Repercussions

Loosely inspired by Patrick Collison’s Fast, here is a list of regulations and shadow regulations from the last century, with harmful second-order effects on innovation and economic wellbeing.

EU AI Act (2024). The EU implemented a series of high-risk system rules, to force startups to add quality-management systems, external audits, and human-oversight layers. Most tech / startup leaders have called out the harmful effects on European AI startups. EU AI Act Faces Backlash from Startup Leaders Demanding Implementation Pause
EU Deforestation Regulation (EUDR, 2023-25 rollout). The EU imposed traceability and geolocation requirements, intended to serve climate regulation. This mainly excluded smaller (and hence less “industrialized”) palm-oil, cocoa, and rubber farmers. Indonesia, Brazil, and others are seeking WTO action. Indonesia says EU deforestation law is still unworkable.
FTC “shadow veto,” Lina Khan onwards (2020). Aggressive merger challenges and threat letters have had a severe negative effect on tech startup M&A exits since 2021. This has stifled value creation, startup liquidity, and angel capital reinvestment back into the ecosystem. The Wrath at Khan.
Sri Lanka's National Ban on Synthetic Fertilizers (2021). To promote organic farming and conserve foreign currency, the Sri Lankan government abruptly banned all imports of synthetic fertilizers and pesticides. The policy led to a catastrophic collapse in agricultural output within a single season, with tea and rice harvests (critical for exports and domestic food security) plummeting by as much as 50%. In Sri Lanka, Organic Farming Went Catastrophically Wrong.
U.S. Ban on Juul and Flavored E-Cigarettes (2020-2022). The FDA's ban on the sale of Juul and most flavored e-cigarette cartridges was implemented to curb the rise of teen vaping. The policy did successfully reduce teen access through legal channels; but it fueled a massive black market for (unregulated) disposable vape products imported from China with higher nicotine concentrations and kid-friendly flavors. Congress spotlights the FDA’s “Kafkaesque” vaping regulation.
California AB5 Independent Contractor Law (2020). AB5 reclassified independent contractors as employees with benefits, which introduced higher costs and legal complexities of employment for companies. It did have some positive effects on gig workers. However, many firms that did fit the original intent of flexible work and contracting (freelance journalism platforms, trucking companies), were now subject to the law; they ended up capping workers' hours, or terminating contracts with California-based freelancers altogether. The Potential Consequences of California’s AB5.
Rent Control and Housing Supply (resurgence in CA, OR, NY in 2019). Economists across the political spectrum tend to agree that rent control policies reduce the incentive to build new rental units and to properly maintain existing ones. This leads to a deterioration of the housing stock and, creates a perverse disincentive from building new supply. The result is that metros like Austin that expedite approvals and build new supply see falling prices, while cities with rent controls like NYC see increasing rent prices. What does economic evidence tell us about the effects of rent control?
San Francisco’s Gross Receipts tax (2018). Proposition C charged companies a cut of revenue proportional to payroll within the city. Since it was tied to revenue and independent of profit, unprofitable startups and companies with lower margins (especially fintechs which have a much smaller take rate than other companies) were disproportionately affected. This also resulted in several companies moving their HQ out of San Francisco (Coinbase, Stripe). The rule was dramatically rewritten in 2024 to reduce the tax by an order of magnitude. Political foes join forces to fix SF’s job-killing business tax.
EU GDPR (2018). The audit burdens (and high penalties) imposed by GDPR disproportionately hit smaller companies, perversely benefiting large tech companies who could afford to comply with regulation thanks to their scale. It also imposes a "tax" on every visitor on every website, to respond to cookie popups, which “costs” consumers thousands of quality-adjusted years of life every year. Unintended consequences of GDPR: A two-year look back.
Single-use plastic-bag bans (2014 onwards). Consumers pivoted to thicker “reusable” plastic or paper bags, but the far greater plastic materials used in these bags, combined with wastage and lower actual reuse, drove up life-cycle emissions according to some studies. (This claim has been challenged because supporting evidence is hard to establish clearly.) Single-Use Bag Ban Boosts Alternative Bag Production.
Operation Choke Point (2013-17). The DOJ and FDIC aimed to de-risk bank accounts with new guidance, which quietly pushed banks to drop lawful clients (payday lenders, gun shops). This stranded and debanked whole sectors. Justice Department to end Obama-era 'Operation Choke Point'
Durbin Amendment debit-card fee caps (2011). Caps on interchange revenue benefited merchants, at the expense of consumers. While stores paid lower fees, this cap meant checking accounts became an unprofitable for many lower-balance consumers; this led banks to scrap free checking and institute monthly maintenance and ATM fees. The Durbin Amendment: A Short Regulatory History
U.S. Renewable Fuel Standard (corn-ethanol mandate, 2008). Subsidies for corn and ethanol diverted cropland and fertilizer toward fuel. This raised food prices and possibly resulted in a net increase in greenhouse-gas emissions. Environmental outcomes of the US Renewable Fuel Standard.
Short-selling bans during the GFC (2007). Some countries instituted a bans on short-selling during the GFC, intending to limit market panic. This resulted in widening bid-ask spreads, lower liquidity, and slower price discovery. And ultimately, it’s unclear if they even provided price support. Short-Selling Bans Around the World.
Sarbanes-Oxley Act (2002). Strict reporting rules raised compliance costs, and made it infeasible for smaller companies to go public or stay public. This accelerated “go-private” deals, delayed IPOs for most companies, and made it hard for retail investors to participate in value creation (e.g., Amazon IPO at $400M in 1997 / NVIDIA at $600M in 1999 pre-SarbOx; vs, Google IPO at $32B in 2004 / Facebook IPO at $100B in 2012 post-SarbOx). Hunting High and Low: The Decline of the Small IPO…
Basel zero-risk weight for sovereign bonds (1988). Euro-area banks loaded up on home-country debt, which only intensified the 2010-12 sovereign-bank “doom loop.” A zero-risk weight channel of sovereign risk spillovers.
China’s one-child policy (1979). Limiting the number of children resulted in the unintended consequence of parents selecting the gender of their child; this skewed the sex ratio down the road, shrank the future workforce, and accelerated population aging. Consequences of China’s one-child policy.
Escalating child-seat mandates (1977 onwards). Each state-level bump in the required age/size for car seats raises the cost of having a third child. Research estimates ~145,000 foregone births since 1980 (~8,000 in 2017) while averting only 57 crash deaths. (This claim has been challenged because causality is hard to establish directly; I’ve included it because it’s a fascinating example touching dropping fertility rates — one of the most important demographic issues of our time.) Car seats as contraception.
CAFE fuel-economy standards (1970). Different vehicle weight classes were held to different fuel efficiency standards. This led automakers to reclassify heavier vehicles as “light trucks,” and created a perverse incentive to make more SUVs and pickup trucks — which are much more fuel inefficient compared to lighter sedans — having the opposite of the intended effects on reducing emissions. What Is the SUV Loophole and Will It Close?
US Prohibition (1920-1933). Banning alcohol pushed demand into black markets. This fueled powerful crime syndicates, and thousands of deaths from a lack of quality control on liquor production. Unintended Consequences of Prohibition.
Jones Act cabotage (1920). Limitations on ships with only US flags raises freight costs and create supply bottlenecks. One recent case study is the slow aid to Puerto Rico in the wake of Hurricane Maria. Help for Puerto Rico Is Being Delayed by the Jones Act.

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Idle observations

A funny trend I’ve noticed while working in startups is that — when they try — lawyers often make good engineers, and vice versa. This is because legalese and code are both a composition of logic and rules. Code has function calls, legalese has section references. Code has libraries, legalese has case law. I don’t think it’s an accident that the body of laws that govern our society is called the “US Code.”

Software develops “cruft” over time. When lots of different people contribute to a codebase over time, building on top of existing stuff, and no one takes the role of the “gardener” it results in overgrowth. It’s very clear that the same happens to laws and regulations. And just like code, the law needs to be refactored.

I couldn’t find a detailed study of the changes to the US CFR; but a simplistic visual is the history of constitutional amendments. This comes in waves — there was a long dead period from 1795 - 1865, then again from 1870 - 1913, then again from 1971 - 2025 (ignoring the trivial amendment in 1992).

It’s been 54 years since we’ve refactored the constitution. And it does appear that in the last few decades, often-unpopular legislation keeps limping on and even gets renewed (e.g., Patriot Act @ 39% support, Affordable Care Act @ 44% support, Tax Cuts and Jobs Act @ 29% support). It doesn’t appear that we refactor the US code all that much, either.