Seven-year-old Julie Murphy made headlines last week when Multnomah County, Ore. officials told her she would have to shut down her lemonade stand at a local art fair or face a $500 fine. Her crime? Not getting the required $120 temporary restaurant license. The little girl was reportedly in tears as her enterprise, set up with her mother’s help outside a local art fair, was promptly shut down.
Kids aren’t naturally inclined to panhandle, but to trade. They’re excited to make advertisements, attract customers and provide a service, in Julie’s case, a 50-cent glass of lemonade. Such experiences can teach children about the excitement and pride of productivity.
Regulation doesn’t make services safer, just more expensive. Without raising prices, young Julie would have to sell 258 lemonades simply to cover the cost of the license (assuming Mom picked up the cost of the supplies). Of course, in the real world, producers simply pass the cost of regulation on to consumers, as we have seen following tighter credit card regulation -- and as we will see again soon, following the recently passed financial regulation.
In Multnomah, food inspectors told Julie’s mother they couldn’t trust her to ensure that the lemonade stand was hygienic. As she pointed out to the Associated Press, the $120 license fee wouldn’t ensure the stand was safe either.
Government Sours Kid’s Lemonade Stand
In fact, just because a product is regulated doesn’t mean it’s safe. Bernie Madoff was registered and regulated with the Securities and Exchange Commission. And the California meat company now recalling 1 million pounds of ground beef that could be contaminated with E. coli was subject to daily, on-site inspections by the Department of Agriculture.
More damaging than the cost is the message sent to young people like Julie that voluntary, mutually beneficial trade between two willing parties, even around something as simple as a glass of lemonade, requires a direct government sanction… and an accompanying tax payment.
Even the subsequent “apology” from the country’s highest elected official smacked of political power lust. “I don’t think a 7-year-old selling lemonade is the biggest public health threat we are facing as a community,” said Multnomah County Chairman Jeff Cogen, according to local media reports, in an effort to save face by telling the public -- however tongue-in-cheek -- that regulators had at least some cause to do what they did.
In reality, the “free market”, for everything from lemonade stands to mortgage-backed securities, isn’t really free. As we’ve regularly pointed out, in health care, finance and education, some of the most troubled areas of the economy just so happen to be some of the most regulated. In this case, Portland art fair patrons were left parched, and a young girl’s entrepreneurial drive took a heavy blow.
The real issue here isn't lemonade stands or financial regulation, but the endless fashion in which government commandeers our business and private property. In an era in which profit-seeking capitalism is routinely blamed for every social ill, it’s as if the seven-year-old and the CEO have thrown up their hands and accepted the notion that trade, no matter how small, is completely subject to a bureaucrat’s control. In a free economy, it is not.
Jonathan Hoenig is managing member at Capitalistpig Hedge Fund LLC.
Trackback URL for this story: http://www.smartmoney.com/tb/Jd2n.2FNY.3D
What is a Trackback?It is a way to tell us that you have published something that references this story.
How do I send a Trackback? If you blog or mention this story on your website, you can use this Trackback URL to notify us about it. Some blogging software programs can help in sending a Trackback to us.
Click here to read more about Trackbacks.
RT @JonathanHoenig: Business Keeps Getting Squeezed as Kid's Lemonade Stand Shut #freedom #tlot #tcot #teaparty http://bit.ly/a3vKub
RT @JonathanHoenig: Business Keeps Getting Squeezed as Kid's Lemonade Stand Shut #freedom #tlot #tcot #teaparty http://bit.ly/a3vKub
Read Full Article »