Regulation, Distrust, and Growth

Countries with high levels of distrust have more regulation.

Note that this is not distrust in markets leads to more regulation of markets. Rather, it is distrust in general leads to more regulation of markets.

But disturbingly, while poor policy choices cause weak growth, it also appears that weak growth may foster additional bad policies — like more regulation of markets.

Here’s something to worry about: distrust leads to more regulation which leads to lower growth which promotes more bad choices and may increase distrust.

The scary thing is this sounds like a lot of countries around the globe. Think South America.

The really scary thing is that measures of trust in the U.S. have been on the decline for over a generation.

Check out this updated post (and at least browse the links) by Alex Tabarrok.