A License to Grow: Ending State, Local and Some Federal Barriers to Innovation and Growth in Key Sectors of the U.S. Economy

Innovation and rapid economic growth require not only a facilitative legal infrastructure, which the United States already has to a significant degree, but also no or low legal barriers to entry into productive lines of activity.

Unfortunately, despite the deregulation of price and entry controls over the past three decades at the federal level in much of the transportation industry and some of the telecommunications industry, the U.S. legal landscape still is littered with legal entry barriers. These impediments exist primarily at the state and local levels, where they essentially have operated under the radar.

This white paper outlines some of the remaining state barriers and a few federal ones and how they prevent disruptive innovations by entrepreneurs and established firms alike that potentially could bring new and more efficient business models to the market. In the case of the legal sector, the barriers we identify not only adversely affect legal innovation, but also impede innovation in other sectors of the economy. Similarly, in health care, pharmaceuticals, K–12 education, the financing of growth businesses, and many consumer services, legal obstructions hinder innovation and the provision of efficient, affordable, high-quality services and products.

We conclude by surveying the main options for reducing or eliminating these impediments, proposing, in effect, ways to provide a “license to grow.” Although most of the ideas we list are relevant only to state and local governments, we do not recommend, however tempting it may be, federal preemption as the means to their abolition. Apart from the political difficulty of gaining consensus on a sensible preemption approach in a time of deep partisanship with the Congress, it is not necessary for citizens to look to Washington to solve all problems.