October 21, 2008 9:25AM

Deregulation and Inequality

Matt Yglesias has been doing some great blogging lately about the negative effects of certain kinds of government regulation on ordinary consumers:

The fact that Joe is not a licensed plumber would be a great opportunity for an enterprising politician to try to make an issue out of the growth of occupational licensing requirements in the United States and the barriers to economic growth and opportunity they create.

And occupational licensing is hardly the only such example. Lots of America’s land use and business licensing regulations are, likewise, measures that do much more to entrench existing privilege than to promote any kind of public interest...

The original wave of deregulation was promoted by conservatives, but also liberals like Ted Kennedy, Steven Breyer, and Ralph Nader. I think we see now that that wave went too far in some respects, but in other areas it hasn’t gone nearly far enough. This is a good cause for progressives to pick up, but also one that would be completely open for a conservatism that was interested in helping the little guy rather than mocking efforts to help him as the second coming of Josef Stalin.

Matt is getting some criticism from his mostly left-of-center readers for this, but he's right. Even if you think some recent deregulation went too far (personally I think a lot of what was labeled "deregulation" in recent years wasn't), the deregulation of the airline, trucking, and telecommunications industries in the 1970s was unambiguously good for consumers and economic growth. Liberals like Ted Kennedy and Stephen Breyer understood this and were key architects of the deregulation effort. A similar wave of deregulation at the local level could do a ton of good, and it would be a lot more likely to succeed if we had the same kind of ideological buy-in from the left-hand side of the spectrum.

I think there's a related point here for libertarians: we're often too quick to reject populist rhetoric and concerns about inequality. Certainly there are good reasons to be skeptical of proposals to redistribute income via the tax code. But there are also lots of ways in which government policies widen the gap between rich and poor. So when people express concerns about inequality, the most effective response is not to dismiss those concerns out of hand, but to turn the conversation to the many ways that bad government policies have increased inequality. Liberalization of occupational licensure, business licensing, and land use regulations, restrictions on eminent domain, school choice, and a reduction of corporate welfare are all policies that deregulate and reduce inequality. Libertarians and liberals ought to be natural allies on these populist, deregulatory issues, and such a coalition is more likely to emerge if libertarians take liberals' concerns about inequality more seriously.