Laboratory Rats

Virginia Postrel from the May 2000 issue

(Page 2 of 2)

"The diminishment of borders makes the cost and capacity to protect consumers more problematic," states the report. "A criminal or fraudulent business in one state can victimize consumers in a different state. The sale of prescription drugs, pornography to minors, and cigarettes and alcohol over the Internet illustrates how information technology is breeding new federal-state regulatory issues and tensions that challenge existing regulatory regimes."

Of course, the Internet consumers who buy Viagra or Chardonnay across borders do not feel like victims of criminal businesses. They think their states' "protective" laws stink. And their actions challenge the laws' legitimacy. They force states' regulatory monopolies to face competition.

Competition is what "laboratories of democracy" are about. In a federal system, smaller units of government can try different approaches. That allows both diversity--people in one state may not have the same values or preferences as people in another--and discovery. States can experiment, and good ideas can spread.

This process is most valuable when states are functioning as service providers. Contrary to Osborne's industrial-policy emphasis, the real state-level innovations of the past decade have been in such areas as welfare reform--in services, not regulations. States have also learned how to tap the competitive discovery process within the private marketplace, by contracting out functions and, in some rare cases, simply giving citizens vouchers with which to purchase services.

But both state roles, as rule maker and as service provider, also raise a fundamental question: Is this a proper task for government at all? The governors never ask, "What business are we in?" What are we supposed to be delivering? Liberty, order, and justice? Or any good, service, or restriction that sounds attractive and has an effective lobby?

This is the question that determined "pragmatists" like Osborne consistently dodge. As leftist political writer Harold Meyerson correctly observed of the 1996 Reform Party convention, Perot-style technocrats imagine that there are no substantive disagreements between the followers of socialist Michael Harrington and the followers of libertarian Friedrich Hayek. It's simply a matter of getting the "best experts" in a room, stamping out corruption, and finding efficient techniques. The governors' report takes a similar attitude.

The inevitable result is a mandate to do just about anything, and to focus more on the states' powers and prerogatives than on the freedoms of the citizens they serve. The report asserts, for instance, that state and federal policy makers must not let their turf battles deter them from "jointly shouldering the responsibility to shape the future and frame the questions that must be answered."

That line may be federalist boilerplate. But it says a lot about what the nation's governors really think about innovation, decentralization, and all the other characteristics of the "new economy." They're great, as long as they're under government control. We wouldn't want the future to take a surprising shape.

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