States already compete in the regulatory arena, even if state policymakers fail to take account of it. Think tanks regularly publish studies of economic freedom in the states that have a regulatory component. Forbes magazine publishes a ranking of states in terms of their business climates and one of the criteria has to do with regulation. Chief Executive magazine does the same. No doubt, there are other examples, not to mention word-of-mouth among those who make facility placement decisions for large companies.
States’ regulatory regimes differ for a variety of reasons, and some regulation might be inevitable, depending on the specific circumstances in which a state might find itself. For example, Los Angeles essentially sits in a half-bowl formed by mountains to its east while prevailing winds blow from the west. Therefore, pollution is a particularly big problem there because it does not blow away. Naturally, more stringent atmospheric emission regulations might be more justified there than elsewhere.
Not only is it legitimate for policymakers to think carefully how their choices affect their state’s business environment compared to others, it is incumbent on them to think carefully how their regulatory rules affect their state’s business environment compared to others. A law passed in response to circumstances that might best be addressed through civil action, better information or the assumption of risk could have long-lasting, negative economic consequences for a particular state.
Chambers of commerce and various levels of government that have little to no direct control over regulations imposed by other levels of government can still take action to minimize regulation’s impacts. Regulatory specialists can become expert in learning about regulation and can become acquainted with specific regulators so as to facilitate businesses’ meeting regulatory requirements. Such experts can also serve as advocates for the business community, questioning the need for regulation and making recommendations to streamline regulatory compliance. By establishing regulatory “clearinghouses,” state and local governments can reduce the need for every business to replicate other similar businesses’ knowledge of regulatory requirements and reduce the time and cost involved in meeting regulatory burdens.