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Government was much smaller at the time of the Industrial Revolution.

Is this true? Is it really such an open-and-shut case?

In some senses it is obviously true: There were a lot fewer people, a lot fewer filing cabinets and a lot fewer regulations. A lot of the tools needed for our big modern system -- hygiene, communications, literacy -- just weren't there yet. There were essentially no worker protections in the early stages of the Industrial Revolution; there were few environmental regulations. And travel and communications were harder, which made it easier to evade certain regulations -- they say that, as late as the 20th century, movie companies relocated to Hollywood in large part because it was the US city farthest from Thomas Edison's patent lawyers.

But government-sanctioned monopolies are not a new invention. (That's what the British East India Company was all about.) Enormous tariffs levied on mass-produced goods are not a new invention. Taxes are not a new invention. Gangs of Luddites (not metaphorical Luddites -- the real thing) who break your equipment and sabotage your business model are not a new invention.

Wine monopolies? Here's a book that deals, in part, with how the English ban on French wine imports boosted the English brewing industry in the 17th century:

http://www.amazon.com/War-Wine-Taxes-Political-Anglo-French/...

And here's a Wikipedia article on mercantilism, the dominant theory of international trade for over 250 years, starting in 1500:

http://en.wikipedia.org/wiki/Mercantilism

Mercantilism was all about big-government management of the economy through tariffs and subsidies. But, of course, that was arguably a big improvement over the medieval model: Small-government "management" of the "economy" by private armies who threatened to burn your crops and besiege your house unless you paid tribute.

> Is it really such an open-and-shut case?

No, but a reasonable percentage of those convinced that "it's all the government's fault" are going to continue to see it that way no matter what (and get offended when that gets pointed out, apparently). Just like other people think that more government/laws/rules is always the answer. For that matter, I'm pretty convinced of my "radically moderate" views which are somewhere around The Economist's.

Which is why these sorts of discussions rarely go anywhere, even over a beer, to say nothing of short, sharp answers on internet forums.

For that matter, I'm pretty convinced of my "radically moderate" views

Of course you are. If you thought they were wrong, you wouldn't hold them as your views, would you?

I'm fairly willing to be convinced that, on some point or another, the best course of action lies close to what I held to be true, but differs by a few degrees. I also try and think about the holes in my argument and to consider the fact that I am not actually omniscient, and may very well be wrong about things (it is rare, but does happen:-).

I was thinking about this, and part of the problem is that these threads often feel like someone selling me something, rather than trying to figure out how things really work. They'd be much more interesting if people "let down their guard" a bit, upped the reasoning, and lowered the propagandizing. I guess it may not feel like propaganda to those involved, but I really like reading comments like mechanical_fish's, which cast a wide eye on things, considering all points of view, rather than people pulling out all the stops to fit the facts to their point of view.

"moderate" is a cop-out. If you're a moderate now you would presumably have been a moderate 50 years ago. And the moderate of 50 years ago would be fringe today. The moderate of 100 years ago would be a radical today.

Don't surrender your reason to social contructivism.

That's not a bad point, especially where it comes to how we treat other people. Indeed, I am not a moderate in everything, clinging to the center. However, in terms of government intervention in the economy, I am, and I also think it's far too large and interesting, and nuanced of a subject to adequately cover it in these sorts of forum. It's best left to be talked about over a bottle of good wine.

this may interest you: http://en.wikipedia.org/wiki/Overton_window

You ask a very astute question that is too rarely asked. The way this plays out in the United States is that many entrepreneurs complain about the growing role of the federal government in regulation of business over the last two centuries, which plainly is a correct description of the historical trend. But only legal historians, with their specialized knowledge, notice that many state laws have become much less restrictive of business activity over time. It's actually rather difficult to figure out what the overall historical trend is at all levels of government in the United States. Some businesses may be easier than ever to form, while others are harder than ever to form.

Yes, government was much smaller at the time of the Industrial Revolution, at least in the US. The federal budget, as a share of the GDP, was 3% right before FDR. Now it's some giant, horrible amount I don't even want to say out loud.

Given this, the idea that there could be less (or about the same) regulatory interference of business today is, frankly, ludicrous. For one thing, simply reducing business budgets (taxes) at the rate the government does is an onerous burden all by itself. Arguments can certainly be made that it's a net gain for society, but please do not be disingenuous in stipulating the facts.

the idea that there could be less (or about the same) regulatory interference of business today is, frankly, ludicrous.

That depends crucially on which business you're talking about. Exceptions abound. Consider that example of the mail-order wine business. Do you know how hard it was to start such a business in the days before FDR? There was a lot of "regulatory interference", personified by guys like "Eliot Ness". You couldn't start a wine business in the USA, full stop -- unless you kept it underground. That era also had a devastating effect on our brewing industry that took a generation to recover from.

One could also ask some of the people who run porn sites about the complex history of "regulatory interference" in their business.

And, as we now know all too well, there have been times when regulation of the financial industry was much more strict than it is today. That's not a simple history, either: Corporations and stock exchanges have existed since the 17th century, but their degree of regulation has changed in complicated ways over time.

And a relentless focus on taxes obscures other forms of interference that were more important at certain times, for certain industries. However onerous it is to start a telecom-based company today, it was probably harder back in those days before FDR, when AT&T held a government-sanctioned monopoly over all of US telephony:

http://en.wikipedia.org/wiki/Ma_Bell

In 1934, the government set AT&T up as a regulated monopoly under the jurisdiction of the Federal Communications Commission, in the Communications Act of 1934... by 1940 the Bell System effectively owned most telephone service in the United States, from local and long-distance service to the telephones themselves. This allowed Bell to prohibit their customers from connecting phones not made or sold by Bell to the system without paying fees. For example, if a customer desired a type of phone not leased by the local Bell monopoly, he or she had to purchase the phone at cost, give it to the phone company, then pay a 're-wiring' charge and a monthly lease fee in order to use it.

That the Internet managed to come into existence at all is the result of a complex interplay of antitrust law, the rise of government-funded research under guys like Vannevar Bush, and the Cold War (DARPA, which funded the Internet, was born in the days after Sputnik).

Today, our cable and phone companies also wield virtual monopolies with the help of the FCC. The situation is pretty bad in the USA. But I'm not sure it's significantly worse than it was back in 1940.

> Consider that example of the mail-order wine business. Do you know how hard it was to start such a business in the days before FDR? There was a lot of "regulatory interference", personified by guys like "Eliot Ness".

Prohibition was passed in 1919 (under Wilson) and "repealed" in 1934. (The repeal amendment federalized some restrictions that hadn't existed before 1919.)

Why is it bad that in order to automatically generate binding legal documents, someone involved needs to be educated in the subtleties of legal language? A walking, talking lawyer should be personally responsible for the quality of the documents being generated. If there's no such person, you're putting the onus of validation on the client, which I think misses the entire point.

In most of these cases, it's not the government protecting existing companies, it's the government protecting the naive population. You won't fire someone after six months of unpaid labor, but someone else will. Your expert system might create air-tight contracts, but someone else will cut corners.

These laws do not exist solely to frustrate you. Part of being in a uniformly free society is ensuring that naive people are not at the mercy of the better informed or less scrupulous. Things can't work any other way.

>>In most of these cases, it's not the government protecting existing companies, it's the government protecting the naive population. You won't fire someone after six months of unpaid labor, but someone else will. Your expert system might create air-tight contracts, but someone else will cut corners.

This untrue, throughout history companies get laws to make upstarts more difficult. There is no reason you need to go to law school or even pass the bar, if the buyers don't think it is a good tool they won't use it.

In fact things can work the other way, you are protected the few who may be swindled (they're clearly visible), but ignore all those who are harmed by the lack of new products. It's very hard to look at the other side of the equation, but it is normally quite significant.

Do you want to back up that assertion? I'm not saying regulatory capture doesn't exist, I'm just saying it's not the primary driving force behind legislation. You don't get to just say I'm wrong and make vague references to historical trends.

Unless a company already has lawyers on staff, they have no way of determining whether a legal expert system is a good product or not. For that reason, it cannot be a substitute for a living, breathing lawyer. It could certainly be a tool for lawyers, and streamline the hell out of most legal processes, but to treat it as something more is to give up on any lowest common denominator for legal advice. And while this would certainly harm lawyers, it would also harm a great many other people.

But, see, you claim it would harm a great many other people. We claim, on balance, it will help many more people than it hurts. Down with guilds!

Well there are many cases of regulator capture, the AMA, the railroad industry, the airplane industry (pre-deregulation), the telephone industry (pre-deregulation), and the cable industry.

The recent mandates on testing toys for lead, has pretty much outlawed small toy producers. You can't prepare food at your house and legally sell it (even if you say this was cooked at my house). The FDA debacle with juice pasteurization vs more modern UV processes.

> And while this would certainly harm lawyers, it would also harm a great many other people.

Once again you make a statement that claim to be true with no real backing. Say 1 person is harmed by this newer cheaper law advice, and 10,000 are saved due to the reallocation of resources to medicine -- this is of course a hypothetical example, but it has just as much grounding as yours.

The lesson to learn from your example is: don't work for someone without getting paid, unless you /really/ trust them.

Not: we need the government to be our nanny. That results in all kinds of really bad side effects, including those illustrated by the person who started this thread.

I agree. Instead of trying to protect the masses from their own stupidity, why not work harder to educate the masses? I realize that there must be a balance in all things, but I think the scale is tipped heavily in the direction of the government holding our hands and making up our minds for us at the same time.

Thanks Mark

> Why is it bad that in order to automatically generate binding legal documents, someone involved needs to be educated in the subtleties of legal language?

I wouldn't put up a huge stink if the law was "you must pass the bar exam".

However, the law is "you must attend 3 years of law school".

> These laws do not exist solely to frustrate you

Agreed. They exist to decrease the supply of lawyers, thus increasing the price that lawyers can demand.

Frustrating me is just a side effect.

I know a fair number of newly-minted laywers, and my understanding is that most of the concrete material tested in the bar exam is taught in the summer following graduation from law school. Law school is largely concerned with abstract concepts that are important, but more difficult to test.

I sympathize with your frustration, but the reason for the prerequisites could just as easily be that they don't believe they can create a test which properly encompasses everything a lawyer should know.

Also, at least in San Francisco, the job market seems to be saturated with lawyers, even before the economy went south.

However, the law is "you must attend 3 years of law school".

Actually, there are still a few states where you can join the bar after clerking for a number of years and passing the bar exam.

See, for example: http://www.wsba.org/lawyers/licensing/faq-rule6.htm

> Why is it bad that in order to automatically generate binding legal documents

One question is why so many things require generating legal documents.

We've funded lots of startups and we hardly ever see cases where they're crushed by big companies. The biggest exception is music. But though the record labels have certainly captured congress, their lawsuits tend to destroy startups before government regulation does.

>> But though the record labels have certainly captured congress...

And not just Congress:

http://pajamasmedia.com/instapundit/76701/

>> their lawsuits tend to destroy startups before government regulation does.

In the broad sense, this is government regulation as well, but with the laws being written to transfer the regulatory function from the Executive branch to the Judicial branch.

Their lawsuits are only able to destroy startups because government regulations (i.e. laws) let them. So this is government regulation at one remove.

I agree.

To build on this comment, I disagree with pg's statement that startups have and will spread somewhat randomly. The biggest defining factor is having a (more) free market in a given place (inc. lower taxes and a /proper/ legal system).

In fact, that's largely why northern Europe had the Industrial Revolution and why most startups are in the US today. Because the US seems to be becoming more statist, that could definitely change.

From Europe, whilst many elements of our culture are less conducive to entrepreneurs than the US, these examples are not among them (except I don't know about the legal docs thing - I agree with earlier replies that critical information providers need to have rigorously maintained qualifications). My mate set up an internet wine company here without any problems, it's easy to pay directors of a company in equity [but non-directors get minimum wage protection], and the real estate industry is 'self-regulated' here in the UK. Oh, and we have free universal healthcare. All that said, I still believe the next game-changing startups will come mostly from the US - which is still the destination of choice. And I agree with your central argument that 'big government' generally stifles innovation.

> it's easy to pay directors of a company in equity [but non-directors get minimum wage protection],

Thus missing the point.