In my prior post, I discussed the interesting case of certain right-wingers calling deregulation that they don’t like regulation. Specifically, I point out that when the state backs out of enforcing noncompete agreements, this is not regulation; rather, it is deregulation. It reduces the scope of the government. It imposes no rules on anybody. It is quite literally the government staying out of the matter of noncompete agreements.
Some people might think I am being slippery when I employ that analysis, but I am not. The fact is that the state does not involve itself in most agreements people make.
For example, I made an agreement a few days ago to meet some people for lunch. This involved an offer and an acceptance. Something valuable was promised: my time and their time. And a breaking off of such an agreement would impose costs on me if, for instance, it precluded me from finding someone else to eat lunch with that day, which it would have. Had the other parties in that agreement backed out and I went to the state showing them the texts that prove we had an agreement, the state would shrug and tell me to go away.
This is no different than what it does under a regime where it refuses to enforce noncompete agreements. People would be free to make the noncompete agreements just as I am free currently to make lunch plan agreements. It’s just that when someone goes running to the state to tell it to get involved, the state declines.
If you are going to call the decision to not enforce noncompete agreements regulation, then you have to also say the decision to not enforce lunch plan agreements is regulation. This is absurd, not just because enforcing lunch plan agreements seems pretty useless, but also because it has everything backwards. Surely the state regulates lunch agreements when it involves itself in their enforcement not when it ignores them. It is when the state declares that it will enforce them that it has inserted itself into private matters and started to tell people what to do.
People resist this obvious conclusion because they are desperate to say contract law and contract enforcement aren’t regulation. This is because the word “regulation” is so ideologically inflected that certain groups of people want to make sure most of the things they support (especially things they fundamentally support) do not get classified as regulation.
Once you point out the obvious — that all government-imposed economic institutions are regulations — it becomes much harder for them to describe their position as merely being against “regulations” or “distortions” or “government interference.” This becomes a problem because they desperately want to pretend that their preferred economic institutions are what happens by default when you “get the government out of the economy.”
But it isn’t, of course. After property law, contract law is the biggest regulatory system in the country. What’s more, you could plausibly repeal contract law altogether. I often call for its repeal as a joke, but it’s totally doable. People might make less agreements if the state is not willing to impose itself into those agreements, and that might even be a net bad for overall well-being in the world, but I don’t think it would lead to the demise of all humanity.
It would just mean that sometimes you’d make agreements with people that they did not follow through with and have no way of getting the state to force them to compensate you for their breach. Presumably this deregulated environment would require you to be more careful about who you make agreements with, utilize reputations more, and come up with ways to price the new default risks that exist in a world where the state has gotten out of the business of contract enforcement. But, again, all of this is doable.
The fact that ending contract law is deregulatory poses serious questions to those anti-government sorts out there. What reason is there to involve the state in contract law? Why expand the size and scope of the government to cover this stuff? Don’t you want the government to be small? The answer, of course, is that their supposed commitments against regulation and the big government are rhetorical feints. Like everyone else, they want the government to be as big as it needs to be in order to implement the institutions and regulatory regimes they like, but not to implement the ones they don’t like. By cleverly defining the things they don’t like as “regulation” or “big government” or “intervention” (and excluding from those definitions all the regulation, big government, and intervention they do like), they get to say they are against these things and that this opposition is what animates their politics. But when those words are defined in that way, such opposition amounts to nothing more than them being against what they are against.