What does a septic tank have to teach us about economics? This rather mundane bit of technology is at the center of depressingly familiar story figuratively brewing in my backyard. It’s not my septic tank that is the issue, but rather one literally just down the street from me in the small town of Bishop, GA. Bishop residents Blyth and Diana Biggs purchased the “Fambrough House” on the main thoroughfare (Hwy 441) with the intention of residing there and turning it into the first ever restaurant in Bishop. They were on target to open in August 2014 when they hit a snag, well, more of a massive pothole, on the road of entrepreneurship. It seems the Oconee County Health Department is going to require them to rip out their current septic system and install a commercial grade unit to the tune of a mere $75,000. Why? Well, ‘cause regulations say so. And we all know that regulations are infallible because the mantra “one size fits all” has never ever resulted in unintended consequences. Suffice it to say, when I saw their post about this last year on Facebook, all I had to read was “We’ve run into a bit of a problem…” and I instantly knew what the source of their problem was – the state. Nothing will throw cold water faster on the dreams of an entrepreneur than a byzantine labyrinth of irrational regulations.
So, to return to the original question, what does a septic tank teach us about economics? In this case it reminds us of the central lesson of Frédéric Bastiat’s Broken Window Fallacy – unseen effects must also be brought to account when analyzing economic outcomes. In this case, a restaurant that never opens would be an “unseen” effect of a gross misapplication of this particular regulation.
Regulations are an economic good. They provide a benefit, but like all economic goods they have a cost. However, when economic goods are forcibly imposed their cost no longer bears any relationship to the true demand (and hence price) for them. For example, some people like aquariums, but not everyone does. If the government made a law that required all households to have an aquarium, this would naturally shift the demand pattern from partial to universal. From this universal demand we would then witness an elevated price (Econ 101: as demand increases so does price). In the same way an artificially increased demand for regulation drives up the costs for those regulations. The price of these imposed regulations operates in a vacuum, uninfluenced by any other considerations that might compel one to balance their costs with other equally important considerations. For example, if the owners were not compelled by the threat of violence to keep their doors shut they would then be able to freely weigh the costs of opening with a potentially undersized septic vs. the costs of a delayed opening. All things being equal, absent state imposition of these regulations, we would find that demand, and hence price, for septic installation would be lower. This leads to the rather ironic outcome that in the absence of state mandated regulations many places like the Bishop House would actually be more likely to make these such changes owing to their lower costs).
But, if the Bishop House is unable to open due to this artificially imposed barrier, then we will all be the poorer for it, for what is wealth if not the betterment of our lives by the voluntary actions of fellow human beings? Every person barred from adding his own unique contribution to society by artificial barriers (the economic interventionism of regulations, licensing and employment law) erected by the state makes all of society that much poorer.
P.S. If you would like to learn more about The Bishop House or help them please see http://www.gofundme.com/fo1klc