September/October 2011

Public Servants or CON Artists?

Should companies have to prove to a government agency that what they offer fulfills a “public need”? In the latest issue of Regulation, Timothy Sandefur looks at “certificate of necessity” (CON) laws, which force businesses to do just that. Many industries — from taxicab services to moving companies to hospitals — are finding themselves subject to a host of bizarre rules that require them to get permission before opening their doors. Sandefur, a principal attorney at the Pacific Legal Foundation and author of The Right to Earn a Living, explores the history of these laws and reveals their frustratingly anti-competitive nature. “It is hard to imagine how any prospective business owner could ever prove that the public ‘needs’ a new product or service,” he writes.

Michael L. Marlow and Alden F. Shiers, economists at California Polytechnic State University, ask whether government policies aimed at reducing obesity are sound. Using a simple supply-and-demand model, they find that the optimal weight varies across different individuals over time. As such, it is unlikely that public interventions — such as restrictions on soda sales, bans on Happy Meal toys, and mandates on restaurant locations — can successfully address the rise in obesity rates — given that each of these interventions is, of course, “one size fits all.”

Henry I. Miller and Gregory Conko, coauthors of The Frankenfood Myth, investigate activism within the U.S. Department of Agriculture and discover that the regulatory process is often based on politics more than science. By the same token, law professor Jonathan H. Adler considers the REINS Act (Regulations from the Executive in Need of Scrutiny) and its attempt to reassert legislative control over regulatory policy.

Other contributors include Chinmay Jain, Pankaj K. Jain, and Thomas H. McInish on short-selling restrictions in “Everything Old Is New Again,” and Jonathan L. Awner and Denise Dickins on the use of federal bounty programs in “Will There Be Whistleblowers?” The Summer 2011 issue features book reviews on the advantages of big-city living, the problems with philanthropy, and whether or not the U.S economy is stagnating. It wraps up with editor Peter Van Doren’s survey of recent academic papers on the collapse of shadow banking, the enduring financial losses of airlines, and the economics of mergers and acquisitions — as well as a final philosophy lesson from columnist A. Barton Hinkle.