Hazlett: You said you’re not a libertarian. What do you consider your politics to be?
Coase: I really don’t know. I don’t reject any policy without considering what its results are. If someone says there’s going to be regulation, I don’t say that regulation will be bad. Let’s see. What we discover is that most regulation does produce, or has produced in recent times, a worse result. But I wouldn’t like to say that all regulation would have this effect because one can think of circumstances in which it doesn’t.
Hazlett: Can you give us an example of what you consider to be a good regulation and then an example of what you consider to be a not-so-good regulation?
Coase: This is a very interesting question because one can’t give an answer to it. When I was editor of The Journal of Law and Economics, we published a whole series of studies of regulation and its effects. Almost all the studies–perhaps all the studies–suggested that the results of regulation had been bad, that the prices were higher, that the product was worse adapted to the needs of consumers, than it otherwise would have been. I was not willing to accept the view that all regulation was bound to produce these results. Therefore, what was my explanation for the results we had? I argued that the most probable explanation was that the government now operates on such a massive scale that it had reached the stage of what economists call negative marginal returns. Anything additional it does, it messes up. But that doesn’t mean that if we reduce the size of government considerably, we wouldn’t find then that there were some activities it did well. Until we reduce the size of government, we won’t know what they are.
Hazlett: What’s an example of bad regulation?
Coase: I can’t remember one that’s good. Regulation of transport, regulation of agriculture– agriculture is a, zoning is z. You know, you go from a to z, they are all bad. There were so many studies, and the result was quite universal: The effects were bad.