The Rule

Are you for rules or against rules?  Pick a side!

There are some people who still claim to be for deregulation (i.e., against rules) at the same time they claim for “the rule of law”.   Larry Kudlow of CNBC, for example, has no problem claiming to believe in both of these contradictory ideas at the same time. Not only are these assertions inherently contradictory, both are a waste of time.

Rules are a fact of life in a crowded world.  We can’t waste any time being for or against the idea of rules in general, and indeed, people who believe fervently in anarchy are few and far between.  Let’s call deregulation fanatics exactly what they are: anarchists.

Any professional who does any kind of comparative analysis knows that rules are critical.  A formal experiment encapsulates these rules in the form of constraints, factor settings, measurement standards, etc.. All of us need to focus on getting the best rules we can.

To do that, we need to know whether a rule is a good rule or not.  What is a reasonable set of criteria for whether a rule is good or not? The guidelines for good rules are much like the guidelines for good process descriptions.

Purpose: A good rule begins with a clearly defined and purpose.

Metrics: A good rule has measurements that can be used to measure compliance and results.

Understandability:  A good rule is easy to understand and follow.  (The best rules eliminate far more arguments than they create.

Observation:  A rule needs to be observed both in the sense that it needs to be followed and in the sense that the effects of the rule need to be monitored and discussed.  Observers should include the creators of the rule as well as all of those affected by the rule.

Enforcement:  A rule that is unevenly enforced creates more problems than it solves. Rules must be both stable and flexible.

Penalties:  The purpose of a rule should never be to collect penalties, but the penalties should be clearly spelled out and be clearly greater than the cost of compliance.

When a problem requires a rule, we should establish the best rule we can, then slowly make it better as we learn more from applying the rule.  Rules have impacts, and changing rules changes those impacts.

Rules are subject to the Law of Unintended Consequences (All actions have unintended consequences).  Changing rules has unintended consequences; not changing rules has unintended conseuences.  The same can be said for not having rules or for having rules.

Note that all good rules are a customer-driven behavior.  Rules need to be changed or even eliminated if they do not serve the purposes of the customers they were created for.

In all cases where the government makes rules, the general public needs to be viewed as the ultimate customer.  The government should create rules only for the benefit of the general public.  While these rules may benefit a specific industry, no rule should be created to protect one industry over another.

Industries and the busineses within those industries need to fight it out in the marketplace, but this is only possible in a marketplace with rules.

What about Unwritten Rules?

The real question is whether or not unwritten rules should be written down.  In most cases, it seems that this is unnecessary and may even be counterproductive.  However, the existence of unwritten rules does not mean or imply that written rules are unnecessary.  We are only concerned with written rules because we can change written rules.