Brexit constitutes a shift in the direction towards more local autonomy and governance diversity. Since, in general, smaller political entities tend to be governed better than larger ones, one may expect Brexit to have a positive effect on the efficiency of the framework of rules governing British society.
So far so good. But simply shifting powers from politicians and bureaucrats in Brussels to politicians and bureaucrats in London will unlikely lead to the dramatic improvement of the legal and regulatory framework that would be needed to significantly raise standards of living in Britain – especially given the fact that Brexit also means losing the benefits of the European customs union.
Regarding the production of rules the central issue is not “London versus Brussels” but “centralized design versus spontaneous order”.
Whether rules are made by Parliament and regulatory agencies in London or by the European Commission and regulatory agencies in Brussels, in both cases they are the product of a centralized ordering authority rather than the result of a decentralized and market-responsive evolutionary process.
The traditional argument for a spontaneous order over centralized design is that, under conditions of dispersed knowledge, only a decentralized and evolutionary process leads to the discovery of the relevant knowledge. In other words: a spontaneous order is able “[…] to make use of knowledge which nobody possesses as a whole” (F. A. Hayek in Law, Legislation and Liberty, Volume 1: Rules and Order).
The argument for the superiority of a decentralized spontaneous order over central planning is evident to most people when applied to the production of ordinary goods and services. But the same argument can also be applied to the production of laws and regulations.
The intuition is straightforward: as individuals discover new rules that work better than the existing ones, the new rules will be adopted unless the transactions costs associated with switching to the new rules are prohibitive. Superior efficiency of the framework of rules is the result of such a discovery process.
Turning to a large extent the production of laws and regulations in areas that up to now have been largely controlled by the European Union over to the private market rather than merely to politicians and bureaucrats sitting in London would give Britain the opportunity to embark on this discovery process.