Stop Them, Before They Innovate Again!

Wednesday, February 8th, 2012

Three stories about regulations purported to protect consumers . . . that hurt consumers.

  • In Minnesota, a classic case of cartel protectionism as the owner of a funeral home owner fights the needless regulations that help others in his business gouge grieving families. My favorite part of this story is when the head of the rent-seeking trade organization uses the phrase “entrepreneurial dynamo” . . . as an insult! He’s hard working! He’s winning customers by charging them less money! He must be stopped!
  • Fox News looks at the infuriating regulatory barriers innovative tech start-ups are facing. The “Uber” ap, for example, lets you summon a black cab from your phone, track how far it is away, and pay through your phone. Great, right? Not according to the historically corrupt (allegedly!), terrified-of-transparency D.C. Cab Commission: “They’re operating illegally, and we plan to take steps against them,” says D.C. Taxi Commissioner Ron Linton. “What they’re trying to do is be both a taxi and a limousine,” Linton has said. “Under the way the law is written, it just can’t be done.” The cab/limo distinction is nonsense. It’s only important to cab and limo companies who have a financial interest in keeping them separate. There are more examples at the link.
  • A federal judge has ruled against a motion to dismiss the lawsuit some independent Nashville driver services have filed against the city’s new livery regulations. My intern Jessica Greene wrote about these blatantly protectionist regulations a couple months ago. The regulations require all driver services to charge a minimum of $45 per ride, which could be double what some independent driver services were charging. And proponents of the regulations—mostly bigger driver services already charging that much—of course say the regulations are vital to “protect consumers from ‘rogue taxis.'”

And of course it’s not just consumers who get hurt. The Nashville regulations will likely put several immigrant and minority-owned private car service companies out of business. (“Companies” probably gives the wrong impression. Most of them are one guy, one car.)

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17 Responses to “Stop Them, Before They Innovate Again!”

  1. #1 |  Michael Chaney | 

    Re: the Nashville story – not all are “one guy and one car” operations. There’s a company here that I’ve used a couple of times in the past to get to the airport, and they charge me $25 for the privilege. They send a sedan + driver, typically not the newest car but comfortable, clean, and anything else I’d want. And the drivers are friendly.

    The irony is that I would pay a regular cab $25 or more for the same ride, but without all the extras (help with luggage, set time for pick up, etc.)

    Companies like this is what they’re trying to stop. These guys provide a good service at an honest price.

  2. #2 |  Dave Krueger | 

    I don’t think you should use the word “corruption”. This is America. It’s only corruption when it happens in other, less advanced, countries.

  3. #3 |  Radley Balko | 

    The irony is that I would pay a regular cab $25 or more for the same ride, but without all the extras (help with luggage, set time for pick up, etc.)

    This is exactly why they want the regulations. The big car service companies actually argue that customers get confused when they can pay less for a clean town car than they do for a dirty cab. The position itself–that customers are somehow harmed by riding in a nicer car for less money–is absurd. But so are the assumptions behind it: (A) There’s some important reason to distinguish a “cab” from a “car service.” And, (B) price is the way to make sure that distinction endures.

    It’s such a bizarre thing to argue. And yet our Metro Council apparently bought it.

  4. #4 |  C. S. P. Schofield | 

    I would like to point out what seems to me to be a connection to the ongoing immigration mess;

    The regulations that protect entrenched businesses frankly smell to me very similar to the way federal immigration regs trap thousands of poor people in the grey economy. Dig at this enough and what you find, it seems to me, is parasites on both ends of the political spectrum and certainly from both major parties who are desperate to keep the downtrodden they so often cry crocodile tears over as downtrodden as possible, lest they rise up and succeed. Because if they were to succeed the fatuous inutility of the self-selected elites would be obvious, and somebody might shove them off their comfortable pedestal and tell them to get a real job.

  5. #5 |  BamBam | 

    Dave, they’re also savages when they’re in other countries and when they’re trying to repel invaders, I mean “freedom spreaders”.

    http://lewrockwell.com/grigg/grigg-w245.html

  6. #6 |  BamBam | 

    “And yet our Metro Council bought it”

    or more aptly “our Metro Council was bought off”
    follow the money …

  7. #7 |  Bill Roberts | 

    I haven’t seen too many stories about Primateen Mist (besides one or two at the Reason website), but it’s pretty aggravating to me. I used it for years to control my asthma. Then the government took it off the market, because its propellant as somehow destroying the ozone layer. And just to add insult to injury, they took the generic forms of albuterol off the market, too.

    The result is, that instead of paying $15 for something to control my asthma, I’m now paying $45 for. Add in about $25 per inhaler for the doctor’s fee for writing the prescription, and it comes to $70. That means I’m paying about $110 per month more.

    Thanks, FDA.

  8. #8 |  Eric | 

    I have to say that some modicum of taxi regulation seems okay to me. I arrive in a strange city, maybe not even in my home country with a language barrier and I get in a strangers car. In a marked taxi with a meter I know exactly what I am getting and have a reasonable expectation of a certain minimum level of service.

    Of course goverment and modicum don’t go together so well but…

  9. #9 |  Boyd Durkin | 

    Cabs are a cash business, and so is bribing local politicians.

  10. #10 |  Mattocracy | 

    And yet, Libertarians are silly for opposing government regulation.

  11. #11 |  tired dog | 

    In Houston the Yellow Cab co. owns just about every cab in town and city hall as well.

    I support rogue cabs, jitneys and ‘have car will transport’ outfits of all stripes.

  12. #12 |  Brutusettu | 

    Fox News is behind the times, Matt Yglesias has been covering that type of stuff for longer
    http://www.slate.com/blogs/moneybox/2012/01/13/dc_taxi_commission_acting_to_shut_uber_down.html

  13. #13 |  Dave Krueger | 

    #7 Bill Roberts

    The result is, that instead of paying $15 for something to control my asthma, I’m now paying $45 for. Add in about $25 per inhaler for the doctor’s fee for writing the prescription, and it comes to $70. That means I’m paying about $110 per month more.

    You should tell this to the FDA. It’s probably not often that they get any positive feedback showing what a great job they are doing for their drug industry buddies.

  14. #14 |  Cyto | 

    And of course it’s not just consumers who get hurt. The Nashville regulations will likely put several immigrant and minority-owned private car service companies out of business.

    True, although I don’t think pointing this out to the Nashville government will have much effect. I think they probably view that as more of a feature than a bug….

  15. #15 |  Kitty Antonik Wakfer | 

    Government regulations/laws/etc. – via any of the enormity of agencies at all levels, federal, state, county, city – are only more than ignorable words because of government enforcers – individuals who are willing to threaten and actually initiate physical force.

    As for the current problem of government enforcers, both domestic policing agents and military participants, keep in mind that there are far more non-enforcers than enforcers in the US (and in any other location). Therefore it is quite possible for a large number of non-enforcers who cease voluntary association with these enforcers to have a persuading effect on them, if reasoned logic doesn’t do it first. For all who disagree with their various harm-causing actions, don’t voluntarily associate with these government enforcers – no sales, no service, no camaraderie, no anything! And do the same to anyone who you know is a direct supporter of such enforcers. This is shunning and ostracism, used down through the ages with considerable success towards modifying others’ behaviors viewed as unacceptable.

    So instead of simply blaming “the system” and focusing all attention on this ethereal quagmire (evil apparition), take a more substantial tangible approach. Make the position of government enforcer one that is truly unpopular and there will be a lot fewer of them. Stop enabling/supporting government enforcers in any manner and they will cease to exist. With fewer enforcers to obey their orders, governments can’t do the amount of harm they get away with now. In fact, without any enforcers, governments will also cease to exist.

  16. #16 |  Steamed McQueen | 

    How the free market works in America:

    1) Start business

    2) Become reasonably successful

    3) Lobby or bribe government for regulations making it harder for anyone else to get into that same business.

    Happens every time, in every business.

  17. #17 |  c andrew | 

    Bill,

    The FDA is now doing this across the board. Here are two examples:

    http://abcnews.go.com/Health/WomensHealth/price-preventing-premature-births-skyrockets-drug/story?id=13104588#.TzbVCMU7VBk

    The drug company gained exclusive rights to produce a progesterone shot used to prevent premature births in high-risk mothers from the Food and Drug Administration in February, and soon after announced that they would list the drug at a price 150 times higher than the cost of the non-branded version women have been using for years. The shot has been available in unregulated form from specialty compounding pharmacies for years for $10 a pop for years, but now, marketed as Makena, the drug will cost $1,500 per dose — an estimated $30,000 in total per pregnancy.

    http://www.redlinepharmacy.com/blog/1953-price-of-preterm-labor-drug-skyrockets-now-that-it-is-fda-approved.html

    How can they get approval for something that’s been around for so long?

    Hydroxyprogesterone caproate for injection used to be sold as Delalutin, a product that went off-patent more than 30 years ago. Even though the drug was no longer manufactured, compounding pharmacists could still acquire the raw ingredients and prepare prescriptions for patients. KV Pharmaceuticals used the publicly available formula, invested in clinical studies, and submitted their application to the FDA as a “new” drug. That’s completely legal and is something many entrepreneurial pharmaceutical companies have done lately – make old drugs “new” again.

    This very much akin to the basmati rice debacle a decade ago where, because a gen-tech company had modified certain strains of basmati rice, they tried to get all strains under their control due “adulteration.”

    http://www.nytimes.com/2001/08/25/business/india-us-fight-on-basmati-rice-is-mostly-settled.html?pagewanted=all&src=pm

    I am currently on a medication that has been in clinical use for more than 50 years. It’s price has increased 10 fold in the last few years because the FDA, in return for “clinical trials,” has granted patent rights to a manufacturer and has stopped all compounding pharmacies from making this sulfa drug. As if “clinical trials” are going to show anything that a half century of clinical use hasn’t.

    This is rent-seeking at its most immoral level. And while I have been sympathetic to the regulatory burdens on the pharmaceutical industry, this abuse of intellectual property means that when they are nationalized my only response is going to be, “What goes around, comes around.”

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