- Increased regulation often leads to reduced compliance, whereby businesses feel that they cannot possibly keep up with the number of rules and therefore give up all efforts entirely.
- Heavy regulation also stifles safety innovation -- businesses spend so much energy and time attempting to abide by commanded rules that they do not create their own, firm-specific regulations that may be more needed.
- Regulation also causes uncertainty as corporations are more hesitant to invest due to a lack of knowledge regarding the future regulatory landscape.
That regulation will reduce firm-specific safety standards is also a significant problem. Nationwide or even industry-wide regulations usually fail to take into account corporation idiosyncrasies. Thus, even if all regulations are obeyed, there remains significant room for improvement in safety. However, an exhaustive regulatory atmosphere often dampens efforts to create a more comprehensive system of rules.
Businesses hesitate to invest and make drastic changes in their production or line of work when they are uncertain about extraneous factors such as regulation. Managers often cite regulations as one of the greatest factors in their decisions not to hire, and this hesitation causes economic paralysis.
Source: "Do More Regulations Equal Less Safety?" Mercatus Center, December 2011.
For text:
http://mercatus.org/sites/default/files/publication/More-Regulations-Less-Safety.pdf
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