Rasmusen on the value of liberty
What is wrong with government regulations? Well, first, of course, they are likely to be the result of special interests, and inefficient. But even good regulations have a cost that I don’t see mentioned: the cost of having to act carefully so as to avoid breaking the rules. In a society with numerous regulations, people spend a lot of time learning about the regulations.
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What I think the model might illustrate is that when lots of things are arbitrarily illegal, there are big transaction costs.