A major flaw of centralized government, especially in regulatory policy, is that it creates an environment where regulatory capture is not just possible but inevitable. The very structure of centralized regulation encourages large corporations to shape the rules that govern them, as legislators and bureaucrats lack the capacity to engage meaningfully with the full range of stakeholders.
This problem is magnified by the Dunbar number, a well-documented cognitive limit suggesting that individuals can only maintain meaningful relationships with around 150 people. A federal legislator, representing hundreds of thousands or even millions of constituents, simply cannot interact personally with most of the people they serve. Instead, they must rely on hierarchical party structures, lobbyists, and industry experts—who, unsurprisingly, represent the most powerful interests. This creates a system where regulation is dictated from the top down, not shaped by those it actually affects.
But centralization is not an inevitability. We have real-world examples where regulatory power is decentralized, leading to more responsive, rational, and adaptable governance.
The Uniform Commercial Code (UCC) in the United States is a prime example. Rather than being imposed by federal fiat, the UCC was adopted by individual states, allowing for a coordinated but flexible regulatory system. This approach ensured consistency in business law across the country while allowing states to retain control over their legal frameworks.
Europe provides another example of regulatory decentralization. Countries like Sweden and Switzerland have distinct regulatory approaches, yet they are able to coordinate where necessary, innovate more quickly, and update their regulations in response to discoveries faster than a massive bureaucracy like the U.S. federal government.
Decentralized regulatory environments tend to focus more on practical effectiveness rather than preserving bureaucratic structures. When regulation is driven by smaller, more adaptable governments, it remains closer to those it affects, making it easier to reform when necessary.
If the U.S. pushed regulation away from the federal level and toward the states, we could create a more democratic, federated system of governance. States could coordinate regulations among themselves to create a unified regulatory environment where appropriate, while still allowing for state-level innovation and responsiveness.
Under this model:
Individuals would have a greater ability to influence regulation, since state governments are smaller, more accessible, and less burdened by the entrenched bureaucracies that dominate Washington, D.C.
Successful regulatory models could spread organically, as states learn from each other and voluntarily adopt best practices, rather than having policies dictated by a centralized authority.
The system would better align with the original intent of the U.S. as a federation of self-determined republics, ensuring that power remains closer to the people rather than concentrated in distant bureaucracies.
This approach wouldn’t mean the absence of coordination or regulatory standards, but rather a shift in how those standards are created and maintained. By decentralizing regulatory power, we could reduce corruption, increase adaptability, and restore the democratic influence of individuals over the rules that govern them.
