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[personal profile] redsage
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/11/28/BAJM1M338E.DTL

I am really fascinated with the above article. The story is about an injunction against new business licenses for gold buyers while the city council looks into limits on this industry.

At what point should you restrict licenses for a certain type of business to maintain profitability for existing businesses, if ever? How should a city handle a class of business that could easily be a part of blatant crime? At what point should we restrict licenses based on regulation capability?

In general, I like regulated capitalism. This article poses a lot of questions on what limits are appropriate, and I've been thinking about it all day. In theory, it seems like licensing fees should cover the cost of regulation enforcement.

I'm not sure I'm comfortable with the idea of regulating the numbers of businesses to protect profits for those already existing. It seems like some of the business owners quoted in the article love the idea of limits on their businesses because they think it will protect their profits, which seems sketchy to me. What if existing businesses offer bad deals or poor service? The golden ideal of regulated capitalism is that the best businesses win the most customers, and protecting existing businesses against competition sounds like bad news.

I am comfortable with other reasons for regulation, though. I like consumer protection laws, employee protection laws, environmental protection laws. I support profit, not rapaciousness.

For pawn shops and gold buyers, one of the most important regulations has to do with what records they should keep. Given that these places buy valuable things, it seems reasonable to make sure that these things belong to the sellers. How do you protect against the sale of stolen property without creating an undue burden on either buyer or seller?

I guess the reason I find this so interesting is that there are no right answers to these questions. Even within traditional American economic ideologies, I can imagine a pretty broad spectrum of answers for what is appropriate or acceptable.

Thoughts?

Date: 2011-11-29 01:01 am (UTC)
From: [identity profile] jonathankorman.livejournal.com
I'm not sure I'm comfortable with the idea of regulating the numbers of businesses to protect profits for those already existing.

This is the basic principle behind agricultural subsidies and regulations. In some fields, if you don't prevent the market from being flooded with providers you end up with a race to the bottom which overshoots the bottom and actually kills the industry. (Farmers in the 1930s amped up production so much that prices fell below costs and the market could not absorb the food; productive farmers went broke.)

Not that I'm convinced that this case is one of those situations.

Date: 2011-11-29 01:34 am (UTC)
From: [identity profile] dcart.livejournal.com
I think the kind of regulation that they're proposing is actually a really good idea. Beyond the correlation with crime, the rush to open more of these businesses is classic bubble economy behavior. In this case, it is literally a type of gold rush atmosphere. On a much, much smaller scale, this rush to open gold buying shops is the same thing that we saw with various housing related industries during the housing bubble. When that bubble collapses and music stops, most of these business owners won't have a chair to sit down on. If he collapse of these businesses only had an effect on the business owners, I'd say that's the risk you take. But there's a social effect of lost jobs, empty store fronts, etc, etc that also goes with the sudden collapse of an industry in a bubble. It drags a lot of innocent people down with it.

Date: 2011-11-29 05:10 am (UTC)
From: [identity profile] twopiearr.livejournal.com
If the licenses are also revocable, that could serve as one protection against bad business - include language in the new regulations that give aggrieved consumers a way to have their complaints heard by the regulatory body.

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