Pubdate: Sun, 16 Feb 2014
Source: Boston Globe (MA)
Copyright: 2014 Globe Newspaper Company
Contact: http://services.bostonglobe.com/news/opeds/letter.aspx?id=6340
Website: http://bostonglobe.com/
Details: http://www.mapinc.org/media/52
Author: Tom Keane

STATE SHOULDN'T LIMIT THE NUMBER OF LICENSES

IMAGINE A land where there are no restaurants. Someone comes up with
the bright idea of allowing folks to sell meals to others and, after
much debate, the government says it might permit this to happen.
Before it does, though, it tasks some bureaucrats with the job of
deciding who should be allowed to operate these new places. The
officials put together a complicated set of requirements, hundreds bid
and, after many months, the government announces it has picked 20.

That's 20 restaurants in a land of 6.6 million.

The winners are delighted, the losers - sore, of course - complain
about political favoritism. The restaurants are hugely popular, with
long lines and such high demand that they can charge almost any price
they want. And, of course, with a stranglehold on this new-fangled
restaurant business, the lucky 20 are vigilant in making sure no new
restaurants are allowed to open. Consumers need to be protected, they
say, although some suspect that the real reason is they don't want new
competition to threaten their sky-high profits.

Fanciful? Hardly. This happens all the time, be it with taxicabs,
alcohol licenses, casinos, or, most recently, medical marijuana
treatment centers. Massachusetts' 2012 medical marijuana law allows
just 35 such dispensaries in the state (after a year, the government
has the discretion to permit more; don't count on that happening). Out
of 159 applications, the Department of Public Health recently selected
20 operators and, predictably, cries of cronyism and unfairness have
erupted. At the center of the objections is former congressman and
Norfolk district attorney Bill Delahunt. Delahunt's name appeared on
three applications, and he and the members of his team had multiple
close relationships with regulators granting the licenses. And, lo and
behold, all three applications were approved.

Much of this may be smoke, but it sure is unseemly, especially since
it turns out that Delahunt won't be running the dispensaries. That
honor goes to a relative unknown from California, leaving the
impression that Delahunt was just window dressing. My guess, too, is
that we'll hear a lot more allegations of misdeeds. It's the nature of
the beast.

And the beast, in this case, is not the appearance or actuality of
corruption, but the licensing system itself. There's a simple
principle at play: The government should not be limiting the number of
people who can participate in a market. If you want to start a
business and as long as you comply with basic regulations affecting
health, safety, and fair business practices, you should be allowed to
do so.

We see this all the time with any manner of common businesses, be they
restaurants, retailers, manufacturers, or service providers. There's
no limit on the number of clothing stores in a city or town, for
example. There can be one or hundreds, spread out or next to each
other. As long as the clothing stores comply with the rules - pay
minimum wage, for instance, or post prices clearly - then no one else
gets involved. That's the way free enterprise works.

But there are numerous exceptions. Most municipalities put strict
controls on the number of taxicabs they permit (so strict that they've
given rise to new businesses such as Lyft and Uber). Boston is only
allowed 650 restaurant liquor licenses, far fewer than demand, which
is why the licenses trade for about $400,000. Massachusetts' hesitant
experiment with casinos will permit exactly three - spaced carefully
around the state. And the marijuana dispensaries face similar
restrictions on numbers and geography - no matter how much the demand.

None of these rules make sense. Because they limit competition, they
create oligopolies, driving up costs to consumers even as they reduce
supply. The pot shops rules are exceptionally restrictive. They have
to be nonprofit, for example. And they can only sell pot.

A better approach would have been to allow anyone - for profit or not
- - to sell cannabis. Indeed, the most logical medical marijuana
retailers would be local pharmacies - CVS, Walgreens, and numerous
independents. They manage supply chains, know how to securely handle
all manner of medications, and monitor patients' drug intakes. It's
their business. Bill Delahunt? I'm pretty sure he's never filled a
prescription.
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MAP posted-by: Matt