... then a competitor gets them banned in a middle state which disrupts the entire business case.
This is already a risk under the current system. California already enacts stricter standards on many products, such as automobiles.
The problem is when the federal government enacts anti-competitive regulations, there is no "safe haven" free from those anti-competitive regulations.
With a decentralized regulatory system (i.e. federalism) it only takes one holdout state to 'prove' to the others that their policies are substandard. By contrast, a substandard federal policy never gets challenged, never gets 'proven' to be wrong, never gets repealed, never gets corrected, and the incumbents never get challenged.
Incumbents might have an advantage because they have the resources to lobby 50 states whereas a new entrant wouldn't have the resources to compete.
Incumbents currently only have to lobby a handful (or fewer) of powerful politicians. And they don't have to spend 50x the resources to get their way. They merely have to threaten to spend some percentage more than their would-be competitors might be able to spend. And, whereas the would-be competitors are still merely "would-be" that means the potential competitors have very little to gain (with any degree of certainty) and thus have zero (or negative) incentive to wage any sort of lobbying fight against the entrenched incumbents.
... it's hard to think through all the consequences to see if individual state laws would help or hinder that process
Some states' laws will encourage competition, some will hinder it. The problem with the current system is that it is guaranteed to only hinder competition, because the powerful incumbents need only control a small fraction of the decision-makers to solidify their anti-competitive agendas.
And, to the casual observer, it is often made to look like the government is actually protecting its citizens, rather than harming them.
Here is how I teach my students to think about government regulation:
Truly free exchange by definition involves a willing buyer and a willing seller.
As long as there is no fraud or coercion involved in a given transaction, both parties believe they will be better off as a result of the transaction (otherwise one or both would just walk away).
Furthermore, as long as there are no negative externalities associated with the transaction (i.e. there are no costs to society that are not borne by the parties to the transaction) then society is better off as a result of the transaction having taken place.
Every government regulation STOPS willing parties from engaging in free exchanges that they would otherwise have participated in (absent the regulation). This means that each and every regulation is KEEPING society from being better off, UNLESS the regulation is effectively causing true negative externalities to be properly borne by the transaction participants.
As such, the ONLY justifiable regulations are those that properly cause negative externalities to be borne by the parties to the transaction. All other regulations merely stifle increases in societal well-being.
I don't trust the federal government to do a good job of performing that regulatory function.
I also don't trust a majority of state governments to do that either.
However, I do trust (at least moreso than any current alternatives) a system wherein individual states are forced to complete against each other, via their own regulatory policies, to attract and keep citizens and businesses.
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.