With all due respect to my colleague, Sarah, the most ridiculous regulation imposed on the food industry comes from the recent decision by the Los Angeles city government to ban new fast-food restaurants from opening in poor neighborhoods. There was an excellent piece on this regulatory nightmare written by William Saletan at Slate.com, and another for the Los Angeles Times by Joe Hicks, but I want to reiterate several of the reasons why this is such a terrible idea:

• The fast-food ban assumes that poor people can’t be trusted (and therefore have no right) to make decisions for themselves. This is paternalism at its ugliest, because it says that people’s freedom can and should be stripped from them if the majority believes their choices might prove to be unwise.
• The ban ignores the realities of these communities. As unhealthy as fast food can be, it is the most convenient, most affordable way for many people to get a meal. Even if someone in a poor community had the time to shop at a grocery store and fashion home-cooked meals, it is far more expensive to purchase fresh foods and the means to prepare them than it is to swing by a local fast-food restaurant. Especially with the escalating cost of food, families worried about day-to-day survival can’t always afford the luxury of securing the most nutritious meals.
• Fast-food restaurants provide jobs for unskilled workers. While, as Dave Chapelle’s satirical take on this issue points out, these sorts of jobs aren’t likely to end poverty, they do bring money into the community and offer a first step toward more profitable types of employment. The fewer fast-food restaurants in the community, the higher that area’s unemployment level will be.
• The ban prevents competition in the fast-food market. Los Angeles has only banned new fast food restaurants, insulating the existing businesses from competition. Not only does this alleviate some of the pressure to keep menu prices down, it also allows the existing companies to pay rock-bottom wages because workers have fewer alternative employers.

Unfortunately, as with many ill-advised government schemes, this one seems to be catching on.

There are myriad proposals out there to create onerous new regulations, but this one takes the cake:

:In New York City this summer, a law kicked in requiring chain restaurants — from Starbucks to Burger King — to display on menus and menu boards the caloric content of the food they serve. In five other cities and counties elsewhere, similar labeling laws will take effect in coming months.

If the regulators’ goal is to help people make healthier choices, these regulations will probably do just the opposite of what they intend. Collecting information on calories is expensive, and the cost of complying with these laws will be most easily borne by the big fast-food chains. Small restaurants with potentially healthier fare will face this huge obstacle to setting up business. So we could end up with a situation where people know exactly how many calories are in each hamburger at McDonald’s but don’t care because that’s the only place to eat out.

(Not that they care so much now. Everybody knows that fast food isn’t good for you, even if they don’t have the exact calorie count in front of them when they order. It sells anyway.)

Fortunately, this concept hasn’t caught on in Missouri. Let’s hope things stay that way.

The Secretary of State recently approved Proposition A for inclusion on the November ballot. While I express no opinion as to whether this measure should pass or fail, I think it is important to point out that one of the effects of this proposition, if passed, would be to impose a cap on the number of casinos in the state, prohibiting the state from issuing permits to any potential competitors in the gaming market.

This is not a new strategy. In many industries, most notably the taxi and limousine industry, entrenched businesses try to block competition by establishing a licensing system that prevents new businesses from cutting in on their action. This sort of anti-competitive action harms consumers by removing all incentives for the companies in the restricted market to keep prices low or focus on providing excellent customer service. It also harms entrepreneurs willing to provide those services in a more affordable, more customer-friendly way because it erects enormous barriers to their entry into the market. The only way these newcomers can pursue their business is to purchase a permit from an existing company, and those permits (which cost their original recipients almost nothing) don’t come cheap. In some cities, the right just to operate a taxi company can cost hundreds of thousands of dollars.

In Missouri, if Proposition A is adopted by voters, it will likely mean that the currently existing casinos are insulated against new competitors, and the existing casinos will gain the right both to choose who will be allowed to replace any failing operations, and to claim millions of dollars in exchange for that right. It is not likely that this will directly affect those who choose not to patronize casinos, but anyone who enjoys gaming needs to be aware of the potential consequences of this proposition.

Recently, the Institute for Justice released a response to criticisms aimed at their ongoing case against the regulation of interior designers. IJ’s original study, Designing Cartels, exposed arguments in favor of certification and licensure as baseless stabs at protectionism by current practitioners. Many objections leveled against the pro-regulation segment of the industry across the nation are identical to those relevant in St. Joseph’s consideration of contractor licensing.

The fact of the matter is, almost any attempt at regulation is orchestrated by industry insiders to address perceived threats to consumer satisfaction or public health. That alone wouldn’t be so troubling if the dangers they warned of were usually substantive. Personally, I see no need to use legislative tools like those that endorse the competency of doctors and nurses as prerequisites to practicing interior design.

In Missouri, interior design certification is handled by the Interior Design Council. Although individuals are still free to make decorating suggestions without the accreditation of a registered interior designer, the regulatory distinctions currently in place deny them the ability to advertise themselves competitively. The differences are akin to the distinction between a bookkeeper and a CPA. In the one case we sacrifice the virtues of a competitive free market to ensure that our bills are handled according to a standard. In the other, we endure higher prices and fewer alternatives in exchange for decorators who have spent superfluous amounts of time fulfilling coursework that is only questionably necessary to their trade.

I grant you that this AP story in the Post-Dispatch is a rather extreme example. I further grant that of all occupations requiring a license, I agree that doctors need them the most. All that being said, the referenced story of institutional racism is a good example of the problems that can occur when you empower current practitioners of an occupation to decide who else gets to make a living in that occupation. For a more recent example of the abuses that can occur when businesses and unions decide to keep competition out under the guise of “safety,” you only need to go back a few years to the mechanical code disputes in St. Louis County.

Most of all, though, this story gives me a nice segue to my recent op-ed about the consideration of contractor licensing in St. Joseph. The piece was carried by the St. Joseph News-Press last week, which we greatly appreciate — but they didn’t put in online, so you’ll just have to trust me on that. …

I blogged a couple of weeks ago about the North Carolina midwives who want the state to license them. Here’s an article about Massachusetts midwives who have followed suit. A state representative argues in favor of occupational licensure:

If the bill passes, they would have to apply for licensure and pass a series of requirements to practice legally in the state. “It will give any of the births currently being done more regulation and oversight,” Khan says.

This push for licensure might just be a strategy to legalize midwifery. Many Missourians, especially in rural areas, had a positive view of midwifery before the state allowed the practice. The legislation was controversial, but there hasn’t been public outcry about the fact that a private organization is licensing the midwives here. In states where the population is more wary of midwives, establishing a state board to oversee the profession could be the only way to legalize it.

On the other hand, lobbying for state oversight could be a way for the midwives to keep out competition and earn more money. The article notes that home birth with a midwife is much less expensive than seeing a doctor in a hospital. It doesn’t draw any connection between that and all the bureaucratic hurdles doctors have to jump through to be certified. If midwives have to go through a similarly long and costly certification process, you can expect the price for their services to jump.

If Massachusetts midwives need a state board to be recognized as legal, then I guess that’s what they have to do. But licensure should be a last resort.

Continuing a series of blog posts that began in April 2007, and which was on hiatus until now, let us again consider the numerous atrocious ways government has entered our lives, from the most overreaching nanny-state activity to more complicated financial instruments. Sometime in the mid-’90s, Bill Clinton declared, “The era of big government is over.” How wrong he was.

The International Herald Tribune has a kick-to-the-gut article about how it is now the responsibility of the federal government to buy people a home and send kids to college. I am by no means an expert on these issues, but I find it offensive that the government steps in to save everyone from themselves. In this entire mortgage imbroglio, it always gets overlooked that people bear the responsibility for taking on too much debt to buy a house. Nobody forced them to buy more house than they could afford at an adjustable rate mortgage with no money down. And why is it now the federal government’s job to guarantee all the student loans for college? It just sickens me that so many people are so happy to have the government take care of them.

Now, we’ll go into the think tank world for Reason’s newest video from Drew Carey. I have had discussions with plenty of people who support these types of health mandates / control freak laws. (I, myself, can even see the benefits of a few of them, like smoking bans.) The crazy thing, to my mind, is that many supporters argue that because the public pays for the health costs of so many people, the government has a right to regulate the way we live — i.e., banning trans fats or forcing people to wear helmets when they ride a bike. The insane thing is that this argument always comes from people who support greater government involvemnt in health care (i.e., socialism), so they put themselves in the perfect circle of arguing for more socialism in health care out of some moral imperative, and then arguing for the right to control our lives out of fiscal responsibility in health care. The idea that maybe we should let people live their own lives and then let them deal with the consequences of their actions — which, in come cases, will be negative — does not seem to enter their mindset. That would, of course, be too much freedom.

How does all this connect to Missouri? Well, we are the nation’s leader in saggy pants ordinances, so we have struck a blow for decency and telling kids we don’t want to see their boxer shorts. It’s also a nice excuse to stop them and check them for drugs, while we’re at it. It’s all very depressing, and my mood is not helped by the fact that the Cardinals will now be playing in Stella Artois Stadium.

Yesterday, the governor signed a new immigration bill that, among other things, stiffened penalties for employers who knowingly hire illegal immigrants. Reporting on the bill, the Joplin Globe notes:

We realize there are workers willing to do work and businesses who need those workers. Those workers stimulate our economy by buying goods and services from local sellers.

But there is no reason for that work, and the economic side effects, to occur outside the law.

Agreed. Forcing immigrants to operate outside of the law has several undesirable consequences. First, and foremost, in my opinion, it hurts the illegal immigrants, who tend to be extremely poor people looking for a better life. By being forced to operate outside of the law, illegal immigrants can’t expect the same degree of police protection and contract enforcement as legal citizens. As a result, they are more likely to be subject to violence.

Second, it increases the likelihood that an immigrant will commit a crime in two ways. Immigrants who would rather obey the law are less likely to immigrate if it means they have to break the law, while law breakers see immigration as potentially more attractive. So, their illegal status changes the composition of immigrants to include more law breakers. Also, once immigrants arrive in the United States, they are more likely to break other laws, because they are already here illegally. Violence may even be used as a contract enforcement mechanism, because recourse to the courts is out of the question.

Finally, the illegal status for most immigrants decreases the overall amount of immigration, because preventative measures increase the costs of migration. This means the U.S. will have less of the most valuable resource on the planet: the human mind. Not only does an increase in population through immigration help our economy for the reasons the Globe lists, but more minds leads to a better chance for technological innovation.

So, it seems natural to conclude that the governor made a mistake, and should instead petition federal legislators for an easing of immigration restrictions. Instead, the Globe concludes:

[The bill is] a big improvement over current state law, which simply takes away tax credits and abatements as a penalty. Combine those with federal punishments, and employers now have severe consequences to fear.

Wait … what? The Globe seemed to agree that immigration benefits the U.S. economy, which includes Missouri. And an increase in legal immigration would entail more open borders. Here is the author’s rationale:

People who work in the United States should be paid a fair wage and granted certain workplace rights. Employers should not be able to take advantage of a worker’s legal status by paying substandard wages and offering no benefits.

Apparently, the author has never been to Mexico. There is a reason so many Mexicans migrate here illegally in order to work for employers “paying substandard wages and offering no benefits.” In Mexico, the wages are even lower and the benefits are worse. Simply by moving here, they improve their lot. If the issue is a concern for the welfare of the illegal immigrants, letting them come here illegally is much better than not letting them come at all.

One of America’s oldest pastimes is coming under attack, and possibly for good reason. According to an article in today’s Post Dispatch, St. Louis is considering an ordinance that would curtail “cruising” in and around Fairground Park, especially during the weekends. City officials cite a spike in violence and congestion on Sundays as reasons why a new ordinance is needed:

Over the last two summers, Saturday has proved to be the most dangerous day of the week in the area. Every Saturday, an average of eight to nine violent crimes were reported. But this May, Sundays were the most violent day of the week there, with an average of about 11 violent crimes.

Normally, I would be against city ordinances restricting seemingly harmless activities such as cruising, but — assuming that there really are legitimate safety concerns — I have to side with the city. Granted, I’ve never before thought of cruising as a real threat to safety, so I am taking their word for it in this particular case. As much as it pains me to agree with limiting the activities of individuals, as soon as they infringe upon the safety of others, it is no longer their right to continue that specific activity.

Also, by congregating in large masses, these cruisers have made it almost impossible for other city dwellers to enjoy the benefits of Fairgrounds Park:

Antionette Bullay, who lives in the area, said the weekly caravan has grown so large and rowdy that all other activity comes to a standstill. It’s like a Mardi Gras every Sunday.

Considering that the park is public grounds owned by the city, everyone should have equal rights when it comes to utilizing this particular public good. These cruisers are infringing on the rights of others, therefore the city is acting within its realm of responsibility by limiting their ability to cruise. However, having never visited Fairgrounds Park or possessing any statistics on increased crime due to cruising, my position on this issue is based solely on the information contained within the Post-Dispatch article.

The inevitable has come to pass. The Missouri Textbook Transparency Act has become law.

I adopted this issue as my pet cause at the beginning of the summer, leading to a critical op-ed that received a little bit of attention.

It’s not surprising that the bill passed. I understand that only one senator opposed it as it glided through the General Assembly. I am, however, satisfied to see that its proponents have already begun apologizing for its inadequacies. From the AP article:

The law’s sponsor, Rep. Jake Zimmerman, D-Olivette, said his measure won’t help the price of new textbooks but could give students and their instructors more ways to save money.

I’d like to emphasize again how unlikely it is that any government mandate will positively affect the marketplace for used books. I contend that the combination of the law’s shortcomings and a vibrant online alternative to school bookstores offers virtually no benefits to outweigh the costs of market intervention. I don’t anticipate seeing an increase in textbook success stories for otherwise cash-strapped students during the coming years. More likely, this law will pass into obscurity, where it may or may not create hidden costs for buyers. If nothing else, it can serve as an example of unnecessary regulation in an area that has and will continue to be well-served by market forces.

Dr. Philip Anderson, Dean of the St. Louis University School of Medicine, calls for tuition assistance for students studying to be primary care physicians over at the St. Louis Post-Dispatch. His rationale is that there aren’t enough primary care physicians, and tuition assistance would provide an incentive for young bright minds to move into the field.

I suspect that the supply of doctors is relatively inelastic, and thus tuition assistance woouldn’t have much of an effect on the number of primary care physicians available. The problem is that the supply of doctors is fundamentally limited by occupational licensing laws. It’s no secret that it costs an enormous amount of both time and money in order to become a doctor in the United States. As a result, there are fewer doctors than there would be otherwise, and those who do become doctors enjoy much higher wages. In the end, this hurts the average family who has to pay more for medical services — particularly low-income families who are already strapped for cash.

The standard argument for requiring doctors to be licensed is that this protects the public from fly-by-night operations that only endanger the public’s health. There may be some merit to this argument when it comes to invasive surgery. When it comes to things like treating a cold or giving birth, however, the argument loses much of its force. You simply don’t need an M.D. to effectively do many of the things doctors do. What this argument ignores, though, is that fully functioning adults are capable of making their own decisions. It may be a useful service to warn the public about the dangers of not using a doctor for any given medical need, but requiring the public to use a doctor only limits the options available.

Speaking of midwifery, as Justin Hauke notes, the Missouri Supreme Court has just upheld a law to legalize the practice. Midwifery provides a textbook example of how occupational licensing hurts both the consumer and the competition. The Post-Dispatch reports:

Doctors’ groups have fought efforts to loosen the regulations, arguing that midwives lack training and that pregnancies can quickly become dangerous.

Even if this is correct — and it probably isn’t — this issue is fundamentally a matter of personal choice. We don’t allow the government to treat us like children when we decide what to wear in the morning; why shouldn’t we insist on autonomy when it comes to health care?

My fellow bloggers  have written quite a bit more about midwifery in Missouri — for example: here, here, here, and here.

Clearly, Eric Dixon played an influential role in yesterday’s Supreme Court decision.

Missouri now becomes the 38th state to legalize the use of a midwife, certified by a private entity.

In the Post-Dispatch’s coverage, the state’s medical lobby provided a statement:

Tom Holloway, who lobbies for the Missouri State Medical Association, said the new law jeopardizes public safety because it allows midwives to "provide unlimited services related to pregnancy: C-sections, drugs, epidural anesthetic, even abortions, without any state regulation or oversight."

This clearly misses the point. The state’s oversight and regulations haven’t changed. Any expectant mother can still choose to use an “approved” nurse/doctor and receive the same care as always. But they don’t have too. And that is the point.

The Southeast Missourian reports that the potential ban on casino construction might cost local developers a promising opportunity in Cape Girardeau:

Because companies already operating casinos in Missouri are sponsoring the ballot measure through an initiative petition and have refused to negotiate for a share in the Cape Girardeau project, [businessman David] Knight said he must attract an out-of-state casino operator to take part. He intends to have an application ready if the ballot measure fails to make the ballot or if voters reject the proposal.

“We’ve got nobody left in Missouri to talk to,” Knight said. “We are proceeding on in the meantime and getting a gaming partner.”

Thanks to the rhetoric-charged protectionism of the initiative and the short-term moratorium it spawned, Missouri stands to lose a large development to out-of-state builders. It appears that although no one in-state is willing to begin a project that faces considerable risk of being legally prohibited in November, Mr. Knight will be able to find someone else who will help him build his casino. If the initiative never materializes as law, Missourians will watch as recent regulatory debacles negatively affect the state’s businesses. If ballot issue is passed, we will never know the damages caused to state revenues, recipients of casino taxes, and entrepreneurial individuals like Mr. Knight.

Apropos my last post, the Ste. Genevieve Herald reports:

Under Missouri law, customers must purchase electric power from the utility that owns the service territory in which the customer is located. The Holcim cement plant site lies in CEC’s [Citizens Electric Corporation] certificated service territory. However, Holcim wants to buy its power from nearby AmerenUE (a portion of the plant site lies in Ameren’s territorial boundary) because the cement company says there would be very significant cost savings due to Ameren’s considerably lower rates.

This is an example of one of the many ways in which the regulation of natural monopolies can create undesirable outcomes. Allowing Holcim to purchase its power from AmerenUE would increase competition in the energy market and thus put pressure on CEC to find ways to cut costs. In a normal functioning market, this is exactly what would occur. However, the state government has granted CEC an exclusive right to sell electricity within it’s geographic area — exactly the opposite of what would be beneficial for consumers. Do you smell perverse incentives? I do.

CEC defends itself, claiming that:

[...] the electric cooperative has the exclusive right to sell power to customers in its certificated service territory, adding that the contract signed by Holcim in 2002 binds the cement manufacturing firm, and that allowing Holcim to purchase power from someone else will jeopardize the utility and raise costs for other customers.

Part of the problem is that CEC is never jeopardized. In a market, firms must be efficient and innovate or cease to exist. CEC doesn’t have that problem, and thus can get away with inefficient operations and high prices. A consequence of the exclusive territorial right granted to CEC (and other utility companies in Missouri) is that the loss of one customer raises prices for other customers — but this is the symptom, not the disease. Treating the disease will almost always do a better job of solving the problem than treating the symptoms. In this context curing the disease entails removing state-enforced territorial monopolies and allowing competition at least the chance to break down natural barriers to entry.

According to the Springfield News-Leader:

The Public Service Commission is allowing Laclede Gas Company to charge customers an estimated additional $127 over the November through March winter heating season. Regulators have already approved similarly sized purchase gas adjustments for the Empire District Gas Co., AmerenUE, Atmos Energy and Missouri Gas Energy.

The natural gas industry is an example of a natural monopoly. A natural monopoly faces a unique cost structure, in which high fixed costs that present a significant barrier to entry for competitors combine with low marginal costs that allow the monopolist to set its price significantly higher than it would under competition. The textbook argument for regulating natural monopolies is that if regulators can force the monopoly to set its price equal to the marginal cost of the last unit produced (in this case, of natural gas), society benefits from higher levels of production and lower prices.

The problem is, that is one huge "if." In order for regulators to force natural monopolies to set their prices correctly, they have to know both what the correct price is and be motivated to enact the regulation necessary to correctly set the price. In real life politics, neither assumption seems likely. Only the monopolist has any real idea of what industry costs look like, and regulators almost assuredly have less information — especially given the incentive for the monopolist to inflate and misrepresent costs. In addition, regulators face perverse incentives to collude with the monopolist, as well as to prevent any changes — technological or otherwise — that threaten the need for the regulatory commission to operate, and thus for the regulator’s job to remain intact.

Deregulation is not without faults, but the primary benefit to be taken into account is the innovation it spurs. If any industry has abnormally high profits, such as under a natural monopoly, there is an extremely large incentive for outsiders to break down the high cost barriers to entry and compete with the natural monopolist. Under regulation, the natural monopolist is less likely to face this sort of competition and more likely to entrench itself with a static state of technology. In the long run, Missouri would probably benefit from deregulating various natural monopolies in order to let competition and innovation break them down.

Early this week, the Missouri Gaming Commission mandated a restriction on the number of casinos allowable in the state. The move was justified as a prohibition on any sudden actions by would-be casino owners in anticipation of a possible referendum that might permanently prohibit entrants to the gaming business.

The Jefferson City News Tribune correctly discredited the moratorium as naked protectionism of the industry supposedly being regulated. Faced with the prospects of increased competition and a larger tax base, consumers and policymakers alike would benefit from the lack of restrictive policies like this. The only parties that benefit financially from the moratorium (or the referendum it’s behaving like) are the currently established casinos, which are now partially exempt from the required efficiencies of market competition.

Arguments in favor of the moratorium are founded on strange conceptions of the state’s relationship with the market. Speculation that the gambling industry needs special treatment because its revenues are highly taxed is ludicrous. For the most part, artificial barriers to entry will only consolidate gambling revenues to fewer casinos while limiting potential long-run growth. Any decrease in revenue that might result from free competition would probably come from a reduction of monopolistic pricing. Although proponents of the moratorium might possibly defend such monopolistic power because of its implications for state income, I hold that any such intervention is extremely inappropriate. Why would the government be permitted to promote monopolies for one industry while breaking them up for the majority of others?

The suggestion that new casino projects shouldn’t currently be allowed because of a potential referendum also rejects market mechanisms. If developers are bold enough to begin a project in the face of possibly imminent legal prohibition, why should the state stop them? To my knowledge, no other industry is so simplistically regulated against basic market risk.

The current moratorium and the potential ballot issue provide nothing but damaging regulation that arbitrarily selects winners and losers. Regardless of their personal opinions about casinos, Missourians should identify poor policies and consider their universally negative consequences.

Special thanks to the St. Joseph News-Press for reporting on an op-ed I wrote a few weeks ago. I hope that this coverage opens some debate about a relatively obscure bill that is in danger of being signed.

From the report:

The bill’s sponsor, Rep. Jake Zimmerman, D-Olivette, Mo., has a degree in economics and law degree from Harvard. He refers to the Show-Me Institute analysis as “over simplistic and flawed.”

“If you’ll pardon the expression,” Mr. Zimmerman said, “he’s taking a freshman year economics textbook approach to the problem, which does not accurately reflect the real world circumstances that we’re talking about.”

I urge readers to critically read my op-ed to search for the deficiencies Mr. Zimmerman is referring to. I agree that the interaction between supply and demand is essential to any freshman economics course, but I don’t agree that it is inappropriately considered in my commentary. His criticism would be more satisfying if it was specific.

Mr. Zimmerman correctly points out that my take on the bill hasn’t "drummed up any public outcry." I hope that the small publicity it recently received engages Missourians outside of academia and the legislature to give this bill a hard look as it sits on the governor’s desk. After all, you can’t oppose poor legislation if you don’t know it exists.

The points that Justin has made about how zoning laws create a certain security for property owners and their mortgage companies are valid, but he misses the point in a way similar to Mr. Stokes’ earlier argument: That security comes at a price much steeper than is commonly realized.

A free society is, almost by definition, unpredictable. Where people have an abundance of liberty, you can never be certain how changes and innovation will render investments (whether in property, education, or profession) of little value. That unpredictability is extremely uncomfortable for people who have committed enormous resources to any particular endeavor (like, say, investing in airlines or high-risk mortgages), and they will want to do everything possible to protect their investments. All too frequently — and, admittedly, motivated by what they believe to be the best of intentions — these people ask the government to secure their investments by passing legislation that will presumably prevent (or remedy) changes in the market that will disadvantageously affect their interests. Every time the government acquiesces, it does so to the detriment of someone else’s liberty.

David should be well-acquainted with the aftermath of such legislation, because he is currently working on a project involving occupational
licensing. Licensing schemes arise for almost precisely the same
reasons as zoning laws — their proponents are merely trying to secure
their investment in their business or profession. After all, where a
cosmetologist has dedicated thousands of dollars to earning a degree
from an approved school, why should their earning potential be
challenged by "unschooled" competitors offering services for far lower
rates? Or why should extra competition be allowed in taxi markets
where there are already "plenty" of cabs and new drivers might drive down
fares? Or why should a family that has operated a small community store
for decades be forced to compete against a Wal-Mart or Target? Thus,
motivated by concern for the established interests, lawmakers dictate
that only cosmetologists with a ridiculous amount of schooling have any
right to practice that profession, and only cab drivers who can
demonstrate the "necessity" of their services have any right to enter
that market, and that in some areas no big box retailers will be allowed to compete with the local mom-and-pop establishments.

The thing is, the free market’s unpredictability and flexibility work in favor of a lot of people, and in favor of the system as a whole. Regulation and red tape tends to hamper economic growth. Deregulation, on the other hand, allows innovation and rapid economic expansion. Liberty allows entrepreneurs to adapt to changing conditions, meaning that if an enterprising property owner sees a market for a Star Wars memorial, they can build one and thus take advantage of the combination of their property and their ingenuity. If the neighbors don’t like the idea of living near this sort of attraction, they are not bound to suffer because they have a multitude of options. Not only could they try to recover money damages for any harm done to their ability to peacefully enjoy their property, they might discover opportunity of their own by capitalizing on the market for a community composed of Star Wars aficionados. Admittedly, a disavowal of obtrusive regulation might result in some of the inconveniences that Justin mentioned, but even if one discounts the intrinsic value of freedom, a commitment to liberty is likely to be more beneficial to all concerned in the long-run.

Another issue that Justin overlooked is that the simple act of imposing zoning laws itself devalues property, owing to the owners’ loss of ability to develop it as they choose — a fact that was long ago recognized in Missouri’s courts. Initially, of course, the Missouri Supreme Court refused to allow any zoning law that was not designed to protect the health and safety of the community, but even when they departed from that strict stance, the court would only permit the imposition of zoning ordinances if the affected citizens were paid compensation for the loss of their right to use the property. A few years later, the court took leave of its prior wisdom, allowing government to act with impunity in placing value-reducing restrictions on individuals’ use of their properties. Thus, the use of zoning laws is something of a counterproductive solution for those worried about how their neighbors’ actions might adversely affect their property values.

Properly understood, the government absolutely has the authority to see that citizens are held accountable for abuses of their liberty and that victims of nuisance are compensated for harms wrongfully suffered. But it cannot properly be the government’s responsibility to secure the investments of some at the expense of the liberty of others. In the end, these protectionist laws result in the injustice of the government picking winners and losers. The winners are those whose interests are protected; the losers are those whose liberty is unwillingly stripped from them. I understand Justin’s concern that an immediate return to strict
protection of property rights could prove more chaotic than many would
like to see, but similar arguments have been used in other contexts to
postpone enforcement of constitutional freedoms. I, for one, do not believe we should delay the realization of liberty because of potentially unfounded fears of destabilization.

According to a Post-Dispatch article, the metropolitan St. Louis area can expect sharp increases in sewer bills during the next few years. Increases will be necessary to follow an EPA mandate that regulates how the metro area deals with sewage overflows regularly caused by inclement weather. The current practice of dumping excess waste in natural waterways will be replaced by an infrastructure project that could cost more than $4 billion.

Is it worth quadrupling the average household’s sewage tax to create an expensive system that offers help only sporadically? The EPA seemingly addressed potential problems with waste in rivers by requiring warning signs last year. Although this measure understandably wouldn’t satisfy conservationists, everyone should weigh benefits and costs, especially when replacing a system that has worked for a long time. The article also notes that current spillways include the Mississippi and the River Des Peres. Frankly, the current system poses no threat to anyone wise enough to stay out of already-polluted bodies.

Overly zealous environmental regulation should not be allowed to impose unnecessary costs on anyone, especially a targeted area with an sufficient policy already in place. Bullying like this only harms St. Louis’ economic condition, both in absolute and relative terms.

While doing some research for one of my many bosses, David Stokes, I ran into a number of city ordinances that left me shaking my head. Now, don’t get me wrong, St. Louis is a great city, but some of these ordinances led to laughter in the office. For example, did you know that in the city of St. Louis you are only permitted one pot-bellied-pig per household? Sure, you may not think this is a bad ordinance, but I’m worried about my personal freedom, ladies and gentlemen. What about those people who have a collection of their favorite lawn gnomes? Are they just supposed to forget about them? If you start taking away people’s Vietmanese pot-bellied-pigs, you are going down a slippery slope of government regulation, my friend.

In the same city ordinance, it proclaims that individuals are not allowed to raise or keep rabbits, because it is deemed a public nuisance. That’s right, owning a rabbit in the privacy of your own home is somehow infringing on your neighbors. So, who is going tell this guy that his furry little friend is a "public nuisance" at the next town hall meeting? And, probably most importantly, who is going to uninvite  the Easter Bunny to the next family function? Although these ordinances are ridiculous and easy to poke fun at, they are also a perfect example of government over-regulation. It is not the role of the government to rule every aspect of our lives. I think George Will summarized the role of the ideal government best when he said the government should "deliver the mail, defend the shores, and get out of the way":

Yesterday afternoon, Sen. Kit Bond outlined his energy bill, which somehow faltered in the Senate. It seems that typical politicking got in the way of a bill that could have substantially lowered our rising gas prices. Shocking. I know. This bill would have helped combat the ridiculously high gas prices in several different ways. It called for environmentally friendly drilling in places such as Alaska and oil shale deposits in the Rocky Mountains, which would have relieved some of our dependence on foreign oil while increasing the supply. This spike in gas prices may be attributable partly to speculating, but mostly to simple economics. I don’t care how many econ courses I take, it all comes down to supply and demand. With the increase in world demand, something needs to be done to increase supply.

Sen. Bond also called for "Streamlining the oil refinery permitting process, without relaxing any requirements." Hooray! I am OK with taking baby steps to get the the free market, as long as we get there. The U.S. government has put up so many regulations, it has become nearly impossible to build refineries. Hopefully, this "streamlining" can lead to some deregulation, and we can see a substantial drop in gas prices. All in all, I think Sen. Bond summed it up best when criticizing a colleague who actually suggested the oil industry be nationalized (no joke, albeit that is funny):

"I can tell you, you don’t want the government running energy. The free
market may not be perfect, but it doesn’t screw things up like the
government does."

Oh, and of course we can talk about the taxation issue as well, but Justin has already covered that aspect.

Missourinet covers the continuing drama of the pre-need funeral scandals (seriously, what a bizarre thing for a scandal). It seems the summer will be spent in a series of investigative hearings designed to disentangle the issue:

The state has gotten an agreement with National Prearranged Services to suspend all sales of pre-need contracts in Missouri….and has gotten a consent order with the parent company, Lincoln Memorial Life, to stop manipulating the trust funds without telling those buying the plans.

For a quick refresher, prepaid funerals allow households to set aside money for funeral expenses with an insurance broker. Brokers are then legally required to set aside the money in a trust fund, but they maintain rights to 20 percent of the total amount, in the event of cancellation or other changes. Apparently, unscrupulous insurers haven’t been doing their duty and have skipped town with large sums of their clients’ funds. In April, Nick, our former-intern-turned-law-student, argued:

While we advocate free-market solutions here at the Show-Me Institute that shy away from extensive government interference, I don’t think anyone can reasonably claim that a market with a definite and defined end is truly free, and I hope stronger legislation can be put in place to protect consumers of these unique services.

First of all, better laws aren’t the problem. Enforcing the existing laws is the problem. Whenever a scandal erupts, the gut reaction is to legislate because at least it creates the pretense of doing “something.” But if insurers broke the existing laws, what makes anyone think that they won’t do the same thing with news laws? Not only will we face the same problem, but we’ll invite greater government intrusion into our lives.

Second of all, prepaid funerals are a colossally stupid idea. You could just set aside $1,000 in a savings account for 40 years and have more than enough to pay for a funeral. Plus, you’d have the freedom to do whatever you wanted with that money, without penalty, in the event that you decided not to use it for a funeral. Unless there’s some kind of great tax benefit or significant funeral discount for a prepaid plan, I see no reason not to use a savings account instead. Really, I think David said it best in one of his previous posts:

If agreements are not being honored, then the companies should be prosecuted. But that should not serve as a jumping-off point for more laws or more control. [...]

Just because something may be a bad deal [...] should not automatically be a reason for the government to jump in to protect us from ourselves. This is the type of reaction that leads to the ever-expanding role of government in our lives.

Indeed.

It’s certainly a rarity that market-regulating legislation uniformly helps economic growth. New standards facing Missouri scrap metal trading, however, have the rare distinction of being sensible. Although the law imposes new responsibilities on metal buyers, the parameters of the regulation are reasonable and definite. Only an unfamiliar seller with $50 or more in scrap is subjected to documentation requests. The law’s rigidly defined limits and minimal allowance for subjectivity are praiseworthy.

Aside from being horrendously wasteful, metal theft can affect businesses and homeowners of almost every variety. This new measure may seem especially appropriate to the construction industry, which, in addition to suffering the rising costs of metal, is especially vulnerable to materials theft.

Hopefully, the felony penalty attached to stealing certain metals and the fines associated with buying them will deter dangerous and costly criminal activity. If not, at least police will have a new tool for tracking perpetrators. After all, everyone gets along better when traffic lights don’t go missing.

The proposed Textbook Transparency Act hopes to reduce seemingly exorbitant prices to students by mandating that publishers and bookstores provide a wealth of extra information about their books, and restricting their ability to bundle individual items for sale. Although our skepticism has been explained, the Missouri bill’s strong chances of success and the national momentum behind similar legislation warrant further consideration of this issue.

My fellow critics have described how mandated information sharing will fail to effect any change for all but the least discriminating consumers (those who don’t check prices online). Also, the potential abuses of a tuition-funded book purchasing system are glaringly obvious. They rightly suggest that communication costs between producers and bookstores, especially regarding bundling, would necessarily increase prices to students.

The simple fact is that textbook authors enjoy an intellectual monopoly. The tremendous input costs of time and expertise, coupled with the overwhelming risk that a new book will not replace the existing standard, afford successful authors handsome payoffs. Textbook bundling is simply a tactic employed to partially reconcile monopolistic prices with what consumers think is fair. If Missouri lawmakers take away this option, producers will have little trouble reclaiming their lost profits elsewhere. In fact, more common than bundles are supplementary software packages and personalized website codes sold alongside lone textbooks. At the end of the day, authors of quality textbooks could always resort to overt price increases without facing much penalty from eagerly subscribing professors.

Only one provision of the act, the ineffectual mandated information bit, addresses the bookselling practice most widely begrudged among college students — the seemingly unnecessary and frustratingly frequent release of new editions. I can hardly think of a more potent insult to a room full of economics majors than to deny them aftermarket prices on their textbooks so that they can receive essentially the same product, now with four font colors. But then, legislation cannot (and should not) decide for authors when it’s appropriate to revise their works.

In the end, successful authors deserve proper reimbursement for providing a superior resource. As the chances of the Textbook Transparency Act’s passage grow, Missouri lawmakers should reevaluate the practical inefficiencies of such a bill. Outraged students and parents should join them in analyzing how supply and demand account for the allegedly unfair prices, realizing that those prices are in no way connected to any frustrations that they might have with other costs of education.

I meant to write about this a few weeks ago when I first heard about it. Earlier this month, a Senate panel endorsed a bill to repeal Missouri’s mandatory helmet law.

This is one of those examples of a law designed to “protect Missourians from themselves.” Would I ride a motorcycle without a helmet? Absolutely not, are you crazy? But should I be allowed to? Yes.

Opponents argue that the law’s repeal will result in more highway deaths, possibly increasing taxpayer-funded health care costs and driving up insurance premiums.

I used to hold that insurance belief as well, until I looked into the evidence a little more. From what I’ve read, there is only weak evidence that seat belt and helmet laws decrease highway fatalities, and mixed evidence that safety device laws actually cause more erratic driving (potentially offsetting the decrease in premium costs).

The insurance argument is evoked a lot, and several state supreme courts have upheld the argument. To the best of my knowledge, however, there is no empirical connection between helmet laws and insurance premiums absent some circumstantial studies about long-term effects. I would also argue that the numbers most often cited are one-sided, focused on the cost of helmet repeal alone. They don’t address the cost borne by society for enforcement and installation of “mandated safety devices” — such as airbags, etc. — that taxpayers and individuals incur already (think of all those seatbelt law commercials and the amount of time police officers are forced to spend enforcing such laws rather than, say, preventing violent crimes).

So I could go either way on this. If the law does in fact lower taxpayer costs, then I might find it justified. I tend to believe, however, that the law’s primary intent is simply to “protect us from ourselves.”

As I am writing this post on Thursday afternoon, I am not officially licensed to practice law in the state of Missouri. Tomorrow, when many of you will be reading this post, I will officially be licensed to practice law in this state. In order to convince the powers that be to give me their blessing to use my lawyering skills, in February I had to take and pass an arduous and mostly useless ritual called a bar exam. The test is insanely difficult, in no small part because it requires each examinee to demonstrate memorization of a range of legal concepts that they will likely never use in their practice. For example, even though my expertise is in constitutional litigation, I had to be prepared to answer — from memory — detailed questions related to wills and estates, family law, secured transactions, and commercial paper.

As with most people who have passed a bar exam, now that a couple of months have passed, I probably couldn’t tell you much at all about those subjects without first doing some research about the question asked — which is, in fact, what attorneys tend to do in the real world! In short, my ability to earn a living in the profession for which I am trained depended on my developing a (short-lived) command of information that would be thoroughly useless to me after the exam.

All of that is to say that the idea of licensing attorneys is little more than a convoluted way of restricting the services available to consumers and bolstering the rates we are allowed to charge clients, all under the guise of "protecting the public." Well, that’s just silly and patronizing. People recognize the difference between gourmet restaurants and street hot dog vendors, and they can also recognize the difference between a white-shoe law firm whose attorneys graduated from Ivy League schools and a small-time local lawyer who went to night school so he could learn just enough to hang out his own shingle.

I’ll happily admit that there are some bad attorneys out there already, and that there would likely be more if you didn’t have to get permission from the state in order to practice. But academic credentials and a license from the state is no guarantee of quality, just as many fine, smart lawyers might have trouble passing the bar exam. In fact, the people most likely to hire a lawyer with questionable credentials are those who otherwise wouldn’t be able to afford legal representation at all. So the issue really boils down to why the state should be in a position to tell citizens that they are not permitted to choose who could best fulfill their need for legal representation.

The Post-Dispatch carried a story today that touches on this question. Attorneys from Missouri’s Office of Chief Disciplinary Counsel are trying to strip Mark Belz — an attorney with a distinguished 30-year career — of his law license because several years ago he used $175,000 of his clients’ funds for his own purposes. This is serious business, as attorneys are ethically bound never to breach their clients’ trust in this way, and those who do are almost always disbarred. But several facts make Mr. Belz’s case unique.

First off, he recognized that what he had done was wrong without being caught. He confessed, apologized, and made restitution for the funds used. Second, at the time of his wrongdoing he was suffering from bipolar disorder — an illness for which he is now being treated — and his psychiatrist has testified that he is unlikely ever to repeat such behavior. Finally, and most importantly, his clients forgave him and continued to use Mr. Belz as their attorney. To the best of my knowledge, no one is interested in pressing criminal charges.

No one, not even Mr. Belz, is contending that he is without fault. But the market provides a ready solution for situations like this, without depriving someone of their right to earn a livelihood. When any service provider, regardless of their profession, breaches the trust of a client or customer, word gets around. Potential clients or customers can discover these sorts of transgressions by exercising a little bit of diligence on their own part. Armed with such information, it should be up to the consumer rather than the government to decide whether they value the provider’s services enough to risk similar experiences.

Removing the state’s authority to exclude people from the legal profession is a market solution that would address a number of issues. Aspiring attorneys could apprentice under practicing attorneys, and thereby would not have to waste thousands of dollars and years of their lives in law schools whose courses are heavy on theory, but do little to teach students how to be lawyers. This would lower the costs of entry to the profession, relieving young attorneys of the pressure to charge high rates in order to pay off student debt. The larger pool of service providers would also result in lower-cost legal service, meaning that more people would be able to afford representation. And, most importantly, it would move us that much closer to being a society in which ordinary people are free to seek their own happiness and prosperity without first obtaining the government’s permission.

The Missouri General Assembly has approved a bill, which Governor Blunt will almost certainly sign, loosening the certification requirements for people who would like to teach, if they have a college degree in the subject they hope to teach and can pass an alternative certification test. (Hat tip to to my friend Don for the suggested link.) Here is yesterday’s Post article on the issue. In short, this bill will allow a retired chemist from Monsanto to teach high school chemistry without having to go through the lengthy teacher certification process. Rep. Muschany puts it very well here:

"We’ve got a crisis of a teacher shortage facing us," said Rep. Scott Muschany, R-Frontenac, the sponsor of the House version of the bill. "If Harry S Truman were alive today, he wouldn’t be allowed to teach history to 12th-graders."

I’ll leave additional commentary on this change to our education people, but I think this is a great improvement for education in Missouri. I commend Rep. Muschany for leading the succesful fight.

There’s an article in the Post-Dispatch today about the "hormone-free" milk labeling dispute. Supporters of the bill that would forbid the (truthful) labels make it clear that it’s not this particular language they object to, but any labels that make their competitors’ milk look better than theirs:

"Somebody could say there’s no battery acid in their milk," said Rick Scheer, a producer from New Haven, Mo. "Their assumptions make my milk look bad."

Does he want a law against saying that, too?

Seriously, people, I had no idea that after I testified (or, more accurately, attempted to testify) on Monday about occupational licensing that St. Louis papers would have a bunch of stories related to the issue. This week’s Riverfront Times has a story about the bail bondsman industry, which we have covered before on this blog. You really have to read the entire thing to do the story justice, but here are some classic quotes from it — and, yes, I think bail bonding is one industry where some type of occupational registration can reasonably be required.

How about this description of the Missouri Professional Bail Bondsman Association:

"They pretty much only represent themselves at this point," says Angela Park, a bail bond industry blogger. "I can see why other people might be hesitant to join. It kind of leaves a bad taste in your mouth that Jackson was in the leadership and that he paid a bunch of lobbyists and state reps off and tried to murder his competitor."

Just the type of leadership that deserves to decide who should and should not be able to enter the business.

That, however, hasn’t stopped the MPBBA from continuing to lobby the state legislature with new proposals. In February, Sen. Maida Coleman, a St. Louis Democrat, introduced Senate Bill 1247 that would take oversight of the bail industry away from the Department of Insurance and place it in the hands of a "professional bail bond board."

At least one bondsman sees the licensing system for what is really is:

On her Web site, Park decries the proposals as a "bail bond power grab" by the MPBBA and writes that, "The association would like to pass legislation that will feed revenues to the association and require its continued existence."

But, as I said, you really have to read the whole thing.

The above title is what Senator Scott told me when I testified Monday in front of his committee about the harm done by occupational licensure in Missouri. Be that as it may, sometimes lost causes are the best ones of all. It’s like a Billy Joel song, but instead of an angry young man in Manhattan, it’s an aspiring economist in Jefferson City.

Whether or not I’m 100 years late (and he is probably right), the issue will always be here, because existing firms will always try to use political muscle to limit their competition from the outside. That is, frankly, what the entire Department of Professional Registration is about: bureaucrats colluding with business groups to form cartels — nothing more.

As an example of how the issue will always be around, I present two articles dealing with it, in different ways, from today’s Post-Dispatch (hat tip to Combest for one of them; I forget which). We have the return of the annual midwifery debate, as discussed in this article. I love how Senator Loudon cuts through the b/s and gets to the point in the debate:

"I’ve come to recognize a turf battle when I see it," Loudon said. "It’s time to call it what it is and decide are you going to protect their turf, or are you going to let the people of Missouri make their choice?"

People should be able to make choices, and if use of a midwife is one of them, then they should be allowed to do so. The other article is about prepaid funerals, which Nick the Intern blogged about the other day. The issue is that sellers of prepaid funerals have apparently not been properly putting the money in trusts, as required. From what I can see, this is a criminal matter — but no doubt the funeral home industry will try to take advantage of it for more regulatory control. If agreements are not being honored, then the companies should be prosecuted. But that should not serve as a jumping-off point for more laws or more control. Prepaid funeral plans are a dumb idea for most people. I like this simple advice from the article:

His recommendation is basic: Consumers should put their money in a savings account or an investment in their own name rather than prepaying for a funeral.

Just because something may be a bad deal (referring to the 20 percent allowed to be kept by the seller in case of cancellations or other changes) should not automatically be a reason for the government to jump in to protect us from ourselves. This is the type of reaction that leads to the ever-expanding role of government in our lives. And I though The Nintern was coming along so well. …