ridge Parkway It's the most heavily visited National Park in in the world actually and he's going to begin this important discussion as an attorney and member of the house Representatives chairman Goodlatte has extensive experience with both legislative and the regulatory process and the daily effects of regulations on all Americans Please join me in welcoming chairman Goodlatte Well, thank you very much and good morning in my apologies for being a few minutes late the The rain makes the traffic slow down and that slowed me down, but it's a pleasure to be with all of you this morning and Just when you think everyone knows who you are because you're an elected official you get your comeuppance During the great healthcare debate of a few years ago I was visiting a nursing home in my district and I saw a lady sitting there and I went up to her and I said Do you know who I am and she looked at me and she said no But if you ask at the nurses station, they might be able to tell you So we're here today to consider how to unleash an economic resurgence through regulatory reform And we've have an esteemed group of experts assembled and I am happy to launch our discussion Looks like I almost missed that opportunity, but I am Pleased to be able to do that. There are a few matters more There are a few matters more vital to our nation right now and into the future than the search of for how to unleash a resurgence of our economy the American people are now four elections and more than seven years Into the worst period after an economic crisis since the Great Depression But ever since America emerged from the recession it has witnessed a recovery like no other and not in a good way For most if not all of the recovery we have witnessed jobs not truly recovering wages Not truly recovering and the rate of new business startups not truly recovering Instead we've seen permanent exits from the labor force at historic levels real wages falling and Dependency on government assistance increasing all across this country people have been struggling people whose jobs and wages have been disappearing people who have been leaving the labor pool For the dependency pool people who have seen no way possible to start a new business Have been feeling in their bones that the American dream the dream that they cherish and their children need is slipping away They are feeling that a future of prosperity is slipping out of their grasp what's behind this it is not a lack of American resources it is not a lack of American ingenuity it is not a Lack of American spirit and it is certainly not unbeatable foreign competition more than anything else it is the endless drain of resources that takes working people's hard-earned wages to Washington and bureaucratically impose regulatory roadblocks in the path of opportunity and growth Today the combined economic burden of federal taxation and regulation is over three trillion dollars Almost 20% of our economy of that the larger part is the burden of regulation now estimated to reach at least 1.88 trillion dollars that federal regulatory burden is larger than the 2013 gross domestic product of all but the top ten countries in the world It is half the size of Germany's entire GDP. It is more than one-third the size of Japan's GDP most important that burden is $15,000 per American household nearly 30% of average household income No one says we need no regulation But who can credibly say we need regulation that costs this much America cannot possibly retain its competitive position in the world and create opportunity and Prosperity for all Americans if the federal government continues to drop such a crushing weight on our economy much of this burden has accumulated over decades as the authors of one of the studies that will be discussed today have shown the cumulative effects of Regulation have slowed economic growth in the United States by on average eight tenths of a percent per year since 1980 Slightly less than 1% per year at first blush may not sound like much, but we all need to understand that it is what it means is that if we had held regulation constant at 1980 levels the US economy would have been roughly 25 percent larger than it actually was by 2012 that's the equivalent of four trillion dollars per year or about $13,000 per person per year Rather than reversing the trend of accumulating regulatory burdens the Obama administration has accelerated it Imagine what our recovery could have been like if we had been able to reclaim a significant share of that lost growth But rather than reverse the trend of accumulating regulatory burden to let the economy breathe the Obama administration has brought us an unprecedented avalanche of new and costly regulation The regulatory onslaught is a major reason why we have just concluded eight years of zero Zero real-wage growth for America's workers and families It is a critical reason why well over 90 million Americans above the age of 16 are out of the workforce It is an unmistakable reason why we are still missing the almost six million more new jobs Americans would have had if the so-called Obama recovery had just been as strong as the average recovery since World War two Things do not have to continue this way. We can unleash an economic resurgence through regulatory reform All one has to do is take a look at the flaws in how Washington's regulators currently do business to see why that is true Washington's regulatory bureaucracy rarely knows both the monetized costs and the monetized benefits of even new major regulations that it issues Frequently the benefits claim for new regulation are not the direct benefits Congress directly sought when it passed the relevant regulatory statutes instead. They are purported co-benefits side effects that the bureaucracy argues serve some other end Imagine how much more efficient and less unnecessarily burdensome our regulatory system would be if we enacted reform that forced agencies to stop shooting in the dark and Stop shooting sideways requiring them to actually show the true monetized costs and benefits of proposed alternatives and prohibiting excessive reliance on claimed co-benefits or Consider that notwithstanding the size and growth of federal regulation No regulatory budgeting mechanism provides Congress with the ability to manage the level of new federal regulatory costs imposed each year other nations meanwhile have successfully implemented the use of regulatory budgeting to control excess regulation and regulatory costs Surely we can motivate effective regulatory budgeting tools that could bend the regulatory cost curve down without hampering the realization of regulatory benefits Further consider that Washington regulators rarely take into adequate account The adverse impacts their regulations have on the rate of new business startups the depressing impacts regulations have on jobs and wages the long-term harmful impacts regulations have on displaced workers their families and their communities and The regressive impacts of regulation on poor and lower income communities who often see their Electricity rates or other household expenses take a disproportionately hard hit from new regulation Or the cumulative impact these factors have on economic mobility It's long past time that Congress required regulatory agencies to work much harder to account for these factors and Avoid these adverse impacts as they write new regulations And I look forward to a productive discussion of these issues today and hope that today's proceedings increase all of our Dedication to achieve regulatory reform that can provide a true economic resurgence for our country Thank you all for letting me be with you today Thank You chairman good lat as somebody who's been in the regulatory business now for 35 years That's about as good a summary as I think anybody could do so we here at the Mercatus Center use an economics toolkit to look at regulations and like everybody else and like the chairman just mentioned I think this is a conversation that's taking place across the country And across the internet and in homes and in workplaces To begin our discussion our first panel is going to discuss all of the connections between Regulations and economic growth in particular They're gonna we're gonna start with looking at regulations effect on the national economy Then we're gonna move to the effect on on the individual states And finally we're gonna look at the effect on right down to the household level and for those of you who believe that all Politics is local you'll be particularly interested probably in that third discussion So again, let me turn it over to my esteemed colleagues bill beach. Thank you very much and Thank you very much chairman good. Good lad. You actually Hit the points that we were hitting before you came in So so no no no it was it was it was it was a it was a godsend What a great way of starting this discussion? We have three great panelists for the first panel and let me introduce each one and then I'll call on Pietro to begin our discussion Our first speaker is Pietro Pareto who is professor of economics at At Duke University He's written extensively in this area of technological change and its connections to economic growth and macroeconomics The environment R&D all these factors like international trade and innovation and so forth and he is the co-author of a Paper which was released just a couple of days ago and that will be the subject of his remarks today extraordinary Demonstration of how we can estimate regulatory cumulative regulatory burden within an economic model He'll be followed by Adam Mills app Who is a research fellow in state and local of a policy project at Mercatus a colleague of mine? Adam has conducted research and urban development and growth population trends federal and local Urban policy and has written extensively in all those areas and published with us He has a PhD in economics from Clemson a BS in economics and a BA in comparative religion from Miami University And our last speaker on this panel will be Dustin Chambers who's associate professor at Salisbury University He is aren't his PhD from the University of California Riverside. He has a distinguished record in econometric studies in this area of of economic growth and has looked at how Economic growth convergence rates across countries have Have occurred and why they have occurred the way they have so without further ado. Petra. Would you start us off, please? That's okay Thank you for the invitation. It's an honor to be here and I Think my role is probably to play the academic and put the study that We are going to discuss in context Taking it from the a long-run view The problem for many many years people knew that we needed to understand better innovation technical change in economics There was no doubt that that's the engine of growth For many years, however, we lacked the proper theory to study it in particular if the models were supposed to be used to study regulation the interaction between the economy environment and topics like that Luckily roughly 30 years ago Paul Romer gave us a breakthrough. He showed the profession how to write Dynamic general equity role models of the entire economy that allowed for endogenous technological change and Pointed us in the right direction 30 years later. We are still working very hard. It's a collective intellectual journey With many people involved asking various questions exploring dimensions of the models that can be improved and that Need to be changed in order to make progress in some areas and my contribution in particular here has been to take seriously the idea that technical change come from the activities of firms and Possibly modeled in a way that people coming from outside economics will recognize immediately institutions that specialize in production in The having internal organization and part of their activity is what we call research and development bringing to markets new goods improving their productivity and all these sorts of things of Course when we think when we look at the real economy We see that there is another big dimension of economic dynamism related to technological change, which is entrepreneurship Agents we call them entrepreneurs typically are individuals or collection of individuals that get together have some vision about a product and my cell in the market and Spend resources on developing the product the process They do marketing campaign and then they set up an institution a firm that Serves the market so we want to understand in the context of the entire economy how these two activities innovation incremental innovation in particular internal to the firm and entrepreneurship setting up new firms are affected by the overall economic environment and how they Produce the technical change that is the key to our living standards Regulation has always been very hard to introduce in these environments because Many models were not sufficiently Tractable and what I have in mind here is precisely the The goldical goldilocks rule if you want that the model shouldn't be too hard There shouldn't be too simple too simple it doesn't help you understand a complex reality too hard you don't understand the model and Then it becomes useless to use it to interpret reality I'm happy to report from the trenches of academy research that we have made enough progress to produce models are Extremely tractable and then now are easily Adjusted tailored to study the problem of regulation. They studied that We conducted with Patrick and Bentley Bentley is a former student of mine at Duke graduated 10 15 years ago They studied it with the that we did exploits to Major in my opinion advances That are available today the first and most important in my opinion is the data that the mercatus group collected It's a great data set. It's sorely needed. I keep arguing that we need something like that on the benefit side of things because at the moment we we have Evidence that allows us to think in an organized fashion about the potential benefits of regulation that Scattered across industries. It's not collected in a consistent fashion across time industries and their activities what they did with the red data Project is they finally accomplished a consistent measure of regulation that can be deployed to study the entire economy and then The other advance is on the theory side. Essentially. That's where I come in into the picture because I developed models that Are so trattable that you can solve by hand that you see immediately what happens in these models When you study when you use them to try to understand what happens to the growth rate of the economy over time as a result of the regulatory environment The model produces transparent analytical answers that you understand and then you can do empirical Exercises like the one that we did in this paper, which is an estimation exercise For practical reasons focused only on the cost side of things We didn't even start thinking about benefits because of the lack of data that I mentioned a minute ago to our surprise the number that came up is pretty big and I take it as a signal that we are after the big fish and That we need to work more. There are more papers to write which is good for me. It keeps you employed and Mostly because good theories also a device that focuses your attention and helps you frame new questions or reframe old questions in a more specific and precise way I Think I can't stop here because I provided enough context and Well, that's just outstanding and we'll return to The findings in the model and to reg data, which I think we should we should say spend a few more minutes on so that everyone understands What what a breakthrough that that was Adam? I'm gonna stand over here because I All right so My comments today are going to focus on why federal regulation impacts the 50 states and then Washington, DC in different ways So first it's necessary to point out a fact about the US economy firms in the same industry Tend to cluster together in the same area. All right some examples of this Silicon Valley in California the financial services sector in New York City automobile manufacturing in Michigan and then the film industry in Los Angeles The two primary economic causes of this clustering are economies of scale and agglomeration economies So I'm going to briefly explain those two things So a firm has economies of scale when the average cost of producing a good declines as more is produced and a primary reason for this is specialization as More of a good is produced. It makes economic sense to have different workers focus on different individual tasks as An example of this I worked at a GM plant when summer when I was in college and my job was to install Gas tanks on the cars that they went down the assembly line It makes sense it made sense at the time to have me focus on doing this one task Because we were producing 500 cars per shift So with each of us they are focusing on just one job The car could quickly move down the assembly line and we would each get you know, perfect at doing our individual job This reduced waste reduced mistakes and then also cut costs Does it so the combination of more output for a given amount of overhead and less mistakes decreases the average cost of reducing a Product and leads to large firms that end up employing hundreds or even thousands of workers all of whom live in proximity to one another So this is the beginning of a city and also a firm cluster The second cause of the existence of agglomeration economies So one feature of agglomeration economies is that workers tend to be more productive when they are surrounded by other workers in the same industry Often this is due to knowledge spillovers Which simply means that workers in different firms in the same industry share knowledge with one another and then this leads in leads to increases in productivity The increases in productivity then induce other firms in the same industry to locate near one another So another agglomeration economies when a large number of employers and employees are together This leads to better job matching which can increase productivity and then decrease a firm's cost associated with finding new employees So together the economies of scale and agglomeration economies generate firm clusters in specific areas Geography and natural resources also play a role in an area specialization Hawaii and Florida have relatively large tourism industries due to their nice weather West Virginia is a large has a large mining industry due to its endowment of coal So together with the agglomeration economies and specialization and geography and resources we see these firm clusters This is possible within the u.s. Because residents of states are free to trade with one another It's not necessary for each state to produce all of the things that its residents want And so instead states can specialize and produce certain goods and services And then trade across state borders for the other things that the residents in a particular state want to consume Since firms tend to in particular industries tend to cluster together Federal regulations that disparately impact certain industries will also disparately impact certain states This is an inevitable outcome of specialization and unrestricted interstate commerce This does not however mean that industries are forever bound to particular states So an industry may concentrate in a new state for a variety of reasons One is that new methods of production can change the relative attractiveness of a particular state an example of this is Shale and natural gas and the decoders in the Midwest Largely displacing West Virginia coal as a input into the energy production process A second is that changes in state and local policy may induce firms to relocate across state borders There is evidence that states with simple tax codes and stable lucid regulatory environments Tend to have better economies that are more attractive than to both people and firms Third entrepreneurs are constantly inventing new products and services that displace old ones and such innovation can occur in unlikely places State policymakers cannot ensure that productive innovation takes place in their state But states to implement a simpler tax code and regulatory environment will create the conditions that are necessary For innovation which makes it more likely that industry changing innovation occurs in those states Since in the long run firms can and will move in response to these various factors Federal regulations that impact an industry in one straight one state will follow that industry to others In the front, maybe some of you picked it up Hopefully there was a handout that shows the five states with the largest share of US employment in the most regulated industries According to the federal regulation and state enterprise index phrase index for short in both 1998 and 2014 So the phrase index is a way to calculate how federal regulation Impacts the different states based on the industry makeup of those states also created by Patrick will be talking later As you can see in that handout over a span of 16 years there were some changes in the location of employment in those industries So the shaded states in the 1998 panel on the left were replaced by the shaded states in the 2014 panel on the right as an example in the air transportation industry Georgia replace Illinois as the number three state in terms of employment in Chemical manufacturing Illinois, Ohio replaced New York and Pennsylvania respectively They are now so those two states Illinois, Ohio are now well positioned to increase their share of employment in chemical Manufacturing as the industry grows and evolves since they now have the benefit of agglomeration economies on their side Of course the firms and employees in Illinois and Ohio will also have to contend with the federal regulation that followed that industry to their state So while it may initially appear that federal regulations that impact a particular industry Won't have much of an effect on a particular state Changes in the economy that cause firms and employment to relocate can alter that result Because federal regulations follow industries across state lines Policymakers from all states need to be aware of how the cumulative effect of regulation can harm an industry's growth While individual regulations may be largely benign in terms of their effect on growth The cumulative effect can severely hinder firms ability to innovate and create new jobs and opportunities for residents States that are more heavily burned by federal regulation due to their mix of industries will suffer larger negative impacts as An example of this I am currently working on a study that examines the lake and labor market recoveries of Kentucky and its neighbors since the Great Recession Kentucky, Ohio and West Virginia have all experienced large drops in their labor forces since September of 2007 and they've yet to recover It is not surprising that these states ranked fifth twenty first and eighth respectively in the phrase index since regulations that hinder economic growth also limit workers opportunities Kentucky's poor ranking is largely due to its automotive industry, which is heavily regulated by the environmental protection agency Ohio's low ranking is primarily due to its utilities industry while West Virginia's poor ranking is due to its concentration of mining Which is heavily regulated by the Department of the Interior When employment opportunities disappear workers will move to states with better economies such as those that are less impacted by federal regulation They may choose to retire early or in the worst case scenario They may be forced to rely on family friends and public assistance to make ends meet so in closing. I just want to emphasize three facts firms cluster together due to specialization and agglomeration economies Number two due to this clustering federal regulations that disparately impact certain industries will necessarily Disparately impact certain states any negative effects that come from the accumulation of regulation Will then disproportionately harm certain states weakening their economies and their labor markets and Third since federal regulation follows industries across states It is in every policymakers interest to understand how the cumulative effect of regulation impacts an industry After all at some point the heavily regulated industries may be large employers in your states. Thank you Thank you very much So we've we've we've heard from Pietro that the results of a model that estimates Accumulative effect of regulations has reduced national GDP by 25 percent in 2012 dollars We just heard how differences in regular regulatory burden across states make a huge difference in where people migrate and where businesses migrate and Dustin now is going to talk to us about the regulatory effect on the families and the price system So we're going from national state see the logic to family Well, thank you so much for having me out today. I really it's an honor to be here Before I dive into my remarks I just wanted to touch on Pietro's results real quickly because when I saw the numbers a few days ago. It's something instantly came to my head I teach primarily undergraduate students in in our first lecture in macroeconomics I put up a slide where I show them what living standards looked like around the world a century ago And what they look like today and we have the beginning and the ending values and the rates of economic growth Associated with each one of them the fastest growing country in that group's Japan Which went from rags to riches from a very undeveloped economy to one of the most developed economies on the planet At the tail end of that particular slide is Bangladesh and it had a growth rate per person of just under 1% per year The United States which is by far the world's largest economy had a growth rate That was about 0.8 percentage points higher than Bangladesh a century ago Fast forward an entire century you get the difference between the US today in Bangladesh a century ago now we started off wealthier than Bangladesh did But you can see that when you have a very low growth rate countries grow very slowly and they remain mired in poverty So if you try to wrap your mind around what that number means just think us versus Bangladesh That's the difference in growth performance that we're talking about as a result of these regulations Now the reason I was asked to come out today to speak with you was to address the issue of what impact Regulations have at the household level which is also a very interesting question as all of you have constituents that are interested in living standards right within your your congressional districts so the What I'm gonna go ahead and do is give you a little bit of a background Just that you kind of understand what's been done up to this point And then you can see the the value added by the paper that I did with Courtney Collins, which recently was released I think in April If you look at regulations in general no one up here is arguing that regulations are universally bad or that we should just take the federal register and burn it out on the in the in front of the capital building But what is argued and Patrick's actually spoken at length about this and you can seek him out And he can give you more information about it Is that we need a better framework for evaluating regulations It should be the case that if you have a regulation that's on the books that it needs to be current You know, we can't be regulating piston engine aircraft that don't exist anymore for example You know is is sorry the particular regulation actually germane It should also address a significant risk if it's a small issue. It's probably not even worth Regulating the next thing that you need to look for is Did the benefits of the regulations outweigh the costs or as my handyman likes to say is the juice worth the squeeze? that's an important issue because Perhaps there are benefits, but the unintended consequences Outshadow those benefits you have to take that into account and also there's a lot of rule duplication You have to make sure that you don't have two different regulations Basically trying to regulate the same thing. You need a streamlining up to benefits now when regulations fail The the above tests that I just spoke about Okay Bad things can happen not surprisingly So Diana Thomas at the Mercatus Center wrote a white paper Looking at the child care daycare sector in particular So most of the work that's been done up to this point has been case studies Looking at specific industries the work that I did and that I'm going to describe at the end of my comments Actually looks at all consumer prices taken together But if you look at a particular industry like daycare you can see that Regulations actually aren't terribly effective, but add to tremendous costs in that sector So let me give you a few highlights The first is that most of the current regulations dealing with daycare are what Dr. Thomas referred to as structural measures So these are things like how large the daycare center is things like a child staff ratios The amount of teacher education required in order to to watch the kids now If you juxtapose that with the child psychology literature, which is actually looks at child development outcomes So these are things like language development and academic skills in young people They find that the things that most statistically Significantly a fact or have a real effect on those outcomes are Unrelated to the things which federal regulations are Imposing upon those those daycare centers So let me give you a few numbers for example if you were to allow a Childcare worker to take care of one additional infant. It's just increased that ratio by one child You would reduce the annual cost of a daycare between 850 and $290 per year so substantial savings just by having an additional child watched by a particular worker Also, if you require a high school diploma for all caregivers that raises the cost of daycare between 20 and 40 percent Now if you're a wealthy household, maybe you don't care about that 20 to 40 percent But there are a lot of low-income families for whom that's a tremendous expense Most worryingly they found that a 1% increase in the price of child care Reduces the employment of single mothers by between 0.3 and 1.1 percent So some of the most vulnerable people in society those people who have to purchase daycare in order to work and then take their Entire paycheck to pay the daycare Basically are forced in that the paper found a much higher proportion of them get pushed into welfare They don't want to go into welfare, but they can't afford the daycare so they exit the labor force all together So that's just one particular industry Let me go ahead and give you guys a Overview of the results that I had with the Courtney Collins and we were trying to measure What's the overall impact of regulations on all consumer products? So like a basket of consumer products if you will in order to do that What we did is we went to the Bureau of Labor statistics and they published data on expenditure by different item different categories Roughly 60 different categories basically spanning the the range from housing to Groceries everything that you might spend money on And they have data on income levels for five different income groups the poorest 20 percent The next 20 percent so this would be 20 to 40 the middle class The next 20 and then the highest income 20 percent of households So this lets us tease out. Are there any kind of disparate effects of regulations on different income groups? What we found was that overall a 10 percent increase in regulations increased consumer prices by zero point six eight Seven percent so basically seven tenths of a percentage point Increase in your that your total prices or expenditures as a result of having a 10 percent increase in regulations We also found and this was very worrisome Is that if you look at every particular Particular expenditure category and you look at the amount of regulations being imposed on those various categories and how Volatile those prices are that actually the poorest households Spent 15 point one percentage points more their income. So if you look at their their monthly budget 15.1 percentage points more were spent in those areas that were most volatile and Subject to the highest levels of regulations And so it's not surprising that if you look at the overall rate of consumer inflation It's highest for the poorest consumers in the United States Between 2000 and 2012 the annualized rate of inflation was two point four six percent For the poorest twenty percent of households, and it was only two point zero eight percent for the wealthiest households And so this leads to a very interesting Potential question that you could ask What would be the impact of reducing across the board regulations by 15 percent on the various income groups? We found that it would be equivalent to a Basically a progressive income tax cut if you look at the poorest 20 percent of households It would be like a two point two seven percent cut in overall expenditures If you look at the highest income Americans even though they would save the most the savings would amount to zero point seven seven percent of income Thank you. Thank you. Thank you very much. Thank you very much indeed I think the I think a very key takeaway from that last presentation by Dustin is the Burton is greatest on the lowest 20 percent and that lowest 20 percent is having the hardest time getting off the sticky floor So economic mobility is directly affected by this by by this set of findings. We have we have Microphones, I believe located on either side of this hearing room And they are not to just be there there for your questions and we're good. Oh Good excellent, right? So Sam Sam has has that If anyone has a question, that's good If not, I have a question to start off the questioning and my question goes to Pietro I'd like you to say just a couple of words if you would How this of finding about to reduce GDP that affects labor and capital markets Maybe just labor labor labor markets. What are the jobs effect? Do you think I know you didn't separately estimate that in the paper? But could you say a couple of words on that? Yes first? I want to connect to the example that Dustin gave How to think about growth rates perhaps rather than thinking in US versus Bangladesh Is an exercise that we always have our undergrad to do which is that if your growth rate is the rule of 72 That is a way of computing the doubling time. How long it takes to double your income if you're growing at 10 percent per year The rule says take 72 and divided by the growth rate. So your income doubles ever every seven point two years that's repeated the Experiencing repeated in your working lifetime doubling of your income. If you're growing at 1% income doubles in 70 years Probably the end of your lifetime. Definitely not within your working lifetime I think that that's put some flesh on the bone. So what we're talking about here in when Korea was growing a roughly 77.5% per year new Koreans and Korea 1953 was the poorest country in the world If not the poorest the next to poorest country in the world the Koreans experience within their working lifetime starting at 25 retiring at something like 73 or 4 Episodes of doubling income. That's big So that's what we're talking about here now on the On the labor market implications in the paper. We didn't go there because we wanted to keep it simple as possible I have the field that has explored the interaction between labor market and economic growth, of course, and it's very easy to extend the type of analysis that we did allowing for Increasing complications or a richer structure of the labor market. You can go for to an environment where there is a Participation decision so going after for example one of the starkest features of the last eight years, which is the drop in participation rate that's a Very rare event to see or something of the magnitude you can allow for an unemployment rate Voluntary and voluntary doesn't matter and Look at these interactions Any kind of the the kind of models that we use for these analysis are going to tell you that Regulations they reduce the level of activity are going to reduce Incentives to participate in the labor force and probably are going to rise unemployment. Okay So that can be done very quickly on the estimation side. We would need additional data, but that's so there's a significant impact on labor market So you just want to make that clear Who would like to ask first question run Ron bird Ron. Thank you Thank you. It's the remarkable impacts that you've described for administrative regulations Make me wonder could you in fact extend this analysis beyond the administrative regulations fear and also look at the volume of restrictive laws passed by Congress by state legislatures or even all municipal Governments What why the limitation of the analysis just to regulations? Adam why don't you take a first swing at that? So I think At the federal level Laws really have been largely delegated down to bureaucracies in the sense that they actually show up more in regulations and they do necessarily in legislation So I know Patrick's done some work on like the Dodd-Frank Act So that's one law, but it has a lot of restrictions associated with it So I think that's a good place to start looking anyway when it comes to the federal level as far as the local level It's again. It's hard. It's also comes down to a lot to a measurement problem It's hard to get data on local restrictions and local rules and stuff like that It's not necessarily publicly available in any kind of searchable format So it involves a lot of you know on the ground type of research Which could be very effective and it's something that more should be done But yeah, currently there's no like repository of data that makes it easy to Necessarily analyze at the state and local level, but certainly something that well, we're actually trying to expand out and do more work on Dustin or Pietro. Do you have any views on that or that? well, I If you look at how reg data was put together, I don't we haven't really discussed that much although many of you may be familiar with How that was done basically it was a massive data mining exercise If you look at the federal register, you you've got centralized digitized copies of Existing federal regulations So you've got the existing data that you can then take in and you can data mine and actually extrapolate the number of Regulations and even assign them to particular industries as was pointed out if you're looking at the state and local They're spread out all over the place. So it's very difficult to have it in a Workable format. It's something that I think we would like to do any but it's it's a it's a Significant amount of resource manpower money in order to do something like that I want to make one more but just to emphasize what you said though I think it is important because ultimately people when they're thinking about starting a business the first Regulatory hurdle they run into is at the local level They don't get to federal stuff usually until they've gotten that business license till they've Messed with the zoning laws in order to get the location for the business and all that kind of stuff So certainly local level stuff is very important. It's something that needs to be studied more good Yes, right down here first like wait for the Michael. Thank you Roman Bueller with the Madison Coalition and the regulation freedom amendment as anybody done any research on the not the effect of regulations in place, but the fear of Unpredictable and capricious future regulation as as disincentive to growth and investment and job creation Not in a macroeconomic environment and But it will be done. We were discussing it at dinner last night with Patrick We we can do it to my knowledge. No, but it's done if it's been done on a more micro level is possible But not in macroeconomic context Very good. I I'm going to take the privilege of the last question and ask Adam Milsep if regulatory differences explain why Florida has so many people and everyone in New York wants to go to Florida And I think quick questions about population change so to be fair I think certainly Regulations and job opportunities have something to do with it I actually though I'm a firm believer that you should never discount things like weather and climate when it comes to People's migration decisions, so I think all else equal regulation certainly matters But I think Even if New York was able to get their regulates They would have to be significantly better than Florida in order to deter people from moving down But that's something that's actually one of the things they probably should be working for though Is because they because they are such a disadvantage when it comes to weather that they do have to be so much better along These are the dimensions Well, please join me in thanking the participants of the first panel