The Smoke-Free Cigar Bar and the Fully Clothed Revue

June 22, 2010

The Smoke-Free Cigar Bar and the Fully Clothed Revue

The Wall Street Journal recently highlighted some of the possible effects, including increased unemployment, of a bill on the governor’s desk concerning strip club regulation in Missouri. Similarly, Christine Harbin’s post earlier this month highlights some further potential economic ramifications of S.B. 586. Among other restrictions, included in the bill is a requirement that clubs close by midnight. There are further problems beyond the economic impact on those Missouri employees affected, though.

Tightening restrictions in Missouri gives an automatic boost to the strip club industries along Missouri’s borders, which in some cases may be even more unsavory. Closing the Missouri clubs earlier than in other states will also unwittingly create more post-midnight (including cross-river) traffic — a public safety concern that effects more people than the clubs’ patrons.

Well-intentioned measures frequently have unintended consequences.

Consider Springfield’s proposal to ban smoking in workplaces. Most workplaces are smoke-free by choice, but some businesses — like cigar bars and hookah lounges — are built around smoking customers. Although it’s likely that the ordinance will make some exceptions, those exceptions themselves create a tilted playing field for competition.

If you don’t like strip clubs and smoking (and I certainly do not), the simplest solution is not to smoke and not to patronize strip clubs or smoky bars. This an example of how the over-regulation of an industry potentially creates conditions favorable to further problems — while solving none of those it was intended to solve — and, in the process, harming the livelihoods of people who have elected to work in affected industries (after all, erotic dancers need to eat, too).

The fairest (and most effective) way to kill an unsavory business remains not to patronize it.

« Read Previous Entry Read Next Entry »

41 Comments »

Would you support auctioning off smoking licenses?

Comment by Eapen Thampy — June 22, 2010 @ 6:13 p.m.
No, I would not support licensing for something like this. I do support businesses freely choosing to become smoke free (http://stlouis.metromix.com/bars-and-clubs/roundup/smoke-free-bars/872730/content), and customers freely choosing which places to patronize.

Comment by Martha King — June 22, 2010 @ 7:25 p.m.
Do you support liquor licensing?

Comment by Eapen Thampy — June 23, 2010 @ 9:52 a.m.
Of course not.

Comment by Eric D. Dixon — June 23, 2010 @ 11:08 a.m.
Do you support health codes or building codes?

Comment by Eapen Thampy — June 23, 2010 @ 11:37 a.m.
Why are you even bothering to troll us with the pretense that you don’t already know we’re libertarians?

Comment by Eric D. Dixon — June 23, 2010 @ 11:44 a.m.
“Libertarians” is a loose term and you don’t own the entirety of what it means. I apologize if you think I’m “trolling” you, but perhaps you shouldn’t be allowing comments in the first place. I also don’t understand why you’re answering questions directed at someone else.

Comment by Eapen Thampy — June 23, 2010 @ 11:55 a.m.
Perhaps you should think of more intelligent questions to ask, and specify if you’re restricting them to a single person in a public forum.

Comment by Eric D. Dixon — June 23, 2010 @ 12:02 p.m.
I would support liquor licensing and building codes under certain circumstances if locally controlled, and locally desired (by the affected citizens).

Comment by Martha King — June 23, 2010 @ 12:25 p.m.
Martha,
The nature of these regulations is that they’re typically only viable as local propositions. They’re generally tied to the business licenses granted the businesses. These licenses implicate local government entities and also state government entities, but no serious bar or restaurant owners think that these are unreasonable or unjust propositions.

I should clarify that I used to manage a restaurant here in Columbia (Trattoria Strada Nova, I worked there a little over 2 years) and that I also worked as the sommelier at Hemingway’s Wine & Bistro (year and 4 months) and then selling wine at Top Ten Wines. I also have a business interest in a local bar that was badly hit by Columbia’s idiotic smoking ban. Prior to working in Columbia I bussed tables at Dierdorf & Hart’s in Westport, St. Louis, and waited tables at Patrick’s (which is now Pujol’s 5).

So Eric’s wrong in assuming I have no perspective or knowledge relevant to this argument, and doesn’t know enough about how these businesses actually operate to understand that I’m making an intelligent argument.

I think there are legitimate property rights issues that smoking bans infringe on, but the other option, to let anyone smoke anywhere, equally implicates the property rights of non-smokers. That’s why I think selling smoking licenses the way we sell liquor licenses is the allocatively efficient solution. My introduction to auction theory in Dr. Ron Harstad’s courses here at MU give me the intuition that an auction mechanism is probably the best way of pricing these licenses.

Comment by Eapen Thampy — June 23, 2010 @ 12:38 p.m.
Yes, I’ve heard of your storied career as a wine salesman.

Restaurateurs generally support liquor licensing for the same reasons that any professional supports occupational licensure in their field — it’s an easily captured form of protectionism that keeps competitors at bay.

Comment by Eric D. Dixon — June 23, 2010 @ 12:55 p.m.
This isn’t Boston, and there is no cap on the number of liquor licenses available.

Comment by Eapen Thampy — June 23, 2010 @ 12:59 p.m.
The relevant fees, paperwork, and approval process increase the marginal cost of doing business, which is generally easier for established successful businesses than for struggling startups. Artificially increasing market entry costs dampens economic growth.

More to the point, when government is granted this sort of arbitrary regulatory power, bureaucratic whim and special interest lobbying can easily recreate Boston’s particularly draconian license laws.

Comment by Eric D. Dixon — June 23, 2010 @ 1:21 p.m.
To create a “market” where licenses are auctioned is itself a distortion of demand.

Comment by Martha King — June 23, 2010 @ 1:25 p.m.
As a point of clarification: competition is stifled whether there is a cap on the number of liquor licenses or not. The costs of liquor licenses will still price out competition in much the same way that the costs of compliance to obtain an occupational license, such as a medical license, price out competition though there is no cap on the number of doctors allowed to practice. Perhaps I’m not understanding your last point properly.

Comment by Abhi Sivasailam — June 23, 2010 @ 1:26 p.m.
This isn’t “arbitrary government power”. Many communities and cities recognize that the social costs of cheap alcohol and unregulated bars are enormous. I live a block down from Harpos and 3-4 nights a week there are enormous crowds of drunk greeks getting in fights, driving drunk, and creating public disturbances. These manifest in very real costs of drunken driving accidents, the costs of medical care for people involved in fights (even as innocent bystanders), and other costs that accrue to people who don’t patronize frat bars late at night.

These are all very real, local costs. It’s easy to make extrapolations from your theory that says all regulations are bad because they decrease competition and I think you very much come off as someone who is simply convinced by your theory. I don’t think you understand the risks that alcohol sales bring by their very existence; I argue that there should be some way to mediate the property rights concerns of everyone who doesn’t patronize these businesses with the rights of those who do. Licensing is an effective way to do that.

I agree that licensing shouldn’t become another tool in the monopoly toolbox, but that’s a problem that stems from the interactions that businesses have with politics, not from the licensing mechanism itself. Your concerns are with the political economy of licensing but you conflate them with everything else.

Comment by Eapen Thampy — June 23, 2010 @ 1:34 p.m.
Abhi,
I think you understand my last point perfectly as well. I think that it is true that any increase in teh costs of entry does limit the size of the market.

However, consider the flip side. Barriers to entry also serve as a selection mechanism. Imagine a world where anyone could get a medical license. There is no market mechanism to separate the quacks from the real practioners (especially because they’re not always the same people at the same time). A barrier to entry requires a non-negligible investment to overcome, and we can look at it as “anyone who is willing and capable of making this investment is also someone who will act with integrity in the market”.

Comment by Eapen Thampy — June 23, 2010 @ 1:40 p.m.
Martha,
As an aside, I think that it is dumb to regulate cigar bars in the same regulation as hookah lounges. They have different externalities that are very contingent on the nature of the smoke, for instance. The American Cancer Society has a very good monograph on the different types of tobacco delivery mechanisms that is worth reading.

I think your “central planners bad” argument means more when you make the distinction that these central planners seem to be unable to make the distinction between hookah, cigarettes, and cigars.

Comment by Eapen Thampy — June 23, 2010 @ 1:51 p.m.
“Many communities and cities recognize that the social costs of cheap alcohol and unregulated bars are enormous. I live a block down from Harpos and 3-4 nights a week there are enormous crowds of drunk greeks getting in fights, driving drunk, and creating public disturbances.”

So what you’re saying is, we have regulation now and it’s not working well enough to allow you to get peace and quiet? Let’s not assume that all regulation is bad. Let’s just say that in this one instance, we *might* be better off without it. A pigouvian tax on opening a bar in the form of a (frought with implicit bureaucratic costs!) lengthy and expensive licensing process is unlikely to produce economically efficient results for the same reason that all other pigouvian tax scenarios are. The correct amount of the tax is not obvious to the legislator and those harmed are unlikely to be compensated appropriately by a government agency which will likely lack proper accountability. “Markets fail. Use markets.”

“There is no market mechanism to separate the quacks from the real practioners (especially because they’re not always the same people at the same time).”

Are you similarly appalled that we don’t allow a food board to tell us what foods are most delicious? Or that we lack a clothing board to tell us what clothes are most comfortable and fashionable? We let consumers meet with producers on a level playing field when it “matters least” and people get what they want at a price they are willing to pay. Sorting happens as a matter of spontaneous order. If the market gets these unimportant things so right, how can we possibly think that people will not act with the same or even more care in choosing a doctor? This sort of sorting is a fundamental feature of any market. People use limited information to make the best decision they can about how to expend their limited resources to obtain the most of what they want. These are fundamentals of economics that I would expect an economics student to understand implicitly.

Comment by Josh Smith — June 23, 2010 @ 1:59 p.m.
Josh,
Auctioning off licenses is the market solution to these problems. Markets fail, use markets.

Comment by Eapen Thampy — June 23, 2010 @ 2:09 p.m.
And yes, I understand what spontaneous order means. My aunt is a phd economist who works with complexity and adaptive systems. http://www.bracil.net/finance/People/Sheri.html

Comment by Eapen Thampy — June 23, 2010 @ 2:12 p.m.
What keeps the cost of the licenses from going to zero? If their supply is restricted, then I ask “by what?” It already costs money to open a bar. You need Land, Labor and Capital, not to mention someone willing to take the risk that one more bar will make money amidst much competition. Any attempt by a government official to increase the cost of opening a bar beyond the cost of production (Land+Labor+Capital+Entrepreneur) represents a regulatory tax. For reasons I already hinted at, but Hayek goes into detail on, no central authority can possibly know what the proper price of such a thing should be. Having a government employee artificially restrict access to something and then sell permits to the highest bidder is quite far from “using markets.”

Comment by Josh Smith — June 23, 2010 @ 2:18 p.m.
I have two aunts and three cousins who were/are nurses, but you won’t catch me commenting with authority on http://rntalk.nursezone.com/ because I don’t know anything about nursing. There’s nothing wrong with my rational ignorance of the nursing profession, provided I don’t try to give anyone the impression that because I am related to someone who understands triage, I can therefore speak with authority on the subject.

Comment by Josh Smith — June 23, 2010 @ 2:24 p.m.
Josh,
Do you think the Columbia City Council in setting the appropriate regulatory structures for Columbia businesses, or Bill Alton, the representative for the state liquor board who determines compliance, really represents a “central planner”? I would point out to you that these are people who aggregate hyper-local information and make policy recommendations specifically related to that information. The Columbia City Council for instance is particularly well situated to listen to the people who own Harpos, as well as the neighbors (both businesses and residents) and can determine with precision the extent of negative externalities that exist on the ground level and price them appropriately.

I challenge you to answer me with specificity and not the generality of your theory.

Comment by Eapen Thampy — June 23, 2010 @ 2:26 p.m.
I know a lot about complexity theory and dynamical systems. i took classes with dr carmen chicone on dynamical systems, fractals, and chaos theory. I have studied that stuff for years and I cite my aunt because part of her work has been very useful.

My dad also has a medical license, and that allowed me access to a lot of relevant data and empirics on how these things function.

Where you’re randomly spouting stuff linked from wikipedia I’m presenting work that represents actual knowledge that I’ve gained from thousands of hours of engaging this kind of material.

Comment by Eapen Thampy — June 23, 2010 @ 2:34 p.m.
Short answer: Yes.

Long answer: I understand the concept of limited information well enough to know that I can’t possibly speak with authority on the state of liquor merchants in the Columbia, MO area. I recommend you read that Hayek article I linked earlier again: I’m sure it was required for at least one of your classes but it’s so relevant here it’s worth noting.

“these are people who aggregate hyper-local information and make policy recommendations specifically related to that information. ”

Yes, that is their job, but I have no way of knowing how good they are at it and I maintain that it is unlikely to the point of nigh-impossibility for a regulator to understand what consumers want more than. . . well, the consumers themselves. Businesses that don’t give people what they want go out of business, and there are whole classes of people who make a living taking risks in determining what new businesses should open in different places. Venture capitalists, investors and entrepreneurs must weigh what consumers want with what is available to bring to them. The meddling of government draws a veil over their already difficult work of foreseeing the commercially feasible.

In conclusion, I can not speak with specificity and local authority for the same reasons that I believe no one can. Your very request is faulty.

Comment by Josh Smith — June 23, 2010 @ 2:37 p.m.
Your argument assumes all information is homogenous. It is not. information is widely heterogenous and aggregation provides its own locally-viable information.

I think your concept of “local” is static whereas mine is dynamic. I know this is a far cry from the context of this discussion but I might note that there is some interesting conceptual work by Jayan Nayar on the global/local dichotomy that is very relevant. As long as you’re telling me to read Hayek I think I should suggest you read Nayar.

Comment by Eapen Thampy — June 23, 2010 @ 2:42 p.m.
Jayan, “Orders of Inhumanity,” Transnational Law & Contemporary Problems, Fall 99, p. Lexis

Comment by Eapen Thampy — June 23, 2010 @ 2:42 p.m.
But, Josh, what of the social costs of consuming alcohol?! How are entrepreneurs held accountable for these costs? I don’t expect you to understand that, you and your ilk are all just paid propagandists…especially that Abhi guy.

Comment by Joe Nutsak — June 23, 2010 @ 2:50 p.m.
I reiterate: it is my contention that goods are priced at or near their marginal costs in a competitive marketplace.

Also, in the face of a claimed negative externality, the burden is on the claimant to establish that harm has taken place, and as for handling the remuneration, well, markets can work well for that too, provided the judicial system is robust.

You argue for government involvement of a specific type, amount and purview. You have not satisfactorily demonstrated that this government involvement is either necessary or effective. Although I feel like I know your family pretty well at this point.

Comment by Josh Smith — June 23, 2010 @ 2:55 p.m.
You should meet my brother. http://educationnext.org/on-winning-and-losing-the-national-spelling-bee/

Comment by Eapen Thampy — June 23, 2010 @ 6:01 p.m.
@EapyTheapy

What do you actually want? Are you contending there is some psycho-histrionic new science that can crunch all this hyper-local data into a consistent externality-solving algorithm?

Even if this were physically possible, this is not how such decisions are made. Every piece of policy that comes out the pipeline is solely for the benefit of those who have won the lobbying auction in this particular election cycle, or as populist coupon giveouts for vote pandering.

I dispute it’s possible that government can ever accurately correct externalities cost effectively. Furthermore, public good is never the motivation of bureaucratic output. Politicians at every level are self interested human beings who work for whoever can offer the best trade at the moment.

Comment by vroman — June 23, 2010 @ 10:42 p.m.
Here’s a good Ted Talk: Kurzweil on Asimov, with an aside on Roubini.

Comment by Eapen Thampy — June 24, 2010 @ 11:52 a.m.
@ Noted wine seller and family man, Eapen Thampy- How are smoking licenses even relevant? People smoking cigarettes in a bar or restaurant do not produce the host of negative externalities you get with alcohol sales. The only people who could be adversely effected by smoking in a business are the people inside the business. Employees have chosen to work there, patrons have chosen to patronize to dine/drink there. What exactly are we making up for? How is there no middle ground between smoking bans and people smoking EVERYWHERE at ANY TIME? Are you seriously contending that the amount of smoke that could possibly escape a business that allows smoking as people enter/exit the building presents a problem?

Comment by S/A — June 25, 2010 @ 3:51 a.m.
Yes.

Comment by Eapen Thampy — June 25, 2010 @ 11:05 p.m.
I demand that EapyTheapy compensate the world for the negative externalities he inflicts every time he opens his mouth.

Comment by ZOMG — June 26, 2010 @ 12:28 a.m.
@Noted wine seller and family man, Eapen Thampy- You’re joking right? That’s such an irrational position, you have to be messing with me.

Comment by S/A — June 26, 2010 @ 1:53 a.m.
Smoking licenses are relevant because there are externalities to cigarette smoking that are greater in scale and larger in scope than your guess assumes.

And while we’re on the subject, how about some non-anonymous posts?

Comment by Eapen Thampy — June 26, 2010 @ 7:08 p.m.
Forcing EapyTheapy to compensate the rest of the world is relevant because there are externalities to his clueless pontificating that are greater in scale and larger in scope than his stabbing in the dark assumes.

I think he should also cease to post anonymously. EapyTheapy is such an absurd name, it has to be made up.

Comment by ZOMG — June 26, 2010 @ 8:40 p.m.
Hey, could we try to stay on topic? Maybe we could talk about the post only and not the people who comment on it (or any other non sequitur) Thanks!

Comment by Caitlin Hartsell — June 26, 2010 @ 10:05 p.m.
37.@Noted wine seller and family man, Eapen Thampy- I’m not anonymous. My name is Sarah Anne. I shorten it to S/A when I’m signing things.

What are these externalities that are effecting people OUTSIDE of the restaurant that are greater in scale and larger in scope than the smoke coming out of the door? The angst of those who want a smoke-free world? Are we counting people’s wishes here?

Comment by S/A — June 26, 2010 @ 10:50 p.m.

RSS feed for comments on this post. TrackBack URL

Categories

Would you support auctioning off smoking licenses?

Comment by Eapen Thampy — June 22, 2010 @ 6:13 p.m.

No, I would not support licensing for something like this. I do support businesses freely choosing to become smoke free (http://stlouis.metromix.com/bars-and-clubs/roundup/smoke-free-bars/872730/content), and customers freely choosing which places to patronize.

Comment by Martha King — June 22, 2010 @ 7:25 p.m.

Do you support liquor licensing?

Comment by Eapen Thampy — June 23, 2010 @ 9:52 a.m.

Of course not.

Comment by Eric D. Dixon — June 23, 2010 @ 11:08 a.m.

Do you support health codes or building codes?

Comment by Eapen Thampy — June 23, 2010 @ 11:37 a.m.

Why are you even bothering to troll us with the pretense that you don’t already know we’re libertarians?

Comment by Eric D. Dixon — June 23, 2010 @ 11:44 a.m.

“Libertarians” is a loose term and you don’t own the entirety of what it means. I apologize if you think I’m “trolling” you, but perhaps you shouldn’t be allowing comments in the first place. I also don’t understand why you’re answering questions directed at someone else.

Comment by Eapen Thampy — June 23, 2010 @ 11:55 a.m.

Perhaps you should think of more intelligent questions to ask, and specify if you’re restricting them to a single person in a public forum.

Comment by Eric D. Dixon — June 23, 2010 @ 12:02 p.m.

I would support liquor licensing and building codes under certain circumstances if locally controlled, and locally desired (by the affected citizens).

Comment by Martha King — June 23, 2010 @ 12:25 p.m.

Martha,
The nature of these regulations is that they’re typically only viable as local propositions. They’re generally tied to the business licenses granted the businesses. These licenses implicate local government entities and also state government entities, but no serious bar or restaurant owners think that these are unreasonable or unjust propositions.

I should clarify that I used to manage a restaurant here in Columbia (Trattoria Strada Nova, I worked there a little over 2 years) and that I also worked as the sommelier at Hemingway’s Wine & Bistro (year and 4 months) and then selling wine at Top Ten Wines. I also have a business interest in a local bar that was badly hit by Columbia’s idiotic smoking ban. Prior to working in Columbia I bussed tables at Dierdorf & Hart’s in Westport, St. Louis, and waited tables at Patrick’s (which is now Pujol’s 5).

So Eric’s wrong in assuming I have no perspective or knowledge relevant to this argument, and doesn’t know enough about how these businesses actually operate to understand that I’m making an intelligent argument.

I think there are legitimate property rights issues that smoking bans infringe on, but the other option, to let anyone smoke anywhere, equally implicates the property rights of non-smokers. That’s why I think selling smoking licenses the way we sell liquor licenses is the allocatively efficient solution. My introduction to auction theory in Dr. Ron Harstad’s courses here at MU give me the intuition that an auction mechanism is probably the best way of pricing these licenses.

Comment by Eapen Thampy — June 23, 2010 @ 12:38 p.m.

Yes, I’ve heard of your storied career as a wine salesman.

Restaurateurs generally support liquor licensing for the same reasons that any professional supports occupational licensure in their field — it’s an easily captured form of protectionism that keeps competitors at bay.

Comment by Eric D. Dixon — June 23, 2010 @ 12:55 p.m.

This isn’t Boston, and there is no cap on the number of liquor licenses available.

Comment by Eapen Thampy — June 23, 2010 @ 12:59 p.m.

The relevant fees, paperwork, and approval process increase the marginal cost of doing business, which is generally easier for established successful businesses than for struggling startups. Artificially increasing market entry costs dampens economic growth.

More to the point, when government is granted this sort of arbitrary regulatory power, bureaucratic whim and special interest lobbying can easily recreate Boston’s particularly draconian license laws.

Comment by Eric D. Dixon — June 23, 2010 @ 1:21 p.m.

To create a “market” where licenses are auctioned is itself a distortion of demand.

Comment by Martha King — June 23, 2010 @ 1:25 p.m.

As a point of clarification: competition is stifled whether there is a cap on the number of liquor licenses or not. The costs of liquor licenses will still price out competition in much the same way that the costs of compliance to obtain an occupational license, such as a medical license, price out competition though there is no cap on the number of doctors allowed to practice. Perhaps I’m not understanding your last point properly.

Comment by Abhi Sivasailam — June 23, 2010 @ 1:26 p.m.

This isn’t “arbitrary government power”. Many communities and cities recognize that the social costs of cheap alcohol and unregulated bars are enormous. I live a block down from Harpos and 3-4 nights a week there are enormous crowds of drunk greeks getting in fights, driving drunk, and creating public disturbances. These manifest in very real costs of drunken driving accidents, the costs of medical care for people involved in fights (even as innocent bystanders), and other costs that accrue to people who don’t patronize frat bars late at night.

These are all very real, local costs. It’s easy to make extrapolations from your theory that says all regulations are bad because they decrease competition and I think you very much come off as someone who is simply convinced by your theory. I don’t think you understand the risks that alcohol sales bring by their very existence; I argue that there should be some way to mediate the property rights concerns of everyone who doesn’t patronize these businesses with the rights of those who do. Licensing is an effective way to do that.

I agree that licensing shouldn’t become another tool in the monopoly toolbox, but that’s a problem that stems from the interactions that businesses have with politics, not from the licensing mechanism itself. Your concerns are with the political economy of licensing but you conflate them with everything else.

Comment by Eapen Thampy — June 23, 2010 @ 1:34 p.m.

Abhi,
I think you understand my last point perfectly as well. I think that it is true that any increase in teh costs of entry does limit the size of the market.

However, consider the flip side. Barriers to entry also serve as a selection mechanism. Imagine a world where anyone could get a medical license. There is no market mechanism to separate the quacks from the real practioners (especially because they’re not always the same people at the same time). A barrier to entry requires a non-negligible investment to overcome, and we can look at it as “anyone who is willing and capable of making this investment is also someone who will act with integrity in the market”.

Comment by Eapen Thampy — June 23, 2010 @ 1:40 p.m.

Martha,
As an aside, I think that it is dumb to regulate cigar bars in the same regulation as hookah lounges. They have different externalities that are very contingent on the nature of the smoke, for instance. The American Cancer Society has a very good monograph on the different types of tobacco delivery mechanisms that is worth reading.

I think your “central planners bad” argument means more when you make the distinction that these central planners seem to be unable to make the distinction between hookah, cigarettes, and cigars.

Comment by Eapen Thampy — June 23, 2010 @ 1:51 p.m.

“Many communities and cities recognize that the social costs of cheap alcohol and unregulated bars are enormous. I live a block down from Harpos and 3-4 nights a week there are enormous crowds of drunk greeks getting in fights, driving drunk, and creating public disturbances.”

So what you’re saying is, we have regulation now and it’s not working well enough to allow you to get peace and quiet? Let’s not assume that all regulation is bad. Let’s just say that in this one instance, we *might* be better off without it. A pigouvian tax on opening a bar in the form of a (frought with implicit bureaucratic costs!) lengthy and expensive licensing process is unlikely to produce economically efficient results for the same reason that all other pigouvian tax scenarios are. The correct amount of the tax is not obvious to the legislator and those harmed are unlikely to be compensated appropriately by a government agency which will likely lack proper accountability. “Markets fail. Use markets.”

“There is no market mechanism to separate the quacks from the real practioners (especially because they’re not always the same people at the same time).”

Are you similarly appalled that we don’t allow a food board to tell us what foods are most delicious? Or that we lack a clothing board to tell us what clothes are most comfortable and fashionable? We let consumers meet with producers on a level playing field when it “matters least” and people get what they want at a price they are willing to pay. Sorting happens as a matter of spontaneous order. If the market gets these unimportant things so right, how can we possibly think that people will not act with the same or even more care in choosing a doctor? This sort of sorting is a fundamental feature of any market. People use limited information to make the best decision they can about how to expend their limited resources to obtain the most of what they want. These are fundamentals of economics that I would expect an economics student to understand implicitly.

Comment by Josh Smith — June 23, 2010 @ 1:59 p.m.

Josh,
Auctioning off licenses is the market solution to these problems. Markets fail, use markets.

Comment by Eapen Thampy — June 23, 2010 @ 2:09 p.m.

And yes, I understand what spontaneous order means. My aunt is a phd economist who works with complexity and adaptive systems. http://www.bracil.net/finance/People/Sheri.html

Comment by Eapen Thampy — June 23, 2010 @ 2:12 p.m.

What keeps the cost of the licenses from going to zero? If their supply is restricted, then I ask “by what?” It already costs money to open a bar. You need Land, Labor and Capital, not to mention someone willing to take the risk that one more bar will make money amidst much competition. Any attempt by a government official to increase the cost of opening a bar beyond the cost of production (Land+Labor+Capital+Entrepreneur) represents a regulatory tax. For reasons I already hinted at, but Hayek goes into detail on, no central authority can possibly know what the proper price of such a thing should be. Having a government employee artificially restrict access to something and then sell permits to the highest bidder is quite far from “using markets.”

Comment by Josh Smith — June 23, 2010 @ 2:18 p.m.

I have two aunts and three cousins who were/are nurses, but you won’t catch me commenting with authority on http://rntalk.nursezone.com/ because I don’t know anything about nursing. There’s nothing wrong with my rational ignorance of the nursing profession, provided I don’t try to give anyone the impression that because I am related to someone who understands triage, I can therefore speak with authority on the subject.

Comment by Josh Smith — June 23, 2010 @ 2:24 p.m.

Josh,
Do you think the Columbia City Council in setting the appropriate regulatory structures for Columbia businesses, or Bill Alton, the representative for the state liquor board who determines compliance, really represents a “central planner”? I would point out to you that these are people who aggregate hyper-local information and make policy recommendations specifically related to that information. The Columbia City Council for instance is particularly well situated to listen to the people who own Harpos, as well as the neighbors (both businesses and residents) and can determine with precision the extent of negative externalities that exist on the ground level and price them appropriately.

I challenge you to answer me with specificity and not the generality of your theory.

Comment by Eapen Thampy — June 23, 2010 @ 2:26 p.m.

I know a lot about complexity theory and dynamical systems. i took classes with dr carmen chicone on dynamical systems, fractals, and chaos theory. I have studied that stuff for years and I cite my aunt because part of her work has been very useful.

My dad also has a medical license, and that allowed me access to a lot of relevant data and empirics on how these things function.

Where you’re randomly spouting stuff linked from wikipedia I’m presenting work that represents actual knowledge that I’ve gained from thousands of hours of engaging this kind of material.

Comment by Eapen Thampy — June 23, 2010 @ 2:34 p.m.

Short answer: Yes.

Long answer: I understand the concept of limited information well enough to know that I can’t possibly speak with authority on the state of liquor merchants in the Columbia, MO area. I recommend you read that Hayek article I linked earlier again: I’m sure it was required for at least one of your classes but it’s so relevant here it’s worth noting.

“these are people who aggregate hyper-local information and make policy recommendations specifically related to that information. ”

Yes, that is their job, but I have no way of knowing how good they are at it and I maintain that it is unlikely to the point of nigh-impossibility for a regulator to understand what consumers want more than. . . well, the consumers themselves. Businesses that don’t give people what they want go out of business, and there are whole classes of people who make a living taking risks in determining what new businesses should open in different places. Venture capitalists, investors and entrepreneurs must weigh what consumers want with what is available to bring to them. The meddling of government draws a veil over their already difficult work of foreseeing the commercially feasible.

In conclusion, I can not speak with specificity and local authority for the same reasons that I believe no one can. Your very request is faulty.

Comment by Josh Smith — June 23, 2010 @ 2:37 p.m.

Your argument assumes all information is homogenous. It is not. information is widely heterogenous and aggregation provides its own locally-viable information.

I think your concept of “local” is static whereas mine is dynamic. I know this is a far cry from the context of this discussion but I might note that there is some interesting conceptual work by Jayan Nayar on the global/local dichotomy that is very relevant. As long as you’re telling me to read Hayek I think I should suggest you read Nayar.

Comment by Eapen Thampy — June 23, 2010 @ 2:42 p.m.

Jayan, “Orders of Inhumanity,” Transnational Law & Contemporary Problems, Fall 99, p. Lexis

But, Josh, what of the social costs of consuming alcohol?! How are entrepreneurs held accountable for these costs? I don’t expect you to understand that, you and your ilk are all just paid propagandists…especially that Abhi guy.

Comment by Joe Nutsak — June 23, 2010 @ 2:50 p.m.

I reiterate: it is my contention that goods are priced at or near their marginal costs in a competitive marketplace.

Also, in the face of a claimed negative externality, the burden is on the claimant to establish that harm has taken place, and as for handling the remuneration, well, markets can work well for that too, provided the judicial system is robust.

You argue for government involvement of a specific type, amount and purview. You have not satisfactorily demonstrated that this government involvement is either necessary or effective. Although I feel like I know your family pretty well at this point.

Comment by Josh Smith — June 23, 2010 @ 2:55 p.m.

You should meet my brother. http://educationnext.org/on-winning-and-losing-the-national-spelling-bee/

Comment by Eapen Thampy — June 23, 2010 @ 6:01 p.m.

@EapyTheapy

What do you actually want? Are you contending there is some psycho-histrionic new science that can crunch all this hyper-local data into a consistent externality-solving algorithm?

Even if this were physically possible, this is not how such decisions are made. Every piece of policy that comes out the pipeline is solely for the benefit of those who have won the lobbying auction in this particular election cycle, or as populist coupon giveouts for vote pandering.

I dispute it’s possible that government can ever accurately correct externalities cost effectively. Furthermore, public good is never the motivation of bureaucratic output. Politicians at every level are self interested human beings who work for whoever can offer the best trade at the moment.

Comment by vroman — June 23, 2010 @ 10:42 p.m.

Here’s a good Ted Talk: Kurzweil on Asimov, with an aside on Roubini.

Comment by Eapen Thampy — June 24, 2010 @ 11:52 a.m.

@ Noted wine seller and family man, Eapen Thampy- How are smoking licenses even relevant? People smoking cigarettes in a bar or restaurant do not produce the host of negative externalities you get with alcohol sales. The only people who could be adversely effected by smoking in a business are the people inside the business. Employees have chosen to work there, patrons have chosen to patronize to dine/drink there. What exactly are we making up for? How is there no middle ground between smoking bans and people smoking EVERYWHERE at ANY TIME? Are you seriously contending that the amount of smoke that could possibly escape a business that allows smoking as people enter/exit the building presents a problem?

Comment by S/A — June 25, 2010 @ 3:51 a.m.

Yes.

Comment by Eapen Thampy — June 25, 2010 @ 11:05 p.m.

I demand that EapyTheapy compensate the world for the negative externalities he inflicts every time he opens his mouth.

Comment by ZOMG — June 26, 2010 @ 12:28 a.m.

@Noted wine seller and family man, Eapen Thampy- You’re joking right? That’s such an irrational position, you have to be messing with me.

Comment by S/A — June 26, 2010 @ 1:53 a.m.

Smoking licenses are relevant because there are externalities to cigarette smoking that are greater in scale and larger in scope than your guess assumes.

And while we’re on the subject, how about some non-anonymous posts?

Comment by Eapen Thampy — June 26, 2010 @ 7:08 p.m.

Forcing EapyTheapy to compensate the rest of the world is relevant because there are externalities to his clueless pontificating that are greater in scale and larger in scope than his stabbing in the dark assumes.

I think he should also cease to post anonymously. EapyTheapy is such an absurd name, it has to be made up.

Comment by ZOMG — June 26, 2010 @ 8:40 p.m.

Hey, could we try to stay on topic? Maybe we could talk about the post only and not the people who comment on it (or any other non sequitur) Thanks!

Comment by Caitlin Hartsell — June 26, 2010 @ 10:05 p.m.

37.@Noted wine seller and family man, Eapen Thampy- I’m not anonymous. My name is Sarah Anne. I shorten it to S/A when I’m signing things.

What are these externalities that are effecting people OUTSIDE of the restaurant that are greater in scale and larger in scope than the smoke coming out of the door? The angst of those who want a smoke-free world? Are we counting people’s wishes here?

Comment by S/A — June 26, 2010 @ 10:50 p.m.

June 22, 2010