– October 23, 2019
Share:

The surest way to discourage innovators is to treat them and their inventions as guilty until proven innocent. Public policies that demand endless permission slips before new technologies are allowed into the wild can dampen the entrepreneurial spirit and diminish the chances for life-enriching innovations to come about.

Unfortunately, this is exactly what the city of San Francisco threatens to do with its newly proposed Office of Emerging Technology. Norman Yee, president of the San Francisco Board of Supervisors, recently announced the creation of this new bureaucracy within the city’s public works department. Yee insists that he supports innovation, but the proposed regulatory regime would represent a major setback for a city that has become increasingly associated with some of America’s biggest tech companies. If enacted, it would likely stifle much-needed future technological improvements and ensnare the newest ideas in red tape. 

The proposed Office would impose a new permitting system on anyone looking to launch new technologies that might somehow use public rights-of-way, such as sidewalks and roads. Operating freedoms would be doled out under a pilot program for emerging-technology devices, which is tantamount to a system of special blessings for select innovations that foster “the common good.” Innovators lacking the appropriate permission slips face civil and criminal penalties.

Welcome to the techno-nanny state. San Fran’s new bureaucracy might better be labeled the Office to Block Emerging Technology because it would create a laborious, mandate-laden process of prior restraints. It would discourage entrepreneurial efforts, consumer choice, and new employment opportunities. 

Prior Restraints Stifle Human Creativity

Whenever bureaucrats are in charge of an innovation-by-permission-slip regime, a line will form to get permits on the best terms possible. Whoever is the most clever and well-connected will get access first. Scrappy start-ups won’t have the resources to play the lobbying game or navigate the costly and complicated permitting system. Innovation will suffer.

Imagine if San Fran was proposing a new office to grant permits to engage in free speech and expression. Such a system would not be tolerated. It is generally understood that prior restraints and permission slips for speech would stifle human creativity and lead to repressive regulatory regimes. 

The same is true for innovation. Prior restraint on acts of entrepreneurial creativity can undermine human well-being by limiting opportunities to find new and better ways of solving societal problems. The problem with our ever-expanding “permission society,” as Goldwater Institute attorney Timothy Sandefur describes it in his latest book, is that “when told that they will have to undergo expensive and time-consuming permit processes before being allowed to pursue a new idea, many simply give up without trying.”

Instead of serving the public interest, permitting models tend to lock in yesterday’s business models and the well-heeled incumbents that support them. Risk-averse regulators and turf-conscious crony capitalists will always opt for stability over disruptive change. This is the way that many old, heavily permitted sectors have worked for many decades. Municipal taxicab commissions, for example, generally protected old “taxi” operations. Disruptive innovation in the form of ride-sharing services like Uber and Lyft was frowned upon by regulators, despite being loved by the public, who welcome greater competition and quality of service compared to what old permitting systems had delivered. 

Uber and Lyft were only able to break through and offer competitive choices because they engaged in a bit of “evasive entrepreneurialism”; they basically did an end run around the old cronyist system. Their strategy was to become so firmly lodged in the public psyche that not even regulators could dislodge them. Indeed, once the public got a taste of the true competition and choice these companies brought, the political calculus changed. While many cities still regulate ride-sharing services, the rules have at least been relaxed to allow for some semblance of choice to exist in most areas. But mountains of red tape remain in place for this and other new transportation innovations, like rentable electric scooters. 

Imagine this same protectionist system being in place in San Francisco for any “emerging technology” that the city (or anti-innovation forces) wants to control. Many entrepreneurs will likely give up or relocate elsewhere to gain the freedom to innovate. Innovation arbitrage is a phenomenon that the city should be worried about. It refers to the movement of ideas, innovations, or operations to jurisdictions that provide a legal and regulatory environment more hospitable to entrepreneurial activity. 

Innovation arbitrage is becoming easier in the Internet Age than it was in the past. Many cities and states are experiencing an outflow of talent because of onerous policy regimes that prioritize red tape and vague notions of the public interest over worker opportunities and consumer choice. If San Fran’s new anti-innovation office is established, it wouldn’t be surprising to see many firms and individuals relocate to areas with greater freedom to experiment. 

Better Ways to Govern the Commons

Of course, it is true that some new technologies — especially those that use public roads and sidewalks — create unique policy challenges. Cities still need to have some policies governing the use of public spaces. But there are more creative ways to govern the “commons” than with innovation-stifling permitting processes that deprive the public of much-needed choices. 

Governance can take many forms, including “softer” mechanisms aimed at creating opportunities for dialogue and ongoing collaboration. Many people are quite rankled by rental scooters that are left lying on well-trafficked areas, creating hazards for pedestrians and cyclists. The solution, however, isn’t highly restrictive permitting systems. The better approach is a combination of collaborative best practices, educational efforts, and creative public–private solutions to ensure scooters are ubiquitous, yet orderly. 

San Francisco already has an Emerging Technology Working Group “to inform future legislation on emerging technologies” through public–private discussions. Stated objectives include developing recommendations, evaluating impacts, and improving dialogue. Kansas City is also moving forward with an Emerging Technology Board aimed at “fostering a system of collaboration among City departments and agencies on significant emerging technology decisions” as well as providing information and advice to city policy makers. That model could be a useful forum for achieving more sensible governance approaches going forward. 

By contrast, the permitting model San Fran proposes with the new Office of Emerging Technology would mean that prior restraint and policy rigidity will crowd out a more flexible, adaptive approach to commons governance. 

There are still other ways to bring order to the rollout of emerging technologies without resorting to prior restraints on innovative activities. Nuisance laws, torts, property rights and trespass rules, and other common law remedies still exist and can help address some of the unforeseen problems that can arise when new technologies are used in public spaces. Social norms and industry best practices also help govern the ways new technologies are developed and used. 

Instead of erecting barriers to economic opportunity and consumer choice with a burdensome new “Mother, May I?” permitting regime, San Francisco should give innovators the green light to experiment with new ideas that help rejuvenate the inventive spirit of a city still brimming with talented entrepreneurs. 

Share:

Adam Thierer

Adam-Thierer

Adam Thierer is Research Fellow at the American Institute for Economic Research and a Senior Research Fellow at the Mercatus Center at George Mason University.

Get notified of new articles from Adam Thierer and AIER. SUBSCRIBE