Regulatory uncertainty is what actually holds back innovation
Regulatory uncertainty is what actually holds back innovation
https://www.brookings.edu/articles/regulatory-uncertainty-is-what-actually-holds-back-innovation/
Publish Date: 2026-04-20 16:42:00
Source Domain: www.brookings.edu
President Trump signed an executive order last fall aimed at ensuring artificial intelligence (AI) companies are “free to innovate without cumbersome regulation.” In pursuit of this goal, the order established an AI Litigation Task Force to challenge “burdensome” state AI laws, directed the administration to evaluate state AI laws, and threatened to restrict remaining funding from the Broadband Equity Access and Deployment (BEAD) Program to states with onerous AI laws.
The directive followed the president voicing concerns about a patchwork of state AI regulations and attempts to regulate the technology harming American innovation—one of the most common arguments against new AI rules. While there is some empirical support for this view, there is stronger evidence that regulatory uncertainty—a lack of clarity over what the rules are or how they will be applied or enforced—is far more disruptive to innovation than regulation itself. The recent executive order threatens to create such an environment and may itself be disruptive to American innovation.
The arguments against regulation
Companies, think tanks, and politicians regularly claim that privacy and AI laws suffocate competition and slow technological progress, often drawing on three main sets of evidence: studies of the impact of the EU’s General Data Protection Regulation (GDPR), broad comparisons between Europe and the United States, and disproportionate compliance burdens borne by smaller firms.
The GDPR has reshaped data handling practices across Europe and imposed compliance obligations on firms of all sizes. Broadly, empirical research confirms these new obligations have likely negatively impacted innovation. Studies show new compliance costs and legal complexity have diverted resources from product development, and the regulation has led to reductions in revenue and venture funding. After the GDPR took effect, some firms shifted from innovating radical new products toward more…
