The Costs of Regulation

Mark Perry has an excellent little chart compiled from the World Bank's publication "Doing Business 2008". Quite simply, the more difficult it is to do business, the lower the income per head in that country. It's a nice reminder that it is in fact business (in all its myriad forms) which creates the wealth in the first place.

Some might be puzzled by the two outliers in the most difficult to do business in category: Venezuela and The Congo (R). Those are the two with oil.

There could be many reasons for the restrictions that are put in the way of people creating value by setting up a business but there are only two I would personally give credence to. One is that some rulers are so stupid that they think it helps (the existence of hard line socialists in the 21st century shows that this level of idiocy is indeed possible) and that licence and permit regimes benefit the bureaucrats and politicians who have to be bribed to provide them.

Which ever explanation holds sway in a specific case this does point us to something we can sensibly do with our foreign development aid budget. Instead of trying to get people to do new and exciting things we could simply advise them to stop doing the stupid things they are.

Set the markets free as it were, create some wealth, then use it to deal with the more trivial problems (as we do ourselves) that laissez faire doesn't quite get to.