James d. Gwartney

particularly common in post-communist economies.
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Running Out of Agricultural Land by Dwight Lee

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81
Sensible and Limited Regulation
As we previously noted, gains from trade directed by competitive markets promote both
economic progress and social cooperation. Government regulations, often promoted by
established businesses, are a major source of trade barriers and market entry restraints. There
are three major ways that regulations limit exchange and reduce the competitiveness of
markets.
First, regulations often restrict entry into markets. Many countries impose regulations
that make it difficult to enter and compete in various businesses and occupations. In those
countries, if you want to start a business or provide a service, you have to acquire a license, fill
out forms, get permission from different bureaus, show that you are qualified, indicate that you
have sufficient financing, and meet various other regulatory tests. Some officials may refuse
your application unless you are willing to pay a bribe or contribute to their political coffers.
Often, well-established and politically influential businesses that you would be competing
against can successfully oppose your application.
Video:
Food Truck Roadblock
In his revealing book The Mystery of Capital, Hernando de Soto reports that in the late
1990s in Lima, Peru, it took 289 days for a team of people working six hours a day to meet the
regulations required to legally open a small business producing garments. (In an earlier book,
The Other Path, he revealed that along the way, ten bribes were solicited and it was necessary
to pay two of the requested bribes in order to get permission to operate legally.) In an example
ELEMENT 2.3
Regulatory policies that reduce exchange and restrict competition impede economic