This morning's WSJ includes "Nuns with Guns: The Strange Day-to-Day Struggles Between Bankers and Regulators ... Lenders are awash with new regulations, and growing armies of enforcers are forcing striking changes on bank's internal cultures ..." This type of thing, we are told many times, has little or no effect on the economy nor does it explain the slow recovery. But the accompanying graphic shows (corrected) near-25,000 pages of new Dodd-Frank rules.
I know that the free-lunch myth is a favorite among politicians and acolytes but it takes a special kind of willful blindness to wish away the costs of complying with near-25,000 pages of new rules. And this is just one law.
The 2016 Papers and Proceedings of the American Economic Review includes a helpful analysis by Ryan Decker and colleagues, "Declining Business Dynamism: What We Know and the Way Forward." They report that "The evidence is consistent with the presence of adjustment frictions that are changing the payoff to business scale adjustments." Twenty-five thousand pages of new rules surely feed these adjustment frictions.
Why does Washington DC tilt towards the lower end of housing affordability? On the supply side, there is evidence of restrictive policies (Pendall, 2006). On the demand side, the no evidence for great weather is but there is evidence for job opportunities. Dodd-Frank is just one of many such opportunities. Trouble is that these are not the jobs that contribute to economic dynamism. In fact, they do the opposite.