Elon Musk on the Problem with Regulators
Religion & Liberty Online

Elon Musk on the Problem with Regulators

RiskAhead“Most of economics can be summarized in four words: ‘People respond to incentives,’” says economist Steven E. Landsburg. “The rest is commentary.”

When governments create a regulation, they are creating an incentive for individuals and businesses to respond in a particular way. But the people who create the regulations — government regulators — also respond to incentives.

As Elon Musk, the CEO of Space X and Tesla Motors, explains,

There is a fundamental problem with regulators. If a regulator agrees to change a rule and something bad happens, they can easily lose their career. Whereas if they change a rule and something good happens, they don’t even get a reward. So, it’s very asymmetric. It’s then very easy to understand why regulators resist changing the rules. It’s because there’s a big punishment on one side and no reward on the other. How would any rational person behave in such a scenario?

 

 

Joe Carter

Joe Carter is a senior writer for The Gospel Coalition, author of The Life and Faith Field Guide for Parents, the editor of the NIV Lifehacks Bible, and coauthor of How to Argue Like Jesus: Learning Persuasion from History’s Greatest Communicator. He also serves as an associate pastor at McLean Bible Church in Arlington, Va.