Lawrence J. McQuillan, PhD Chief Economist Illinois Policy Institute
Illinois has felt the bite of the Great Recession more than most states. Our unemployment rate increased to 8.7 percent in June, the highest in the Midwest and 10th highest in the nation. Lawmakers should be doing all they can to make opening a business easier. But in Evanston, Illinois, they are imposing needless restraints.
James Nuccio and Gabriel Wiesen, two young entrepreneurs, want to operate their Beavers Donuts food truck in that city. But Evanston officials have constructed a road block: only food trucks run by brick-and-mortar restaurant owners are legally permitted to operate there.†
The Liberty Justice Center has filed a lawsuit on Jamesís and Gabrielís behalf, claiming that the ordinance serves no health or safety purpose, but exists only to protect preferred groups from competition. But this goes far beyond a local squabble over gourmet donuts and coffee: governments across the country impose thousands of needless restraints on competition that crush economic freedom, and they come at a steep price.
In a nutshell, economic freedom is the right of an individual to own what he earns and choose how to use his income, to produce what he wants in accordance with his own values, and to compete fairly in markets of his choosing. On one level, this freedom is a valuable end in itself: people have a fundamental civil right to pursue their dreams and earn an honest living. Thatís all James and Gabriel want. But restricting economic freedom also hurts our economy in tangible ways.
Economist Russell Sobel has studied the effect of economic freedom on entrepreneurship. He found that less economic freedom in a state reduces its venture capital investment per capita, patents per capita, the growth rate of sole proprietorships, and business birth rates Ė all critical measures of entrepreneurship.
And entrepreneurship is the single greatest driver of net job growth in Illinois, according to a forthcoming study by the Illinois Policy Institute. Business births have more of an impact than businesses moving to Illinois or existing companies in the state expanding.
Also, economists Stephen Easton and Michael Walker found that a small increase in economic freedom produces an increase in average annual income of more than $1,500. And Horst Feldmann found that expanded economic freedom substantially lowers unemployment, especially among women and young people.
The evidence adds up: needless government restrictions not only crush entrepreneursí optimism, drive and morale, they damage local economies as well. Evanstonís unemployment rate was 7.5 percent in 2011, up from 3.5 percent in 2006. City officials should be doing all they can to get people back to work, not imposing needless obstacles.
It would be best for the Evanston community if the food truck ordinance were struck down, allowing restaurant competition to flourish and entrepreneurs such as James and Gabriel to pursue their dreams.
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Lawrence J. McQuillan, PhD is chief economist of the Illinois Policy Institute.