Tuesday, October 25, 2011

When regulatory bodies go wild

In the aftermath of the 2008-09 financial crisis, there has understandably been broad support for "more regulation", particularly in the banking world. In many cases, increased oversight by a government or independent body is indeed both warranted and helpful. But this is not always the case, and unintended consequences abound--when the power dynamic shifts too far from the regulated to the regulator, who will be the watchdog's watchdog?

Along those lines, I've recently come across a couple of examples that highlight what happens when a regulatory body becomes too powerful for its own good. First, from nearby Fairfax County, Virginia:
A father's promise for a treehouse is turning into a lesson in bureaucracy. 
Before he left on his last deployment to Iraq, Mark Grapin promised his two boys he would build a treehouse when he got home. 
But Fairfax County officials say it is a violation of zoning laws. 
Living out a childhood dream, Eric and Sean Grapin helped their father build the sturdy treehouse, complete with a slide, two climbing ropes, a shingled roof, and even shutters to match the homes in the neighborhood. 
“I built the treehouse as a kept promise to my boys,” said Grapin. 
It was something for the boys to look forward to when Mark, an Army Aviation Specialist, would return back to Falls Church from Iraq. 
And this is no shack, it took $1,400 dollars worth of materials, six weeks of hard labor, and the boys even earned scout badges for their masterpiece. 
“It fits in the neighborhood, it’s part of raising children, it is what’s expected in a single bedroom community,” said Grapin.
But, of course, overly broad zoning laws make this kind of thing technically illegal. A special wag of the finger should also go to the "anonymous neighbor" who blew the whistle on the zoning violation in the first place. When we go running to the regulators instead of settling our neighborly disputes face-to-face, we know the needle has moved a bit too far in the regulatory direction.

Unfortunately, this isn't the only recent example of blind (and tone-deaf) adherence to the letter of the law over the spirit of the law. From Pittsburgh:
Steelers safety Troy Polamalu was fined $10,000 by the National Football League for talking on a cell phone while sitting on the bench during the game against Jacksonville, the league announced Friday.
Mr. Polamalu borrowed a cell phone from a team trainer Sunday to let his wife know he was OK after leaving the game against the Jaguars with concussion-like symptoms. League rules state: "possession of cell phones, [personal digital assistants] or other electronic equipment in the bench area during a game is strictly prohibited by league policy beginning 90 minutes before kickoff through the end of the game."...
At his weekly news conference earlier this week, Steelers coach Mike Tomlin defended Polamalu's use of the cell phone.
"He has had a history of concussion-like symptoms in the past," Mr. Tomlin said. "[Mr. Polamalu's wife] was concerned. In this era of player safety, you would think that common sense would prevail in some of these things. It wasn't a personal call. He wasn't checking on his bank account."...
The NFL has a long-standing policy on use of electronic equipment during games to protect the integrity of the game. The league does not want coaches or players using electronic equipment to gain a competitive advantage.
In this case, it seems that in trying to "protect the integrity of the game", the league has ironically damaged the integrity and reputation of the league itself. Troy Polamalu is one of the game's brightest stars, and he is by all accounts a solid citizen and a positive representative and ambassador for the league. But because he wanted to tell his wife he was okay, he got fined $10k. Granted, that kind of money is pocket change to a player who is due to earn more than $6 million this year (in addition to huge endorsement money from Head & Shoulders), but that's clearly not the point here.

When regulatory bodies begin to hide behind their own policies and rules rather than abiding by the spirit of their existence, these kinds of outcomes are inevitable. We may feel better knowing that oversight agencies exist, but the power we imbue them with can easily corrupt them. The job of oversight must ultimately come back to the citizens themselves--if we enlist a middle man agency to do our oversight for us, all we have done is shift the power from one group to another. We still must keep our eye on the regulatory agency, to ensure that they are not abusing their power and leading to undesirable outcomes (cough, the Fed, cough). We all must be the watchdog's watchdog.

[Pittsburgh Post-Gazette]

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