Law Does Not Evolve Apace with Economic Dynamism

Lynne Kiesling

At Reason Brian Doherty reports on home gardeners in Oakland being fined for zoning violations when they sell produce, and their being required to spend a lot of money to acquire commercial permits.

Bob Dylan, prophet for his generation: even your home garden absolutely is against the law–at least if you dare let any of its produce exchange for cash with a fellow inmate in the open-air prison of America.

Reason also featured an article from Baylen Linnekin about food trucks in the April issue. Speaking about food truck regulations and permits in DC,

“You also need to get a permit for your cart or your truck from the Department of Health,” says Shapiro. “But they don’t give out any more permits. The Department of Health has capped the amount of food-vending permits. And you cannot get one. The waiting list is even closed. But it was 10 or 15 years’ wait. It’s impossible to get a food vending permit from the city.…If you want to get a permit for your cart or truck, you cannot do it.”

Surely there must be some way? “No,” confirms Zoe Tobin, associate press secretary with the city health department. “The number of permits is capped under the city’s administrative code,” Tobin explains. “The city council would have to change the administrative code in order for there to be more permits available.” Unless city legislators act, the city’s vendor permit ceiling will stay capped at 3,100 renewable two-year permits and 1,000 seasonal permits.

We have the same problems in Chicago, and they are becoming increasingly apparent as food trucks grow in popularity with the chef crowd. In Chicago you can only operate a food truck if you have cooked the food in a stationary kitchen that has been inspected by the Department of Health (and in Evanston you can only operate a food truck if you already operate a bricks-and-mortar restaurant; regulatory entry barrier, anyone …?).

Furthermore, the Chicago Health Department has also taken to raiding shared kitchens. There are a couple of people who own commercial kitchens and who rent out space in that kitchen. Think about the economics of this and the growth of social media: if you are a small-scale chef but you have a loyal, core following, and you can, say, use Twitter to share information about where to buy your sandwiches/cupcakes/confections etc., you may have a viable business if you can economize on the infrastructure and capital costs of setting up a commercial kitchen. But the Department of Health doesn’t just require the kitchen owner to have an inspection and permit; it requires every single person who uses the kitchen to have a separate permit and inspection (and pay a separate fee, naturally). Notice the illogical foundation of this policy in this context — different chefs may use different parts of the kitchen, but they may also use the same parts at different times of day (the economics of this is similar to hotel rooms, electricity transmission, airline seats, ice skating rinks, anything where capacity utilization of infrastructure is a core issue). It would be in the owner’s interest to ensure the health practices of her renters, and the Department of Health could enforce compliance at lower cost by random inspections that could occur at any time of day. But no, they have to raise business costs by requiring every single renter to have a separate permit.

The Chicago Department of Health has ruined more than a few promising small food businesses with this policy; when they raid a shared kitchen and find a renter without a permit they destroy all of the prepared food and food inputs on the premises.

We can apply this example to a broader general point: law does not evolve apace with economic dynamism. The combination of increasing rents and the aggressive rivalry in the restaurant industry with technological change has induced chefs to be creative and look for alternative business models, such as food trucks and tweeting routes and locations to potential customers. The inherent incentive to maintain a healthy cooking space so you can continue to get word-of-mouth and repeat business exists, but is ignored and undermined by onerous health regulations that do not adapt to these changes, allegedly because they are “protecting the public interest”, but really because bureaucracies innovate slowly, if at all. The Department of Health suffers no cost, harm, or penalty if they drive entrepreneurs out of the city, so there’s no natural check on their exercise of power.