A Feel for Economics: Murray Weidenbaum 1927-2014

By Henderson, David R. | Regulation, Winter 2014 | Go to article overview

A Feel for Economics: Murray Weidenbaum 1927-2014


Henderson, David R., Regulation


I first met Murray Weidenbaum at the 1974 American Economics Association meetings in San Francisco. I was interviewing for a position as assistant professor, and Murray was part of the Washington University contingent that was on the buyers' side. At the time, I was earning my Ph.D. in economics at the University of California, Los Angeles, and was working on a dissertation on the economics of coal mine safety legislation. I did not wow most of the interviewers, but I still remember Murray's raised eyebrow when he found out two things about my dissertation: First, it was on regulation. Second, I had already learned enough to conclude, tentatively, that the regulations did not do much for safety but did raise costs, especially for small, non-union mines. I thought that the raised eyebrow, along with the little twinkle in his eye, was a sign that he liked what he had heard. As I got to know him in the early 1980s and the mid-1990s, I learned that my instincts about that twinkle were right.

'FEEL' FOR ECONOMIC ISSUES

One of Murray's strengths was his "feel" for a popular issue. For instance, the high point in U.S. economists' criticism of government regulation was in the late 1970s. As early as the mid -1970s, he seemed to have sensed that the issue was a political winner and that some of the most destructive regulations were vulnerable.

Murray was one of the leaders in criticizing regulation, especially by the U.S. federal government. His leadership caught the attention of some defenders of regulation. In an October 22,1979 article in the Village Voice titled "The Counter-Intelligentsia: The 'Free-Enterprise' Think Tanks and the Holy War on Government," author Peter H. Stone singled out a study by Murray's relatively new Center for the Study of American Business (CSAB) at Washington University. The study, done in the late 1970s, argued that by 1979 the total annual cost of regulation would be about $100 billion. Here is a quote from Stone's critique:

   A Library of Congress review of his [Weidenbaum's] data
   pointed out that he got his $100 billion total by taking a figure
   of $4.8 billion for administration of regulation and multiplying
   by 20--but without explaining how he came up with the
   number 20.

I could not find the CSAB study. But I did find Murray's article "On Estimating Regulatory Costs" in the May/June 1978 issue of Regulation that appears to be based on it. I can say with certainty that he did base estimates of the cost of regulation on actual studies done by others. He noticed that the cost of regulation was approximately 20 times the budget of the regulatory agencies involved. Then he wrote,

   [Robert] DeFina's and my method of estimating the direct
   and indirect compliance costs of federal regulation produces a
   figure of $62 billion for 1976--which is about twenty times the
   administrative costs of $3 billion for regulatory agencies that
   year (see Table 2). The total cost of federal regulation in 1976
   was thus roughly $65 billion. This is equivalent to $307 for
   every man, woman, and child in the United States or to 18 percent
   of the federal budget. While these estimates of regulatory
   costs must be regarded as tentative, I submit that any error is in
   the direction of understatement.

He added:

   If the 1976 ratio of administrative costs to compliance costs
   should hold for 1979--and there may be reasons why it would
   not--compliance costs would be $97.9 billion in that year. With
   administrative costs estimated at $4.8 billion, the estimated
   total costs of federal regulation would exceed $100 billion.

I trust that the reader sees the difference between that methodology and arbitrarily choosing the number 20.

Why do I say that Murray had a good "feel" for a popular issue? One reason is Stone's Village Voice attack. You have to read the piece for yourself, but Stone's tone suggests that there is something sinister in the fact that an increasing number of economists were pointing out the cost of regulation and that many of those economists were funded by foundations, much of whose assets came from wealthy business owners. …

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