Capitalisn’t: Why Trump Is Deregulating in the Wrong Way

Sam Peltzman: If you were serious about changing regulation, you wouldn’t start by firing bureaucrats. I think that’s performative. There’s a lot of performative stuff that goes on.

Bethany: I’m Bethany McLean.

Phil Donahue: Did you ever have a moment of doubt about capitalism and whether greed’s a good idea?

Luigi: And I’m Luigi Zingales.

Bernie Sanders: We have socialism for the very rich, rugged individualism for the poor.

Bethany: This is Capitalisn’t, a podcast about what is working in capitalism.

Milton Friedman: First of all, tell me, is there some society you know that doesn’t run on greed?

Luigi: And, most importantly, what isn’t.

Warren Buffett: We ought to do better by the people that get left behind. I don’t think we should kill the capitalist system in the process.

Bethany: There are lots of things to be said about the present moment, but one thing we could label is that this is a new age of deregulation. In President Trump’s recent address to Congress, he said, “To unshackle our economy, I have directed that for every one new regulation, 10 old regulations must be eliminated.”

Speaker 8: Part of the executive order Trump signed says agencies must follow how the president and attorney general interpret the law.

Bethany: The new head of the EPA, the Environmental Protection Agency, has announced the biggest deregulatory action in US history.

Speaker 9: The proposed rollbacks would impact dozens of rules, from emissions limits for power plants and vehicles to wastewater regulations and air-quality standards.

Bethany: Elon Musk has argued that it’s time to get rid of all regulations, or as he said, “Regulations, basically, should be default gone.”

Elon Musk: If, year after year, there are more laws and regulations passed and more regulatory bodies created, eventually, everything will be illegal.

Bethany: The owner of The Washington Post, Jeff Bezos, has announced that that publication’s opinion pages will only advocate for individual freedoms and free markets.

Luigi: This raises a lot of important questions. First of all, what do all these people mean by the words free markets? Does freedom mean the absence of regulation? Is that really the goal of Trump, Musk, and Bezos? Does the absence of regulation unleash the economy, or does it damage it?

Bethany: To discuss free markets and regulation, we decided to bring on the show the leading living expert in the economic theory of regulation, Sam Peltzman, who is the Ralph and Dorothy Keller Distinguished Service Professor Emeritus of Economics at the Booth School of Business at the University of Chicago.

Luigi: Political economy is based on politicians being not these kind human beings fighting for the good of humanity, but simply normal human beings pursuing their interests. It is true that consumers’ interests can be protected, but most of the time, they are protected as a result of a politician trying to get votes.

Peltzman introduced the concept of a political equilibrium where, in jargon, the marginal political gains from supporting one group are balanced against the marginal political costs of alienating another.

His theory suggests that regulatory policies are the result of the complex negotiations and trade-offs among various interest groups rather than being solely influenced by producer interests.

Bethany: Peltzman is also famous for his work on the effects of auto-safety regulation. In an empirical piece in 1975, he shows that traffic fatalities decreased much less than expected after the introduction of regulatory measures, because drivers adjusted their behavior in response to increased safety measures. When safety measures are implemented, individuals may perceive a lower risk and, consequently, engage in riskier behaviors.

This risk-compensation effect is now known as the Peltzman effect. His analysis indicates that although auto-safety regulation decreased fatalities among vehicle occupants, it did not reduce overall highway deaths, because there was an increase in pedestrian fatalities, suggesting that drivers’ riskier behavior transferred some of the danger from themselves onto others.

Luigi: Sam has the additional benefit of having been an active participant in the literature for 60 years. Thus, he can provide a historical perspective to Trump’s deregulation effort.

You lived through one of the most intense regulatory periods between 1965 and 1975. During that decade, there was no year without a significant piece of regulation, from the Motor Vehicle Safety Act to the Fair Packaging and Labeling Act, from the Flammable Fabrics Act to the Wholesale Meat Act, to the Truth in Lending Act, and so on.

Even after the Nixon administration took over, we had the Federal Coal Mining Health and Safety Act, the National Environmental Protection Act, and I can continue. What do you think was worthwhile, and what do you think was counterproductive?

Sam Peltzman: That’s a huge question. I actually was in the federal government halfway between ’65 and ’75. The fact is, you had, in the 1970s—I don’t want to call it a counter-revolution, but a countermovement toward a view of regulation as a basically benign influence on the economy, that helped the economy function better.

The work that I and others were doing cast a profession-wide doubt about that kind of model. By the mid-’70s, the end of the 1970s, you get a more balanced view of regulation. Yes, it could make the economy work better in certain cases, but it also has costs. It creates a competition for political access to the regulation that’s costly in and of itself, and it generates the lobbying and the interest-group organization that can divert the regulatory effort to the benefit of that kind of pressure.

Luigi: Of course, George Stigler, who is the namesake of the center that sponsors this podcast, and your mentor, is the one who started this analysis. But George Stigler’s view was quite extreme, arguing that all regulation was driven by the interests of the industry.

Probably what he had in mind was more of the 1930s regulation, because if I look at the regulation that was introduced just before Stigler’s work, for example, the Motor Vehicle Safety Act, it was really pushed by Nader, and the industry hated every piece of it.

To what extent is your broader theory of regulation in response to this contradiction implicit between Stigler’s theory and reality?

Sam Peltzman: Well, Stigler also said regulation is always, as a rule, captured by the producer interest. I don’t subscribe to an extreme view of regulation. It’s a much more nuanced view. In fact, I would venture to say that, at the beginning, most regulation is opposed by the producer interest. My view is, it’s much more complicated.

But the element of what he was talking about that I think persists is the importance of politics. The reason he was led into what you and I might call an extreme view is because the industry is always organized. The importance of that, I think, is probably his biggest contribution. Once the regulation gets going, you have an incentive to organize. If you can’t overcome the problems related to organization, your influence on regulation is going to be small.

There’s an important process which he missed, which is adaptation. You say that the industry was bitterly opposed to safety regulation at the beginning. That’s not the case now. They’ve adapted. They know how to play the game. They’re organized.

If you asked now: “Should we drop all safety? Let’s go back to the 1960s. No seat belts, no pop-out windshields. General Motors and Toyota, would you favor that?” They’d be scratching their heads. They wouldn’t even know what you’re talking about, because they’ve adapted to it.

They fight skirmishes. They do that at the margins, but the basic system is one they live with every day. It has a very valuable side product, which is, if you want to come into this market, you’re going to have to pay all those costs of access to the regulatory system before you can enter the market. It protects their market position as well.

Bethany: Is there any way to know, when you enact regulation, what the unintended consequences will be? Given that industry has adapted—as you said, one of the chief characteristics is adaptation—is there any way to know, when you enact a set of regulations, what it’s actually going to look like 10 years, 20 years, 30 years down the pike?

Sam Peltzman: Sometimes, but obviously, if it’s really unintended, the answer has to be no.

What you can tell is that there will be a reshuffling within the regulated industry. They’ll move from opposition to adaptation. That will always happen. That’s predictable. How it actually plays out, you don’t know.

Did the Dodd-Frank Act end forever the financial crises in the world? I have strong doubts about that. How strict are these regulators going to be in enforcing these laws? The industry has a great say, as does anybody else who has an incentive and an ability to organize to bring pressure on that process.

Luigi: One of your most famous results is that there is an important behavioral response to regulation. If cars are safer, people drive faster in compensation. It’s so famous that it’s become known as the Peltzman effect.

Sam Peltzman: Only because I’m old.

Luigi: It’s better to be old than the alternative. But am I right in thinking that this doesn’t necessarily eliminate the benefit of a regulation? Is it only that the benefits might be overestimated?

Sam Peltzman: Yeah. Whenever somebody asks me about this particular application, I always say, “Wear your seat belt, please.” I’m not saying that you shouldn’t have it. I’m saying you should expect the response.

We were talking about the Dodd-Frank Act. That’s a perfectly good example of a response, a counter-response, and then another response, and so on. It’s part of the world we live in. If you try to tamp down risk—risk that two parties would willingly engage in—you haven’t eliminated the incentive for the risk. It will show up someplace else.

Bethany: Specifically, when you think about the banking system, do you mean the growth in private credit, that it will grow the more we clamp down on the banking system?

Sam Peltzman: I can’t begin to tell you. The growth of private credit itself is a response, ultimately, to the securities regulation of the 1930s. That’s part of the problem. I can tell you there’ll be an incentive for offsetting behavior, but I can’t tell you exactly the form it’s going to take in every instance.

Luigi: There is an old video of Milton Friedman that I think Musk keeps retweeting, where he lists how many departments he wants to close down. Imagine that Elon Musk calls you but asks, “What regulation will you save?” He’s there with his axe, or a chainsaw like Milei, ready to cut everything, and you are the one saying, “I want to save this.”

Sam Peltzman: I won’t answer a question. Give me a specific case, and we’ll discuss it.

Luigi: OK. Would you save the EPA?

Sam Peltzman: No. I would change it in a way that you would agree with. I think there’s a role, clearly a role, that government should play in protecting the environment, but it’s not the role that’s currently being played. The best example of that is the way the Environmental Protection Agency has been pushed to respond to global climate change.

Would I abolish the agency and start from zero? I’m not sure, but we would have to discuss some very serious reforms before I would answer a question like that and say: “Absolutely not. Don’t do anything. Don’t touch it. It’s completely sacrosanct.” That’s why I say you’ve got to take these things one issue at a time. They all have their complications.

Bethany: Right now, one of the targets of the Trump administration is the Consumer Financial Protection Bureau. If you were in charge, would you abolish the CFPB?

Sam Peltzman: Sure.

Bethany: Why?

Sam Peltzman: It’s another example of something where the initial analysis . . . It goes back to the meltdown of 2008, which I regard as, basically, a bank-capital problem. It diagnosed the problem as people were taking stuff, mortgages, that they shouldn’t have. Why shouldn’t they have? Well, because we think they shouldn’t.

The issue is that those mortgages were being peddled by government institutions with a government guarantee. It was a misdiagnosis of what the problem was, and nothing that they have done ever since has convinced me that there was a real problem that required . . .

You have other issues, like the constitutional one, that they were supposed to be funded by the profits of the Federal Reserve, which is constitutionally very questionable. Congress passes appropriations for every other regulatory agency except the Fed. There’s a big constitutional question, in my mind, about whether that kind of thing is appropriate.

But certainly, there’s nothing that that agency has done that convinces me that it was anything but a misdiagnosis of what the problem was. So, I’m happy to see it go.

Luigi: Constitutional question aside, on the consumer side, during the heydays of the early 2000s, we saw banks that were selling deposits with some embedded option linked to exchange rates. We saw all sorts of crazy products that were sold to, by and large, unsophisticated players to take advantage of them. Don’t you see a role to protect the unsophisticated?

Sam Peltzman: That’s completely wrong. Completely wrong. They weren’t being taken advantage of. How do we judge that they were? There was an incentive for regulated financial institutions to take on risk. That incentive had been playing out since at least 1960. The industry was evolving in a way to push risk away from its capital to the federal government.

I got a federally insured deposit. I remember this, because I was almost ready to buy one of these things. I got a federally insured deposit, which guaranteed I would get all my money back. In exchange for the interest, I got an option on the S&P. Why do I get the put? Because I have FDIC insurance. Why is that taking advantage of anybody? It’s taking advantage of the incentives facing both sides.

Luigi: Aren’t you assuming that consumers are not being taken advantage of? You are sophisticated, but most—

Sam Peltzman: I am not saying that consumers are all sophisticated or that there’s never buyer’s regret. I’m saying that if you ask the question, “Why do you see this kind of a product succeed in the market?” you have to ask, “What are the incentives at the margin for consumers who are well-informed to buy it?”

If you can’t rule that out, then how much misperception is there? Are there other ways to take care of it? This one’s an easy case.

Bethany: While we’re getting rid of the CFPB, should we get rid of the FDIC, too? Should we just abolish the whole shebang?

Sam Peltzman: No, no, no, no, no, no, no. I’m not dogmatic. I’m very practical. Let’s take each case on its own.

Would I get rid of the FDIC? No, but I would change the way it’s run. What I would tell you would be entirely irrelevant, because it won’t be changed in the way that I would want to make it run, partly because it’s not in the interests of the organized players.

But the answer to your question is Silicon Valley Bank. Almost all the deposits were uninsured by the FDIC, but they were made good, weren’t they?

Bethany: Mm-hmm.

Sam Peltzman: Right? So, what do we actually have with the FDIC? You have to ask that question.

Luigi: Let’s talk about crypto. First of all, the market actually seeks regulation. This is the ultimate unregulated business, and there was an enormous effort, starting with SBF’s lobbying, in favor of regulation.

Sam Peltzman: Yeah.

Luigi: Now, the market is more or less limited to more-sophisticated players, but the amount of fraud in the industry is huge. If you look at how much money is lost, people don’t want to talk about it, but it’s very large.

Sam Peltzman: Fraud is a criminal offense. Why do you need regulation?

Luigi: I think you need regulation to make it more difficult for people to disappear with the money. It seems that market forces are not enough protection on this front.

Sam Peltzman: The public-policy interest in crypto is all I can pretend to speak about as an expert. Is this going to be another entitlement program in the sense that we get a government put? That’s a major policy question. Who is guilty of fraud is a criminal issue. Is the breakdown, when and if it comes, going to affect the macroeconomy?

If we can set things up—and I’m not sure we can—to prevent an implicit government guarantee of crypto and to prevent a meltdown from affecting the macroeconomy, you’re going to be worse off regulating that business than not regulating it.

Remember, it’s always one or the other. You can imagine fraudulent transactions that are prevented by regulation. You can imagine fraudulent transactions that are encouraged by the belief that the thing is regulated and, therefore, that there might be an implicit guarantee, and that the government would never allow such obvious fraud to proliferate.

You have the one and the other, but the ostensible public-policy interest is preventing you and me from having to pay for the meltdown and protecting the macroeconomy, not much more than that.

Luigi: I’m going down my list. Since you have written fairly critically in the past about the Food and Drug Administration, would you save the Food and Drug Administration, or would you let it be eliminated?

Sam Peltzman: Again, yes or no is not the question. Would I change it? I would change it quite drastically.

The current system for new drug approvals has been one of the great public-health disasters of recorded history. Hundreds of thousands of deaths have needlessly occurred because of that form of regulation. Before a new drug can be marketed, the Food and Drug Administration must certify that the drug is both safe and effective. Not just safe but effective.

What does effective mean? You come to the Food and Drug Administration, and you say, “If you take this drug, you will lose 10 pounds in five months,” or whatever it is. You have to make a claim. You have to conduct a randomized, double-blind, controlled trial.

This takes time. It takes enormous expense. For something like a blockbuster drug, you’re talking billions of dollars of expense. From the time that you’ve begun the process, it’s going to be a decade.

What is the cost? You can figure it out. Here’s a drug that’s causing significant benefits to fat people called Wegovy. It’s saving people from heart attacks. It’s saving people from diabetes. It’s on the market minimally a couple of years after the submission of data to the federal Food and Drug Administration. All of those benefits have been sacrificed. It wasn’t on the market two years ago. That’s the cost.

If you take the history of medical advances, those cases are much more numerous than the sensational failures that make the headlines. You don’t make a headline about obesity drugs until they’re on the market, except for a small group of people inside the industry. You probably didn’t even know about it until it came on the market. There is, in short, a huge opportunity cost to this kind of regulation, and you can have a hard time showing that plausible benefits come even close to matching that cost.

You have a very good example in the COVID vaccine development. You know that the COVID vaccines never got on the market. It’s an FDA-approved drug. You know that. They’re an emergency-use exception.

What does that mean? There’s no way we were going to wait 10 years to get a COVID vaccine. It was a miracle, but a miracle in the context of the way the FDA works. Had the process worked the way it does with every other drug, we would still be waiting for a COVID vaccine, and we would be talking about a much bigger death toll than we had.

I’ll give you my favorite reform, which doesn’t sound very radical, but nobody ever discusses it in connection with the FDA, which is prescription drugs to begin with. Why should you have to go to a doctor to get a prescription to get a drug? Why shouldn’t you walk into a drugstore and just buy whatever you want?

Now, there’s a good answer to that, but it’s not an answer that really applies to most prescription drugs. I would substantially reform that if I could.

Bethany: You expressed some skepticism that Trump and Musk would be able to succeed in doing away with regulations.

Sam Peltzman: I say it remains to be seen.

Bethany: I was going to—

Sam Peltzman: Yeah. I’ll agree with you. I’m a little bit skeptical.

Bethany: Is that just because it flies in the face of the history you pointed out, that the body of regulations has been growing unimpeded for decades, or is that for another reason?

Sam Peltzman: Not just that. If you were serious about changing regulation, you wouldn’t start by firing bureaucrats. I think that’s performative. There’s a lot of performative stuff that goes on.

As I say, I worked in the federal government free, just a year, but it was enough to give me a great education into how these agencies work. The lower-level employees that are being laid off and fired have very little to do with the policy that they’re enforcing. You’ve got to start at the top, not at the bottom.

This is not to say that there isn’t a case to be made for downsizing the federal government. I’m not saying that at all. In fact, there is a case based on some of the experience that I had.

The people that they’re going after are risk-averse folks who made a trade. They want a secure job, and then they’ll carry out whatever policy somebody at the top tells them. They’ll do their job and take the benefits of the job as offered, but you’re not going to change policy by firing some low-level bureaucrats. So, yeah, there’s a skepticism about the method embedded in that.

Luigi: Since we’re coming against our time limit, let me ask you one last question. Can I share with our listeners your age?

Sam Peltzman: Yes, of course. It is what it is.

Luigi: One of the many great things about you is, at age 85, you’re still very active in writing papers, and very interesting papers. The latest one is about the effect of marriage on happiness.

You find that married people are happier than unmarried ones, and this is true even if you control for the frequency of sexual activity and whether people live together or not.

Ironically, marriage is a form of government regulation. In Israel, there is no state marriage, only religious marriage.

Sam Peltzman: Yes, of course.

Luigi: Why does this piece of government regulation work?

Sam Peltzman: I do not know, and I do not pretend to know. I got into it because economists have gotten into happiness research, and I thought this was interesting and I should look at the data.

It is a mystery to me, as well as to you, that you can carve marriage up into its parts, as you implicitly just did, and it doesn’t add up to the happiness differential between married and unmarried people.

There are many explanations. I don’t have one that’s my favorite. There’s reverse causality going on. Happy people get married. There are what we call omitted variables, which is, there are certain background conditions that make people happy and also make them want to get married.

There are all those things going on. I am only describing. What strikes me is not that there’s a differential but how big it is. It’s as big as anything else that I’ve been able to put my hands on that separates happy people from unhappy people.

Luigi: Can you quantify the difference in terms of wealth? If I’m poor and married, how much richer should I be to be as happy?

Sam Peltzman: You can take somebody at the top 1 percent of the income distribution. That person is much happier than somebody at the bottom in the same marital status. If you take the very bottom and the very top, the differential rivals the marriage gap.

But compare somebody who’s at the bottom 10 percent and is married to someone who is in the top 10 percent and is unmarried. Those two people are equally happy, or the odds are that they will say they are. We’re talking about self-reported stuff. The odds that one will say, “I am happy,” is exactly the same as the odds that the other one will say, “I am happy.”

That’s how much of a difference it is. It’s the poorest and the richest. If they differ on marital status, they’re equally happy. If they’re anywhere beyond that or in the middle of that, you can have a relatively poor, married person and a relatively rich, unmarried one. The poorer one will be happier, measurably.

I’m not just talking about it passes our test of statisticalism. There will be a measurable, an important difference between those two. With this latest paper, I’m trying very hard to find exceptions, and I can’t.

Bethany: Luigi, you know Sam and Sam’s thinking well. Did anything he said surprise you?

Luigi: The points he raised are true and excellent, and sometimes very controversial. The part that I thought was weaker is when he didn’t recognize the fact that there are unsophisticated people and that there are a lot of businesses taking advantage of them, and this is not something we want to encourage in any shape or form.

Bethany: I’m thinking about a piece I wrote in the wake of the financial crisis. I published an op-ed in The New York Times about how the financial crisis was essentially caused by people taking out loans that were too risky, and that for all the fingers we were pointing at the financial sector, there was personal responsibility at work here, too.

I still agree with that, because I think in some ways, without personal responsibility, we’re all lost. But then I came across these internal documents from Washington Mutual that talked about how you got someone who had always wanted a 30-year, fixed-rate mortgage, because that’s what their parents had, to take out a riskier loan instead.

That was in Washington Mutual’s interest to do that, because that riskier mortgage could be sold to Wall Street for more money because of the higher yield. It could be packaged into a security that would yield more than the perfectly safe 30-year mortgage.

I thought: “Oh, boy. That’s wrong,” because somebody has no idea and would never think that the person advising them to take out a mortgage was pushing them toward a riskier mortgage because it was in that financial institution’s interest to do that. The whole process was so very complex. And that’s wrong.

For financial institutions, responsibility needs to be a two-way street. Maybe there’s regulation that makes responsibility a two-way street that makes sense.

Luigi: I agree. I think that my views changed, as yours did, with the financial crisis, precisely because I saw the abuses by many financial firms.

At the end of the day, as an economist, I want to try to reduce the cost of these abuses. Putting all the responsibility in the hands of the less-sophisticated party, in this case the consumer, is not the right way to do it. You want to give liability not to the party that deserves fault, in maybe a Catholic sense of fault, but to the party that is better equipped to fix the problems in the long term.

Do you have a responsibility to pay attention not to burn yourself with a coffee? Yes. However, it’s much simpler for the coffee maker to regulate the temperature of the coffee and make sure that people don’t get injured accidentally than the other way around. Putting the burden on the coffee maker is more efficient from an economic point of view. This is the part where I probably diverge from Sam.

Bethany: Yeah. Were you annoyed by his refusal to give a sweeping answer to the question of more regulation or less regulation, his refusal to put value judgments on it, and his refusal to give any sweeping answers, or did you think that made sense?

Luigi: I think it came across pretty clearly that he doesn’t think much of any regulation. I was surprised that he was so protective of the FDIC. I wish I had pushed him more on that front. But when it came to other regulations, the EPA, he said, “Oh, I would want to change a lot of things.”

I’m not so sure what is left after all these changes. I think he has a point with the FDA, but I think he pushes those points beyond what I’m comfortable with. But maybe that’s my view.

Bethany: Yeah. This is a bit of a tangent, but I couldn’t help thinking about the FDA—and maybe this goes to part of his point of cynicism about reducing regulations—even if he’s right about that, the efficacy data from the FDA is now tied up in an insurer’s decision to reimburse.

It’s not just that you could put a product on the market and allow people to decide for themselves whether or not it’s efficacious and pay for it if they want to take that. You have to have a system in place that determines whether an insurer is going to reimburse, hence the efficacy part of the issue.

That actually, in a way, also made me think that the whole thing is really, really complicated. It did underscore for me his point that it’s very difficult to make a judgment about any piece of this without thinking through all of the issues.

I’ve often thought about the wake of the Enron fiasco, where you had George Bush standing in the Rose Garden announcing Sarbanes-Oxley, saying that it was going to make the world safe for individual investors, and nobody had to worry ever again. Then, just a few short years later, you had Barack Obama standing in the Rose Garden, giving much the same speech, when he announced Dodd-Frank.

Another part of the problem with this is that in fast-moving areas, regulation is inherently backwards looking. It’s trying to solve yesterday’s problem, and tomorrow’s problem is coming down the pike. That’s another element of complexity.

Maybe you could do some kind of diagram where the more politically powerful an industry is, the faster-moving it is, the more quickly things change, the more you have to be very cautious about regulation and what the unintended consequences might be, and how there might be this time-lapse quality to it.

I was thinking that maybe if we had a Hippocratic oath for regulation, first do no harm . . . Maybe that’s not quite right, because then that gets into the argument of harm to whom. But maybe to have some idea or acknowledgement that there are going to be unintended consequences, and it is going to be manipulated in ways that aren’t necessarily foreseeable at the start.

This would, of course, do the opposite of what Trump and Musk want to do. It would add to the bureaucratic state if you had to have a check-in every five years to see what had actually happened to the original motivation for the regulation and whether it was actually playing out as it was expected to or not.

Luigi: Yeah, but there is a very sad conclusion, in Sam’s view, which is, if you see regulation as a result of competing interests, there are some weak interests that always lose out. People that you could have cured, but you didn’t, tend to be much less influential from a public-opinion point of view than the death that you cause.

If you were to weigh the two things equally—and I’m not saying you should, but just as a first pass—the outcome would be very different. But you would never be able to achieve that outcome, because people are very much afraid of the newspaper headline that you caused X number of deaths, and the counterfactual does not make a good headline.

Now that I think about it, it’s all the fault of journalists that cannot sell the counterfactual well enough.

Bethany: Maybe it’s that journalists can’t sell the counterfactual or that journalists are anecdote driven. It’s all the fact of the anecdote about the death versus the counterfactual of the lives that could have been saved.

Do you have a view as to whether we have too much regulation now or too little regulation? If you had to choose certain pieces of regulation to dismantle, do you know what you would pick?

Luigi: We have, a lot of times, the wrong regulation. I don’t make it a question of quantity; I make it a question of type. Also, the way it is administered should be different, in my view. You should make it a little bit less burdensome for smaller firms and newer entrants and more burdensome for established firms that can amortize, precisely, to reduce this barrier-to-entry effect of regulation.

But it’s really the other way around. The moment this stuff is introduced for large firms, large firms make sure that everybody is subject to the same law.

Bethany: I thought, too, one of the most interesting things he said was that the Trump-Musk, whatever you want to call it, sledgehammer is going about dismantling regulation in precisely the wrong way, even if it were actually to be something one could accomplish. I hope that’s something that everyone who is taking the chainsaw to regulation listens to and thinks about to the extent that they are capable.

Luigi: Yes. But to some extent, it might be the worst of both worlds, because the regulation remains there with all its burden, but then it’s—

Bethany: Selective?

Luigi: —either not enforced or enforced in a capricious way, because they don’t have the resources. This might be—

Bethany: We’re back to cynicism.

Luigi: —the worst possible outcome.

Bethany: On that note, let’s conclude before we decide that the world is coming to an end.