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  • Capitalism Makes a Comeback on Campus

    February 25, 2015 12:15 PM

    There’s exciting stuff going on in the world of higher education these days for fans of free markets. Just last week, the University of Arizona’s Center for the Philosophy of Freedom received a $2.9 million grant from the John Templeton Foundation to help build a network of philosophy, politics and economics (PPE) programs at several universities around the world.

    Closer to home here in Washington, D.C., the new Ed Snider Center for Enterprise and Markets at the University of Maryland is making a strong showing out of the gate. Earlier this month the Center hosted a debate over income inequality and public policy including current Executive MBA students and outside speakers Yaron Brook and Paul Vaaler. The video content from that event is well worth re-visiting for anyone who was unable to attend in person.

  • There Are No “Neutral Taxes” in Politics

    February 25, 2015 10:24 AM

    Those favoring larger government are finding it harder to finance them by raising taxes. Proponents have sought to reduce opposition by claiming that they’re not really raising taxes at all—their taxes will be “neutral.” Sure, we’ll take $50 billion or so in taxes from the economy, but we’ll then put it back again in the form of tax reductions or rebates. From a macro-economic perspective, they argue, there will be no impact at all! Why bother, you might ask? 

    The prime candidate advanced by those seeking to better plan our economy is the carbon tax. We’ll tax carbon and use the revenues to offset its impact. People will use less energy but retain the same income. We’ll change prices without changing income—a highly targeted incentive package! To tax energy users is feasible, although complicated—simply tax all energy materials. But farmers have traditionally escaped gas and diesel taxes for on-farm use—will this exemption be repealed? 

    In many regions, people use natural gas, oil, and electricity (which in turn uses coal, natural gas, and some hydro and nuclear). The prices of some of these energy types is market driven, while others are regulated. The income impact on specific consumers is not easily ascertained nor is the appropriate rebate. The result is that the micro-impact of energy taxes is never neutral. Individuals in areas dependent on coal or oil will lose; individuals in areas where climate or policy has shifted to solar or other renewable energy will gain relatively. And this critique fails to note another problem: the tendency of politicians to use new tax revenues to gain support for the measure.  Since different groups have different priorities, the result is often to “spend” the new tax revenues many times over. Rebates, being complicated and having no strong political champion, are likely to receive low priority.

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

    February 23, 2015 7:26 AM

    In a very cold, holiday-shortened week, federal agencies issued 40 final and 33 proposed regulations covering everything from lithium-ion batteries to small fish in Oregon.

    On to the data:

    • Last week, 40 new final regulations were published in the Federal Register, after 57 new regulations the previous week.
    • That’s the equivalent of a new regulation every four hours and 12 minutes.
    • So far in 2015, 351 final regulations have been published in the Federal Register. At that pace, there will be a total of 2,581 new regulations this year, which would be roughly 1,000 fewer rules than the usual total.
    • Last week, 1,118 new pages were added to the Federal Register, after 1,341 pages the previous week.
    • Currently at 9,353 pages, the 2015 Federal Register is on pace for 68,772 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, none in the past week.
    • The total estimated compliance cost of 2015’s economically significant regulations is $630 million for the current year.
    • Twenty-nine final rules meeting the broader definition of “significant” have been published so far this year.
    • So far in 2015, 75 new rules affect small businesses; nine of them are classified as significant. 
  • Brussels Meeting Ends with White Smoke

    February 20, 2015 5:05 PM

    To surprise of many, Friday’s meeting in Brussels ended with white smoke, like Greek Finance Minister Yanis Varoufakis has hoped when he was referring to the signaling system used by the Vatican. The meeting, which was scheduled to discuss Greece’s proposal for a six-month extension of its loan agreement with the Eurozone lenders, was sealed with a deal to extend the current bailout by four months.

    The Greek government formally submitted their request on Thursday, following pressure from the ECB, which decided to raise a cap of Emergency Liquidity Assistance to Greek banks to 68.3 billion euros. The modest increase of 3.3 billion euros of cash offered by the ECB was significantly smaller than the 10 billion euros that the Greek Central Bank had been requesting.

    Even though the decision to ask for an extension was welcomed by the markets, Germany’s early reaction suggested a pessimistic outcome on Friday. A German document, prepared for the Euro Working Group meeting in Brussels on Thursday, called Greek proposal a “Trojan horse,” as it did not include any clear commitment to successfully conclude the current program and it fell short of a clear freeze of proposed Greek spending measures.

    Additional pressure was applied by Donald Tusk, President of the European Council, who rejected Greek prime minister’s calls to convene a summit of Eurozone leaders on Sunday, in case there was no deal today. Moreover, SKAI TV also reported that Spanish and Portuguese ministers, who also have leftist parties gaining support in their countries, tried to block any deal favorable to Greece.

    According to the Greek Mega TV, the temporary agreement includes a four month extension of Greece’s bailout program, with no austerity measures. However, Greece had to commit not to make any unilateral decisions regarding its plans to reverse reforms made by the previous Greek government, including increasing pensions and wages. Eurogroup President Jeroen Dijsselbloem added that Greek government will also have to present a list of reforms to the Eurozone by Monday.

    Even though Jeroen Dijsselbloem announced that Greece has committed to honour the previous government’s financial obligations, today’s agreement does not mean that Europe’s problems are finally over. The extension was made only for four months and both sides will have to engage in another round of discussions over the permanent deal.

  • 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.

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