How Government Regulations Cause More Problems Than They Solve - Part I

A few weeks ago my post quoting one of the unfortunate truisms we live under – how regulated portions of the economy tend to have the biggest problems – struck a chord with one of my commenters.

Apparently she believes we don't have enough regulation, citing the problems caused by shady banking practices that helped bring down the economy as the only justification for even more regulation. I came back at her with the problems within the telecommunications industry because of heavy-handed regulation, much of it at the behest of “rent-seekers”. Such 'regulation' is crony capitalism at its worst and in the end benefits no one except the rent-seekers. And even they feel the negative effects eventually, making far less money than they might have otherwise and costing the consumers plenty.

There are plenty of other examples of regulation having exactly the opposite effect from the one most would expect. The question is, where to start?

How about one of my favorite targets, gasoline? Or should I say ethanol in gasoline?


The EPA, in it's push to clean up the tailpipe emissions of anything that burns gasoline, decided that pump gas needed something that would help gas burn cleaner, thereby reducing pollution. At first that something was MTBE. MTBE certainly helped engines with carburetors burn cleaner, but it had little effect on fuel injected engines. Unfortunately MTBE had a serious side effect.

While it helped gas burn cleaner, it also polluted water supplies as it was a hydrophilic substance, meaning it was chemically attracted to water. Unfortunately the water it was attracted to far too often was that in out municipal water supplies and private wells. MTBE started showing up in places it didn't belong. It didn't help things that it's also considered a carcinogen.

So in its wisdom, the EPA banned the use of MTBE and decided ethanol would make a great substitute. Like MTBE ethanol also helped gasoline burn cleaner with the added benefit of boosting the octane rating of gasoline. While the water pollution problem was solved, other problems raised their ugly heads, some of them quite costly to deal with.

Like MTBE, ethanol is hydrophilic. It absorbs water. The problem with it is that if it absorbs enough water it separates from the gasoline, turns into a yellowish sludge, and settles to the bottom of the tank. This has two effects. First, it lowers the octane rating of the gasoline. Second, the sludge will clog the fuel systems of the vehicles it's used in.

On more than one occasion I've written about the problems with ethanol in marine gas and how it costs boat owners millions in repairs. The same holds true in other areas, such as small gas-powered equipment. Lawnmowers, chain saws, weed-trimmers, snowblowers, generators, lawn tractors, and a whole host of other equipment don't get along with 90/10 gasoline/ethanol mix presently being sold in the US. Corrosion, detonation, and deterioration of plastic/rubber parts in the fuel systems plague otherwise trouble-free gas powered equipment.

But that's not the whole story of ethanol. There are other unintended consequences created by the use of ethanol as a fuel component.

One of the biggest is the effects on food prices, followed only by the greater pollution generated by its production.

When land previous used to grow food is now used to grow the feedstock for ethanol (corn), the supply of food goes down and prices go up. More pollution is created when those feedstock crops are grown because the farmers will use even more fossil fuels and petroleum-based fertilizers to grow them. The amount of energy derived from the ethanol created from those crops barely equals the amount of energy used to grow and process those crops in the first place.

But do you know what the biggest irony of this story is? Gasoline/ethanol fuels don't help fuel-injected engines burn any cleaner than straight gasoline does. These days, how many engines in cars and trucks sold over the past decade and a half or so aren't fuel injected? None of them.

Oh, and one other thing we must remember about ethanol: it contains less energy per gallon than gasoline, meaning you need to burn more of it to get an equivalent amount of power out of the engine using it. What that means is you get fewer miles per gallon with ethanol-blended gasoline than you do with straight gasoline. And this is good how?

Air Pollution Other Than Tailpipe Emissions

Here's another area where the EPA has gotten it wrong, and it's all going to cost us plenty with little return seen for what we spend.

First, I have to ask you out there how many times you've heard this refrain: “It's just awful! Air pollution is getting worse all the time!”

I've heard it far too often over the past 10 years or so. There's only one problem...it's a lie.

I can't speak for you, but I can honestly say I remember the days when the smog was so bad in some cities that it cast a dark brown pall over them. Automobiles, trucks, power plants, and factories spewed all kinds of noxious fumes from their tailpipes and smoke stacks. The air stank of all kinds of chemicals and partially burned hydrocarbons, even in many of the smaller cities.

Can we honestly say that is the case today? Not by a long shot.

But what effluvia still spews into the atmosphere isn't necessarily the fault of those generating it so much as it's the rather rigid rules created by the EPA that makes it far more expensive to clean up the emissions from the smokestacks than it needs to be. What do I mean by this? Call it the All-Or-Nothing rule.

Let's use coal-fired power plants in the mid-West as an example of the shortsightedness of this rule.

At one point during the Bush Administration, the president wanted to relax rules that would make it easier for the aforementioned coal plants to upgrade their systems to make them more efficient. The upgrades would also have the side effect of making the plants run cleaner than they would without the upgrades. But those upgrades also meant they had to go well beyond those changes and install scrubbers and other air pollution controls as if the plants were brand new. New plants had to meet far stricter emissions requirements than the older plants. The cost to make the older plants meet the new requirements exceeded that of building a new plant. Under EPA rules the utilities had two choices – spend far too much money to upgrade the old plants to meet new plant requirements, or don't do the upgrades at all. There was no in-between solution as far as the EPA was concerned.

So what happened?

President Bush was lambasted by Congressional Democrats and enviro-socialists for “allowing his buddies in the energy industry” to pollute the air all in the name of obscene profits. Congress killed any chance the utilities would get a waiver to reduce their emissions less than the EPA wanted them to. The end effect: the coal plants were not upgraded, their efficiencies were not increased, and their emissions did not decrease. Yet somehow the EPA and the left saw this as a victory for the environment. They wanted the whole thing but they ended up with nothing at all and everyone downstream of those plants are still paying the price.

This is yet another case where government regulation had the opposite effect from that intended.


This is the first in a series of posts dealing with the problems of government regulation overstepping its bounds and causing far more harm than good.

Part 2 will cover energy and how the government regulations are making sure we'll have less of it at a much higher costs.