Can regulation beget innovation?

[Commentary] The big complaint from the business lobby these days concerns a "lack of clarity" about federal regulation that prevents companies from using all that cash piling up on balance sheets to hire workers and make major investments. Then, without missing a beat, those very same business groups declare themselves unalterably opposed to any climate-change legislation that sets plant-specific targets for carbon reductions, puts a floor and a ceiling on the price of carbon, tells utilities exactly how much of their power should come from low-carbon sources or sets specific standards for the energy efficiency of cars and appliances.

Apparently the Chamber of Commerce types think Americans are so gullible that we won't notice their blatant and self-serving hypocrisy. In reality, it's only a certain kind of regulatory clarity they seek -- the clarity of knowing that old regulations won't be enforced and new ones will be dictated by industry lobbyists.

It's been 20 years since Harvard Business School professor Michael Porter provided scholarly support for the notion that, rather than hamper economic growth and competitiveness, well-crafted regulation could actually promote it. Porter's first observation was that some of the world's most prosperous and economically vibrant countries were also those with some of the most stringent business regulations, such as Germany and Japan. His studies of specific industries also turned up numerous examples of new products and more efficient ways of doing business that came about only because companies and industries were forced to comply with rules.

The problem in Washington is not that President Obama and the Democratic Congress have created a hostile regulatory environment for investment and job creation. Rather, the problem is the hyperbole and poisonous rhetoric from the business lobby that have created a hostile environment for political compromise. Over the years, Americans have shown that they can respond creatively, even profitably, to reasonable regulation. Apparently our business leaders have lost faith that we can do it again.