James Czerniawski and Nick Grose: Utah should embrace the innovation that springs from economic disruption
Steve Griffin | The Salt Lake Tribune
A drone is displayed in the Capitol rotunda as Lt. Gov. Spencer Cox is joined by the Governor's Office of Economic Development and dignitaries in Utah's aerospace industry as Gov. Gary Herbert declared Feb. 26 as Utah Aerospace Day in the Capitol rotunda in Salt Lake City, Friday, February 26, 2016.
Utah is a state that typically prides itself on being a safe harbor for businesses and supportive of innovative and forward thinking business models. However, the state may not be living up to this claim, as many entrepreneurs have experienced run-ins within regulators while trying to do something unique and different.
Fear of the new is an age-old problem. Even in the technology age with its rapid innovations, constant fears of worst-case scenarios arise — but typically end up being unfounded.
In the 1860s, for example, the English Parliament passed a series of Locomotive Acts which called for extreme restriction on automobiles. This stunted growth in the automotive industry and set the U.K. back three decades until the law was finally fixed.
These same battles with government regulation are prevalent in America, even today. As the ride-sharing model increased in popularity, Uber and Lyft faced countless battles with regulators who wanted to treat them like taxi cab drivers. Many airports around the country initially banned these companies in order to support an aging industry that wanted to use the government to prohibit their competition. Uber and Lyft drivers in Salt Lake City, for example, were fined thousands of dollars until the law was eventually fixed.
Short-term rentals are no different. Across the state, homeowners face all kinds of regulatory hurdles to share their home — and many are totally prohibited from doing so. Allowing Utahns to use their property as they see fit empowers them to become more self-reliant by defraying the costs of home ownership while simultaneously enabling entrepreneurship to take root and allow them to fill a gap for a much needed service in demand by consumers.
Tesla, Zenefits, Turo, Neighbor, Homie, the list goes on and on. Innovative companies continue to face regulatory hurdles, even in a “pro-business” state. Some companies we’ll never know about were no doubt stopped by such regulatory barriers before they even really got started.
The drone industry, for example, has been hampered for years. Regulations on the federal and state level have stunted an industry that could grow much more rapidly and could provide significant benefits. Imagine how helpful a more robust drone industry
could have been in the midst of COVID-19 to deliver needed medical supplies, protective equipment, food … and even toilet paper
In the name of fighting the coronavirus pandemic, federal, state and local governments waived
hundreds of regulations. Months have passed since some of those first waivers were issued. Life has seemingly gone on without any negative incidents, which raises the question: Why were these laws ever on the books to begin with?
Whenever a new good or service is introduced, there is always going to be a desire to want to control it. So the question becomes: How do we deal with the identifiable risk associated with being exposed to new things while simultaneously driving human ingenuity and innovation? Policymakers need a practical way of evaluating these new technologies and business models to determine the necessity and severity of regulations to avoid imposing regulatory burdens that may not have to be there in the first place.
The Libertas Institute and the Center for Growth and Opportunity at Utah State University are developing a framework and method for legislators, regulators and others to utilize when thinking about these issues, called the Market Empowerment Framework, based on the concepts discussed in the book “Permissionless Innovation,” written by Adam Thierer. The framework lays out a pathway for identifying the level of regulation appropriate for a new technology or business model by focusing on:
• Identifying the harm a consumer could face, such as physical, financial, mental or emotional harm.
• Identifying the severity of the harm a consumer could face.
• Identifying the probability or likelihood the harm might occur.
• Identifying the permanence of the harm done to the consumer.
In implementing this framework, legislators will be better informed on how to tackle the issues raised by new and innovative services coming to market. If Utah follows a least restrictive means approach to regulation, the state can cement its place among the country’s leaders in regulatory reform and become an increasingly attractive alternative for companies looking to potentially relocate from more restrictive states.
It is impossible to tell where the next great idea is going to come from, but a friendly and limited regulatory environment will be best suited to allow and enable such innovation to occur. The framework outlined above crafts a path to guide Utah through the coming years in promoting beneficial human innovation.
James Czerniawski is the tech and innovation policy analyst with the Libertas Institute, a free-market think tank based in Utah.
Nick Grose is a Policy Research intern with the Libertas Institute and is working on a master’s degree in economics at George Mason University.