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  • 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.

  • New U.S. Dietary Recommendations to Correct Misunderstanding about Cholesterol, Not Fat

    February 12, 2015 1:34 PM

    Thomas Jefferson once said, “If people let the government decide what foods they eat and what medicines they take, their bodies will soon be in as sorry a state as are the souls of those who live under tyranny.” On this issue, TJ seems to have hit the nail on the head.

    Since Uncle Sam started telling us what to eat, Americans have steadily grown less healthy in many ways. In the 1970s, we were told to eat less meat and more grains. We listened, but it did little to curtail the oncoming obesity “epidemic” (some claim government recommendations may have actually caused this epidemic). And for decades, we have been told to restrict our consumption of cholesterol in order to reduce our risk of cardiovascular disease. That is, until now. The new dietary guidelines will no longer recommend restrictions on cholesterol consumption. This is a great first step, but the best advice is to stop listening to government nutritional advice.

    For many people, this will seem like an abrupt about-face after 50 years of lectures about cholesterol. But for those in the medical research field, the shift is long overdue. During the last decade, it has become increasingly clear that there is no real evidence linking dietary cholesterol and blood serum cholesterol (which is used as a stand-in for CVD risk). While many physicians are still wedded to the idea that their patients at risk for cardiovascular disease should limit their egg consumption, it sounds like the Dietary Guidelines Advisory Committee—a joint effort of HHS and USDA—has finally come to grips with the evidence. Unfortunately, the real lesson remains unlearned: the U.S. government shouldn’t be the authority on what is or isn’t a healthy diet.

    The DGAC, which consists of “nationally recognized experts,” meets every five years to review medical literature and hash out recommendations for what a healthy diet should look like. Their report to the secretaries ultimately becomes the official Dietary Guidelines for Americans, which is used by policy makers as a guideline in federally administered nutritional programs and assistance. Unfortunately, it sounds like they will still cling to their increasingly suspect beliefs about saturated fat.

  • The $7 Billion Slowdown

    February 12, 2015 11:12 AM

    The ongoing logjam at ports on the West Coast could cost American retailers around $7 billion this year, according to the consultancy Kurt Salmon. That’s a lot of money, and huge disruption to the nation’s economy. Of course, it’s impossible to prevent disruptions, including large ones, from ever happening. The problem is that this one was not only easily foreseen, but preventable.

    The recent shutdown, and continuing backlog, has followed a similar pattern as past West Coast port shutdowns. That’s because labor at the ports functions as a cartel that can disrupt commercial shipping easily.

    Shippers must negotiate with the union as a group, through a trade group called the Pacific Maritime Association (PMA). The union, International Longshore and Warehouse Union (ILWU), represents dockworkers at ports all down the West Coast. (Unionized port workers on the East and Gulf coasts are represented by the International Longshoremen’s Association.)

    Like railroads and airlines, maritime shipping is a network industry vital to commerce. However, while labor relations at railroads and airlines are covered under the Railway Labor Act (RLA), which was designed to avoid major disruptions to commerce, ports are covered by the National Labor Relations Act (NLRA), which enables disruptions that the RLA doesn’t allow.

    “Railroad crews cannot decide to stop working on the tracks, and airline crews cannot withhold fuel from planes,” explains Diana Furchtgott-Roth of the Manhattan Institute. “But [port] workers can simply not show up for shifts in Los Angeles and Oakland in order to hold out for higher wages.”

    A clear solution would be for Congress to shift jurisdiction of ports from the NLRA to the RLA, much as it extended the RLA’s jurisdiction to airlines in 1936, 10 years after the original Act’s 1926 passage.

    American Action Forum President Douglas Holtz-Eakin explains:

    A cornerstone of the RLA is that its purpose, as stated in the statute, is to “avoid any interruption of commerce” while providing for “the prompt and orderly settlement of all disputes” that arise in labor matters. Labor contracts under the RLA do not expire. Instead, they become “amendable” and remain in force until a new agreement is reached.

    If negotiations are not productive, then federal mediation is required before either unions or employers can engage in “self help” like slowdowns, strikes or lockouts. The National Mediation Board, which oversees the process, says that 99% of all of its mediation cases since 1980 have been handled without interruption.

  • NPR Wrongly Suggests Hate Speech and Blasphemy Are Unprotected by First Amendment

    February 11, 2015 12:13 PM

    NPR gets a lot of taxpayer money based on a false pretense of objectivity and accuracy. Its departing ombudsman, Edward Schumacher-Matos, says that “as a public media that receives some 11 percent of its funding indirectly from the government, it cannot be partisan or have a declared bias.”

    But it routinely gets basic facts wrong. While touting NPR’s supposed superiority over other media, such as Fox News, ombudsman Matos recently made the false claim that the French satirical magazine Charlie Hebdo, whose staff were massacred by terrorists, would not be protected in the U.S. under the First Amendment, because it made “fun” of people’s “prophets and gods,” and constituted “hate speech.”

    This was simply ignorant, because the Supreme Court declared blasphemy laws unconstitutional in Joseph Burstyn, Inc v. Wilson, 343 U.S. 495 (1952), stating that “it is not the business of government in our nation to suppress real or imagined attacks upon a particular religious doctrine, whether they appear in publications, speeches or motion picture.”

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