Archive for July 17th, 2012

by lizard

I must admit, when I think of regulations, I usually think of necessary government oversight of Big Business to keep the public safe. Deregulation, or lax regulation, in my mind, are significant contributing factors to our economic crisis and major environmental disasters, like the BP blow out in the Gulf of Mexico and Fukushima nuclear disaster.

If you have similar knee-jerk thoughts, I’d suggest maybe putting those thoughts aside for a moment, then go check out The Montana Regulation Project. Here’s the mission:

As the amount of local, county and state regulation increases, the ability of Montana citizens to exercise their rights under Montana’s Constitution Article II “of pursuing life’s basic necessities” has become increasingly difficult. While we understand the state’s interest in protecting the public through regulation we also understand that the regulatory corpus becomes outdated, ineffective, and presents barriers to entry for people working in their own interest and needs continual review for rationality, cost effectiveness and process efficiency in order to provide for the economically disadvantaged to rightfully earn a living in the economic pursuit of their choosing.

We are convinced that the regulatory burden falls disproportionately hard on individuals who hope to create and trade products and services who are in the initial start-up or early expansion phase of small business enterprises and that certain regulations are in place either from a poor understanding of the risks posed to the public or by regulatory capture of special interest who, under the banner of public interest, gain by limiting the entry of new competition and market participants. Additionally, over time the bureaucratic processes of regulation become equally prohibitive for new and growing market entrants and increase in perpetuity for the convenience of the regulators at the expense of the regulated.

Thus, the goal of The Montana Regulation Project (The Project) is to reduce the regulatory barriers to entry for first stage growth and other small enterprises to the greatest extent possible without damaging the public interest.

I applaud the focus of this project on “barriers to entry for first stage growth” because that is the stage where regulation can function as a disincentive for developing new, small businesses.

In Missoula, the story of the empanada lady is what first clued me in to the problem of regulations divorced from common sense.

In June of 2008, Kim Olson (the empanada lady) and Steve McGregor showed up to a City Council meeting to talk about the costly dilemma she faced:

The “empanada lady” wasn’t on the agenda, but she and Steve McGregor, of McGregor Mobile Foods, showed up to say that an odd rule is keeping them from using the kitchens they rent.

Officials approved the kitchen she uses at Bear’s Brew sometime in the past two years, she said. But when a business changes hands, the building needs to meet code.

And in this case, that means putting in a thousand-gallon underground tank to catch grease, Olson said. But she said she produces – at the most – just 2 cups of grease a week.

There’s another problem, too, said McGregor. That’s the high cost of one of those grease traps, at some $80,000.

The rule is meant to keep grease from going into the wastewater system, but McGregor said it also puts a severe hurt on small businesses.

“For the local guy, it doesn’t work very well,” he said.

An $80,000 grease trap system to deal with 2 cups of grease a week? Yeah, I’d say that’s unnecessary.

Local food is one area I hope The Montana Regulation Project will look at. Considering one of the two Montana bloggers involved in this project now dabbles in producing artisan cheeses, I’m certain that will be something he will be interested in bringing attention to.

Initially, just shedding light on the process might be of benefit to anyone looking to invest in starting a small business. The more folks know what they’re getting into, the better they can plan for what they’ll need to take the risk.

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