Monday, August 23, 2010

The Government Reflex

Another case of libertarianism run amuck. Gourmet cupcakes only exist because of... zoning laws and (local) government planning! It's always hilarious when 'pro-market' folks see a type of consumer good they don't like, so let's blame it on government!
That's Jeremy Horpendahl's comment via Google Reader on this article. It's about those tiny stores--specifically cupcakes--which sell expensive gourmet treats and how they are really the engineering of government action.
Consider the cupcakes. Sure, there is clearly a market for gourmet cupcakes with high-end ingredients. But it’s probably not a viable storefront business in most locales. Except due to zoning and government planning, there are commercial districts with “excess” capacity. Simultaneously, governments strongly discourage home-based and informal businesses that promote trade outside designated “commercial” areas. Planners also want commerce concentrated in areas where customers are more likely to pay upscale prices — and thus higher sales taxes — which contributes to the appearance of economic growth.

Gourmet cupcakes are a city planner’s dream business. It’s an impulse purchase that fits into high-foot-traffic areas (no cars!) and provides the customer with the illusion of luxury. It also tends to bring attention from fad-conscious media outlets — there’s a cable television series devoted to a Washington, DC cupcake store — which also feed the illusion.
Its tortured logic. Planners want cut gourmet shops. They have the ability to make easy for some shops to open and hard for others. We have many gourmet shops. Ergo, they are they because of government.

I don't know if we have "many" of these shops or "too many" of them. I have not idea what that means. I know that once Tanya and I ducked into a gourmet cupcake one in Georgetown (not the one on the show). It's off the main street, a bit hard to find actually, and it was so crowded we could barely walk around. Yeah it was a weekend, but it was about as stuffed as a Starbucks on a Monday morning.

Is it so hard to believe that if people are willing to pay a premium for coffee (which is one of the easiest things you can make in your kitchen), they won't also pay a premium for hot dogs, ice cream, and cupcakes? That these aren't daily purchases only translates into fewer stores. A struggling Cold Stone Creamery is more likely the result of the recession, not the beginning of some sort of gourmet bubble.

I assume that, like restaurants, these stores have a high failure rate. That is hardly grounds to weave an elaborate story involving sugar, bureaucrats, and dreams of a centrally planned future. It's haphazard and sloppy. It's embarrassingly knee-jerk. It's intellectually lazy. It speaks to everything people hate about libertarians.

Sometimes a short comment says a lot more than a long article.


jeremy h. said...

Also funny that some claiming to be followers of Austrian economics exhibit the pretense of knowledge. "We know exactly what businesses would and wouldn't exist in the absence of regulations X and Y."

rachel said...

I love your blog! You're much much smarter than I am when it comes to this stuff - sometimes I pretend to understand it but I honestly don't. I'm going to go back and re-read this when it's not midnight to see if I can completely figure out what you're saying... :)