Subject: 1776 Insights & News
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Date: Fri, 10 Aug 2018 15:47:06 +0000
List-Id: 9923c478789c2ad2443a33a60mc list <9923c478789c2ad2443a33a60.153621.list-id.mcsv.net>

Regulations: Innovation Friend of Foe?

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** A bimonthly newsletter on innovation in complex industries and our startup communities
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In our latest Insights, John Dearie, Founder and President of the Center for American Entrepreneurship, shares his proposal on how to break the regulatory red tape.

Why are there so many regulations?

Regulation is essential to market economies. It establishes the rules of competition, ensures a level playing field, governs participants’ behavior, and protects consumers, public health and safety, private property, and environmental resources. In this important sense, innovation, economic growth, and wealth creation depend on the promulgation and enforcement of regulation.

But regulation isn’t free, or without consequence.

Regulation imposes costs — costs borne by businesses. A wave of new, inconsistent or outdated regulations, or complex and confusing regulations can distract business owners’ focus and time away from their product line and the marketplace. They can impose costs that consume resources that could otherwise be invested back into businesses. Regulation can also create economic distortions, entrenched interests, and powerful constituencies, and lead to cronyism and dependency. Perhaps most insidiously, regulation and its costs operate like an invisible and, therefore, easily overlooked, tax.

Michael Mandel, chief economist at the Progressive Policy Institute, has pointed out that the sheer accumulation of regulations over time can begin to suppress innovation and growth — even if every individual regulation, considered in isolation, is determined to be sound and reasonable.

“The problem is that it’s possible for every individual regulation to pass a cost-benefit test, while the total accumulation of regulation creates a heavy burden,” he says. “I call this the ‘pebble in the stream effect. Throw one pebble in the stream, nothing happens. Throw two pebbles in the stream, nothing happens. Throw one hundred pebbles in the stream, and you have dammed up the stream. Which pebble did the damage? It’s not any single pebble, it’s the accumulation.”

Read more: Regulation: Innovation enabler, or destroyer? (https://www.1776.vc/insights/regulation-innovation-enabler-or-destroyer)
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** The latest news from our network:
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* D.C. food-tech company Hungry enters Philly market by acquiring Wharton startup and 1776 member LocalStove (https://www.bizjournals.com/philadelphia/news/2018/08/08/wharton-localstove-bought-hungry-food-tech.html)
* How These 5 Women Entrepreneurs Impressed the Founders of Rent the Runway (https://www.inc.com/jemima-mcevoy/from-germ-detection-to-flossing-at-work-meet-5-women-led-startups-that-won-rent-runways-annual-entrepreneurship-competition.html) (including alumnus member company Entrada ESL’s Erin Janklow)

** Featured Contributor: Center for American Entrepreneurship
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The CAE recently released a new analysis (http://startupsusa.org/americas-rising-startup-communities/) by their research director, Ian Hathaway, of America’s startup communities. To test the notion of new entrepreneurship clusters emerging outside the coastal hubs of Silicon Valley, New York, and Boston — a phenomenon referred to by Steve Case as ‘The Rise of the Rest’ — Ian analyzed eight years of “first financing” venture capital investments in high-growth early-stage startups across the country.

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