Short-version of Marc Andreessen’s “It’s Time to Build”: Can’t Because Regulatory Capture

I enjoyed Marc Andreessen essay, It’s Time to Build, as did others.

I think he does a good job of identifying the key obstacle gumming up the works of America’s innovation engine, but misses the true underlying causes.

He identifies a lot of problems, like shortages of basic stuff during Covid-19, and skyrocketing home prices in San Francisco and pins the blame on regulatory capture.

For example, the folks who want to keep the quaint feel of San Francisco have the power over the zoning regulations which prevents builders from building more housing units to meet high demand. When supply is way less than demand, prices rise.

He writes (emphasis added):

The problem is desire. We need to *want* these things. The problem is inertia. We need to want these things more than we want to prevent these things. The problem is regulatory capture. We need to want new companies to build these things, even if incumbents don’t like it, even if only to force the incumbents to build these things. And the problem is will. We need to build these things.

But, why does regulatory capture exist?

Concentrated benefits and distributed costs.

The regulation is worth a lot more to the folks who fight for the regulations (the benefit of the regulation is concentrated on them) than the folks who are hurt by them (distributed costs), so the latter group doesn’t typically have enough incentive to dig in and fight for it.

I liked these two paragraphs:

The right starts out in a more natural, albeit compromised, place. The right is generally pro production, but is too often corrupted by forces that hold back market-based competition and the building of things. The right must fight hard against crony capitalism, regulatory capture, ossified oligopolies, risk-inducing offshoring, and investor-friendly buybacks in lieu of customer-friendly (and, over a longer period of time, even more investor-friendly) innovation.

I agree. But what would make them willing to give up their regulatory capture (which comes in the forms of crony capitalism)?

You will have to convince voters to vote for politicians who are for limiting their own powers of regulation, so they can’t sell that power back to their friends for really good sounding reasons.

But many voters on all sides want to vote for politicians for the opposite reason. They want their politicians to put in place the regulations that they favor. That empowers both sides to keep writing regulations.

The left starts out with a stronger bias toward the public sector in many of these areas. To which I say, prove the superior model! Demonstrate that the public sector can build better hospitals, better schools, better transportation, better cities, better housing. Stop trying to protect the old, the entrenched, the irrelevant; commit the public sector fully to the future. Milton Friedman once said the great public sector mistake is to judge policies and programs by their intentions rather than their results. Instead of taking that as an insult, take it as a challenge — build new things and show the results!

These folks aren’t into the whole ‘try things’ mindset. It’s all-or-nothing. They, like the crony capitalist, are monopolists. They would rather not have competition to their ideas.

They’re terrified that if given a choice, people won’t choose their solution, so the best thing to do is get rid of the choice.

Many of them think that solving the problem is just as simple doing what sounds good for the whole system and never understanding that competition is the best way to discover what can work better. Without competition, you get what?

Regulatory capture.

It’s a big circle.