WMUR’s Hometown Hero this week is Alexa Cannon, a Founder’s Academy senior who started delivering groceries to people after she lost her job. She’s one of many, from business owners to individuals, who have begun offering urgently needed services outside of traditional regulatory controls.

In normal times, government prevents a lot of this innovation and cooperation by requiring permission before people can enter the market with a good or service. (Think of the police shutting down children’s lemonade stands.) 

Why weren’t people making face masks for doctors, nurses, and patients before? Because they aren’t allowed to. 

The Food and Drug Administration, which regulates face masks and respirators, suspended its normal, shortage-creating regulations only on March 25.

Why weren’t private labs making Covid-19 tests in February, when the coronavirus was quickly spreading across the United States?

Because the CDC shared testing instructions on Jan. 28 but did not allow private testing until Feb. 29, costing the U.S. an entire month of widespread testing.

In New Hampshire, the governor had to issue emergency orders just to make sure doctors could provide health care services over the Internet, out-of-state doctors could practice in New Hampshire, pharmacists could make and sell their own hand sanitizer, and notary publics could offer services remotely. 

The state even prevents itself from innovating. To allow the transition to remote learning, the state Board of Education had to pass an emergency rule suspending the rule limiting remote learning to five days.

All of this comes from a presumption among lawmakers and regulators that the government always makes people safer by requiring approval before providers can enter the marketplace. 

That’s the impulse behind laws that make it a criminal offense to give haircuts without a license or build a treehouse without a permit. 

A distiller in Vermont got to the heart of the issue when he told the Valley News after transitioning to hand sanitizer production, “Legally, we kind of weren’t supposed to be doing this, but no one cares right now.”

The opposite presumption has come to be called “permissionless innovation.” Duke University economist Michael Munger defines it as “a strong presumption in favor of allowing experimentation with new technologies and with new business platforms that use those technologies.”

It is, Munger says, the most important concept in political economy. 

As he explains, “delays in processing ‘applications’ for permission to experiment sharply curtail the types and frequency of experiments that are possible.”

That’s exactly what we saw with the U.S. response to the spread of the coronavirus. Critical weeks were lost before the government figured out that we didn’t have time to wait for the normal regulatory process to play out. 

That normal process is not just a problem during emergencies. As Munger points out, it curtails experimentation and innovation all the time, making us less well off. 

The coronavirus pandemic is helping to expose many flaws built into our existing regulatory regime. A lot of regulations that prevent innovation and market cooperation are simply unnecessary. 

If the emergency is exposing needless state regulations in health care, imagine how many there are in all the other fields the state regulates. 

1 reply
  1. Deanne
    Deanne says:

    I think I would say that safety is the EXCUSE given for many laws that are actually only about limiting competition and access to a market in regard to whichever area legislation is being passed.

    Reply

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