“The interest of the dealers … in any particular branch of trade … is always in some respects different from, and even opposite to, that of the public. … The proposal of any new law or regulation of commerce which comes from this order ought always to be listened to … with the most suspicious attention.”

Adam Smith, “The Wealth of Nations”

Skirmishes at the State Capitol over Minnesota’s bewhiskered bans on Sunday sales by liquor stores and car dealers may not rank among our most momentous policy debates. But seldom does a simple issue so vividly illustrate a larger and too-little-understood truth about economic life.

The trouble with government’s “regulation of commerce” — as noted long ago by Adam Smith, prophet of the free market’s “invisible hand” — is not merely, or even primarily, that it can hobble innovation and growth (though it can).

Regulation also, far too often, comes to principally serve the interests of business — or the interests of certain businesses vs. other businesses — in a way “different from, and even opposite to” the public’s interest.

Take the Sunday-sales controversies. Although Sabbath closing laws have religious roots, today about the only zeal for keeping liquor stores and car dealerships closed by law on Sunday comes from the liquor store owners and car dealers themselves, who decry the very idea of their being set free from these chains.

Writing on this page last week on behalf of the Minnesota Licensed Beverage Association, one liquor store owner doubted that smaller stores like his could maintain viable profit margins if Sunday sales were legalized. The never-on-Sunday law is essential, he suggested, if small, mom-and-pop liquor stores are to survive against their “big-box” competition.

Meanwhile, a leader of the Minnesota Association of Auto Dealers was recently quoted as saying 99 percent of his members support the ban on Sunday operations.

Why this fondness for regulatory shackles? The mandated day of rest helps these merchants trim costs without worrying that competitors will decide to open on Sunday and gain sales at their expense. And these are businesses whose total sales volume probably isn’t much boosted by fleeting impulse purchases you have to stay open to capture — the way total sales of snack foods or gossip magazines might be. Even with only six days a week to shop, consumers likely buy nearly all of the booze and cars they would buy in seven days.

Whatever the calculation, the liquor store and auto dealer lobbies have for years fended off all heavy-handed efforts to liberate them from government’s suffocating grip — never mind that some liquor and auto merchants located near borders with some neighboring states understandably feel differently. And never mind, more importantly, that the public’s natural interest in being able to shop on Sundays for cars or liquor if they please — just as they can buy most anything else on what’s become a busy errand-running day — is poorly served as a result.

Now, if this inconvenience were sufficiently troublesome to the public, these last remaining “blue laws” would probably fall. Maybe their time is coming. But the mere existence and durability of such open and obvious special treatment for a “particular branch of trade” reveals the broader hazards of the regulatory state. (Because regulatory hanky-panky is often far more obscure, subtle and complex.)

Another State Capitol dispute may be a case in point — legislation to abort the State Lottery’s venture into online and other electronic games. Philosophical distaste for gambling fuels some of the widespread legislative support for this ban, but Gov. Mark Dayton suggested last week that rival gambling operators — the charitable pulltab and tribal casino industries — may also be pushing it for reasons of their own.

It certainly wouldn’t be the first time that the very people peddling gambling joined a crusade to prevent its harmful expansion by competitors.

All across the vast regulatory landscape of America, at every level of government, similar lobbying and manipulations are ever afoot. Businesses and industries (and unions) have huge incentives to develop unequaled expertise in the intricate regulations — and political and regulatory processes — that affect their interests. They work tirelessly to skew rules in ways that secure special favors, or hobble competitors, almost by definition undermining the public interest. Economists call it “rent-seeking.”

Occupational and business licensing is especially vulnerable to being turned into a device to discourage competition rather than protect the public. By some accounts, well more than a quarter of American workers now require a government license. Notorious cases of unnecessary license burdens in Minnesota have included onerous training requirements for hair braiders, relaxed some years ago but only after a lawsuit brought by the libertarian Institute for Justice, which makes a cause of fighting for economic freedom.

Minneapolis officials recently pledged to review the types of business licenses the city requires today — all 250 of them. The battle over taxicab regulation that flared up in Minneapolis last year as never before with the arrival of the upstart ride-share firms spotlighted another industry that has long seemed to welcome heavy regulation as a way of limiting competition.

But the same sort of mischief is widely found. Also last year, the Institute for Justice won another battle when the Legislature (again following a lawsuit) repealed a state requirement that every funeral home equip a costly embalming room, even if a particular home has no desire to offer that service. The institute argued that the mandate served no purpose other than to guard established traditional funeral homes against innovative low-cost competitors. Imagine that.

In general, of course, big businesses are better able to bear the costs of complying with regulations than small businesses are. But the liquor stores’ argument suggests that in certain circumstances more regulation may actually favor small business. Whether giving an advantage to either serves the public interest is another question.

Mainly the Sunday-sales dispute is a useful reminder that the regulatory system can be and is hijacked to serve narrow interests in a dazzling variety of ways that policymakers are hard-pressed to anticipate or resist. A good deal of regulation is of course needed all the same, but surely the regulatory state has grown in size and complexity beyond what Smith’s “suspicious attention” would recommend.

 

D.J. Tice is at doug.tice@startribune.com.