One thing that government officials do well is establish barriers to market innovation and erect hurdles for entrepreneurs to clear. The Show-Me Institute is committed to showing how burdensome regulations stand in the way of economic growth and individual prosperity. Market solutions lose their strength when bound by red tape.
Counties in Missouri have for decades had the power to levy annual license fees on any public establishment that hosts a pool table. A holdover from earlier times when pool halls were seen as social ills, the tax remains in many areas today. This amounts to an endorsement of some types of recreational activities, and a punishment of others.
Many of us who have elderly family members living in nursing homes feel a natural urge to protect them through government regulation. But before passing new legislation, it’s important to determine whether the proposed regulations will actually have the desired effect of protecting Missouri’s elderly citizens.
Natural disasters and terrible weather inevitably lead to warnings about price gouging. But high prices during emergencies are simply a measurement of supply and demand. If prices aren’t allowed to rise, people who don’t really need scarce goods tend to buy more than they should, and businesses tend to produce less than they should, leading to shortages.
Those calling to reform the payday loan industry are misguided in their attempt to help consumers. Interest rates for such loans are exorbitantly high, it’s true, but that’s because the borrowers tend to be high credit risks. Capping those rates would likely drive some desperate consumers to even more odious sources of credit. Programs to increase financial literacy would be a much more effective solution.
Most industries are open to all firms willing to make the necessary initial investments to enter the market. If I want to open a bar in my neighborhood, can clear the zoning restrictions, and have the necessary capital to rent a space, fill it with booze, and market it to my prospective customers, then that bar will open, with me as its proprietor. This open process creates an environment in which businesses compete for customers, encouraging the innovation that leads to higher quality and lower prices. Requiring a prospective bar owner to obtain a permission slip showing a need for another bar in their neighborhood would obviously be ridiculous. Unfortunately, this is exactly the requirement made by the state of any entrepreneur looking to offer health care services.
Imagine if the law required every restaurant to serve its customers a four-course meal. Cafeterias and fast-food chains would be out of business. Eating out would become more expensive. There would be fewer restaurants to choose from, and a lot of people might just stay home for dinner. The only people who would benefit from such a law are the owners of upscale restaurants. They’d make out like bandits as the law put their competition out of business.
