A solution to the old rules vs. new tech problem

Washington, D.C. cabbies recently put together a slow-moving taxi caravan in protest of disruptive transportation services Uber and Lyft, claiming that existing transportation regulations need to be applied to these novel services. In fact, for several months now, regulators and legislators throughout the country have clashed with innovative companies that use new technologies to provide goods and services that already have some regulatory frameworks around them. To name a few: transportation services Uber and Lyft were ordered to cease and desist by the Virginia DMV; electric automaker Tesla wants to sell cars directly to consumers but has run up against legislated protection of franchise auto dealerships in New Jersey, Texas and elsewhere; cities, especially New York, are trying to figure out whether to apply old zoning laws or to create new laws designed to limit short-term rental listing service Airbnb; and Toyota, Audi and other automakers want the National Highway Traffic Safety Administration (NHTSA) to permit automakers to include adaptive headlight systems on cars sold in the United States — so far to no avail. This list is not exhaustive, nor is the phenomenon new.

How should policymakers respond when old rules are rendered obsolete by new technology? So far, we've seen two varieties of responses. Sometimes, policymakers stubbornly refuse to consider the possibility that existing rules should be changed, citing — but not proving — that the rules are necessary for safety or to prevent traffic congestion. In other cases, policymakers respond to the clash of new technology with old rules by creating new rules, changing the existing rules, or by at least promising to study the issue. None of these responses is ideal.

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Rather than wait for a new technology to force self-examination, agencies should proactively search for ways that their rules might be hindering technological growth and eliminate those barriers — a process I call "adaptive self-disintegration."

Adaptive self-disintegration is different from sunsetting (which, by the way, could also be a good solution). A sunset clause makes a rule self-destruct after some time period — e.g., five years. Agencies then reexamine whether the rule was accomplishing its goal and, if so, whether its continuation is necessary to maintain that goal's accomplishment. Sunsetting is a form of nonadaptive self-disintegration.

Adaptive self-disintegration similarly involves a rule's self-destruction, but the trigger is adaptable rather than preset. Under a policy of adaptive self-disintegration, an old rule — and even the existence of many agencies — would be reexamined on any of three triggers: the passage of time (as in sunsetting); at first sign of the possibility that it's inhibiting the growth of technology; or upon evidence that the rule may no longer be necessary to the accomplishment of its original objective. This would improve upon sunsetting alone by recognizing that technology can change rapidly and drastically within the two- or five-year period sunset clauses typically consider.

At least at the federal level, processes exist that are designed to ensure that new regulations avoid commonly known anti-tech pitfalls — such as using design standards instead of performance standards. But there is no process in place to look back at old regulations and ensure that their design is not preventing technological and economic progress. New technologies can benefit the consumer through increasing competition, improving the availability and quality of goods and services, and lowering prices (for example, it's both cheaper and more convenient for me to take UberX to the airport than it is to take a taxi).

In fact, new technology increasingly can solve problems that regulation had previously tried to solve. NHTSA regulations require cars to have high beams and low beams (and nothing in between) and were ostensibly created to keep drivers from using headlights that would blind oncoming drivers — but of course, a driver could always accidentally leave high beams on even when another car is approaching. Adaptive headlight systems would not allow the driver to accidentally blind the oncoming driver by automating the process — and simultaneously increasing safety by keeping high beams shining on other areas of the road.

A policy of adaptive self-disintegration would have NHTSA reexamine this rule to see whether its design standard (high beams, low beams, and nothing in between) could be inhibiting new technology. Even if it found that it is not, NHTSA would also need to ask itself whether the rule is still necessary to solve the problem. Without this rule, would carmakers suddenly start producing cars with only high beams or only low beams? If the answer is no, then the rule can self-disintegrate. Standards and business practices in the market have changed and solved the problem that the rule was addressing, and the rule itself must adapt to the new environment by self-disintegrating.

These sorts of regulations exist at all levels of government — local, state and federal. Rather than wait for disruptive technologies to force regulators to either attempt to enforce obsolete regulations and require useless paperwork, testing and waiting, governments should proactively establish processes that examine the rules that they already have on the books on a continual basis. At the very least, these examinations should consider whether rules are embracing specific technologies at the expense of new technologies and whether rules are demonstrably achieving some socially desirable outcome such as increased safety. But it would be even better if the rules could adapt to new technologies — when those technologies solve the problems that the rules were originally designed to solve, the rules can adapt ... and self-disintegrate.

McLaughlin is a senior research fellow with the Mercatus Center at George Mason University.