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  • How to Help Tesla and Taxpayers

    February 20, 2015 12:59 PM

    Policies aimed at reducing auto emissions in California and 10 other states are having a troubling set of unintended consequences, according to a recent editorial at Bloomberg View. Editors point out that the “zero-emissions” credits program ends up amounting to a subsidy for electric carmaker Tesla Motors of up to $30,000 per car sold, penalizing the buyers of nonelectric vehicles who end up underwriting the purchase of someone else’s $100,000 Model S. In addition, electric cars may not even be much “greener” than their nonelectric counterparts, when one considers the time of day these cars are charged as well as the source of the electricity—in many parts of the country, exchanging a conventional vehicle for an electric one means trading a gasoline-powered car for one powered by coal.

    The Bloomberg editors, unfortunately, suggest solving the problem with two even worse policies: stricter fuel economy standards and a carbon tax. Perhaps if they had read this post by my colleague Richard Morrison, they might also consider a free market approach to the auto industry. Richard suggests treating Tesla fairly by ending both the apparent war against their retail strategy of selling directly to consumers (or owning their own dealerships), as well as eliminating the huge tax subsidies being offered by states like Nevada and New York. If Tesla makes cars that are as awesome as they are made out to be, then surely the company will find consumers who want to drive them—without having to pick their neighbors’ pockets.

  • When Kittens Explode

    February 20, 2015 11:31 AM

    A fascinating Kickstarter funding campaign just ended yesterday, and it was a major one. A new card game with the alarming title of “Exploding Kittens” (don’t worry—no actual kittens were harmed) has managed to raise $8,782,571 over the last 30 days. This makes it the third most highly funded Kickstarter campaign ever, and the one with the most total backers.

    Exploding Kittens is a wonder of the Internet age—a party game full of goofy images and bizarre characters that was 1000-percent funded in less than an hour of its launch. It’s unlikely to have attracted the venture capital bigwigs from Shark Tank or the product acquisition VPs from Parker Brothers and Hasbro. The title alone is edgy enough to make your average Toys ‘R’ Us executive nervous, yet it’s clearly a product hundreds of thousands of people are willing to pay for. Thank you, Internet.

    The advent of online crowd funding, of which Kickstarter is merely the best known platform, has become one of the most exciting developments in recent business history. At a time when voices from the left are again arguing that the history of the “self-made man” in America is built on myth, the projects that have been successfully crowd funded demonstrate that a single person—or a small team—with a good idea can produce something customers love and make some good money in the process. What could be more American than that?

  • Vapes on a Plane: More on Why DOT's Proposed In-Flight E-Cigarette Ban Is Fatally Flawed

    February 20, 2015 9:51 AM

    Over at CNN.com, I have a piece arguing against the Department of Transportation’s (DOT) forthcoming rule aimed at outlawing “vapes on a plane.” I explain why the rule is both unjustified on risk-based grounds and an illegal implementation of the law written by Congress that outlaws tobacco smoking aboard aircraft.

    Due to the limitations of the op-ed format, I wasn’t able to address a few items related to the airplane electronic cigarette rulemaking. Here are some additional thoughts:

    First, DOT’s official timeline shifted earlier this week (inconveniently in Word .docx format). Instead of the end of April, the Department released its updated milestones in its February “Report on DOT Significant Rulemakings”:

    Milestone

    Originally
    Scheduled
    Date

    New
    Projected
    Date

    Actual
    Date

    To OST

    04/10/2012 

    08/13/2014 

    08/26/2014 

    To OMB

    05/08/2012 

    03/19/2015 

     

    OMB Clearance

    08/06/2012 

    06/19/2015 

     

    Publication Date

    08/20/2012 

    06/30/2015 

     

     

    The new estimated publication date is sometime by the end of June. It is fairly likely that this will be delayed again. The impact of this delay will likely be minimal. Currently, U.S. domestic airlines voluntarily prohibit their passenger from using e-cigarettes.

  • Does Regulation Hurt Innovation?

    February 19, 2015 2:12 PM

    How much does regulation crimp innovation? Not very much, according to a new study from the U.S. Census Bureau’s Nathan Goldschlag and George Mason University’s Alex Tabarrok. They find that “Federal regulation has had little to no effect on declining dynamism.” In other words, fewer businesses are starting up today than in previous years, but the authors don’t think federal regulations are among the major causes (see also Tabarrok’s summary over at Marginal Revolution).

    That said, the authors are unsure of what else might be responsible: “The subsequent analysis will be unable to address the declining share of employment for young firms as evidence for the secular decline in dynamism and entrepreneurship (p.9).”

    They base their regulation exoneration on a dataset called RegData, put together by analysts at the Mercatus Center (disclosure: one of whom is a former professor of mine). It is the best dataset yet devised for quantifying federal regulatory burdens. I’ve cited it before in some of my own work, and will very likely do so again. RegData works by counting the number of times the terms “shall,” “must,” “may not,” “prohibited,” and “required” appear in the Code of Federal Regulations. These individual restrictions are then broken down by industry and over time, going back to 1997. The total number of such restrictions currently in effect is more than one million.

    But RegData has limits, and Goldschlag and Tabarrok have exceeded them. RegData counts the number of burdens, but does not estimate how much each one costs. These costs are over the map. One “shall” burden may be nearly costless, such as requiring a business to post a notice of local labor practices in the break room. Given the cost of printing posters and the minute or two of staff time required to hang it up every year, this may or may not cost a business a dollar per year. Another “shall” requiring power plant scrubbers may cost billions of dollars per year. Even though those rules both count as one restriction, they have very different costs.

    RegData is state-of-the-art. But the art needs to improve its state before one can convincingly argue that the Code of Federal Regulations doesn’t harm economic dynamism.

  • Victory for "Caveman" Blogger and Free Speech in North Carolina

    February 19, 2015 6:54 AM

    Many people associate professional licensing with consumer safety. For example, we wouldn’t want any schlub doing surgery. But where occupational licensing laws may have started out with the goal of protecting consumers, they have now become a means by which certain professionals restrict competition. States require licenses for hundreds of occupations including perilous professions like florist, funeral director, hair braider, and fortune teller.

    The case of the “Caveman” blogger who was bullied by the North Carolina Board of Dietetics/Nutrition for providing nutritional advice without a license illustrates how licensing threatens not just our economic freedom, but our other basic freedoms. Luckily for blogger Steve Cooksey, his right to express his opinion and give advice to fellow dieters won out over the need to protect licensed dieticians from competition.

    As the Institute for Justice, which has been fighting on Cooksey behalf, wrote yesterday:

    In December 2011, Steve Cooksey started an advice column on his blog to answer reader questions about his struggle with Type II diabetes. Cooksey had lost 78 pounds, freed himself of drugs and doctors, and normalized his blood sugar after adopting a low-carb “Paleo” diet, modeled on the diet of our Stone Age ancestors. He wanted to use his blog to share his experience with others.

    However, in January 2012, the North Carolina Board of Dietetics/Nutrition informed Cooksey that he could not give readers personalized advice on diet, whether for free or for compensation, because doing so constituted the unlicensed practice of dietetics. The board deemed Cooksey’s advice the unlicensed practice of nutritional counseling, sent him a 19-page print-up of his website indicating in red pen what he was and was not allowed to say, and threatened him with legal action if he did not comply.

  • What the U.S. Can Learn from Canada on Aviation Innovation

    February 18, 2015 4:06 PM

    As I continue to digest the sUAS NPRM, which is expected to be published in the Federal Register on Monday, I came across Canadian drone attorney Diana Marina Cooper’s post comparing the proposed U.S. small drone framework with Canada's regime: 

    Practicing in the Canadian jurisdiction, I believe that one of the most valuable aspects of our system is its flexibility and the fact that the system rewards safe operators. For instance, in Canada, first time SFOC applicants are typically rewarded narrow certificates in terms of time, geography and level of operational risk. As operators develop a track record of conducting safe operations, they are able to receive ‘standing certificates’ allowing them to operate for up to three years over large regions of the country.

    The FAA should consider adopting a similar approach that rewards safe operators by allowing them to complete less restrictive operations. For instance, the proposed rules state that operators would not be able to fly over persons not involved in the operation. If an operator has a good track record of conducting safe flights, there is no reason why the FAA should not consider removing this burden.

    As the FAA crafts its final regulations, it is important to find ways to build flexibility into the system, and to not only focus on punishing irresponsible behavior but also rewarding safe operators.

    It does appear, as Ms. Cooper notes, that the FAA/USDOT approach skews heavily toward preventing a parade of airborne horribles rather than fostering a regulatory environment that would let this very promising technology thrive.

    But we shouldn’t stop our search for aviation policy lessons learned from Canada at drones. In fact, a far more important lesson, which could also impact the UAS industry, concerns air navigation services. Right now, the U.S. is one of the few remaining industrialized nations in the world that has yet to separate its air traffic control operations from its aviation safety regulator. Canada famously did this in the mid-1990s, creating nonprofit Nav Canada to manage its airspace with great success that has become a model for the rest of the world.

    Bob Poole of the Reason Foundation, who has promoted this sort of institutional innovation in aviation for several decades, has crafted a plan to bring 21st century management to U.S. air traffic control. The problems FAA has experienced in its attempt to integrate UAS into the national airspace system are almost certainly in part due to its outdated institutional model.

    To be sure, making large changes to ossified bureaucracies is never easy. Fortunately, U.S. reformers need not look far to see the advantages that alternatives can offer us over the status quo.

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

    February 16, 2015 9:42 AM

    In a week like any other, regulatory agencies issued more than 50 new rules covering everything from from rockfish to wine.

    On to the data:

    • Last week, 57 new final regulations were published in the Federal Register, after 59 new regulations the previous week.
    • That’s the equivalent of a new regulation every two hours and 57 minutes.
    • So far in 2015, 311 final regulations have been published in the Federal Register. At that pace, there will be a total of 2,592 new regulations this year, which would be roughly 1,000 fewer rules than the usual total.
    • Last week, 1,341 new pages were added to the Federal Register, after 1,445 pages the previous week.
    • Currently at 6,885 pages, the 2015 Federal Register is on pace for 68,850 pages, which would be the lowest page count since 1992.
    • Rules are called “economically significant” if they have costs of $100 million or more in a given year. Three such rules have been published so far this year, one in the past week.
    • The total estimated compliance cost of 2015’s economically significant regulations is $630 million for the current year.
    • Twenty-seven final rules meeting the broader definition of “significant” have been published so far this year.
    • So far in 2015, 67 new rules affect small businesses; seven of them are classified as significant. 
  • First Thoughts on FAA’s Small Unmanned Aircraft System Proposed Rules

    February 15, 2015 11:38 AM

    At 10am on Sunday, the Federal Aviation Administration (FAA) announced its draft rules to govern small unmanned aircraft systems (UAS). The announcement is not particularly surprising, especially given the fact that FAA apparently accidentally uploaded a key rulemaking document for a few minutes over the weekend. Thankfully, the Internet never forgets.

    Small UAS (up to 55 pounds) operators will now have a formal certification process. Previously, the FAA was issuing case-specific exemptions for commercial operators under Section 333 of the FAA Modernization and Reform Act of 2012, the same law in which Congress ordered the agency to integrate UAS into the National Airspace System by September 2015. Under the newly proposed framework, small UAS operators may be certified if a number of conditions are met, including:

    • Operations are within 500 feet above ground level;
    • Operators maintain line-of-site monitoring at all times;
    • Operators pass a written FAA-certified aeronautical knowledge test;
    • The UAS will not be carrying external-loads (i.e., no package delivery);
    • Operations occur during daylight hours; and
    • All operations are manually directed in accordance with FAA’s see-and-avoid requirements (i.e., no automated operations).
  • Coming Up: King Plaintiffs’ Day in Court

    February 13, 2015 5:20 PM

    Oral arguments before the U.S. Supreme Court in King v. Burwell will be held on March 4, 2015. The Competitive Enterprise Institute is coordinating this case, which challenges an IRS regulation that illegally distributes subsidies in states that refused to establish state-based health insurance exchanges. The IRS regulation is illegal because it is contrary to the plain language of the law passed by Congress.

    The four plaintiffs involved are individuals who are harmed by this regulation because it makes them subject to Obamacare’s individual mandate, which requires people to enroll in comprehensive healthcare coverage or pay a tax penalty. Both lower courts unanimously agreed that the individual plaintiffs have standing and the Justice Department expressly abandoned any challenge to their standing before the Supreme Court.  

  • Ridesharing and Regulation

    February 12, 2015 2:06 PM

    Earlier this week, I appeared on a Cato Institute panel organized by Cato’s Matthew Feeney, author of a new report on for-hire vehicle safety issues. Video of the event, which also included Center for Economic and Policy Research’s Dean Baker, can be found here.

    The panel was titled, “How Should Ridesharing Be Regulated?” Naturally, being a general skeptic of regulation, I titled my presentation, “Why Should Ridesharing Be Regulated?” I noted that modern municipal taxicab regulations were crafted by the then-powerful streetcar lobby in response to new competition from jitneys and buses that occurred around 1915. By 1922, the streetcar industry’s main trade association, the American Electric Railway Association, was already crowing about its rent-seeking successes:

    In many instances, municipal action has solved the question, but the situation demands general power in regulatory bodies to prevent competition of jitneys and busses with essential street car service. In the meantime, regulatory bodies and the public realize that transportation by electric railways will always be necessary…

    Yes, those “always necessary” streetcars soon disappeared from the streets of U.S. cities, but the streetcar lobby’s efforts resulted in an entrenched taxicab cartel that supported the same types of anti-competitive regulations. Most major U.S. cities adopted regulations that established operating caps and minimum fare requirements through the Great Depression. Until the late 1960s, these rules went unchallenged. The 1970s saw a wave of several dozen cities deregulate their taxicab markets. Unfortunately, a number of the experiments were flawed and resulted in a number of cities reversing course and reregulating their taxicab markets. (For more on the regulatory history of the taxicab industry and the related economic research, see Reason Foundation Vice President Dr. Adrian Moore’s excellent literature review here.)

    Then Uber came. Cities are now facing great pressure to deregulate or at least accommodate Uber, Lyft, Sidecar, and similar services that directly compete with taxicabs. However, I worry that some of these efforts, particularly the accommodationist strategy favored by Uber, risks locking in business models and restricting future innovation—particularly with the looming rise of autonomous vehicles.

    One thing that really gets my libertarian blood boiling is that “ridesharing” only becomes regulated when the driver turns a profit. Hitchhiking is legal and essentially unregulated in most U.S. states. Anonymous commuter carpools like D.C.’s slug-lines are entirely unregulated, although there are social etiquette “rules” that “slugs” are expected to respect. In fact, not only is charging your carpooling passengers for gas and even mileage depreciation legal and unregulated up until profitability, many government agencies actively encourage it. The bias against commerce runs deep in the U.S., despite our reputation as a highly individualist, pro-market nation—this just shows how horrible the anti-commerce biases are in other countries!

    I discuss this and more on the panel. Watch the whole thing here.

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