Regulation and Security

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.