The unseen is as important as the seen

Via Professor Bainbridge, a fascinating and pithy dissection of the fallacy that businesses only succeed through government's munificence from Tom Smith at Californian blog "The Right Coast".

Unlike much other discussion around this topic, Smith turns it on its head and points out an issue that politicians have been much less keen to mention: how much has state and federal regulation prevented potentially successful and profitable business from even starting?

I don't see our young president taking credit on behalf of the state for all the failures it help cause, all the ideas that never got off the ground because the regulatory hurdles were so high, or all the established companies that never had to face competition because they had managed to get their rents written into law. This is part of the seen and not seen insight of Bastiat.

Intuitively it's obvious - make it harder and more expensive to start a business, and fewer businesses will be started. Existing businesses will be better entrenched and more prone to increase prices without fear of competition. If my plans for a cat shaving business require six months of filling in forms to register the business with the local chamber of commerce, monthly inspections by PETA consultants that I have to fund, and punitive "animal service taxes" in the unlikely event that I make a profit, then those Californian cats are going to stay furry, hot and bothered; I'm going off to Texas (where at least I can enjoy foie gras for lunch) and actually make something approaching a profit.

Read the whole thing.

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