This was originally posted on PoodleRose on August 7, 2013. Comments have not been migrated.
You might think that all it takes to start a business is a good idea and the necessary capital. And you would be wrong. The Cato Institute informs us that, in some states, you also have to have the permission of your would-be competitors before you can start a business:
There have been 39 applications for new moving licenses since 2007. Those that were not “protested” by existing moving companies were approved without incident. But in 19 cases, existing firms did object. And in all of those cases, one of two things happened: either the applicant gave up and abandoned the application, or the government denied it on the grounds that existing moving services were “adequate.” The state never approved an application that was protested by existing firms, no matter what. In one case, an applicant who’d been working for moving companies for 39 years was denied a license in a decision that declared him fully qualified–but said existing companies didn’t need the competition.
“Certificate of Public Convenience and Necessity” laws, also called “Certificate of Need” laws, allow existing businesses to effectively prevent new competition.
Consider what this would have meant to Henry Ford. Makers of buggies could have prevented Ford from competing with them, because there was no “need” for a horseless carriage. Or telephone manufacturers could have halted the production of cell phones, because land lines worked just fine. In fact, every innovation could be halted on the grounds that there is no need.
Visionaries and entrepreneurs like Henry Ford, Steve Jobs, and Bill Gates see a “need” long before others. Sometimes they truly create a “need” by introducing a product–like automobiles and smart phones–that soon becomes indispensable. But whether their product is a smashing success or an abysmal flop, they have a moral right to act on their judgment. If there is no “need,” the market will let them know pretty quickly. And if there is a “need,” then everyone benefits.
There is a crucial difference between entrepreneurs and bureaucrats when it comes to identifying “need.” Entrepreneurs risk their time, money, and reputation; bureaucrats risk nothing. Entrepreneurs offer values; bureaucrats offer threats of fines and imprisonment. Entrepreneurs allow consumers to act on their own judgment, purchasing the products and services that consumers believe to be beneficial; bureaucrats deny both entrepreneurs and consumers the freedom to act as they deem best.