John Cochrane writes in his blog The Grumpy Economist, Three Kinds of Regulations, 1/2/2012:
For regulation is not “more” or “less,” something you just pour into a cup until you’ve had enough like a good beer. Regulation is most of all “smart” or “dumb.” Dumb regulations produce the opposite of their intended effects, have all sorts of unintended consequences, or get used for fully intended but pernicious consequences like driving out competition. Smart regulations don’t.
And then there is discretion. Congress empowers “czars” who can do as they see fit, and tell businesses after the fact how to operate. They issue thousands and thousands of pages of rules, but the rules are often vague, impossible to satisfy, and serve to limitlessly expand rather than limit the discretionary power of the regulator.
Partisan talking heads act as if the existence of rules is the question. The answer to bad regulations is not more regulations. In fact if the core problem is excessive systemic complexity, then the additional compexity of regulations will only make the problem worse. But the more pervasive problem as Cochrane clarifies is the discretion afforded to regulators. Businesses never really know what the rules are and this stifles the incentive to risk capital to grow a business. It is not any single or group of rules but a steady accumulation of rules that eventually stifles the economy into stagnation.