The hostage holding that regulatory bodies impose upon businesses punishes consumers in various ways.

Audio recording of this article here.

Big business is an extension of the state.

Governments control businesses and their customers, and their weapon of choice is legislation. The resulting regulations are so broad and arbitrary that the government can harass businesses until they comply like a mafia protection racket. And given the abundant pettiness of bureaucrats, the rules can be as pointless as a reality TV show.

Rather than deal with the harassment, most companies have entire departments that focus on regulatory compliance. The compliance costs are not trivial, but it’s a lot better than not having a business at all, so businesses pay them. These are essentially departments to keep bureaucrats happy. The mob at least has the courtesy to be straightforward about what it wants, regulators are often self-contradictory and compliance is more art than science.

And make no mistake, you do not want to piss off bureaucrats, because they can make life hell. For example, the Equal Employment Opportunity Commission (EEOC) has enormous regulatory power over every business.

Originally created to enforce civil rights legislation, they currently have the power to destroy any business they wish. How? Through what’s known as the “disparate impact” legislation. Like any legislation, the intent is noble enough. The idea is to make sure that employers don’t discriminate against minorities. In practice, however, the rule makes every business a violator.

The standard is that if any particular job within a company does not have the exact percentage of minorities as the local population, the EEOC can find companies in violation. This is, of course, statistically impossible to do for every single job in any company. Since every company is in violation, the job of compliance departments everywhere is to read the tea leaves and try to not piss off the EEOC as much as possible.

The fact that companies can’t possibly obey all the rules means that regulators are free to pursue litigation against businesses that they don’t like. Every business is in violation, so rule enforcement essentially means death. When every business can be put to death by the government without any recourse, that is tyranny. Arbitrary enforcement of legislation gives bureaucrats power and that power is a blank check to enforce the bureaucrats’ preferences.

Companies generally don’t fight the bureaucracy but appease it instead. The dynamic that emerges is one where businesses become tentacles of the state, pushing whatever agenda they are asked to push. Witness how enthusiastically companies are embracing woke ideology and mask mandates. Instead of serving customers, businesses serve the government because of the rule-enforcement power.

Twitter and many other companies remove accounts they don’t like. They’ve learned the power of rulemaking, too. Pretty much every account is in violation if you look hard enough. Businesses are learning abusive behavior from their masters and perpetuating it to their users.

At the heart of all these dysfunctional relationships is power, and more rules means more power for those in authority. The people who get to enforce the rules become more powerful and as power centralizes, tyranny is the inevitable result. Rulemaking, in other words, is the weapon for those in authority to wield power over those they rule. Like an abusive, emotionally unstable relative, those under such authority have to walk on eggshells hoping that they can get through the day.

The consequences of legislative tyranny are devastating. People, not just businesses, become rule-followers. Instead of evaluating a situation based on principle, they evaluate based on who has power. Morals become sociopathic, where they only matter if they piss off the people in charge. People are incentivized to curry favor with the rulers rather than build useful things. The will of the rulers becomes more important than customers, civilization or even what’s right or wrong.

Rulers then use this change in behavior to remake social norms. They force society to reform based on their ideals, which inevitably have flaws and court complete disaster. The many experiments in Marxism over the past century are testaments to how deadly such remaking can be.

More legislation and rules only centralize power and create a system that becomes more tyrannical over time. Even the United States, which was founded on principles of limited government, now has an organization like the EEOC which can find any company it wants to be illegal in some way and punish them unjustly. The trend toward authoritarianism can be traced back to the proliferation of legislation. In retrospect, legislation centralized power, the same way sugary desserts increase body mass index.

So what’s the alternative? How does a society prevent centralization of power?

The answer is social norms, or justice based on natural law. Natural law is the idea that people have an intuitive sense of justice that’s generally agreed upon and it is by that which we can determine the fairness of an action. A good example of a system based on natural law is English common law. English common law wasn’t something enacted through legislation, but slowly defined and discovered one case at a time. Judges ruled based on social norms and that’s what common law is. To this day, where there isn’t explicit legislation, judges simply use the social norm standard to make decisions. It sounds much more heady and esoteric than it really is. Natural law is literally common sense, as in common to most people.

Natural law is a fairer standard, one that’s based on norms derived from all people, not just the ruling elites. It is decentralized law rather than centralized legislation. Social norms, after all, develop through many interactions and emerge bottom up rather than being handed down.

So much of what legislation does is trying to make fetch happen. Regardless of legislation, natural law or common sense will still be there and it’s the violation of natural law that we generally recognize as evil. Authoritarianism fails because natural law is violated one rule at a time.

Social norms are much more difficult to change than rules made by an authority and therein lies its power. Social norms are much more stable and not subject to sudden change through legislation. This is a great thing because people can plan with a lot more certainty going forward. If this sounds familiar, it should. This is why a stable currency is a good thing for a society and an unstable currency is terrible.

The rules being based on social norms and people’s collective sense of justice make for fertile ground from which civilization sprouts. Instead of being subject to tyrannical forces of rulers, there’s certainty that acting within the social norms will provide some protection against sudden destruction. In a society based on natural law, changes in social norms are slow, meaning that they are earned by those who would change them, not granted. That’s a good thing as any potential change needs to win the hearts and minds of society as a whole and not just a few rule makers.

The instability of social norms is characteristic of authoritarian structures. Simply witness all the changes in social norms over just the last two years versus the prior ten.

In contrast, under common law, social norms are stable and low-time-preference behavior results, which builds up civilization. Longer-term projects can be completed and capital invested instead of squandered. There’s also a notable lack of rent-seeking as there’s no central bureaucracy to feed.

It’s no coincidence that places living under English common law tend to thrive. Hong Kong, Dubai, Australia and many other places have thrived under a decentralized law standard. The lack of tyranny has been a boon in these countries and allows for long-term planning.

We need to rethink legislation. Politically, new legislation is seen as ways for people to get what they want but ignore the cost to everyone else. The zero-sum game of legislating ultimately puts people in a bind and under the control of the people making the rules. Instead of freedom, we get armies of rent-seekers that focus on compliance to the authorities and this detracts from the actual builders.

Humanity can flourish under decentralized law, in law that doesn’t change all the time. This is the argument behind Bitcoin and the argument against fiat money and altcoins. Fiat money and altcoins depend on rulemaking from above and limit freedom due to the increased control from the central authorities. More rules means more control. A decentralized system naturally means more freedom and more certainty, resulting in better planning. Look at how many public companies are planning to mine bitcoin versus ether for the next decade.

Bitcoin will win because of its decentralized nature. Society can win if it embraces decentralized law.

This is a guest post by Jimmy Song. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

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