I've got a new column up at Time, all about ridiculous regulatory attempts to squelch disruptive business models such as Tesla, Uber, and Airbnb. Here's the start:
What the Invisible Hand of free-market innovation giveth, the Dead Hand of politically motivated regulation desperately tries to taketh away. That's the only way to describe what's happening to three wildly innovative and popular products: the award-winning electric car Tesla, taxi-replacement service Uber, and hotel-alternative Airbnb. These companies are not only revolutionizing their industries via cutting-edge technology and customer-empowering distribution, they're running afoul of interest groups that are quick to use political muscle to maintain market share and the status quo…. If mobsters were pulling these sorts of stunts, we'd recognize the attacks on new ways of doing business for what they are: protection rackets.
I cite historian Burton W. Folsom's distinction between "market entrepreneurs" and "political entrepreneurs." The former capture customers and profits by delivering new and better products and services. The latter rely on governments and regulators rigging or freezing markets to their advantage (bonus frustration: market entrepreneurs routinely transmogrify into political ones after gaining a big market share). In Folsom's telling, the 19th-century steamboat pioneer Robert Fulton exemplifies both categories, first by improving a technology and gaining a market and then by locking in a state-granted monopoly for steamboat traffic in New York. In the end, though, real markets do win out, though:
Folsom's study of political and market entrepreneurs also suggests that political entrepreneurs are ultimately unsuccessful. Indeed, in 1817, Fulton claimed that his monopoly meant that no one could ferry passengers to New York City from neighboring states. A young Corneilius Vanderbilt was hired by a Jersey businessman to challenge Fulton not in a court of law but on the Hudson River, ferrying passengers from Elizabeth, New Jersey and Gotham. Vanderbilt cheekily flew a flag from his ship that read, "New Jersey must be free." While evading capture, Vanderbilt lowered prices and changed the business climate. It turns out that New Jersey must be free again — to sell Teslas. And New Yorkers should be free to rent out their rooms if they want to. And Uber to drive you where you want to go. The Invisible Hand of free markets shouldn't have to spend so much of its time slapping away the Dead Hand of political entrepreneurship.
Comments