February 16, 2012 10:11AM

Think of All the Jobs We’re Creating in Regulatory Compliance!

Not long ago I took note in this space of how some people conceive of government regulation as a way to create jobs among lawyers, fillers‐​out of paperwork forms, installers of state‐​mandated equipment, and so forth. In case you thought I was exaggerating, here’s a new Business Week article arguing in all earnestness that “Regulations Create Jobs, Too.” Given the wounded state of the U.S. economy since the 2008 crash, it laments, “government rules have become politically toxic.” But never fear: “The Obama Administration, girding for election‐​year attacks on its record, is trying to highlight the upside of government rules.”

To be sure, the article itself is not as bad as its headline, and does make some fair points. It’s true that many politicians sling around the epithet “job‐​destroying” as if the chief objection to regulatory monstrosities like ObamaCare and Dodd‐​Frank were their effect in wiping out many existing jobs. In practice over the longer run many such laws shuffle around employment (often from productive uses more highly valued by consumers to those more highly valued by Washington) rather than reduce it permanently. If coal burning is suppressed, perhaps there will be more jobs for those who drill for natural gas, cut down firewood, or manufacture candles for use in blackouts. Overall, the soundest critique of bad regulations is often the most fundamental: that on net they destroy wealth, liberty, property rights, and freedom of consumer choice, in ways that last long beyond the initial pain of disrupted employment.

Of course proponents are at liberty to argue that a given regulation generates benefits that make it worthwhile, and the rest of us will evaluate those arguments on their own merits. But in trying to “highlight the upside of government rules,” it does rather sound as if the Obama administration is hoping to claim some sort of credit for the supposed benefit of creating jobs in the compliance sector. And that claim deserves to be filed under Frederic Bastiat’s broken window fallacy, as explicated in this space and indeed on occasion in the pages of Business Week itself.