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Local Lessons In Overregulation
By: Fisher Investments   Monday, May 14, 2012 5:55 PM
All these are costs, competition restrictions and barriers to entry—later passed along to consumers.

Next consider taxi medallions. Legally operating a taxi in many major cities requires the car owner purchase a medallion. In New York, that runs about a cool million—greatly limiting who participates. That means fewer mom-and-pop cab companies and more major fleets. But it also means fewer cabs overall, reducing competition. Simply, the risk of investing $1 million in a license—not including other costs of doing business—means a host of individuals who might otherwise compete won't.  In fact, government officials even acknowledge this by capping fares on certain routes. How do businesses respond? Cut back on fare-capped routes, maybe?

Common in major West Coast cities like Seattle, Portland and San Francisco, food carts—mobile eateries whose proprietors often specialize in one type of food—are quite popular. And in many ways, they're a great example of economics at work. The owners have identified an area in which they feel they have a comparative advantage and move to where it can best be captured. But competition is stiff. And in San Francisco, many food cart owners are facing a new form of competition.

A recent California state law bans food trucks operating within 1,500 feet of any school, on the grounds the students' diet should be restricted to healthier, cafeteria options—of course, implying cafeteria's food is either universally or generally healthier than food carts'. And since the law doesn't apply to stationary restaurants, we presume the government believes food produced in a non-mobile kitchen is somehow safer. (Data, please.) What's more, this isn't the only regulation, and it's not the only city with them.

The conversation globally regarding how best government can aid economies is so bifurcated and polarized many folks seem to have missed obvious opportunities, like cutting restrictive rules with little to no real benefit. Deficits aren't boosted by regulation cutting—neither is this an austerity plan dismantling social programs some desire.  If the US wants to lead the way along a different course, we suggest it should consider businesses' total regulatory load and slash accordingly.

*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.


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