A lesson in economics: barriers to entry.

[Coito ergo sum]

Portland lemonade stand runs into health inspectors, needs $120 license to operate

It's hardly unusual to hear small-business owners gripe about licensing requirements or complain that heavy-handed regulations are driving them into the red.

So when Multnomah County shut down an enterprise last week for operating without a license, you might just sigh and say, there they go again.

Except this entrepreneur was a 7-year-old named Julie Murphy. Her business was a lemonade stand at the Last Thursday monthly art fair in Northeast Portland. The government regulation she violated? Failing to get a $120 temporary restaurant license.

http://www.oregonlive.com/portland/inde ... uns_i.html


You see, the $120 is a "barrier to entry." This little girl is effectively barred from entering the lemonade industry because her temporary lemonade stand has to comply with a $120 filing fee. The effect is that she needs to sell 240 lemonades at her price of 50 cents each, just to pay the license fee. Basically, the State is confiscating this little girl's lemonade money. If a private entity did this, it would have the local "newsbusters" on their ass, don't you think.

The function of a barrier to entry is to keep the little guy/girl out of the market, or make it more difficult to compete. Coke and other soft drink companies have no problem paying these kinds of costs due to their high volume, and they are more than happy to have small competitors regulated out of the market.

The criminal:

Julie had become enamored of the idea of having a stand after watching an episode of cartoon pig Olivia running one, said her mother, Maria Fife.

EDITED to correct typo --- 60 in original should have been 240.....

[PsychoSerenity]

Awww

[Feck]

I'm glad you have explained more economics to us because frankly I don't understand it

You see, the $120 is a "barrier to entry." This little girl is effectively barred from entering the lemonade industry because her temporary lemonade stand has to comply with a $120 filing fee. The effect is that she needs to sell 60 lemonades at her price of 50 cents each, just to pay the license fee. "

[mistermack]

I'm glad you have explained more economics to us because frankly I don't understand it

Yeh, I'm having trouble with that.
.

[maiforpeace]

The comments are much more entertaining than the article.

The function of a barrier to entry is to keep the little guy/girl out of the market, or make it more difficult to compete. Coke and other soft drink companies have no problem paying these kinds of costs due to their high volume, and they are more than happy to have small competitors regulated out of the market.

Why would you complain - this is just corporate capitalism at it's finest. Didn't you defend McDonald's right to do as they please? After all, they deserve the same rights as an individual like little Julie.

[Coito ergo sum]

barriers to entry are obstacles in the path of a firm that make it difficult to enter a given market.[1]
Barriers to entry protect incumbant firms from competition from newcomers.

Government regulations - It may make entry more difficult or impossible.... Requirements for licenses and permits may raise the investment needed to enter a market, creating an effective barrier to entry.

http://en.wikipedia.org/wiki/Barriers_to_entry

[Trolldor]

I'm pretty sure Coito was being Sarcastic...

[FBM]

I'm glad you have explained more economics to us because frankly I don't understand it

You see, the $120 is a "barrier to entry." This little girl is effectively barred from entering the lemonade industry because her temporary lemonade stand has to comply with a $120 filing fee. The effect is that she needs to sell 60 lemonades at her price of 50 cents each, just to pay the license fee. "

3412801042_efb10276f3.jpg (42.98 KiB) Viewed 737 times

[Coito ergo sum]

The comments are much more entertaining than the article.

The function of a barrier to entry is to keep the little guy/girl out of the market, or make it more difficult to compete. Coke and other soft drink companies have no problem paying these kinds of costs due to their high volume, and they are more than happy to have small competitors regulated out of the market.

Why would you complain - this is just corporate capitalism at it's finest. Didn't you defend McDonald's right to do as they please? After all, they deserve the same rights as an individual like little Julie.

Why would I complain? One, I didn't "complain" - I illustrated an example of a costly (to this person) government regulation that effectively prices her out of the business. It illustrates that ill-advised costly government regulation stifles business opportunity. The higher these barriers to entry, the tougher it is for someone to go out there and earn a buck.

Whether that's a "good" or a "bad"thing is up to your own judgment. If you think it's good to for the government to require 7 year olds to get licenses to operated lemonade stands, then that's your evaluation of it, and the barrier to entry is worth it to you.

Two, you'll need to explain why you think my support of McDonald's on the speech/advertising issue would necessitate that I support charging this girl $120 for a license? I have never suggested that I support big business over small business or sole proprietors. I think this girl should not need to pay $120 for the license, and I also think that McDonald's should be able to advertise its hamburgers. There is no conflict there.

Three, the consumer is best served by more, not less, competition in an industry. I oppose irrational barriers to entry which cost people money unnecessarily and without any reasonable benefit to the public. I know that from being the owner of a small business, and one thing that people who have never run a business have a hard time understanding is that you get whacked day in and day out by government fees (not just taxes), and the time it takes to comply with various requirements are very real costs to a business, and can make it unfeasible for people to survive. In the case of this little girl, to charge her $120 to sell lemonades on a sporadic basis does nothing to protect the public, essentially confiscates her operating revenues, and helps entrench larger competitors and free them up from competition.

[Coito ergo sum]

I'm pretty sure Coito was being Sarcastic...

Yes, I thought the article was funny. But, I do think it's stupid to charge little kids permitting fees to run a flippin' lemonade stand.

That'll be $120 please!

[mistermack]

I'm pretty sure Coito was being Sarcastic...

I think you ought to tell him then.
.

[AnInconvenientScotsman]

Wouldn't she have to sell 240 lemonades at 50c each to make up $120?

[Coito ergo sum]

Wouldn't she have to sell 240 lemonades at 50c each to make up $120?

What did I type?

Yes, it would be 240....oops!

[Feck]

I love how my post was ignored .Could FBM have drawn any more attention to it ? Sometimes I wonder why I bother

[FBM]

I love how my post was ignored .Could FBM have drawn any more attention to it ? Sometimes I wonder why I bother