One Regulation Is Painless – A Million of Them Hurt
A huge part of the problem is that many legislators and regulators don’t understand the economic theory behind regulation and government intervention in the first place. Generally speaking, the goal is to price in negative externalities. In some cases, that can extend to disincentivizing certain behaviors as well.<p>You also have to acknowledge that, just as certain market forces can cause distortions, so too can government actions. Regardless of your school of thought, there’s no escaping the realization that regulation is an incredibly nuanced issue. It’s not black and white, and never has been.<p>There’s also a ton of room for abuse, both willful and through neglect. In general, this is probably what most people are thinking of when they talk about regulations being bad.<p>As an example, and apologies in advance for the length, my dad’s family is in the cemetery industry. Over the past few months, a few members of the Pennsylvania Senate have pushed a bill—Senate Bill 874—that changes how cemeteries handle funeral merchandise (caskets, vaults, bronze markers, etc.). Currently, 70% of retail price of pre-need merchandise is put into a trust fund until the merchandise is delivered. It’s been this way since the 60s in Pennsylvania and most other states, and there have never really been any problems. The money sits in trust, earns interest, and when the merchandise is ready to be delivered, is used to pay for the merchandise. Very, very simple stuff.<p>Among other things, SB 874 would change that funding requirement to 100%. The biggest problem with that is that there are costs associated with the sale—offices, marketing, sales staff, etc.—that can’t be deferred. So you have two options: (1) you quit selling pre-need merchandise altogether, or (2) you raise non-merchandise prices (lots, mausoleum crypts, etc.) to compensate. And you start making significant cuts, starting with the sales staff. The significant hit to a cemetery’s cash flow also means it’s harder for them to pay for maintenance costs without tapping into their perpetual care funds (a big issue for smaller cemeteries and those that are mostly full), meaning that money isn’t there earning interest for the future.<p>SB 874 also makes some other changes like ending constructive delivery on caskets and vaults and applies the FTC Funeral Rule to PA cemeteries. There’s an argument to be made about constructive delivery of caskets, but existing regulations still apply and the practice is rare to begin with. So even if you’re worried about a casket “rotting away in a warehouse” as one person put it, the cemetery is still responsible for it as it’s under their care. If the casket is damaged, they have to make good that damage. And as for vaults, they’re large concrete boxes that go in the ground. They’re very tough, hard to damage, and installing them in bulk leads to significant cost savings. By not permitting cemeteries to constructively deliver them, you wind up raising the cost of both the vault and the installation to the detriment of consumers. As for the Funeral Rule, even the FTC says that “[many] of the disclosures required by the Funeral Rule make little sense if they are imposed on cemeteries” and that “there is insufficient evidence that commercial cemeteries, crematories, and third-party sellers of funeral goods are engaged in widespread unfair or deceptive acts or practices.” They advised the PA Senate that SB 874 would “lessen competition, resulting in potentially higher prices and fewer options for consumers, without countervailing benefits to consumers.”<p>So basically, we have a bill that would make significant changes to the cemetery industry for no verifiable reasons. There’s no evidence of any malfeasance in PA cemeteries over the course of decades, and no benefit to the consumer for the changes. And any benefit there might be would be wiped out by the increased costs elsewhere, to say nothing of the decreased competition as cemeteries exist the pre-need merchandise market. And the other regulations and contract law protect the consumer in the few specific hypotheticals that they’re worried about. So why push it?<p>Well, that’s where it gets interesting. One of the senators sponsoring the bill happens to own a large funeral home near Philadelphia. With cemeteries not selling merchandise, people would have no choice but to go to the funeral director. The bill originally came up after a public company, StoneMor, signed a lease agreement to operate the Philadelphia Diocese’s cemeteries, including the right to sell merchandise for them. So Philly funeral directors came up with this bill as a means of fighting back, and the rest of the state’s funeral directors went along with it because it would benefit them significantly.<p>At the very least, it’s a massive conflict of interest and a classic example of political corruption for private gain. Why should any elected representative be permitted to push legislation that would have a direct benefit on their own business’s bottom line?<p>When people bemoan government regulation and intervention, it’s stuff like this that they’re thinking about. Every time a legislator jumps the shark with something like this, they make it that much harder for legitimate government intervention. The end result is the sort of gridlock we have now, where things are black and white and each side shouts slogans at one another.<p>Sorry for the length.