Thursday, January 25, 2007

Government Regulation Done Right

California just banned a toxic solvent commonly used in dry cleaning called perchloroethylene. The ban is to take effect by 2023 with some intermediary steps in between. Apparently, some people against the ban say that it will be harmful to small business owners who can't afford the more-expensive non-toxic alternative. This argument is just wrong. This regulation effects everyone in the industry and as such the entire supply curve will shift together, maintaining the relative positioning of everyone in the market. While dry cleaners may need to purchase new equipment, the fact that nearly every player in the industry faces this requirement means the costs can easily be passed to the customer. Since there is no real alternative to dry cleaning, demand shouldn't change. The bottom line is no dry cleaner should suffer as a result of this new regulation and everyone gains from the elimination of the toxic chemical.

The only people who should be upset are those who do a lot of dry cleaning. However, more expensive dry cleaning is basically a consumption tax and I'm all for consumption taxes, even when it hurts me personally. That being said, I'm already using a dry cleaner who uses the non-toxic stuff and I didn't need to watch Al Gore's propoganda to convince me to do so!

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