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OpenMarket: April 2014

  • CEI Podcast for April 9, 2014: A Consumer's Guide to Chemical Risk

    April 9, 2014 11:20 AM

    Senior Fellow Angela Logomasini talks about her new Consumer's Guide to Chemical Risk.

  • Professional Licensing: A Risk to the Free Markets and Freedom of Speech

    April 7, 2014 2:59 PM

    From physicians to dentists to lawyers, the licensing requirements of many professions are well known—but for bloggers? A recent case in North Carolina demonstrates the dangers that mandatory occupational licensing poses to liberty and how established interests use such requirements to protect their bottom line.

    North Carolina resident Steve Cooksey was ill, obese, and struggling with type 2 diabetes. In 2009, after being rushed to the hospital, nearly in a coma, he decided to do everything in his power to get healthy. By following a low-carbohydrate diet, Cooksey claims he was able to drop 45 pounds and get off insulin and drugs. He documented his story on his personal blog, where he provided advice to others practicing the “paleo” diet that he believes saved his life.

    That sounds like a win-win situation, but not according to the North Carolina Board of Dietetics and Nutrition (NCBDN), which decided to go after Cooksey for the “crime” of offering nutritional advice without a dietitian's license. In 2011, it sent Cooksey a letter, claiming that his blog, by giving readers “unlicensed dietetic advice,” even for free, violated North Carolina law. The NCBDN included a 19-page copy of his online writings with comments in red ink pointing out what he could and could not say.

    Even more surprising, the notice asserted that Cooksey’s private conversations with readers and friends via email and telephone also constituted a violation of the state’s dietitian licensing law!

    Unfortunately, Cooksey’s case is far from an isolated incident. In just about every state, there is a dizzyingly long list of jobs that require would-be workers to go through a long, expensive, and sometimes arduous process to earn the privilege of entering into a given profession. While the stated reason for requiring occupational licenses is public safety, established players operating under existing licensing schemes usually fight tooth and nail to maintain occupational license requirement in place, to make it harder for potential competitors to enter the market.

    Today, roughly 30 percent of jobs in the U.S. require some form of license (a sharp increase from a low back in 1950, when the share was only 5 percent). Fortunately, some workers are fighting these licensing regime—and many are winning.

  • Food Policy Fight: Junk Study on Vegetarian Diet

    April 7, 2014 1:25 PM

    Log on to Twitter and you might read: "A vegetarian diet is associated with poorer health, a higher need for health care, and poorer quality of life." Here we have junk science going viral! And its fanning the flames between meat-eating and vegetarian advocates. But it shouldn't.

    You can't really blame the person pushing out this tweet too much, however, because her source is a study published in a PLOS One research paper. It highlights some of the pitfalls associated with paying too much attention to isolated studies that rely on questionable methodology and overblown claims.

    This study is another example of how junk science adversely impacts public policy debates, which is why I recently developed A Consumer's Guide to Chemical Risk: Deciphering the “Science” Behind Chemical Scares.” As this study on vegetarian diets shows, it's not just chemical policy that's negatively impacted by bad science. Personal choice, should rule the day when it comes to dietary choices, but because government is so involved -- setting guidelines and telling us what we should and shouldn't eat -- food politics are unavoidable. Accordingly, meat-eaters might use this dumb study to push their agenda, but the facts do not really support them.

    This study placed all vegetarians into one category, but there is no such thing as a single vegetarian diet. For example, some vegetarian diets might include mostly processed food and french fries, while others consist of nuts, beans grains, and fresh vegetables. It makes no sense to lump these diets into one category. Yet there are no more details in this study about what the vegetarian participants' diets included and when the participants began them. Nor does the study include any empirical medical data; just reports from individuals about their perceived health profile.

    Apparently, assessing the value of any particular diet was not really the point of this study, despite its conclusions. Rather it addresses the subjects lifestyles' and perceptions about them, and it found that vegetarians (at least the Austrians in this survey) worry more about their health and report having more health problems than do meat eaters. It does not demonstrate that a vegetarian diet can't be as healthy as or healthier than a diet that includes meat.

    Yet the authors somehow conclude:

    Moreover, our results showed that a vegetarian diet is associated with poorer health (higher incidences of cancer, allergies, and mental health disorders), a higher need for health care, and poorer quality of life. Therefore, public health programs are needed in order to reduce the health risk due to nutritional factors.

    This conclusion offers lots of opportunity for anti-vegetarian soundbites, but the study really doesn't show what this conclusion says. First the "association" does not prove cause-and-effect; and second it's not a vegetarian diet that causes these problems. It's the alleged lifestyles of the vegetarians, such as not getting vaccinated as often and not pursuing preventative health check-ups.

  • CEI’s Battered Business Bureau: The Week in Regulation

    April 7, 2014 11:25 AM

    79 new regulations, from whistleblowers to watermelon promotion.

  • Is High-Frequency Trading a Form of Front-Running?

    April 4, 2014 8:50 AM

    On 60 Minutes, Michael Lewis accused high-frequency traders of front-running. Apparently it’s become necessary to remind critics of high-frequency trading of the definition of “front-running.”

    Front-running  - n. “The practice by market makers of dealing on advance information provided by their brokers and investment analysts, before their clients have been given the information.”  -- Oxford English Dictionary

    There is room for reasonable debate about the merits of HFT. And there is room for multiple exchanges catering to multiple types of investors.  But one thing critics should be wary of is distorting the terms of debate. Many, if not most, HFT firms are ”prop shops.” That is, they are proprietary traders, trading on behalf of their own accounts, not clients. There are no clients for these particular high-frequency traders to “front-run.”

    Front-running is already illegal under current law. If firms that do take in outside capital are front-running, then they should be prosecuted. But indiscriminate use of that term detracts from the HFT debate.

  • CEI Podcast for April 3, 2014: Clean Air Act Costs and Benefits

    April 3, 2014 4:31 PM

    Senior Fellow William Yeatman is skeptical of an EPA report claiming the Clean Air Act will have nearly $2 trillion in annual benefits by 2020.

  • Is the Stock Market Really Rigged?

    April 2, 2014 5:30 PM

    Everyone seems to be jumping into the debate about high-frequency trading, now that Michael Lewis is peddling his new book, Flash Boys.

    Lewis contends that the stock market is rigged, and that the culprit is high-frequency traders. But not everyone agrees that they are to blame, or that the stock market is even rigged to begin with.

    Cliff Asness, founder of AQR capital, suggests that high-frequency traders have in fact made trading cheaper for hedge funds. And this, in turn, benefits clients, such as pension funds or university endowments:

    What is good for us is lower trading costs because it translates into better investment performance and happier clients, which makes our business slightly more valuable. How do we feel about high-frequency trading? We think it helps us … we devote a lot of effort to understanding our trading costs, and our opinion, derived through quantitative and qualitative analysis, is that on the whole high-frequency traders have lowered costs.

    So the hedge funds that benefit from these lower transaction costs are able to pass those savings along to their investors. And their investors are made up largely of pension funds and university endowments.

    In short, the savings that high-frequency traders generate get passed on to a very broad base of consumers, including those who only participate in the market indirectly -- via a pension plan or as the beneficiary of a university endowment.

  • Consumer's Guide to Chemical Risk

    April 2, 2014 3:40 PM

    Will these chemicals make me fat? That sounds like a weird question, but some consumers may actually have such worries, thanks to a constant barrage of news headlines suggesting that synthetic chemicals—an even some naturally occurring ones—are responsible for nearly every public health problem imaginable.

    My website and CEI's recently released booklet, A Consumer's Guide to Chemical Risk: Deciphering the 'Science' Behind Chemical Scares,” are tools designed reduce both the confusion and fear about chemicals. These tools provide consumers with some insights on the science and the politics behind the headlines.

    For example, when confronted with a new claim, consumers can evaluate the underlying science by asking the following questions:

  • Taxable Bitcoins: Property or Money?

    April 1, 2014 3:54 PM

    Is Bitcoin currency or property? It depends on which parts of the federal government you ask. Last week the Internal Revenue Service (IRS) announced that bitcoins are taxable and how it would implement such taxation. While the rule could have been much worse, the manner in which the IRS went about doing so brings up many more legal questions.

    In context, the fluctuating exchange rate between bitcoins and dollars does cause the cryptocurrency to behave more like property in terms of valuation. The IRS merely took its explanation on "virtual currencies" from the current definition of taxable bartering:

    Bartering is an exchange of property or services. You must include in your income, at the time received, the fair market value of property or services you receive in bartering. If you exchange services with another person and you both have agreed ahead of time on the value of the services, that value will be accepted as fair market value unless the value can be shown to be otherwise.

    This is clearer when seeing the IRS’s answer to how Bitcoin values must be calculated for tax purposes:

    …A taxpayer who receives virtual currency as payment for goods or services must, in computing gross income, include the fair market value of the virtual currency, measured in U.S. dollars, as of the date that the virtual currency was received.

    This classification of Bitcoin as non-currency for tax purposes isn't that new. Back in January 2014, Sweden's Tax Agency moved to classify bitcoins as assets rather than currency itself. In Australia, this month, the tax authority announced Bitcoin transactions person-to-person would be subject to a "goods and services" tax, similar to the IRS classification, as well as a capital gains tax for profits made through Bitcoin. It is not unusual for bitcoins to be treated as non-currency for tax purposes.

  • Why Is Obama's Report to Congress on the Benefits and Costs of Federal Regulation Delayed?

    April 1, 2014 3:05 PM

    In April 2013, the White House Office of Management and Budget (OMB) issued its Draft 2013 Report to Congress on the Benefits and Costs of Federal Regulations, which covered rules and regs issued in fiscal year 2012. The final 2013 edition never appeared; now, the Draft 2014 edition is due. I'm not holding my breath.

    President Obama claimed again as recently as February 2013 that "this is the most transparent administration in history."

    But getting this important document, as well as the oft-delayed Unified Agenda of Federal Regulatory and Deregulatory Actions, is like pulling teeth. Part of the recent House-passed ALERRT Act addressed the Agenda's tardiness; it's naturally stuck in the Senate. (The Agenda is an obscure but important document wherein federal departments and agencies reveal their priorities along with disclosing recently completed rules.)

    The 2013 Draft Report revealed that costs of major rules jumped under Obama; The 14 rules added during the fiscal year ended September 2012 imposed costs of from $14.8 billion to $19.5 billion (that's in the 2001 dollars OMB uses, which look better than 2012 dollars).

    The OMB breakdown incorporates only benefits and costs of a handful of major rules which the OMB or agencies have expressed in quantitative and monetary terms. It omits numerous categories and cost levels of rules altogether, and rules from independent agencies are entirely absent.

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