Since I want the new city to be a bastion of capitalism, regulations should be kept to a minimum. That being said, some regulations are a necessary evil. We have to rethink how industries, even professions are regulated.
One thing I’ve learned over the years is that bureaucrats are not compensated enough and are generally not smart enough to catch up to industry players who are cheating until there is a big blow up. Additionally, since many bureaucrats are interested in leaving government to work for industry, it makes their attempts at regulation kind of suspect.
So, what can we as designers of cities do to construct a regulatory scheme that is light touch, low-cost and effective? The answer lies in harnessing natural state human emotions such as greed and fear.
Who knows the industry rules, shortcuts, etc best? The industry, of course. We just need to change the rules so that their incentives make them want to self-regulate. How?
Simply, each industry must create an entity which serves to collect data from the companies as well as perform various auditing tasks. That data is submitted to the government. Sounds simple, right? Yup. Why wouldn’t they cheat you might ask?
Good question! The government will review the data and information submitted and can choose to review data with the industry regulator or even to go to the company level raw data. If something is shown to be wrong, the government can fine the industry regulator which all the companies in that industry pay for. Since these companies don’t want to lose money that way, they will be incentivized not to engage in behavior that will potentially result in fines. Individual illegal behavior results in collective punishment by the industry itself. This minimizes the need for bureaucrats. They will be some to oversee the industry regulators, but it will be minimum.
There will be a part two for this as I will talk about managing professions such as accountants, engineers and doctors next. See you then.
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