Tuesday, August 4, 2015

Taxis, Über, Medical Cannabis, and Regulations

Also available at Cannabis in Canada.ca

All taxis do is drive people around. Like growing medical cannabis, it doesn't take a rocket scientist to figure it out. And like cannabis farmers, some cabbies are of a higher quality. But who determines this? Jerry Seinfeld has a great bit on this question, where he lampoons the notion that these are “professional” drivers. What does it take to get a license? In places like New York City, it costs $950,000 to get a taxi license, in addition to other government regulations that drive up costs, all of which gets passed on to the consumer. By keeping the price for licenses high, supply can be restricted despite increasing demand, thus cabs can charge higher fees than they otherwise could in a free market. Ride-sharing apps like Über undermine the crony-capitalism of the cab industry.

Former BC Transportation Minister Kevin Falcon told CTV, “Whenever you have a regulated system that limits competition you inflate the value of the licenses that are in the system.” Falcon has since left government. The situation in Vancouver (or Toronto, or New York City) between state-protected taxi companies and free-market competition like Über isn't so different from the cannabis industry of Canada. Just as the supply restriction on cabs leads to higher prices, the attempted restriction of 30,000-plus cannabis growers for a small cartel of licensed producers will only lead to higher prices. Not to mention the severe restriction of civil liberties on the people who claim to be living in a free and democratic society. Imagine if cab companies tried to ban private automobiles.

And like taxi companies attacking Über, the LPs are criticizing their “illegal” competition like dispensaries and compassion clubs. “Illegal” competition that, unlike ride-sharing apps vis-à-vis the taxi industry, predate the state-protected LPs. John Arbuthnot, vice president of Delta 9, a Manitoba-based LP, recently told the CBC that patients should be cautious of buying cannabis from dispensaries. He thinks there are “challenges” that need to be regulated like “packaging, labeling. Where's the product coming from?” He asked, “has it been grown under sanitary conditions?” All good questions, but Arbuthnot concludes that only the federal government can provide this regulation. If he had thought about this a little further, and perhaps he already has, he would realize that very often the top-producers in the industry will influence government bureaus to write rules and regulation that limit their competition and make it easier for them to profit at the expense of consumer sovereignty. This is what has happened with the taxi companies of virtually every city in the Western world. This same style of crony-capitalism is now here in the Canadian cannabis industry. The attack on “unregulated” dispensaries isn't about patient health and safety. It's about making sure the LP competition is either nonexistent or subject to the same costly government regulations.

There is a way out, however. For both taxis and cannabis in Canada, licensing and regulation don't need to be under the sole discretion of the monopoly state. It's a self-evident notion that we accept in other areas of our lives. If there is only one grocery store in Vancouver, then it doesn't matter how good or bad the quality of the goods or services are. If people wanted to patronize another grocery store, they wouldn't have a choice. Likewise, since there is only one licensing bureau in the city, it doesn't matter how effective they are at their licensing. Producers have no other choice than to use the city and consumers are required to accept this monopoly.

In a free society, producers would have the option of patronizing different licensing businesses to decide which regulatory scheme best suited their needs. And why would they voluntarily abide to third-party regulators? Because consumers demand it! That's where the whole concept of government regulation came from. Voters wanted protection from predatory business practices without realizing that all government action is by definition predatory. A better solution would be to allow entrepreneurs to provide the kind of regulations consumers demand. Bad regulations would be abandoned since they wouldn't make the regulators any money, and the only way to make money absent of taxation is by providing value to consumers. Licensing and regulating businesses is a business itself. Without a government bureaucracy, a free market licensing and regulation industry would provide a wider variety of better goods and services that would reach the market sooner. The free and fair market would force consumers to act in accordance with their own — rather than the government's — risk assessment. And competing regulatory agencies, to safeguard against product liability suits as well as to attract customers, would provide increasingly better product descriptions and guarantees. There is simply no excuse for anyone – let alone people calling themselves “progressives” – to be championing government regulations.

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