Over at EconLog, Bryan Caplan makes an interesting obervation:
"Contrary to popular belief, Big Business often supports federal regulation. Economists' standard explanation: Regulation either directly restricts competition, or indirectly imposes a greater burden on smaller businesses. But there is another important reason why Big Business supports federal regulation that economists often overlook: To avoid the enormous transactions costs of dealing with 50 different sets of state regulation, and thousands of different sets of local regulation."
This poses a problem for my proposal for libertarians to support federalism. Because increased federalism would likely create a large set of differing regulations, this could impose greater costs on businesses than the more uniform federal regulation, however burdonsome the latter may be.
A plausible responce is that competition among states to attract business will result in more liberal regulation, as most companies can easily leave a state if the regulations are overly burdonsome.
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