No Permit Brings Sour End to Seinfeld Lemonade Stand

Comedian Jerry Seinfeld is best-known for his long-running show about nothing, Seinfeld. In the series finale, which aired in 1998, Jerry and his friends are thrown in jail for being horrible human beings.

They not only failed to help a man being car-jacked, they enthusiastically cracked jokes, laughed at the victim, and filmed the incident. In real life, Jerry Seinfeld and his family recently ran afoul of the law in East Hampton Village, New York for an act of goodwill.

Seinfeld’s son and his friends were running a roadside lemonade stand to raise money for a charity without a permit. The village’s police department did not make anyone available to me for a comment, but a search of the municipal code reveals that street peddling is restricted to farm commodities and is prohibited during the summer tourist season.

For the majority of the year in East Hampton, you can legally sell lemons on the side of the road, but you can’t sell lemonade.

While an extreme and amusing example, these types of laws and regulations too-often do immense damage to economic enterprise. Fortunately, the value of these types of rules is receiving scrutiny in a new Obama administration study.

A recent landmark study compiled by the Council of Economic Advisors, the Treasury Department, and the Department of Labor, is calling for states to limit occupational licensing to public health and safety concerns. According to the report, “more than one-quarter of U.S. workers now require a license to do their jobs, with most of these workers licensed by the states.”

In the construction industry, for example, 28 states require painters to get a license before they are legally allowed to paint, according to 2012 study from the Institute for Justice. In New Mexico, for example, painting a building requires two years of work experience and costs about $250 in application, testing, and licensing fees. Meanwhile, twenty-two states do not require an occupational licenses for commercial/general painters.

Not only does this landmark study provide much-needed attention to the issue of how government regulations can choke small businesses, it provides guidance to state policymakers on how they can better meet the needs of both public health & safety and economic growth.

The White House report repeatedly cites and relies on a recent Goldwater Institute study, “Bootstraps Tangled in Red Tape: How State Occupational Licensing Hinders Low-Income Entrepreneurship” to make its case for state-level rollback of occupational licensing. Using entrepreneurship data from the Institute for Justice and the Kauffman Foundation, former Goldwater Institute Senior Economist and current senior research fellow at the Center for the Study of Economic Liberty at Arizona State University Stephen Slivinski found that that the states requiring licenses for the majority of their low-income occupations had lower-than-average entrepreneurship rates. He also found that the states with fewest licensing requirements had higher-than-average entrepreneurship rates.

The White House study should serve as a clarion call to state-level policymakers. It is time to carefully re-examine the utility of the government-created obstacles that increase the barriers to entry to entrepreneurship; especially those that disproportionately discourage entrepreneurship in low-income sectors of the economy. In particular, occupational licensing should be evaluated and removed in those instances where there is no compelling public safety interest.

If states are to be competitive, innovative, and vibrant over the next century, we must recognize the growing importance of entrepreneurship in labor markets and must be willing to remove the tax and regulatory barriers that undermine small business formation and expansion.

Instead of putting the “squeeze” on would-be entrepreneurs, some policymakers are already leading the way toward reform. Minnesota lawmakers recently passed the Minnesota Cottage Food Law that loosened restrictions on home-based bakers, allowing them to sell their products directly to consumers. In 2013, Salt Lake County, Utah eliminated 45 fees associated with a wide range of business licenses and streamlined their occupational and business licensing rules.

The bitter truth is that policymakers wield enormous control over an area’s economic opportunity, but they also have the opportunity to unleash this untapped and too-often stifled entrepreneurial potential. They should seize the opportunity, not squeeze it.