Listen to a podcast about the paper here.

The post Why Markets Matter for Human Progress and Prosperity appeared first on Show-Me Institute.

Yet research tends to show CON has the opposite effect of its original intention, leading to higher costs and reduced access to care for patients. This is not surprising, of course. As President Ronald Reagan once joked, often when the government comes “to help” is when the public should get concerned.

Missouri can stop “helping” in this counterproductive way by unwinding its CON law. By repealing its certificate of need law through removing sections 197.300-197.367 from the state’s statutes, Missouri could promote competition, reduce costs, and increase access to care for all Missourians.

To find out more about the CON issue in Missouri, read our 2019 paper on the subject, End Certificate of Need in Missouri.

The post Repeal Certificate of Need For the Health and Welfare of Missourians appeared first on Show-Me Institute.

How can we prevent this from happening? An analysis of these data yielded an interesting finding—a little competition might just do the trick. And how do we get that competition? We encourage charter schools to open in every type of district, even those with “good” schools that don’t “need” them.

Generally speaking, suburban school districts are believed to be the highest performing and the most protected from competition. When open enrollment was considered in Missouri, suburban districts balked. The fear was that students from low-performing urban districts would try to enroll in their schools while providing no local property tax dollars and depleting their test scores. This is not unique to Missouri. When open enrollment programs, in which students can choose any school in the state, are voluntary for districts, the higher-performing suburban districts often opt out.

But, according to this new analysis, when charter schools open in suburban districts those that have chosen to sit out open enrollment realize that they’re going to need to get in the game. Their students can already leave for a charter school so they might as well start competing with other districts in the area for open enrollment students. Of the six states analyzed, the one with the most competition—Arizona—also had the best growth performance. More importantly, the finding held for low-income students. Seventeen percent more suburban schools achieved more than one year of growth for their low-income students than achieved less than one year of growth. In Ohio, where there are no suburban charter schools and open enrollment is voluntary, the numbers were reversed. More suburban schools achieved less than one year of growth for low-income students than not.

Of course, Missouri has no suburban charter schools or voluntary open enrollment. We have suburban districts such as Columbia 93 that have become complacent and middling to low performing. We should be encouraging high-performing charter schools in these districts to push them out of their comfort zones.

The post It’s Time to Get Out of the Comfort Zone appeared first on Show-Me Institute.

But while the jury is still out on whether society-wide lockdowns really work to stop pandemics, the jury is not out on the importance of supply-side health care reforms: supply-side health care reforms work, and they help patients.

Of course, we’ve made this point often, and one reform we have emphasized in particular is Certificate of Need (CON) repeal. In short, a CON law “gives government the power to manage competition in a given industry through the allowance, or disallowance, of new providers, facility expansions, or certain services as defined by the law.”

In Missouri, the health care facilities covered by the state’s CON law include nursing homes and hospitals, and competing hospitals and care centers are included in the process of deciding whether to allow new competitors into their health care markets. The economics here are simple: more competition means more choices, which puts downward pressure on prices. That’s good for customers and their pocketbooks, but naturally, incumbent hospitals and other care centers would rather have less competition.

But just because hospitals and other care centers might not want competition doesn’t mean the government should be empowered to prevent it. Imagine if grocery stores, or gas stations, or restaurants had a say in deciding whether consumers could have new options for groceries, gas and dining. It’d be bizarre, anti-market, and anti-consumer. Yet, this is how large swaths of Missouri’s health care market operate, and this system survives at least in part because most of the public doesn’t realize what’s happening.

Supply-side health care reforms like interstate license reciprocity have both immediate benefits for combatting a pandemic as well as long-term access benefits beyond the pandemic itself, and such a reform was very popular because the benefits were immediate and easily explainable. But it’s important for legislators to start considering long-term supply-side reforms, like CON repeal, that may have been a low priority during the pandemic because the benefits would be slower to materialize. Fortunately, several bills have been filed for 2023 that would repeal the state’s CON law; I hope they fare well in the coming year.

Something that sounds like “hospital construction reform” may be a low priority when people are being exposed to a lethal respiratory disease, but policymakers should prepare our health care system for the (hopefully) vast period of time between now and the next pandemic, when more typical health care needs will need to be met and the price for care will be an acute concern for payers. Competition in health care is a good thing for patients’ wallets, and Missouri should repeal its CON law to ensure the state’s health care market is as competitive as possible.

The post Certificate of Need Repeal Must Become a Legislative Priority appeared first on Show-Me Institute.

Most who fight to limit opportunities for food trucks are afraid that food trucks will compete with, and potentially harm, existing brick-and-mortar businesses. My family owns restaurants, so I’m supportive of brick-and-mortar restaurants and I’m sympathetic to this line of thinking. The reality is that food trucks will definitely increase competition, but that is not something that should be feared. Competition among businesses should be expected and encouraged. In the same way that brick-and-mortar businesses compete with one another, food trucks should compete with existing businesses—and may the best food and dining experience win!

Market competition encourages entrepreneurship and leads to the best options for consumers. Food trucks will only do “harm” if consumers overwhelmingly decide that they prefer the food trucks over the existing businesses. And harm is in quotation marks because creative destruction is how we make progress. If food trucks were to overtake brick-and-mortar restaurants in the market (which I think is unlikely), it would mean we are moving forward in a direction chosen by consumers.

Misplaced fear of this process often leads to unnecessary and burdensome regulations. For example, many cities have extremely strict regulations that hinder their operations—and some cities simply don’t allow them at all. (These are, of course, different from regulations that reasonably deal with traffic and public safety concerns.) In cases of overregulation, lawmakers are picking the winners (brick-and-mortar restaurants) and losers (food trucks) instead of allowing consumers to decide. We need to stop being afraid of food trucks (and competition) and give them the freedom to operate.

The post A Policy Scare Story: Don’t Be Afraid of Food Trucks (or Competition) appeared first on Show-Me Institute.

Once upon a time (in 2008), Missouri had the lowest electricity prices in the Midwest at 6.84 cents per kilowatt hour, while our friends in Illinois paid the highest electricity prices in the region at 9.26 cents per kilowatt hour. (The Midwest is defined as Illinois, Indiana, Michigan, Ohio, Wisconsin, Iowa, Kansas, Minnesota, and Missouri.) Now, as of data from 2019 (the most recent data available), Illinoisans pay less than Missourians do (9.56 cents versus 9.68 cents) and have the second-lowest electricity prices in the Midwest, while Missouri’s electricity prices rose to the middle of the pack in the Midwest.

Moreover, when taking inflation into account, Illinois’ real electric prices decreased 13 percent, while Missouri’s increased by 19 percent—the third-fastest increase in the country between 2008 and 2019.

What gives?

The largest difference between electricity markets in Missouri and Illinois is that Illinois allows customers to choose between competing electric service providers, whereas Missouri still operates on a century-old monopoly model. In Illinois, customers have more than 150 electric service providers to choose from. Options for plans include fixed-rate, variable pricing, prepaid, or green energy plans. The pressures of competition ensure that electric providers operate more efficiently and are more responsive to customers.

In contrast, Missourians, wherever they live, have only one choice for an electric service provider—their government-sanctioned and regulated monopoly. Because there’s no competition, monopoly utilities don’t have an incentive to increase efficiency and don’t fear losing any business.

As the electricity price data above show, one of these systems has been working better, and it’s not Missouri’s. Lower electric prices mean households have more money left over for other needs. It also creates a more attractive environment for businesses. Missouri lawmakers can learn something from Illinois—pursuing competitive reforms to Missouri’s electricity market could be worthwhile.

The post Want Better Electricity Prices? Be More Like Illinois appeared first on Show-Me Institute.

Although it’s a little trite, “the early bird gets the worm” is harmless enough as far as old sayings go. Still, living by those words is one thing, and governing by them—as Lake Ozark seems to be doing—is quite another.

Food truck operators want to set up business along The Strip in the city of Lake Ozark, but the Planning and Zoning Commission is prohibiting them from doing so. While identifying consumer desire for food truck options in this area, the Commission says that its intent is to protect brick-and-mortar businesses that are already there. As the daughter of a restaurant owner, I fully support brick-and-mortar businesses, but why is the Planning and Zoning Commission choosing to protect these businesses at the expense of others, namely food trucks? Why are we only allowing the early bird a chance at getting the worm?

The commission fears that food trucks would compete with existing businesses. That is not something that should be feared; it should be expected and encouraged. In the same way that existing businesses compete with one another, food trucks should compete with other restaurants—and may the best food and dining experience win! It’s through this competition that we end up with a collection of businesses that consumers really want. That’s how competition in the market should work; consumers, not commissioners, pick winners and losers. It shouldn’t be the early bird that gets the worm, but the best bird.

After the Great Recession, many were looking for cheaper, on-the-go food options, and a lot of culinary experts were unemployed, laying the groundwork for a surge of food trucks. (And it’s not a stretch to think that our current economic situation could increase the demand for food trucks even more.) From 2013 to 2018, the number of food truck establishments in the U.S. doubled, employing over 16,000 workers in 2018 and reporting sales of $1.2 billion in 2017 according to the U.S. Census Bureau. More options increase the chance that consumers find exactly what they are looking for at a price they are willing to pay. Additionally, more businesses mean more entrepreneurship and opportunities for workers.

Other cities have found ways for food trucks to operate that would be better options than an outright prohibition. For example, Clayton allows for food trucks to operate for city or private events provided that they follow specific guidelines. Branson prohibits food trucks from operating within 100 feet of a restaurant and also allows for food truck courts. While these examples still place regulatory burdens on the food trucks, they show that there are ways for brick-and-mortar restaurants and food trucks to coexist.

Existing businesses should not receive special treatment just because they already exist. We allow brick-and-mortar restaurants to compete with one another—is it really that dangerous to allow them to compete with food trucks? Lake Ozark says it’s working on an ordinance to lay the groundwork for food trucks operating in the area. I say, let all the birds go and see which one gets the worm.

WATCH: More From Show-Me on Food Trucks

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And if you’re like me and not one of the best drivers in the world, well, there’s always a seat in the stadium or at home. After all, it is a spectator sport.

But what’s all this have to do with Missouri? A lot, actually. Indiana, home to the 500, is often viewed as a peer and competitor to Missouri, and in recent years, the Hoosier State has started pulling ahead of us in economic growth. At the end of World War II, Missouri’s population was a touch larger than Indiana’s; today Indiana is larger than Missouri by a half-million people, with a bigger economy to boot.

For years, Missouri has behaved more like a spectator than a racer in this economic competition. Missouri is falling behind, and as Institute analysts have written before, Missouri’s not just falling behind Indiana in the race for growth.

The good news is it seems like Missouri policymakers may finally be turning a corner. The 2021 legislative session was generally a very positive one that built on some of the good government and deregulatory progress made in recent years. In fact, the state started gaining some national accolades for the work of its policymakers, especially the work on licensing reforms. As someone who’s been at the Show-Me Institute for about a decade now, I can tell you that national accolades for Missouri lawmaking weren’t just rare before; they were virtually non-existent.

But will this positive trend continue? Time will tell. There is so much work left to be done for real school choice, tax credit reform, protecting individuals’ rights and reining in overreaching local government, and so many other issues that we’ve talked about again and again. While the 2021 session was good, it still could have been much better.

“If you ain’t first, you’re last!” Ricky Bobby declares after a race in the comedy Talladega Nights, and while the line’s tied up in Will Ferrell’s patented oafishness, the mentality isn’t exactly wrong. Missouri policymakers need to—and should continue to—think not in terms of what maintains the status quo in the state, but in terms of what can make the state the best.

The race for growth and reform has already started, and right now Missouri is stuck in the middle of the pack. Missouri policymakers, in this summer’s special sessions and beyond, should race to win against our fellow states. Racing to do anything short of winning for Missourians is losing.

The post “If You Ain’t First, You’re Last!” appeared first on Show-Me Institute.

• Attempts to license certain occupations are almost always initiated by the current practitioners of that field. Whether framed as a safety measure or a benefit to consumers, don’t be fooled. Practitioners personally benefit from limited competition and higher prices brought about by licensing. It is the classic case of concentrated benefits versus dispersed costs.
• Promises about what occupational licensing will achieve often fall short. Instead of improving service quality, we often see unintended consequences like do-it-yourself accidents and stifled innovation. Much of this can be explained by the fact that licensing increases costs. For example, higher costs lead to more do-it-yourself work, and that leads to more accidents.
• In the absence of licensing, people are not regularly subject to fraud and abuse as proponents of licensing would have you believe. Many Missourians hire from particular professions via recommendation from a trusted third party, like a friend or review website. If the worker does a poor job, he will stop being recommended and will receive poor reviews. As my colleague David Stokes said in his testimony (who was himself paraphrasing economist Adam Smith), in a competitive market, job performance and reputation put bread on a worker’s table, not a state license.

Ultimately, occupational licensing increases costs to consumers, limits competition, and hinders Missouri’s economy. Missouri has lost thousands of jobs and millions of dollars in output due to licensing requirements. During pandemic-related shutdowns, it is especially important to encourage entrepreneurship and remove regulatory barriers to work. Last year, Missouri took a huge step forward by allowing occupational licensing reciprocity and temporarily waiving some occupational licensing requirements. Let’s make sure that policymakers continue to move Missouri in the right direction.

The post Don’t Forget the Basics of Occupational Licensing appeared first on Show-Me Institute.

Competition: Each product is competing for a spot on your shopping list, and each store is competing for your business. Stores have big sales and new products and advertisements appear to try to win your business. Searching for the best deals among stores is the epitome of a competitive marketplace.

Entrepreneurship: Ever see a new product and think, “Wow, that’s a good idea”? Well, someone before you had that exact thought, and they turned it into reality. Your shopping list is full of the results of entrepreneurial ventures, and your holiday purchases will help determine which ones are successful.

Options: An overwhelming number of options is perhaps both the best and worst part of holiday shopping, but we’re lucky that the free market gives us all these choices. Entrepreneurs have the freedom to pursue new ideas, stores have the opportunity to try and outdo competitors, and shoppers have the option to buy the products they want. And if you want to avoid the chaos of the season, you can choose to shop online!

Holiday shopping would be pretty lackluster without these (and other) free-market concepts. As I’ve said before, products find their way to your home through these concepts, so remember the free market when you’re checking things off your list this year.

The post ‘Tis the Season . . . of Free-Market Activity! appeared first on Show-Me Institute.

Moving from a system . . . [that has] 1000 of something to one of something sounds a lot like a monopoly, and monopolies don’t always work in consumer interests.

The sheer cost of a Medicare for All program would dwarf our current federal spending levels and require massive new taxes on Americans. The Atlantic reports:

The Urban Institute, a center-left think tank highly respected among Democrats, is projecting that a plan similar to what [two candidates] are pushing would require $34 trillion in additional federal spending over its first decade in operation. That’s more than the federal government’s total cost over the coming decade for Social Security, Medicare, and Medicaid combined, according to the most recent Congressional Budget Office projections.

In recent history, only during the height of World War II has the federal government tried to increase taxes, as a share of the economy, as fast as would be required to offset the cost of a single-payer plan, federal figures show. There are “no analogous peacetime tax increases,” says Leonard Burman, a public-administration professor at Syracuse University and a former top tax official in both the Bill Clinton administration and at the CBO. Raising that much more tax revenue “is plausible in the sense that it is theoretically possible,” Burman told me. “But the revolution that would come along with it would get in the way.”

Health care providers, health insurers and pharmaceutical companies are not always “good guys” in our health care system, but they compete with one another, which serves consumer interests. Policymakers should go much further in compelling such competition and preventing these industries from leveraging government for their own interests. But Medicare for All goes in the very opposite direction—monopolizing control of our health care system, reducing choice and trusting government to provide these services instead.

It was a bad idea last year. And it is still a bad idea this year.

The post “Medicare for All” Remains a Terrible, Terrible Idea appeared first on Show-Me Institute.

Why is there such a difference between the two? Charles Silver and David Hyman, authors of Overcharged: Why Americans Pay Too Much for Health Care, argue that it is because of the free market.

Traditional providers, like hospitals and clinics, are expensive and inconvenient for the consumer because their pricing is primarily based on what insurers will pay. In comparison, retail providers, like the clinic found in your grocery store, have to price their services in order to attract customers and strive for convenience. The two offer many of the same services but have completely different ways of doing business.

Retail providers are becoming an increasingly disruptive challenger of traditional providers. This should not be surprising—when providers are able to compete the results typically are lower-priced and more attractive options for the consumer. Just as internet shopping is disrupting brick-and-mortar businesses, retail medicine is disrupting traditional medicine, an industry that is used to being insulated from competition.

A great example of this is the way retail medicine is transforming audiology. While traditional audiologists charge steep prices for hearing aids and hearing checks (with additional charges for things like testing, warranties, and damage coverage, which can often make up 70 percent of the total price of a hearing aid), retailers are improving services while lowering costs. Costco Hearing Aid Centers offer similar services to that of audiologists without the additional charges.

Silver and Hyman write:

As more retailers enter the field, prices will become easier to compare and competition will intensify. Bargain-hungry consumers will look for better deals, but they will be interested in quality too . . . With pressure on both quality and price, retail offerings are bound to improve. (pg. 325)

Competitive pricing offered by the retail sector also allows people to avoid markups that come with using third-party payers. While most retail providers take insurance, patients pay out-of-pocket one-third of the time. In contrast, patients who visit primary care doctors pay out-of-pocket only ten percent of the time. Silver and Hyman view this as an important factor in the success of retail providers:

When we pay for health care the same way we pay for other services—by spending our own money instead of an insurer’s—good things happen: prices fall and quality improves as providers compete for business. (pg. 320)

Competition provides good things indeed. Want to learn more about market solutions for health care problems? Join us in St. Louis or Kansas City to learn more from Cato Institute scholars Charles Silver and David Hyman as they discuss why the American health care system is so dysfunctional and costly.

The post Health Care Desperately Needs Competition-Retail Medicine Provides It appeared first on Show-Me Institute.

But that may soon change. Senate Joint Resolution 25 would finally give Missourians a choice about choice, at least for our electricity. The legislation authorizes a statewide referendum on electricity competition that should spark a much-needed conversation about the benefits of reforming the state’s 100-year-old regulatory structure and requiring those that provide our power to compete for customers rather than letting them take Missouri taxpayers for granted.

For most of the 20th century, every state operated under an electricity system similar to Missouri’s. Local monopoly utilities provided power to customers and were heavily regulated by state utilities commissions. Electricity rates were set based on the utilities’ expenses (plus a return of profit), leading to a situation where the more a utility spent, the more money it made. This system encouraged wasteful spending and discouraged innovation, but since every state had the same system, it was hard to compare what was to what could be.

Beginning in the 1990s, however, a number of states began to restructure their electricity markets, allowing for greater competition. Today, more than a dozen states have adopted some form of choice for electricity.

And the results have been positive. From 2008 to 2016, the average price of electricity decreased 8 percent in states with competition, while rising 15 percent in monopoly states. Unfortunately, Missouri has gone in the wrong direction on this front; electricity rates in the Show-Me State increased by nearly 40 percent between 2008 and 2016. While Missouri once had among the lowest electricity rates in the nation, today electricity rates in Missouri are above the national average.

Lower electricity prices nationally have translated into billions in cost savings for consumers. For example, one recent study found that the introduction of electricity competition in Illinois resulted in $37 billion in consumer savings from 1998 to 2013. Another study found $15 billion in savings for electricity customers in Ohio over the course of this decade.

The fact that competition leads to cost savings for consumers shouldn’t be surprising. One of the chief ways businesses attract customers is by offering better quality services at a lower price than their competitors. Businesses under competition are constantly looking for new ways to improve their products or make them at a lower cost, and that applies to hamburgers, to health care, to schools, to electricity . . . to just about everything.

By contrast, when utilities are shielded from competition, they tend to resist innovation and are slow to adapt to changed circumstances. In the coming decades we are likely to see major changes in the way the electricity system operates. New technologies will give consumers much greater control over where they get their power and how they use it. Competition will help ease this transition.

Missouri itself increasingly faces competition from states such as Illinois, which can offer businesses the advantages that electricity choice provides. It’s time for Missouri to think seriously about whether to join more than a dozen other states and allow electricity competition. It would be good for the state, good for our businesses, and good for our families.

The post Electricity Choice Would Be Good for Missouri Consumers appeared first on Show-Me Institute.

Simply cutting the vast majority of tax incentive spending would accomplish this; the less discretion the states have to spend your money on their cronies, the better. But a secondary option, relating directly to the incentive war itself, would be the establishment of a “truce” between Kansas and Missouri—for both states to largely or completely prohibit the issuance of incentives that would draw businesses from one state to another. What that might look like was outlined in a recent Kansas City Star article: 

Missouri first approved a bill prohibiting the use of state incentives to poach businesses in Douglas, Johnson, Miami or Wyandotte counties in Kansas in 2014.

But to go into effect, the law required Kansas’ governor to enact a similar ban on incentives to lure businesses away from Cass, Clay, Jackson or Platte counties in Missouri.

Kansas, under then-Republican Gov. Sam Brownback, balked at the plan. He came back with a proposal of his own two years later, but it ultimately yielded no agreement.

The Missouri law expired in 2016. A bill filed this year by Sen. Mike Cierpiot, R-Lee’s Summit, would renew it through 2021 to open the door for further discussion.

Extending the period for the truce to be offered is an altogether reasonable proposition, one that I would hope the state of Kansas would consider. In an ideal world, Missouri wouldn’t be doling out vast amounts of money on special projects; bad policy is still bad policy, and tax credit reform that puts a hard cap on incentives should still be the ultimate goal. That said, an all of the above approach that includes a “truce” is nonetheless appropriate as the state’s overall tax credit problem is whittled down.

The post Will There Be a Cease-fire in Kansas City’s Economic “Border War”? appeared first on Show-Me Institute.

THE SOLUTION: Repeal the Certificate of Need law.

Eliminating CON requirements would allow Missourians to benefit from true marketplace competition in the health care arena.

WHO ELSE DOES IT? California, Colorado, Idaho, Indiana, Kansas, New Hampshire, New Mexico, North Dakota, Pennsylvania, South Dakota, Texas, Utah, and Wyoming have no CON law.

THE OPPORTUNITY: Missouri would join a growing list of states that have opened the door to real health care competition.

KEY POINTS

• CON laws separate patients who need care from doctors who want to provide it.
• More competition would create pressure to reduce health care prices.
• Missouri would be able to compete with nearby states, including Kansas, where smaller hospitals are opening up because they aren’t restricted by CON laws.
• CON reform is an opportunity to help communities threatened by the loss of existing hospitals.
• Ending CON would empower patients to make choices that benefit their families, rather than support the government-backed competitive advantages of hospitals.

SHOW-ME INSTITUTE RESOURCES

Essay: Demand Supply: Why Licensing Reform Matters to Improving American Health Care

Blog Post: Missouri’s Certificate of Need Law Needs to Go

For a printable version of this article, click on the link below. You can also view the entire 2018 Missouri Blueprint online.

The post 2018 Blueprint: Certificate of Need appeared first on Show-Me Institute.

That’s why news broken by Samantha Liss at the St. Louis Post-Dispatch should be very welcome to patients in Missouri and elsewhere, as it appears the market for at least some pharmacy services is about to grow:

Throughout the past year, and without much fanfare, Amazon.com Inc. has gained approval to become a wholesale distributor from a number of state pharmaceutical boards, according to a review of public records….

According to a review of records by the St. Louis Post-Dispatch, Amazon has received approval for wholesale pharmacy licenses in at least 12 states, including Nevada, Arizona, North Dakota, Louisiana, Alabama, New Jersey, Michigan, Connecticut, Idaho, New Hampshire, Oregon and Tennessee.

An application is currently pending in the state of Maine.

An Amazon spokesperson told the Post-Dispatch via email that the company does not comment on “rumors and speculation.”

It’s a little complicated, but one of the big questions surrounding the Post-Dispatch report is the ultimate aim of the Amazon filings—that is, whether Amazon wants to open up a pharmacy benefits management business only, or whether a soup to nuts model is also in the tech giant’s future. Does Amazon want to be Express Scripts? Does it want to be Walgreens? Or does it want to be both? I would welcome all of the above, actually, and I suspect millions of Amazon customers would feel likewise.

And despite the failure of our Federal representatives to actually do what they said and repeal Obamacare, there is still reason to be optimistic about the trajectory of care in this country. Along with the reform initiatives above, tech innovations like 3D printing of prosthetics, and much more, the potential entry of Amazon into the pharmaceutical space reiterates that the future of health care as some government product remains anything but assured. After all, people are markets, and markets are powerful things.

The post Is Amazon Getting into the Pharmacy Business? Let’s Hope So appeared first on Show-Me Institute.

In just 20 years as a public company, it has experienced a thousand-fold growth in sales – going from $148 million in 1997 to $138 billion in 2016 and a projected $160 billion in the current year. Adjusted for splits, the price of the stock has gone up 200-fold – from a high of $5 a share in 1997 to $1004 a share today.

To paraphrase the bard, Amazon doth bestride the narrow world of retailing like a colossus. Others quake at its every movement. Back in June, when the company announced the acquisition of Whole Foods, the stocks of other grocery chains plummeted – with Kroger falling 26 percent in the two days following the announcement and SuperValu down 16 percent. Wal-Mart fell 5 percent. Within days, Amazon’s market cap went up nearly as much as the $13.7 billion it agreed to pay for Whole Foods.

In many years of writing about business and economics, I can think of no other enterprise that has come so far so fast. Even so, waxing biblical in your 2016 letter to shareholders, you said it is still “Day 1” (the first day of creation) in the company’s evolution. When someone asked you at a recent “all-hands meeting” what Day 2 would look like, you answered:

Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.

Your words prompt me to warn you that Day 2 may be approaching much more quickly than you think. Surely you don’t want to turn Amazon into a subsidy junkie. If that happens, Day 1 will turn into Day 2 in the blink of an eye.

Right now, cities and states across the country are competing with one another to throw big money – taxpayer money – at Amazon in the hope of being chosen as the site for Amazon’s proposed second headquarters. With one hand, you dangle the promise of up to 50,000 jobs paying an annual average of more than $100,000 per employee. With the other, you rattle a tin cup, stating in your request for proposals:

Incentives offered by the state/province and local communities to offset the initial capital outlay and ongoing operational cost will be significant factors in the decision-making process . . . . Outline the type of incentive (i.e., land, site preparation, tax credits/exemptions, relocation grants, utility incentives/grants, permitting, and fee reductions) and the amount. The initial cost and ongoing cost of doing business are critical decision drivers (emphasis added).

A few years ago, Boeing Commercial Airplanes, your cross-town neighbor in Seattle, initiated a similar nationwide bidding war for production of its latest big new wide-body – the 777X. In the end, Boeing decided to keep production at its massive facility in Everett, Washington – but only after winning nearly $9 billion in tax breaks and subsidies from the state legislature. That worked out to more than $1 million per promised job, or about $50,000 per year per job over a 20-year period (the tax breaks do run out eventually).

Maybe that sounds great to you. From your perspective, it may seem like the equivalent of having local and state governments pick up half of the anticipated HQ 2 payroll for a long time.

But think of the downside of making Amazon and its people deeply dependent upon corporate welfare. Think of the gross unfairness of huge tax carve-outs for Amazon that are denied to other smaller businesses (which have to pay for their initial costs and ongoing costs out of their own hard-earned dollars). How do you want your company and its people to succeed – by winning in the marketplace . . . or by securing a fatter portion of government largesse?

Last but not least, think of the hypocrisy of preaching a gospel of “obsessive customer focus” as the key to maintaining “Day 1 vitality,” while gouging money out of taxpayers. According to Consumer Intelligence Research Partners, there are now about 85 million Amazon Prime members – that’s 68 percent of all U.S. households! As Amazon becomes increasingly ubiquitous, most of every dollar that Amazon takes out of taxpayer pockets will be money stolen (or lifted) from its own customers.

As one of your customers told me, “I am never in favor of using my tax money to build someone else’s business so that it can sell products to me and profit off me a second time.”

The post Beware the Perils of Corporate Welfare: An Open Letter to Jeff Bezos appeared first on Show-Me Institute.

The city and the commission that oversees the airport have endorsed a plan to impose $3 pick-up and drop-off fees on TNCs serving the airport. That means every time a passenger is either picked up or dropped off at the airport by drivers for companies like Uber or Lyft, they’ll pay an additional $3 on top of their regular fare. There are two apparent motivations for the fees: (1) the airport wants to collect as much revenue as possible; and (2) taxis pay a $4 pick-up fee at the airport, and so regulators want to “level the playing field” between taxis and the more popular TNCs. There are also two fundamental problems with the proposal.

For one, taxis pay a special pick-up fee partially because they’re guaranteed fares at the airport. They queue at a designated area where, after waiting their turn, they get a fare. But this designated area wasn’t free to build, and TNC drivers cannot que there for guaranteed fares. TNC drivers respond to passenger requests in real time, and so must find fares “on their own.” Moreover, TNCs impose no special costs on airports like taxis do in terms of a designated waiting area or congestion. So if the TNC business model doesn’t necessitate these extra costs, why should TNCs or their passengers pay for them? Should TNCs be punished for being efficient? The answer may irk you as much as it does me: because of the “convenience of being allowed to offer curbside pickup.”

Secondly, it is not the government’s job to pick winners and losers. By protecting some market participants at the expense of others, policymakers hurt ordinary consumers—the overwhelming majority of society—in two ways. In the present case, consumers must first pay artificially higher prices for a service they demand. Second, economic progress is slowed by propping up failing businesses. Some city officials say that allowing TNCs to operate at the airport could hurt taxis’ business. They’re exactly right. Ford’s Model T hurt the carriage industry, and the advent of electric refrigerators hurt the ice industry—but society as a whole grew richer. The market destroys some jobs as others are created. Imposing fees on TNCs will not “level the playing field”; it will simply protect government-favored businesses from the pressures of the market (i.e., the preferences of consumers).

If policymakers truly want to level the playing field, they should eliminate fees, regulations, and other perks that help some at the expense of others—for both TNCs and taxis. Deregulation has already proved itself effective in the vehicle-for-hire industry. I hope officials keep this in mind going forward.
 

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To help cab companies compete with Uber and other ride-hailing firms, the Metropolitan Taxicab Commission voted Wednesday to slash license fees and reduce inspection requirements.

The new rules, which take effect Thursday, also cut minimum liability insurance requirements for the cab firms.

Fingerprint background checks still will be required for new cab drivers but they’ll be able to get them from lower-cost private vendors instead of at the commission office.

The St. Louis Post-Dispatch article linked above goes into greater depth on what is changing in Saint Louis, so hit the link to get the full rundown. Show-Me has discussed the issue at length for a number of years now, and more recently my colleague Graham Renz in particular has repeatedly raised flags about the behavior of Missouri’s taxi cartels and their impact on consumers. After the Legislature defanged taxi commissions statewide, this week’s regulatory changes were more or less a foregone conclusion.

On behalf of Graham, I have the privilege of saying that today’s events are no surprise. When you let the market work, innovators will innovate, or else be left behind, and it seems clear that the Commission has recognized and responded to that reality this week.

Whether in transportation or energy or some other sector of the economy, monopolies and oligopolies often work to the detriment of the average person and to the advantage of entrenched interests. Let the market—let competition, let innovation—work, and the result tends to be far superior to letting the status quo ossify, with the backing of government bureaucracy.

These reforms were long overdue, but they are here. Congratulations, St. Louis.

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