State and Local Issues

Regulations Block New Businesses

In San Antonio, repairing furniture in the home is prohibited. Detroit will not permit street vendors to sell any hot food except hot dogs and sausages. New York City requires a license to fix VCRs. From coast to coast, would-be entrepreneurs are blocked by thousands of local regulations, say observers.

The pretext for the regulations is usually health and safety, but few "have anything to do with health and safety," says William H. Mellor, president of the Institute for Justice, a public-interest law firm. "They insulate monopolies from healthy competition that would lower costs to consumers."

  • After two years and $40,000 in costs, a businessman in Brooklyn, N.Y., obtained permission from the Taxi and Limousine Commission to operate a new van service serving low-income areas.

  • But a committee of the New York City Council then rejected his application, and only an extended political fight by Major Rudolph Giuliani got the council to relent.

  • Indianapolis Mayor Stephen Goldsmith found taxi service was limited to only 392 cabs -- with the result that it was cheaper to rent a limo to go to the airport than take a taxi.

  • Goldsmith appointed a Regulatory Study Commission, which recommended eliminating the ceiling -- resulting in lower fares and increased competition from 29 new cab companies.

Arbitrary regulations, says George Mason University economist Walter E. Williams, discriminate against "outsiders, latecomers and the resourceless."

Source: Randy Fitzgerald, "It's Your Business," Reader's Digest, July 1998.

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