Canada's Regulatory Burden

About the authors Canada’s Laura Jones is the Director of the Centre for Studies in Risk and Regulation at The Fraser Institute. She joined The Fraser Insti- tute in 1996 to develop the Institute’s policy Regulatory Burden on the environment. Since joining the Insti- tute, she has edited Fish or Cut Bait! The Case for Individual Transferable Quotas in the Salmon Fishery of British Columbia, Glo- How Many Regulations? bal Warming: The Science and the Politics and Safe Enough? Managing Risk and Regu- lation. Ms Jones has also published articles in Fraser Forum, The Vancouver Sun, the At What Cost? Ottawa Citizen, and the Financial Post. She is the author of Crying Wolf? Public Policy on Endangered Species in Canada and was a co- author of four editions of Environmental In- dicators for Canada and the United States, a by Laura Jones Fraser Institute Critical Issues Bulletin. She received her B.A. in Economics from Mount Holyoke College in Massachusetts, and her and Stephen Graf M.A. in Economics from Simon Fraser Uni- versity in British Columbia. Prior to joining the Institute, she taught economics at Co- quitlam College and is currently teaching Economic Issues at the British Columbia In- stitute of Technology. Stephen Graf holds a Bachelor of Busi- Contents ness Administration, with joint majors in business and economics, from Simon Fraser University (1999). He will enter his third year of study at the University of British Co- 3 Direct and indirect costs of regulation lumbia’s Faculty of Law in September 2001. Stephen participated in The Fraser Insti- tute’s Student Leaders’ Colloquium in 1998 7 What is regulation? and worked as an intern at The Fraser Insti- tute in 2000. 9 Regulatory activity in Canada Acknowledgments In two previous studies published by The Fraser Institute, Fazil Mihlar developed a 24 The cost of regulation framework for assessing the burden of regulation in Canada. Much of the work in this publication is based on those studies. We 28 A modest proposal to reform regulation would also like to thank Prof. Bill Stanbury and Joel Emes for their helpful comments and suggestions and Liv Fredricksen for her assistance with the research. Finally, we would like to thank Dr Paul Reed, Senior Social Scientist at Statistics Canada for providing us with the numbers for the costs of administering regulation. Of course, we take responsibility for any errors. Editor’s notes Fraser Forum is published 12 times a year by The Fraser Institute, Vancouver, B.C. Canada. All of us have read lurid media accounts of The Fraser Institute is an independent Canadian economic and social research and education- unpleasant, freak accidents: the man prun- al organization. It has as its objective the redirection of public attention to the role of compet- ing his shrubbery who cuts through the itive markets in providing for the well-being of Canadians. Where markets work, the high-voltage wires and is electrocuted; the Institute’s interest lies in trying to discover prospects for improvement. Where markets do not spectator at a hockey game hit by a stray work, its interest lies in finding the reasons. Where competitive markets have been replaced by puck who later dies from the impact; the government control, the interest of the Institute lies in documenting objectively the nature of drunken guest who stumbles over a wall the improvement or deterioration resulting from government intervention. The work of the that is a little too low, falls some distance, Institute is assisted by an Editorial Advisory Board of internationally renowned economists. and finds herself a quadriplegic. Not only The Fraser Institute is a national, federally chartered non-profit organization financed by the have we read the accounts, but we have been sale of its publications and the tax-deductible contributions of its members, foundations, and told that “one unfortunate accident is one other supporters. accident too many. There oughtta be a rule.” For additional copies, or to become a member and receive Fraser Forum, write or call Well, there is. In fact, there is a rule regulat- The Fraser Institute, 4th Floor, 1770 Burrard Street, Vancouver, B.C., V6J 3G7; ing just about every conceivable human ac- Telephone: (604) 688-0221; Fax: (604) 688-8539; tivity or enterprise. But often, we don’t Toll-free order line: 1-800-665-3558 (ext. 580—book orders; ext. 586— membership). realize just how invasive—and costly— those rules and regulations are. Visit our Web site at www.fraserinstitute.ca. One area where rule-making has reached Copyright 2001 The Fraser Institute; (ISSN 0827-7893). unprecedented zealousness seems to be in Date of Issue: August 2001. Printed and bound in Canada. the area of municipal building codes. In my Canadian Publications Mail Sales Product Agreement #0087246. district, I face a barrage of regulations when Return postage guaranteed. I contemplate building anything more com- plex than a flower box. “We could do that,” Publisher: The Fraser Institute the proposed carpenter will say, “but, of Chief editor: Michael Walker course, to do it to code, there are a few things Managing editor/Design: Kristin McCahon we’ll need to change . .” It is easy to argue Art direction and cover image: Mike Miller Design + Art Inc. that the “code”—the regulations—is there Copy-editing and layout: Lindsey Thomas Martin to protect my safety, but there is a cost to the Advertising Sales: Advertising In Print, 710 – 938 Howe Street, district’s concern for my well-being. Often Vancouver, BC, Canada V6Z 1N9 Tel: (604) 681–1811, e-mail: [email protected] that cost is high, yet it is a cost that Canadi- ans generally tend to ignore or forget about. Contributing editors: Jason Clemens, Peter Cowley, Joel Emes, John R.Graham, Because of regulations and their cost, there Laura Jones, and Fred McMahon are a lot of things I won’t replace or build. I Finance and Administration: Michael Hopkins would rather cook in a smallish kitchen Media Relations: Suzanne Walters with older appliances than invite city in- Fraser Institute Board of Trustees spectors in to cluck and fuss over my out- Chairman Alex Chafuen David McKenzie dated wiring and unfortunately situated R.J. Addington, OBE James Chaplin Gwyn Morgan plumbing. By not undertaking my renova- Wendy Cecil-Cockwell Roger Phillips tions, I don’t employ the tradesperson who Vice Chairmen Serge Darkazanli Herbert Pinder, Jr. would do the work, and I don’t buy the nec- T. Patrick Boyle John Dobson R. Jack Pirie essary supplies at the building centre. In William Korol Greg Fleck Peter Pocklington fact, a lot of activity doesn’t take place in my Mark Mitchell Arthur Grunder David Radler life because of regulations. By extrapolation, John Hagg Conrad Riley, Jr. a lot of productive activity doesn’t happen Board Members Raymond Heung Mark Scott in Canada because of regulations. Keith Ambachtsheer Paul Hill John Scrymgeour This special full-edition issue of Fraser Fo- David Asper Stephen Hynes William Siebens rum attempts to measure the cost to Canadi- Charles Barlow Peter Kains Michael Walker ans of the regulations that are imposed on us Sonja Bata Hassan Khosrowshahi Catherine Windels by all levels of government in every facet of Edward Belzberg Robert Lee our lives. The cost of regulation is much Everett Berg Brandt Louie Secretary-Treasurer higher than you’d think—right up there Tony Boeckh William Mackness Michael Hopkins with our tax burden. There oughtta be a rule. Peter Boyd Jim Main —Kristin McCahon Peter Brown Fred Mannix Canada’s Regulatory Burden small fraction of regulatory costs, the administrative costs, actually appear in governments’ budgets. The lion’s share of the cost of regulation, the cost of compliance, is passed on to businesses, Direct to lower levels of government, and to consumers as higher prices (see box 1). Governments are not required to esti- mate and report these compliance costs. This is why some analysts call regulation “hidden taxation” and claim & indirect that deficit spending lives on in the form of regulatory compliance costs that go largely unacknowledged costs of regulation (Crews, 2000: 1–7). Although most of us spend little time thinking about regulation, we live in a By the early 1990s, Canadians had be- scrutiny: government regulation. Di- highly regulated society. Regulation af- come very concerned about their gov- rect spending, financed by taxing or fects almost every aspect of our lives, ernments’ fiscal policies. The reasons borrowing, is only one tool that govern- including what we listen to on the ra- were not hard to find: the federal gov- ments can use to achieve their goals. dio, the price and quality of the food we ernment had not balanced its budget in Regulation is another. There are impor- eat, the safety features in our cars, who over 20 years and all of the provinces tant differences between spending and is allowed to deliver our mail, where we were also running deficits. Further- regulating. Federal and provincial bud- are permitted to smoke and drink, and more, government spending as a per- geting processes ensure some degree of how we are restricted in the use our centage of gross domestic product accountability to the public—media property (see boxes 2 and 3). The total (GDP) had risen to a postwar high of and policy analysts report on and cri- cost of all this regulation is consider- 52.6%1 and Canadian tax burdens were tique budgets when finance ministers able. The direct cost of regulation in- deemed high even by international announce them and detailed informa- cludes the costs that governments incur standards. Public concern over federal tion on government spending is avail- to administer regulatory activities and and provincial deficit spending, in- able from the public accounts.

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