A case study in regulation run amok: To earn a living blow drying customers’ hair in Virginia, one must acquire a license from the Virginia Department of Professional and Occupational Regulation. To acquire such a license, one must attend an accredited cosmetology school, the average cost of which is $14,887 nationally, not counting the time value of 1,500 hours of training. Only after completing the school program and procuring a license can a budding blow drier embark upon a glorious career that pays an average of about $20,000 a year.
That is just one example of how excessive regulation hampers job seekers, restricts labor competition, protects entrenched special interests, and generally hobbles Virginia’s economy, according to Tyler Foote, Virginia state director of Americans for Prosperity, in a Richmond Times-Dispatch op-ed today.
A dynamic economy continually introduces new products and services that get entangled in regulatory red tape. Sometimes the General Assembly wades in and deals with the problem, as it did by removing restrictions on food trucks from operating on Virginia-owned streets and, again, by creating an exemption from liquor laws so bed & breakfast guests can consume alcoholic beverages in shared spaces like living rooms and porches. (Foote also could have cited recent controversies over ride-hailing services like Uber and Lyft, taxation of Air BnB rentals, and retail restrictions on electric-vehicle manufacturer Tesla.)
Changing the law requires time and money, commodities in short supply for many entrepreneurs trying to build a business. But there is a remedy, says Foote. The Red Tape Reduction Act, sponsored by Del. Michael Webert, R-Marshall, and Del. Nick Freitas, R-Culpeper, would require every new regulatory requirement be offset by eliminating two existing regulatory requirements until the regulatory baseline has been reduced 35%. Once that threshold has been met, new regulations would be offset by a one-for-one reduction.
Foote argues that the bill was inspired by a similar measure implemented by the Canadian province of British Columbia, which had labored under economic growth 1.9 percent lower than the Canadian average. Following implementation of the rule-cutting law, growth jumped to 1.1 percent above the average. (That barely sounds like it’s worth the trouble. Perhaps Foote means growth is now 1.1 percentage points higher, which indeed would be impressive.)
Bacon’s bottom line: I have railed for years how excessive regulation hurts entrepreneurship, small business formation and economic growth in Virginia. I like the idea of rolling back regulations, especially those that restrict competition. (I’m open to regulations protecting the public safety and health, as long as they are subject to a rigorous cost-benefit analysis.) However, I worry that the Webert-Freitas approach would be arbitrary and mechanistic.
I understand the logic that we need to create a meta-rule to govern the lesser rules and keep them in check. Without such a law, new regulations will proliferate without let-up. But how do we know the optimal number of regulations for Virginia? How do we know that the sweet spot is 35% fewer rules than what we have now? What if lawmakers encounter a situation that truly justifies new regulations but find themselves stymied by this new law?
The fact is, we live in a complex society that is becoming more complex. Technology creates new opportunities — and challenges — by the day. When the first mobile phones appeared, people thought of them as substitutes for telephones. Wow, you mean you can carry your phone around with you? Awesome! Who imagined that one day mobile phones would become packaged with software that allowed people to send text messages and, even more astonishingly, that many people actually would prefer that form of communication over talking to one another? Further, who imagined that one day “texting” while driving would cause so many accidents, injuries and fatalities that laws and regulations would have to be passed to curtail the behavior?
Texting was not a problem when good ol’ Ma Bell exercised a telephone monopoly. How’s that for irony. Breaking up ATT and freeing the telecommunications industry from suffocating regulations created one of the great surges of innovation in American history…. which in turn created the need to regulate previously unimaginable behavior.
I agree that many regulations are harmful, and I sympathize with Foote’s frustration. But I prefer the old-fashioned way of doing things: legislators rewriting laws one at time, giving careful consideration to each one.
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