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  • Human Achievement of the Day: The Sharing Economy

    March 27, 2015 3:44 PM

    It’s the most wonderful time of year! Human Achievement Hour is once again upon us, giving us reason to pause and consider recent innovations that have or will significantly improve the human condition. I usually like to focus on some development in medicine or environmental tech, but this year I feel compelled to highlight what may be the most significant advancement in the modern economy. What began with eBay—the digital garage sale—has now blossomed into an entire economy and a way of life. You may have heard it called the “sharing economy,” or “collaborative consumption” is actually about efficient resource allocation.

    Instead of leaving rooms or homes empty and unused families can make extra money by renting them out to vacationers or business people through Airbnb or VRBO. Instead of paying to leave your car at the airport—you can now have someone pay you to use your car while you’re away. The sharing economy allows just about anyone to instantly turn his or her otherwise underused or unused resources or skills to turn a profit. The result is an economy with highly personalized goods and services that are cheaper, higher quality, and more efficient.

    Collaboration allocates resources efficiently: For most people living in a city with public transportation and limited parking, it may not make sense to own a car. However, there are certain times when a car becomes necessary to run certain errands or get to locations not accessible by public transportation. Luckily, services like RelayRides and Getaround connect people who need cars with their neighbors who have cars, but aren’t using them. Spinlister and Liquid offer a similar sharing-service for bikes.

    Time is also a resource, and when you’re busy preparing for a party it’s a resource that might be in short supply. Nobody likes to make that third trip to the liquor store for those few bottles they forgot to pick up. Luckily there are platforms like Klink, an alcohol delivery app operating in DC, Ann Arbor, and Central Florida. It allows customers to use their smart phone to shop local liquor stores which then deliver it (without a markup) to their door.

    Similarly TaskRabbit allows you to outsource errands to qualified people in your area for an hourly rate. You can use the app to find people to help you move, clean your home, do repairs, and staff your events, among other things. Similarly, Zaarly is a peer-to-peer marketplace for services.

    For those hurt by the economic downturn in 2008, services like VRBO and Airbnb provides an opportunity to rent out a room in their home—or the entire house—and to make a little extra money from a resource that would otherwise have remained unused. Customers benefit by getting lower rates, a place with “character,” or a rental in a location where hotels might not be available.

  • Grover Norquist and Americans for Tax Reform Are Wrong about Passenger Facility Charge

    March 26, 2015 5:24 PM

    I saw some unfortunate news today: Grover Norquist’s Americans for Tax Reform sent a letter to Congress opposing a possible increase in the cap of the airport Passenger Facility Charge (PFC). ATR is often an ally in CEI’s libertarian battles, but here they are both wrong on the facts and inadvertently supporting a tax-and-spend federal regime that the PFC and other facility user charges can help counter.

    Before I get to why ATR is completely wrong on federalist and free-market grounds in opposing a PFC cap increase, let’s be clear about what a PFC is, why it exists as it does, and what Congress may (or may not) do with the cap.

    First, the PFC is a local user charge. Congress authorized its creation in 1990 and it allows airports to charge per-passenger enplanement fees. The revenue raised can then only be used for a very narrow class of airport improvement projects. These funds are collected locally and never touch the federal Treasury.

    Second, the only reason the PFC exists is because Congress outlawed user-based airport charges in the Airport Development Acceleration Act of 1973 (widely known as the “Anti-Head Tax Act” and codified at 49 U.S.C. § 40116). Why, you might ask, would Congress intervene? Well, this was a case of pure cronyism. In 1970, Evansville-Vanderburgh Airport Authority enacted an ordinance requiring that airlines using their airport collect and remit a $1 per passenger fee, minus any administrative costs the airlines assumed in the collection process. Delta Air Lines sued, challenging the charge on Commerce Clause grounds. Ultimately, the U.S. Supreme Court accepted the case and rejected Delta’s rent-seeking arguments in 1972. In response to their loss before the Supreme Court, Delta and other carriers then lobbied Congress to outlaw airport user fees, only taking one year to get their terrible law enacted.

    Third, the PFC cap currently stands at $4.50. This was last raised in 2000 and inflation has eroded its buying power by approximately half since then. While CEI supports uncapping PFCs (and ideally repealing both the Anti-Head Tax Act and the PFC-creating section of the Aviation Safety and Capacity Act of 1990, and then letting airports decide their user-fee regimes without federal approval), this is unlikely in this Congress. Instead, we agree with the airports that raising the PFC cap to $8.50 and then indexing it to inflation is a sound move. Note that the PFC cap is not a charge itself, only the limit at what airports can locally decide to charge per passenger. This distinction is important in understanding why ATR’s opposition to the PFC makes no sense.

  • Arsenic in Wine: Dangerous or Beneficial?

    March 26, 2015 2:23 PM

    Dan Nosowitz in Modern Farmer offers some insights on the recent class action lawsuit filed against California winemakers. The plaintiffs found that some inexpensive wines contained arsenic at levels exceeding the federal drinking water standard for this substance. Nosowitz rightly points out that the standard is for water, not wine and “people don’t, or shouldn’t, drink as much wine as water.”   

    Well, let’s not go that far… kidding of course! Moderation is surely a good idea when it comes to alcohol consumption. Yet even if you drank as much wine as you do water, there’s still no reason to be alarmed about arsenic. The levels in wine are still too low to have any significant adverse impacts, and ironically, such small amounts might even have health benefits. 

    Arsenic is an element that naturally occurs in the earth’s crust, so traces of arsenic inevitably appear in food and water. Certainly, high levels of arsenic are not healthy and concentrated exposures can be immediately deadly. But the trace levels found in water and food are rarely an issue. Problems have emerged primarily in developing nations like Bangladesh where poor people drink from untreated water sources with arsenic levels that range in the hundreds of parts per billion (ppb), and sometimes more than 1,000 ppb.

    It’s worth noting that the levels allegedly found in wine are reportedly just five times greater (or 500 percent higher as noted in the press) than the federal drinking water standard of 10 ppb. So, some number of samples—we don’t know how many—tested by the plaintiffs in this case had some level of arsenic near the 50 ppb level. But did you know that until 2006, that was the allowable level in drinking water in the United States and it had been for decades?

    The U.S. Environmental Protection Agency (EPA) changed the standard to 10 ppb in 2001 with full compliance not required until 2006. The 10 ppb standard for arsenic in drinking water is excessively overcautious. When EPA proposed it, it was very controversial because the cost to small drinking water systems was substantial and the benefits highly questionable. EPA’s Science Advisory Board highlighted lots of problems with EPA’s science and maintained that the change could actually undermine public health. The SAB explained that the costs might cause some small communities to disconnect their water systems, forcing people to use untreated well water, but EPA finalized the rule anyway. 

    If you look at the history, you can see that EPA did not change the standard for safety reasons; they did it for political ones. You may remember, environmental activists attacked the Bush administration for taking time to reconsider changing the standard, which the Clinton administration rushed out during the final hours of the Clinton presidency. Green groups made it sound like the Bush administration was adding arsenic to the water supply. And this bad press made a rational and scientific debate impossible.

  • Human Achievement of the Day: Bitcoin

    March 26, 2015 7:51 AM

    On the eve of the financial crisis of 2007-8, financial systems had grown extremely sophisticated, but were still essentially based on a model of trust. When two people engaged in a transaction, they generally relied on a trusted third party to process the payment. This meant that there was room for fraud at worst and at best a transaction cost to the parties.

    The transaction cost arises because there is the possibility of the transaction failing to go through, or, in payments-speak, being “reversed.” A reversed payment can occur because the paying party doesn’t have the money he says he does, or because he is over his credit limit, or because she isn’t who she says she is, among many other examples.

    Over the years, third parties have developed extremely sophisticated ways to handle these problems, but they have never been able to eliminate the transaction cost entirely. Bridling at the transaction cost from merchants has led to punitive regulations on the payments industry, such as the Durbin Amendment to Dodd-Frank and the harassment of payment processors called Operation Choke Point. These are extremely unfair given the nature of the problem.

    On October 31, 2008, a pseudonymous poster styling himself Satoshi Nakomoto on the Cryptography Mailing List hosted at metzdowd.com released a white paper that summarized the problem and proposed a solution. He or she argued:

    The cost of mediation increases transaction costs, limiting the minimum practical transaction size and cutting off the possibility for small casual transactions, and there is a broader cost in the loss of ability to make non-reversible payments for nonreversible services. With the possibility of reversal, the need for trust spreads. Merchants must be wary of their customers, hassling them for more information than they would otherwise need. A certain percentage of fraud is accepted as unavoidable. These costs and payment uncertainties can be avoided in person by using physical currency, but no mechanism exists to make payments over a communications channel without a trusted party.

    In one of the most brilliant applications of lateral thinking ever seen, Nakamoto proposed the use of cryptography to solve the problem:

    What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party. Transactions that are computationally impractical to reverse would protect sellers from fraud, and routine escrow mechanisms could easily be implemented to protect buyers.

    The electronic payment system was dubbed “Bitcoin.” This is unfortunate as this had led people to believe that the point of the system was to create a new currency. It was not. The currency is a means to the end of a payments system that eliminates the transaction cost of third parties. What is more important than the value of an individual bitcoin is the public ledger system known as the blockchain that records every transaction. Being based around distributed computing and cryptography, there is no central authority to control or corrupt it.

  • A Bright Future

    March 24, 2015 2:58 PM

    The following is a guest post by Chelsea German, Researcher and Managing Editor of HumanProgress.org.

    When Homo erectus first learned to control fire a million years ago, humanity gained the ability to light up the night. From fire to electricity to LEDs, lighting technology has advanced unceasingly ever since. Yet every year, the Earth Hour campaign calls on millions of people to forgo this remarkable achievement by turning off their electricity. Earth Hour even discourages the use of smoke-emitting candles, plunging many participants into the same impenetrable darkness that surrounded our ancestors before fire was first harnessed. (Only soy and beeswax candles are deemed acceptable, because they do not emit smoke. It is unclear how many Earth Day participants use such candles and how many go without light altogether.)

    Earth Hour justifies itself as a symbolic act to raise humanity’s commitment to reducing its ecological footprint. Instead of engaging in symbolic action, participants might better spend their time by joining the many innovators who are continuously making technology more efficient. To quote bestselling author Matt Ridley, “A car today emits less pollution traveling at full speed than a parked car did from leaks in 1970.” Unsurprisingly, given such rapid advances, worldwide CO2 emissions are decreasing per person.

    http://www.humanprogress.org

  • Human Achievement of the Day: Guitars

    March 24, 2015 9:14 AM

    When Human Achievement Hour rolls around each year, I make sure to do two things. One is to play an electric guitar. The other is to play an acoustic guitar.

    Guitars are simple things. Stretch some thin metal wires over a plank of wood, and you’re most of the way there. Electric guitars add a few magnets wrapped in copper wire mounted underneath the strings, called pickups. This deceptively simple invention is one of the pinnacles of human achievement. Music made on guitars has brought unfettered joy to billions of people, most of whom have idea how to play one. Whether you like jazz, punk rock, flamenco, blues, death metal, or classic rock, guitars have enhanced your life. In a way, the guitar is one of the defining objects of modern Western culture.

    Regular readers will likely be familiar with CEI’s “I, Pencil” video from a few years ago, inspired by Leonard Read’s famous pamphlet. Nobody can make a pencil on their own. It takes a network of literally millions of people cooperating to make something you can buy in a store for less than a dollar. The network of human cooperation surrounding guitars is arguably even greater.

  • Human Achievement of the Day: Higher Education

    March 23, 2015 9:29 AM

    As the amount of student loans outstanding continues to rise, taxpayers are more on the hook as the Obama administration continues to expand loan repayment programs. As long as President Obama is in office, we are unlikely to see serious reforms that rein in the growing student loan bubble, which has inflated the cost of attending school without a commensurate increase in the value of a degree.

    Source: Business Insider

    Many observers have compared the student loan bubble to the recent mortgage bubble, which inflated home prices under government lending mandates to borrowers with weaker credit profiles. Similarly, the government lends to student borrowers without differentiating pricing based on their school, major, or likelihood of repayment.

    Source: Business Insider

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

    March 23, 2015 7:15 AM

    New rules published in the last week include everything from the IRS and Executive Office of the President declaring themselves exempt from select transparency laws, to requirements for observing sea turtles.

    On to the data:

    • Last week, 68 new final regulations were published in the Federal Register, after 60 new regulations the previous week.
    • That’s the equivalent of a new regulation every two hours and 28 minutes.
    • So far in 2015, 616 final regulations have been published in the Federal Register. At that pace, there will be a total of 2,852 new regulations this year, which would be nearly 1,000 fewer rules than the usual total.
    • Last week, 1,157 new pages were added to the Federal Register, after 1,242 pages the previous week.
    • Currently at 15,133 pages, the 2015 Federal Register is on pace for 70,061 pages.
    • Rules are called “economically significant” if they have costs of $100 million or more in a given year. Six 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 ranges from $693 million to $746 million for the current year.
    • Fifty-nine final rules meeting the broader definition of “significant” have been published so far this year.
    • So far in 2015, 127 new rules affect small businesses; 21 of them are classified as significant. 
  • Yes, and Water Can Run Uphill!

    March 20, 2015 10:05 AM

    A recent Washington Post story by Joby Warrick says much about the credulity of the media. The story extols the great gains in wind power, noting that it “could provide more than a third of the country’s electricity by 2050 while yielding a net savings in energy costs paid by consumers.”

    Warrick, like many in the media, viewed this prediction by the Department of Energy as clear evidence of the gains by non-fossil fuel sources. Indeed, he quoted without comment the Department’s statement that there would a “net savings in energy costs paid by consumers” and later that this shift “would result in a net price increase of about 1 percent for consumers” even though “an overall savings of 2 percent.” The “savings” would include the imputed values of CO2 and other pollutant reductions. Consumers are going to pay more, but “society” will benefit—a story we’ve heard before. 

    But, although the article suggests that dramatic cost reductions in the wind power area have made this source more economically attractive, the report also “warned that consistent government policies were critical to avoiding boom and bust cycles,” and that “Congress must keep the wind-friendly tax policies in place.” So, an efficient technology option has to be subsidized to survive in the marketplace?  Does the media ever read its own stories?

    Of course, wind power can be attractive to some if it is heavily enough subsidized. But an energy alternative that’s been around since the Middle Ages and which the Department of Energy claims to be cost-competitive cannot survive without continued government subsidies? The media seems to like any energy source that requires government support.

  • Is Ferguson "the Norm"? In Some Ways, Yes

    March 20, 2015 7:30 AM

    Recently, the Justice Department issued a report that was very critical of the Ferguson police department and courts. In response, President Obama stated that “he doesn't believe Ferguson is typical of most police departments,” and that the city’s practices were “not the norm.”

    But in reality, the practices described in the report are commonplace outside of Ferguson, including both those that the Justice Department rightly condemned for violating Fourth Amendment rights, and those that may have had a more innocent explanation given the Justice Department’s very poor use of statistics.

    The report leaves the indelible impression that Ferguson’s municipal government was extortionate towards many of its citizens, and took great liberties with the Fourth Amendment. Unfortunately, these practices are not in any way unique to the Saint Louis region, but rather are typical in some neighboring municipalities. In The Washington Post, Radley Balko wrote about how many municipalities in Saint Louis County gouge motorists and others to raise revenue. They also are very harsh and hostile to small businesses in their code enforcement and permitting requirements, an abuse they share with other economically-depressed cities like Detroit.

    In the St. Louis area, there are innumerable tiny municipalities. Just driving to work can take you through a dozen. The tax base can’t possibly support that many little governments, so they engage in predatory practices. One possible solution would be to merge a lot of these small municipalities but, of course, no one wants to vote themselves out of power.

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