Now that things are beginning to look up in the U.S., we’re hearing a lot of talk about how to prevent another economic near-crisis.

And in our civilized society, rules – which take the form of laws and regulations – are the go-to answer for correcting past mistakes. 

But when it comes to rules and regulations, can we have too many?

Absolutely.

In fact, we may already be at that point, as it seems we can’t efficiently manage the laws we currently have.

Perhaps a better approach would be to offer incentives to get the desired results. A supremely effective way to change behavior, the creation of incentives also prevents people from getting lazy – often an unintended consequence of an overabundance of laws.

Take for instance an environment where banks are allowed do anything they want with the caveat they are only allowed deposit insurance for certain services, like savings, loans, checking, credit, debit and ATM cards.  

Two things would happen:

First, banks that wanted to stay in business would only offer those described services.

Second, consumers’ money would only be insured if they banked with an FI that had deposit insurance.

The creation of more incentives, not more laws, stands a much better chance of supporting a no-bailout future for the United States.