This is absolutely fascinating and has definitely opened my eyes up to a new way of thinking about regulation.
How would you think about scenarios where states affect other states with their policy? For example, one state allowing factories to pollute an interstate river that negative affects farms in states downstream? Or one state allowing factories to pollute the air that negatively affects the health of the citizens of a neighbouring state?
I guess it would also mean that each state might need governing bodies like NHTSA? Or I guess states could basically say 'if this vehicle is fine in California or Texas or X, then it's fine in this state'?
My point about the incumbents was that they are usually richer than new entrants and could lobby 50 governors whereas a new entrant might not have the resources to do so... could this create monopolies? I guess I'm thinking of a scenario where something like a new airline wanted to operate in the US, or anything that needs to operate in multiple states to establish economies of scale.