April 9, 2013

Why do Bloomington bureaucrats get to decide when competition is “desirable”?

By Why do Bloomington bureaucrats get to decide when competition is “desirable”?

Bloomington, Illinois, is a city of about 78,000 people, and home to Illinois State University. Sometimes, Illinois State students go out to parties where they drink too much to drive safely, and they need rides home. Many of these students, particularly female students, feel uncomfortable using buses or taxis; they’d prefer a cleaner, more comfortable ride home. That’s why entrepreneur Julie Crowe stepped up. After working for years as a driver for another company, she decided to start her own van business to offer rides to the public….

Until city officials decided that her business wasn’t “desirable.”

City ordinances provide that whenever a person wants to operate a van or taxi business, that person has to get permission from the government, and the City Manager can deny permission when he decides that such services aren’t “desirable.” What’s “desirable” mean? Whatever the government says it means—or, more often, whatever the existing taxicab companies say it means. Sadly, these Certificate of Need requirements, or CON laws, are on the books in most major metropolitan areas in the country, requiring anyone who wants to run a taxi business or a limo company, or a moving company, to essentially get permission from their own competitors before they’re allowed to open up.

Represented by our friends at Illinois’ Liberty Justice Center, Julie Crowe filed a lawsuit in Illinois state court, arguing that this law violates her rights under the state Constitution, and today we filed this brief supporting her argument. PLF has challenged these kinds of laws in Oregon, Missouri, Kentucky, and Nevada: in our view, these CON laws are unconstitutional because they restrict people’s liberty, including their right to earn a living, not in order to protect the general public but in order to protect established firms against legitimate competition.

Our brief points out that CON laws were invented in the 19th century to regulate railroads, and in response to economic theories that economists have since abandoned—such as the idea that competition is somehow a bad thing. In fact, as Hayek, Schumpeter, and other economists have shown, competition is the means by which the economy discovers what people want. Government bureaucrats can’t figure that out, and have little incentive to do so. Instead, when the government tries to manage the economy and decide what sort of businesses are “desirable,” they end up strangling innovation, raising prices, reducing the availability of services—and restricting the economic opportunities of hardworking entrepreneurs like Julie Crowe. Bureaucrats should not be in the business of choosing what sort of goods and services are “desirable.” That decision should be made by consumers.

Thanks to PLF friend Melanie Triebel, esq., for assistance with filing the brief.

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