Incumbent Protection

So much of government regulation boils down to the protection of politically connected incumbent competitors against new competition.  This is an astonishing example, sent in by a reader:

BEMIDJI, Minn. - Assistant House Majority Leader Frank Moe says people
who rent out their lakefront homes may be hurting the state's resort

The Bemidji DFLer has authored a bill ordering the
state's tourism agency to study whether the increased competition is
hurting resorts. It's now awaiting Governor Tim Pawlenty's signature.

If you are willing to make up your own bed, there are a lot of reasons why private home rentals are a more attractive vacation option than resorts, particularly when you consider the high price of those ancillary resort services.  Why the government needs to be involved in what is, to my eyes, just a normal consumer preference is beyond me.  This last line caught my eye:

The state's resort industry is struggling as lakefront property values
soar but the market restricts what they can charge for cabin rentals.

Uh, OK.  I have the same problem -- land for cabins and campgrounds in areas people want to spend the weekend is really expensive, labor costs are up, but rental rates remain low.  So what?  Through their preferences and how they translate to prices, consumers are saying that there is better uses for prime land than lakefront rental cabins.  I can accept that.


  1. Bob Smith:

    Land is expensive in many lakefront areas because development restrictions have made most of it off limits for development, making the existing developed land extraordinarily valuable (and expensive). To match your theme, this isn't really environmental protection so much as it is incumbent protection for current landowners.

  2. Marcus:

    I recently came across a blatant and almost unbelievable example of incumbent protection. I was looking into what is involved to become certified to sell mutual funds. You must take what is called the 'Series 6' exam.

    But get this, before you can take the exam you must be sponsored by an incumbent firm. Unbelievable.

    So, I looked into what is involved to become a 'member firm'. Here's what I found:

    "Submitting an application for membership in FINRA is a serious undertaking and should be considered carefully. You may wish to consider alternatives to applying for membership depending on your desired goals. For instance, working for an existing member firm or managing the branch office of a member firm might achieve your objectives without going through this application process. If you intend to file an application, you must fully understand all of the substantive and procedural requirements. Moreover, you must be in a position to provide in a timely manner information that addresses how you will satisfy the standards for admission and other applicable statutory and regulatory requirements."

    All I can say is, "Wow."