Business Innovation in a Free State
By Arnold Kling
Concerning a hypothetical start-up state, Patri Friedman asks,
What key freedoms and protections would you create, and what immediate industries would they enable? What business would you start if you moved there?
One approach is to think of something that is illegal here but would be good to have, such as an organ market.
Another possibility would be encouraging people to hire low-wage workers to do household chores, without any minimum wage. If that takes off, then industries will spring up to serve low-income people, including low-cost housing and health care.
Another approach is to try to satisfy the desire of people to preserve their own capital. A star tech worker might be able to live in a low-tax location and keep more of his her earnings. And if citizens had access to safe, sound banking without fear of being taxed to bail out government or banks, that would be attractive.
Keep in mind that Fogel’s three growth sectors are education, health care, and leisure. So, yes, medical tourism is a possibility. And if professors actually succeed in blocking productivity improvements in education, then that creates an opening.
But I think that the real key is leisure. You want the start-up state to be an attractive place for people who want to retire or do part-time work. The ideal leisure environment means different things to different people, of course. But the businesses that should take off would be businesses that are complementary with leisure.
The marketing pitch might be, “Life here can be as nice as in California on a good day. But you can afford it more easily because we don’t have all the taxes going for services you don’t want.”