The regulation dice game: Teaching the effects of entry barriers on wealth creation using an interactive class activity

Abstract

There is a well-known connection between the barriers to entry created by an overburdensome regulatory climate and lower levels of productivity that create less economic growth. Many economics students are under the impression that regulations are designed to protect the workers and consumers as well as improve product quality, so they are often uninformed about the adverse effects of regulations and are sometimes reluctant to accept the idea that regulations such as occupational licensing can work to the detriment of those in that occupation and the economy as a whole. The author of this article presents an interactive class activity, providing the instructions and worksheets needed to employ it in the classroom, and which illustrate the costs and benefits of various regulatory environments.

Keywords:

• Economics education
• interactive activity
• regulations

JEL CODE:

• A2

Acknowledgment

The author thanks all of the students and teachers who have participated in this activity and have given helpful feedback and suggestions over the years.

Notes

1 Stigler (1971) discusses the two alternative views of regulation as being instituted for the benefit of the public at large or being instituted to benefit incumbent firms by politicians looking to gain support from these firms. Tullock (1967) demonstrates the welfare costs associated with monopolies that are protected by high barriers to entry to provide a theoretical foundation for the wealth lost as a result of excessive regulatory burden.

2 For example, I have four different colored pairs of dice for this game with the white dice given to the entrepreneur in the minimally regulated environment, pink dice given to the entrepreneur in the moderately regulated environment, green dice given to the entrepreneur in the heavily regulated environment, and black dice given to the entrepreneur in the most intensely regulated environment. This way, I know just by the color of the dice what regulatory environment the entrepreneur is in and can quickly determine if their roll is a success or failure.

3 The Business License is one full page for the purpose of allowing the student to frame it if they prefer. This serves as an entertaining joke that can be made when explaining the activity. I jokingly tell the student who volunteered to be the dice roller in the most intensely regulated environment that if they pass the licensing exam, they get a certificate that they can frame, and they can put the certification on their resume.

4 I usually offer the regulators one extra credit point on a 400-point scale (0.25% of their final grade) in an effort to encourage volunteers.

5 The instructor can provide a ruler to the dice inspector so they can carefully measure the dice to ensure their accuracy, the instructor can forgo having to provide this to the participant by telling the dice inspector to download a ruler app on their cell phone, or to just use their best judgment in the absence of a measuring device.

6 Once again, I usually offer one extra credit point to each of the dice-rolling volunteers in an effort to encourage participation.

7 Due to typically large class sizes and the exorbitant cost of the dice and set-up materials required, I have yet to employ the game in such a way where all students are either regulators or dice rollers. Instead, I instruct all students who are not serving as entrepreneurs or regulators to observe the behavior of the regulators and the entrepreneurs in an effort to answer question 7 on the student activity sheet, which was included to keep inactive students engaged and participating in the activity. There are some important lessons that the observing student can learn from this as they see some regulators just signing forms without doing their job and some entrepreneurs working less than others as they realize they are unlikely to get off more than a single dice roll. These observations can lead to interesting discussions at the conclusion of the activity.

8 It is my recommendation that instructors play the game with only four dice rollers and four regulators first and, from there, determine if they want to extend the activity to include all students as active participants, starting with smaller classes before thinking about employing the activity this way in large ones.

9 While the countries at the top and bottom of this ease of doing business index (World Bank n.d.-b) may change from year to year, the disparity in GDP per capita between those at the top of the rankings and those at the bottom of the rankings persists. The list at the time of this writing includes Venezuela as one of the countries at the bottom of the rankings. It is worth mentioning that Venezuela used to be one of the richer countries in South America due to its vast oil deposits, but is being held back by its current economic policies.

10 As part of the discussion, it might be worth showing Clip 5 from Part 2 of “Making Economics Come Alive with John Stossel” (Stossel 2011), where he explores regulations of the floral industry in Louisiana as pointless and anti-competitive. Similar to the classroom activity, florists in Louisiana have to take a licensing exam before they are allowed to operate.