There’s a saying in economics: when there is a demand, the market will find a way to fill it. Hence, black markets arise for all kinds of things that politicians try to “ban” by statute.
Recently, we reported about authorities in Denver, Colorado, shutting down a kids’ lemonade stand – one of many such instances where the Burgher Meisters didn’t approve of what the children were doing. So perhaps some of us wondered whether this wicked practice would be driven underground.
Imagine, a speakeasy at 3 a.m. in the morning. A special knock on an unmarked door… “What’s the code, daddy-o?”
That little image isn’t too far off, because the market is pulling through again, this time for those kids running lemonade stands, thanks to capitalism fighting the state.
The folks at Country Time lemonade have decided to do something amazing. The company just announced on a special website and through a brief commercial that it will support kids who operate lemonade stands. Through a new initiative they call “Legalade,” Country Time will pay the fines and permits for any kids’ lemonade stands this summer.
To quote the ad:
If you have a problem with your lemonade stand, the offices of Country Time Legalade… are ready to take a stand for you.
Cue one of the lawyers in the ad finishing some lemonade, then crushing the plastic cup in his hand.
Tastes… Like justice!
Who doesn’t want to stand up and cheer?
Hats off to Country Time for coming through for the kids, and for making such a pointed, timely commercial to tell people what’s going on.
But one’s enthusiasm for the Country Time move should not overwhelm righteous contempt for what these municipalities around the U.S. have been doing. Simply put, the idea of police officers shutting down little kids’ lemonade stands is so disturbing and such a prima facie example of the wasteful things cops are asked to do, one wonders how local politicians and police can try to justify it.
Typically, they say they are enforcing licensing laws, and, as we have mentioned, licensing laws are ways for government to squeeze money out of upstart business people and block new entrants into certain market niches. They prevent competition, competition that could lead to lower prices for consumers. That, in turn, is money that could have been spent on something else, expanding the economy and new business opportunities. There is nothing good about licensing, in any way.
Some might argue that by licensing and inspecting businesses, the state (i.e. government) is “protecting” people from bad service or dangerous products.
But it is not the state that keeps market participants striving to do well for their customers. It is the prospect of economic success, and the threat of market failure, that drive entrepreneurs to do their best. If they do not serve the consumer, they will be replaced by someone who does.
After all, consumers don’t like being ripped off or sickened by a business.
And the idea that government licensing and “inspection” actually does protect people is a myth. As I mentioned in my book, “Live Free or Die,” and an essay for the Ludwig von Mises institute, the inspection via government paradigm is a farce:
On March 27, 2007, Jessica Fargen, of the Boston Herald, reported that auditors in Massachusetts found fewer than one food inspector working on any given day in the entire state. The auditors also revealed that local inspectors were often corrupt, and made special deals with those they were supposed to be monitoring.
And that situation didn’t change over time. As CommonWealthMagazine reported five years later:
Some restaurants in Boston aren’t being inspected at all for more than a year at a time. For example, the Island Creek Oyster Bar and Deuxave on Commonwealth Avenue, both categorized as medium–risk, were never inspected last year… Island Creek and Deuxave weren’t the only restaurants that weren’t inspected for more than a year. For example, Smith & Wollensky, Lala Rokh, and Mare, all medium risk, were never inspected in 2011, and Locke-Ober, Mistral, Sorellina, and O Ya, all medium risk as well, were never inspected in both 2011 and 2010.
This is where thinking about economics offers positive alternatives. As mentioned earlier, where there is a demand for something, the market will find a way to supply it. As a result, we don’t need to create food inspection bureaucracies. If there is a demand for reports on food safety and quality, there is an incentive for new market participants to supply the service. We already see the vast prevalence of online food ratings sites. Does anyone think that if agents of the state were no longer puffing their chests, claiming they are our protectors that we, who are in charge of our own choices and spending, would not want various forms of visible quality reports?
And if, just if, one of those private organizations, say a magazine such as Consumer Reports, or a local restaurant website, were found to be corrupt, what would happen to their market share? Would there not be a new opportunity for a new competitor to step in and gain audience share?
What happens to the government licensing and inspection bureaucracy when it fails? Does it get more money or less in the next budget cycle?
We all know the answer to that.
The licensing boards and police expect us to swallow the idea that they spend our money busting little kids at lemonade stands, while we see that their supposed “protection” against bad food and service is an uncompetitive joke.
That’s a bitter brew.
Much better to raise a glass to Country Time’s idea to stick up for the little guys. In this case, they really are little, and they’re getting a good lesson in the dynamics of free market choice versus state force.