Considered “the toughest piece of anti-fraud legislation since FDR” by President Bush, Sarbanes Oxley, signed into law in 2002, has certainly proved onerous. Left unanswered at the time was the question of whether any legislation, no matter how well crafted, could reduce the inevitable lapses in judgment that occur in the corporate suite.

Were John Stuart Mill alive today, he would likely argue that the high-minded assumptions that led to SOX’s passage were doomed to fail. In his book, “Principles of Political Economy,” Mill wrote that the “only insecurity which is altogether paralyzing to the active energies of producers, is that arising from government, or from persons invested with its authority.”

Indeed, since the passage of SOX, unelected and elected government officials have imposed massive compliance costs on companies. These costs have driven initial price offerings overseas, and have reduced what was once an impressive share-price premium for being listed in America. Worse, we’ll never know how many American companies chose not to list their shares altogether in the aftermath of SOX, not to mention the productivity-enhancing risks never taken by corporations fearful of running afoul of SOX restrictions.

No doubt, many welcome the security that is said to result from more government oversight, but history says they should be wary. Mill wrote of Greece and the Greek colonies of the ancient world, as well as of Italy in the Middle Ages, and found a state of society that “was most unsettled and turbulent,” where “person and property were exposed to a thousand dangers.”

But as Mill went on to point out, “they were free countries; they were in general neither arbitrarily oppressed, nor systematically plundered by their governments.” As such, their labor was “eminently productive, and their riches, while they remained free, were constantly on the increase.” It was only when their Roman rulers sought to relieve the “population from much of the former insecurity” that these formerly productive peoples “became enervated and impoverished, until they were an easy prey to barbarous but free invaders.”

Governments can try to create honest business cultures through the imposition of laws, but as Mill noted, “Much of the security of person and property in modern nations is the effect of manners and opinion rather than law.” In trying to imagine a society without SOX and other heavy-handed rules, it’s probably safe to say that most companies and individuals would still operate in aboveboard ways because it’s in their economic and reputational interest to do just that. There have, and there will continue to be, occasional ethical lapses among businessmen, but arguably nothing that new or old rules could help us to avoid.

Mill concluded that, “laws cannot be said to afford protection to property, when they afford it only at such a cost as renders submission to injury in general the better calculation.” Applied to the present, America is a magnet for capital not because of its oppressive rules regarding commerce, but because our business morals and ethics are conducive to profitmaking activity at relatively low risk.

There is much talk today of reforming Sarbanes-Oxley, and in doing so, softening rules and regulations that have made it more difficult to operate a public company. While reform would be an improvement on the existing situation, it doesn’t reach the heart of the problem: the hubris that leads lawmakers to believe that through legislative fiat they can stamp out occasional lapses in human nature.

This kind of thinking is unrealistic, and will only serve to make America less competitive, and with no discernible drop-off in the scandals that created this ill-conceived legislation in the first place.

Mr. Tamny is a senior fellow at the Manhattan Institute. He can be reached at jtamny@realclearmarkets.com.