Wednesday, May 30, 2012

Local Regulation

A nice short video describing some of the trials and tribulations of an excellent Hyde Park cafe trying to navigate our city's over-regulation:

A few things struck me about this story, which only scratches the surface of troubles small businesses have in Chicago.

We talk about "regulation," but the real issue is rules vs. discretion. Regulating by simple clear rules is much better than regulation by discretion, or by rules so complex they amount to discretion. When a zoning inspector can come in after the fact and always find something wrong, it's in invitation to corruption. We are increasingly a country in which "regulation" means that regulators can tell people what to do on a whim, not one in which clear objective rules are imposed.

The ill effects of this sort of over-regulation are hard to measure, so they tend to be forgotten. We talk about tax rates, spending and laws. But how do you quantify the far more important effects of this sort of thing? It's far worse than an explicit tax, or on the books spending. But it just shows up as mysterious lack of business. We can find isolated anectdotes, but how do we add up the effects of regulatory harassment across the whole country?

I am reminded again of Greece. Pundits talk about how Greece needs its own currency so it can devalue its way to prosperity. But the kind of illness shown here in Chicago is multiplied a hundred fold there, and no exchange rate can solve it.


  1. I always liked Salonika better than Istria, but Salonika is cash only...I wonder if that helps them avoid regulations

  2. Now we know where Obama’s views on business were developed and why they are so destructive; Chicago.

    1. Obama is a mason. We all know what that means

  3. John:

    You tell a little of the end game, not the story.

    The fact is that business does not favor clear simple rules. Business, big business, the business that matters to you and Cato, people like the Kochs, the elites, they want discretion because they know that their political influence will over time have the strikes called in their favor.

    IOW, they know the Judge is going to be a John Roberts.

    Let's recall just a little history. When shrub became President he installed a conspiracy of administrators who ruled all their discretion to the favor of Wall Street, giving us the Lesser Depression.

    I fight the system all the time in my City--forget the building inspector---the Board of Alderman is a walking extortion machine---however, your folks are no help at coming up with a solution.

    For starters, they are such nut jobs they can't get elected. If ever elected, they show up wanting to give more discretion, and surprise, such will be to the favor of the "big boys." BTW, you should point out that Chicago is run for the favor of Big Business, and not anyone else. You omit to mention the horrible recent deals like the sale of parking to JPMorgan, as I recall.

    I'' be darned if I know how to fix the problem. Democrats really don't understand it and Republicans, if ever elected, want more discretion.

  4. "We talk about 'regulation,' but the real issue is rules vs. discretion. Regulating by simple clear rules is much better than regulation by discretion, or by rules so complex they amount to discretion"

    Is that to say that you disagree with Arnold Kling's call for "principles-based regulation," as opposed to bright-line rules? If you're curious about this, I wrote a blog post on this topic a week ago:

    - Evan Soltas

    1. Good post. I need to learn some more law and economics. The whole issue of laws vs. rules vs. discretion, and principles vs gameable bright lines is a deep one.


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