Improving Our Standard of Living (Wattpad Edition)

Chapter 14: Too Many Regulations Are Bad

Market freedom is the extent of regulations that a government puts on businesses. For example, an American ban or tax on Chinese-made goods would reduce economic liberty.

The degree of market freedom also includes restrictions placed on consumers. For instance, banning US citizens from buying medications from Canada.

Some controls are vital for a healthy economy. But too many, especially overly bureaucratic ones, are counterproductive.

Take taxes for example. Businesses should pay at least some taxes. But laws and procedures are often more complicated than they need to be. There's no reason a country can't have a simple tax system that doesn't increase the cost of business.

Taxes can reduce the cost of business if revenue is spent wisely. The government can build infrastructure, redistribute income to the poor, or fund education. Revenue well-spent is good for the market even though companies help foot the bill. This would be truer if tax laws were simpler.

Think of a good, simple tax system not as a cost, but as an investment.

The Apollo Program—which led to satellites—and the interstate highway system are two examples of tax money well spent. Even though these programs were funded in part by corporate taxes, they led to the creation of trillion-dollar industries. They were good for business in the long run.

Imagine what we could achieve if we could spend tax revenue more wisely and reduce bureaucracy.

Small businesses are the least able to withstand bloated bureaucracy. Consider someone that wants to start a bakery from his or her kitchen. It sounds simple enough. But it's almost impossible in some cities unless the entrepreneur has ample time and money to deal with regulations. Depending on where the baker lived, he or she would have to acquire a food degree, which can take years; pay for certifications, licenses, and other fees, which can cost thousands of dollars; undergo constant inspections for food, building, and equipment safety; prepare for and file dozens of different types of taxes multiple times annually; measure every calorie and ingredient and put that information on labels; process the food in a very particular way specified by the government, which might require expensive equipment; and so on.

It's not that these rules are inherently bad. But companies automatically engage in quality control once they become well-established. They'd better if they want to stay competitive.

But newer, smaller firms struggle to follow every rule to the letter, especially if there are thousands of them.

It would be better for the economy if the baker could make pastries the way he wants to and sell them in his city without much hassle. Once he becomes more successful, he would happily put labels on his food, get it tested and certified by well-known organizations, and acquire a degree. Doing these things is good for business.

But having so many hassles placed upon bakers from the start means there are fewer bakeries than there otherwise would be. What we have instead is a food industry dominated by a few massive corporations that can buy their way out of all the restrictions. They prefer this because it reduces the likelihood of smaller businesses outcompeting them.

Below are examples from Business Insider of regulations that plague small businesses in various areas of the United States: [1]

* Texas requires that anyone repairing computers for a living obtain a private investigator's license. This requires a degree in criminal justice, which takes years to get and has tuition costs. Violation of this law can result in a one-year prison sentence. The reason for this rule is that a computer repair person might discover illegal activity on another person's computer.