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We’ve all been told why government safety regulations are necessary. Why, without an active government inspecting and approving products and manufacturing methods, consumers will be helpless against the rapacious greed of capitalists. Without government oversight, capitalism results in a “race to the bottom” with manufacturers cutting corners and skimping on quality to protect their profits.
A friend, an economist at a big-time university, sends along the following materials, asking, impishly, “Is there a pattern here?” First, from the United States, in “Conversations with Tyler”:
TYLER COWEN: Let’s start with some questions about stagnation, Peter. At any point, if you care to add other topics of your own, please do so. You’re well known for arguing, well, “they promised us flying cars and all we got is 140 characters”; “technological progress has slowed down.” How is it you think that we’re most likely to get out of the great stagnation, when that happens?
PETER THIEL: Yes, I think there are, those three separate things. There’s the question of stagnation, which I think has been a story of stagnation in the world of atoms, not bits. I think we’ve had a lot of innovation in computers, information technology, Internet, mobile Internet in the world of bits. Not so much in the world of atoms, supersonic travel, space travel, new forms of energy, new forms of medicine, new medical devices, etc. It’s sort of been this two-track area of innovation.
We often argue here about government policy toward victimless crimes — or if you prefer, “victimless” crimes — but it’s hard to see a justification for Chicago’s recently lifted city-wide ban on street food vendors. As noted in yesterday’s Cato Institute Daily Podcast, the Illinois Policy Institute took up the fight last year on behalf of vendors such as Sara Travis, who ended up moving to Austin, TX after discovering it was impossible to legally run her mobile coffee business in Chicago.
Regulation is a tricky matter, filled with tension. Too little and you end up with fraud and harm; too much and you stifle innovation. Too little input from industry and you get decisions ignorant of conditions on the ground; too much and you have regulatory capture. When it comes to homeopathy, the Food and Drug Administration seems to have managed to make all of these errors at once — including ones that should be mutually exclusive.
A few months back, the FDA sought public comment on its regulatory regime for homeopathy. Both homeopaths and science-based activists flooded them with material. The most surprising comment, however, came from another organ of the government: a pointed and bitter memorandum from the Federal Trade Commission, essentially telling its fellow regulators to stop making the FTC’s job impossible by abdicating the FDA’s duty to evaluate homeopathic products’ efficacy and safety in the same way they do normal drugs.
As described by the blog Science-Based Medicine, who — rightly, I think — consider homeopathy a fraud:
So here I am at my job, attending a lunch meeting with a vendor representative extolling the virtues of their lighting solutions. Of course, his lamps were the best lamps for the job, just ask him, he’d know. And of course we’d need them because LED lamps are becoming increasingly the go to lamp as […]
It might just be all the exhaust fumes I inhale as they gather but I find the sight of food trucks somewhat depressing. As the burdens of local regulations and bureaucracy grow each year they represent one of the last vestiges of dynamic urban edible entrepreneurialism. The reason I find them disheartening is it is […]
EPA is about to deliver gut punches to parts of the country doing the best job in pulling themselves up after the Great Recession. The Baton Rouge Chamber of Commerce (BRAC) analyzed the 20 top performing metro economies—which includes Baton Rouge–and found that 18 of them would be considered in “non-attainment” if EPA’s ozone standard were lowered 65 parts […]
One of the virtues of free-market capitalism—perhaps the greatest—is how well it aligns incentives with desired outcomes. If you produce a good or provide a service that other people want, they will pay you for it. If demand for that good or service increases, it’s price will climb, which further incentivizes producers and providers.
Sadly, it doesn’t always work that out that way. Free markets can make tremendous errors and bad players can often get away with deceit and fraud for much longer than we’d like. This is why we have regulations: to impose a level of top-down authority in those areas where bottom-up incentives don’t work.
Of course, designing smart regulations is easier said than done. Simple regulations have the enormous benefit of being predictable and easily-comprehended, but are extremely blunt instruments. Complicated regulations can have the virtue of precision, but are much harder to design and can be difficult to follow if you take their intent seriously and easy to avoid if you don’t. Moreover, poorly-designed regulations often overcompensate for their intended/purported purpose, causing far more harm than they could ever hope to prevent.
Australia has quite a few political similarities to the US, along with some marked differences. Sometimes I find the latter surprising. I hear that the US Congress is dusting off some old legislation that will permit them to protest Obama’s overreaching. This startled me because, in Australia, we’ve long had a mechanism to prevent such overreaches. Like […]
Alcohol regulations in the United States are — to use a technical turn of phrase — completely insane. As anyone who imbibes and has travelled throughout the country knows, sales are regulated in completely different ways from place to place. In some states, beer, wine, and spirits are all available for purchase in supermarkets; others require supermarkets to provide separate entrances for liquor sales; others severely restrict the number of resale licenses; still others mandate sales through state monopolies; others yet allow counties to prohibit sales entirely. Curiously, these rules don’t correlate well with other indices of freedom: one wonders whether any other comparison would lead one to conclude that California is a laissez faire paradise and New Hampshire a statist dystopia.
But if this Cato Daily Podcast has the matter correct, the regulations on alcohol production and distribution are every bit as crazy as those on its sale, and often more pernicious for being federal. Did you know, for instance (I did not) that the federal government has specific taxes on beer production, and that the rate of taxation depends on the size of the brewery’s output? As you might imagine, this tends to pit big breweries against small- and medium-sized ones, leading them to support different reform bills.
Moreover — and this, again, I confess I was wholly ignorant of — most states prohibit breweries from directly selling their product to consumers. Instead, they’re required to sell their wares to a wholesaler. This is generally pitched as a safeguard against alcohol abuse, but also has the effect of creating a rent-seeking lobby that impedes normal market forces.
The proliferation of needless regulations breeds cynicism and contempt for government, which is about the best thing you can say for it. Nowhere is this more obvious than at airport security, where I was recently instructed that I must forfeit a tin of pomade. At John Wayne airport, no less.
For the record, I didn’t let them take it: I simply applied it to my hair where, apparently, it’s perfectly permissible. That’s right: six ounces of hair gel in your carry-on bag and the assumption is that you could be a terrorist. But six ounces in your hair? “Well then! Welcome aboard!”
I’ve lost track of how many times I’ve endured the humiliation of an airport pat-down. More than once I’ve been told by the TSA agent “When I reach sensitive parts of your body I’ll use the back of my hand.”
We often complain of red tape in the abstract — an amorphous pile of rules and regulations Washington, D.C. imposes on the rest of us. But every one of those rules is written into the Code of Federal Regulations.
The CFR is a compendium of every rule and reg ever concocted by the federal government, from soup (9 CFR 319.720) to nuts (21 CFR 164.110). Some are no doubt essential, most are probably well-intentioned, and untold numbers are sops to powerful interests with well-paid lobbyists.
There has been so much bad news in the world of late that it is hard to find time to comment on the July 29 decision by National Labor Relations Board General Counsel Richard Griffin, Jr. to treat McDonald’s as a “joint employer” with its franchisees for the purposes of labor statutes. That decision, if upheld, would subject McDonald’s to liability for all the actions that its franchisees take with respect to their employees.
In the particular cases before Griffin, the potential finding of liability is said to be for “activities surrounding employee protests.” But everyone knows that these actions are just the tip of the enforcement iceberg. Griffin’s real target is to allow individual workers, backed by union dollars, to bring actions for minimum wage and overtime violations under the Fair Labor Standards Act, and to make McDonald’s — and, by implication, all other franchisees — fair game for union organizers and reverse the major decline in union membership.
The decision here is properly understood as a gatekeeper decision. Before the decision, the gates against the NLRB were shut tightly by the conventional tests used to determine whether any given party should be treated as an “employer” under the NLRA. Most unhelpfully, the act defines an employee as including “any person acting as an agent of an employer, directly or indirectly” (after which it exempts a whole host of government employers from the statutory definition). Some further clarity is added to the discussion by the statutory definition of an “employee,” which does not include “any individual having the status of an independent contractor.”
A while back, we had to replace our 12-year-old washer and dryer. Our old units were as basic as it gets: toss in laundry and soap, crank the mechanical timer and, bingo, clean clothes.
Once the washer gave up the ghost, we were excited to replace those dinosaurs with sleek new “High Efficiency” models. Today’s washers and dryers come with Ferrari styling, computer consoles and more lights than a Space Shuttle dashboard. Granted, the cheapest options cost double what we paid for our old units, but finally we could embrace the brave new world of bleeding-edge laundry innovation!
“They probably won’t get your clothes as clean as your old basic washer,” the salesman told me. He added that customers complained all the time, but there was nothing he could do. Government regulators insisted on “high-efficiency” washers and dryers; manufacturers had to comply.
Business owners and those who hope to become one (wantrepreneurs) are a dying breed. First some wonky background: Technically, the U.S. economy is in “recovery”. However, most economists agree growth is anemic and vulnerable. 2014’s first quarter GDP was a mortifying 0.1%, surprising most everyone. Forbes called the growth “glacial”. Now we are informed that […]