Via Reason's Hit and Run, food writer Corby Kummer reveals the impact of bans on trans fats.

I realized that saying trans fats are "totally replaceable" as [New York City Health Commissioner Thomas] Frieden repeatedly does--asserting that they are merely used for texture, not taste--is easier for a health official than for a product developer. It should be simple, yes, to get rid of an entirely artificial ingredient that is used mostly for the convenience of industry. Researchers have been working for decades on substitutes, which should be not be as plentiful and as cheap as trans fats.

But they're not. [Au Bon Pain's head baker Harold] Midttun and [Au Bon Pain's executive chef Thomas] John gave the example of their blueberry muffins, which used to be the highest in trans fats, as a challenge they had finally met. They did it by using a new fat and adding several other ingredients to mask its taste and still get the same mouthfeel. The ingredients, they told me, included oat bran, ground golden flaxseed, soy protein, and emulsifiers. Individual bakers, I thought, were sunk: They'd never be able to figure all that out, even with frequent calls to a city help line.

Is this an aberration, a rare instance where small businesses are forced out by regulation, or is this the standard result of regulations? The Isonomist picks up the debate, noting two primary reasons to suspect that big government leads to big business.

The first approach is to look at the regulations themselves. Auditing, for instance, is more expensive for a large firm than for a small firm, but an audit of the kind that securities or tax regulations may require is not going to be quite twice expensive for a firm twice the size. Product safety testing and filings have to be done once for each product, and while in principle separate firms could contract to all make identical products and have them approved only once, there are obviously going to be transaction costs associated with such a contract, and those costs might very well tip the scale in favor of the small firms just merging instead of contracting.

The second approach to the effect of regulation on the size of firms is to apply the theory of transaction costs to the political process. It is hard to get an industry composed of lots of small firms to contribute to a lobbying campaign. It's a regular old tragedy of the commons, where each firm would like to hitch a ride on the lobbying efforts of its competitors. A large firm (or a well-established cartel) can more easily cough up the money to lobby for regulation, and it will probably ask for rules that benefit large firms.

It's interesting that he also notes how original economic theory would predict that any advantage that a business gets from being big can be replicated by contracting between smaller businesses. The advantage of big business, as noted by Ronald Coase, is that it has lower transaction costs than a comparable network of smaller business and independent agents. Shouldn't we then predict that any technological development that reduces transaction costs, say like the Internet, should encourage a decrease in market concentration?

The internet has fueled other developments, such as the free market anarchy of the blogosphere. This four year old Catallarchy post encouraged Tim Lee to argue once again that peer production is fully compatible with a free society. After all, doesn't peer production come very close to the model of independent agents working together to achieve the same advantages of larger centralized identities, with the lower transaction costs of the internet allowing them to succeed?

Jed Harris continued the discussion by bringing up the divide between capitalists and entrepreneurs, two groups that I doubt most libertarians ever saw as potential rivals.

For example, Linus Torvalds is a great entrepreneur, and his management of the Linux community has been a key factor in the success of Linux. Success to an entrepreneur is coordinating social activity to create a new, self-sustaining social process. Entrepreneurship is essential to peer production, and successful entrepreneurs become “rock stars” in the peer production world.

A capitalist, by contrast, wants to get a return on something they own, such as money, a domain name, a patent, or a catalog of copyrighted works. A pure capitalist wants to maximize their return while minimizing the complexity of their actual business; in a pure capitalist scenario, coordination, production and thus entrepreneurship is overhead. Ideally, as a pure capitalist you just get income on an asset without having to manage a business.

The problem for capitalists in peer production is that typically there is no way to get a return on ownership.

Harris notes how the debate over "intellectual property rights" is one example of the divide between entrepreneurs and capitalists. Tim Lee expands on this divide, but argues that libertarianism doesn't have to be anti-capitalist, it just doesn't always have to imagine entrepreneurship taking place in a capitalist framework. But having offered such as strong criticism of the capitalist desire to own all the means of production, even ideas, cannot this framework be applied to preexisting libertarian criticisms of capitalism? Maybe we don't need capitalists at all, especially if they have a tendency to form "indigestible lumps of socialism called corporations."