Today’s Wall Street Journal has an article tailor made for anyone wishing to defend free-markets from overreaching regulation. The story details the legal battle between the monks of St. Joseph Abbey in Louisiana with the Louisiana state funeral regulatory board. As is typical with such boards, the Louisiana version is dominated by the industry. Of course this is just what Stigler would have predicted 40 years ago in his classic article on regulatory capture. Two things struck me about the story however. First is how the “captured” funeral board doesn’t even make a pretext of some sort of health or safety motivation for its actions. In what might be the most honest statement ever made by a cartel member to a newspaper one of the monks’ competitors states,
“They’re cutting into our profit,” says Leonard Dunn, the owner of Serenity Funeral Home, located a short drive from the abbey. He adds. “I don’t think the monks are actually making the caskets—I think it’s a marketing gimmick.”
Much as I admire the monks’ struggle and am rooting for them I suspect that their efforts will not end the cartel. As with so many things, Stigler had this one right. Few of us are repeat customers of the funeral industry and hence have little incentive to lobby for regulatory change. By contrast the industry is quite lucrative. A more likely candidate to break the cartel, mentioned briefly in the story, is Wal-Mart and internet competition. As economist David E. Harrington of Kenyon College has documented (here, here and here) the costs of this cartel for consumers are substantial and caskets seem to be critical to the cartel.
“Greater competition in casket markets might also spill over to funeral markets if the price of caskets [are] the best place to conceal the economic rents of funeral homes.”
Good luck to the monks of St. Joseph Abbey.
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These Monks and the Monks located in DBQ will have the perfect applicaton of competition. Locally produced products for the funeral industry. The only problem I see here, is that, the local non-profits have established benefit on not paying Sales and Use taxes on there equipment and tools. The Monks should pay sales and use taxes on their pruchases. Income Taxes is another matter — if they’re profitable then they’ll have to paid the incomes taxes
Matt,
My parents lived in Singapore for three years, so I have some experience there. It is repressive in some ways — my dad’s WSJ came with black lines through some text — but they do one thing very well that explains everything in your comment: they are friendly to business. See, e.g., http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ayazKdYIeTR4&refer=asia. If America could do only one thing better, it should be this. From business friendliness (meaning ease in starting businesses) flows almost everything else.
The country of Singapore is a dramatic counterexample here.
The country is thriving economically, but is very tightly regulated in EVERY aspect of life, even requiring a doctor’s prescription to chew gum. The Economist magazine is still banned there because speech is tightly regulated.
But, as a nation, Singapore CLEARLY works very well. It is not filthy, they are NOT plunging into a depression and the people are smart, well-behaved and literate, unlike some profoundly boastful nations that shall be unnamed in this post.