Category: Technology and Regulation

red tape paintIt was once a common practice of saloons in America to provide a “free lunch” to patrons who had purchased at least one drink. Many foods on offer were high in salt (ham, cheese, salted crackers, etc.), so those who ate them naturally ended up buying a lot of beer.

In his 1966 sci-fi novel, The Moon Is a Harsh Mistress, Robert Heinlein used this practice in a saloon on the moon to highlight an economic principle:

“It was when you insisted that the, uh, young lady, Tish—that Tish must pay, too. ‘Tone-stopple,’ or something like it.”

“Oh, ‘tanstaafl.’ Means ‘There ain’t no such thing as a free lunch.’ And isn’t,” I added, pointing to a FREE LUNCH sign across room, “or these drinks would cost half as much. Was reminding her that anything free costs twice as much in long run or turns out worthless.”

“An interesting philosophy.”

“Not philosophy, fact. One way or other, what you get, you pay for.”

While the phrase “there ain’t no such thing as a free lunch” didn’t originate with Heinlein, he did help to popularize the concept. It’s an important economic concept that is often overlooked, particularly when it comes to policy issues. A couple of years ago, in regards to, when Obamacare, economist Thomas Sowell asked, “do you seriously believe that millions more people can be given medical care and vast new bureaucracies created to administer payment for it, with no additional costs?”

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CZI LetterOver at Think Christian, I take a look at the Chan Zuckerberg Initiative and derive a lesson from Jesus’ interaction with the rich young man in Mark 10.

A basic lesson we can take from the decision to organize the initiative as an LLC rather than a traditional non-profit corporation is that pursuing social good is possible in a wide variety of institutional forms. A for-profit incorporation doesn’t preclude a main, or even primary, purpose aimed at social good. Just as non-profit status doesn’t by itself guarantee charitable effectiveness, for-profit incorporation doesn’t by itself indicate egoistic or self-centered goals.

Benedict XVI, in his encyclical letter Caritas in veritate, discussed a hope for “hybrid forms of commercial behaviour to emerge, and hence an attentiveness to ways of civilizing the economy. Charity in truth, in this case, requires that shape and structure be given to those types of economic initiative which, without rejecting profit, aim at a higher goal than the mere logic of the exchange of equivalents, of profit as an end in itself.”

There are, in fact, a wide variety of incorporation options available, including the relatively new L3C, a low-profit form of the LLC. As Zuckerberg puts it, the reason to go with an LLC was that it in their judgment it allows the initiative to “pursue our mission by funding non-profit organizations, making private investments and participating in policy debates — in each case with the goal of generating a positive impact in areas of great need. Any net profits from investments will also be used to advance this mission.”

Some have intimated that Chan and Zuckerberg are being hypocritical and self-serving, and that all this is about ultimately making Facebook more powerful. But if you read the original letter, you can see quite clearly what their intent is. Forms of the word “investment” occur 7 times in the letter. Words like “give,” “charity,” and “philanthropy” are either absent or understated. It was the reportage surrounding the announcement that interpreted the initiative primarily as traditional charity, philanthropy, or altruism.

The point here is that true service of others doesn’t need to be entirely disinterested, as if investing or even giving requires simple abdication of responsibility. In fact, the traditional understanding of self-interest as selfish interest in the self is flawed. Self-interest is better understood as comprising the interests of the self, which can be quite narrow or quite broad.

All this is not to say that the substance of the initiative itself is praiseworthy or condemnable. We’ll need to see a lot more than the rough sketches and outlines that are apparent thus far to make anything more than provisional judgments about the prudence of various projects. But looking at the Chan Zuckerberg Initiative from the perspective of the formal decision to incorporate as an LLC, I think we can find a lesson about creative ways of approaching our attempts to civilize the economy.

red-tape-govt-300x300Of all the executive orders issued by President Obama, one of the most important is one most people never knew existed: Executive Order 13563 – Improving Regulation and Regulatory Review .

In the order, the president requires federal agencies to perform a “retrospective analysis” of existing regulations to evaluate their efficiency and effectiveness:

(a) To facilitate the periodic review of existing significant regulations, agencies shall consider how best to promote retrospective analysis of rules that may be outmoded, ineffective, insufficient, or excessively burdensome, and to modify, streamline, expand, or repeal them in accordance with what has been learned. Such retrospective analyses, including supporting data, should be released online whenever possible.

(b) Within 120 days of the date of this order, each agency shall develop and submit to the Office of Information and Regulatory Affairs a preliminary plan, consistent with law and its resources and regulatory priorities, under which the agency will periodically review its existing significant regulations to determine whether any such regulations should be modified, streamlined, expanded, or repealed so as to make the agency’s regulatory program more effective or less burdensome in achieving the regulatory objectives.

This executive order was issued four years ago—in January 2011. So how is that evaluation process going?

In 2014, the George Washington University Regulatory Studies Center launched a yearlong effort to evaluate high priority proposed rules to “determine whether it was designed in a manner that would make its outcomes measurable ex post.” Unfortunately, their findings are not at all surprising:
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pharma-pills-and-moneyLast month Turing Pharmaceuticals felt the backlash after a medication they sold for $1 a pill in 2010 increased overnight to $750 a tablet.

Politicians like Hillary Rodham Clinton and Bernie Sanders were quick to claim that this is why we needed more government intervention in the healthcare system. But at the time I pointed out that the reason Turing was able to raise the price so spectacularly was not because of a failure of the free market but because of government intervention:

The free market isn’t the reason [Turing’s CEO] Shkreli was able to raise the price. In fact, if he had to sell his product in a truly free market environment the price would likely remain low. And even now, if he continued to keep the price high, some enterprising pharmaceutical company would start making Daraprim themselves, increasing the supply and lowering the cost.

And that’s just what happened. That enterprising pharmaceutical company turned out to be Imprimis Pharmaceuticals. The company announced yesterday that it will start offering customizable compounded formulations of pyrimethamine (the generic name for Daraprim) and leucovorin in oral capsules starting as low as $99.00 for a 100 count bottle, or at a cost of under a dollar per capsule.

In making the announcement Mark L. Baum, CEO of Imprimis, said,
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pollution“The rules don’t apply to me,” is a favorite maxim of toddlers, narcissists, and government officials. This is especially true of the legislative branch, which frequently exempts itself—and its 30,000 employees—from federal laws that apply to the rest of us.

But just as often government at all levels simply ignores laws it finds too burdensome to comply with. A recent study published last month in the American Journal of Political Science titled “When Governments Regulate Governments” found that “compared with private firms, governments violate [the U.S. Clean Air Act and Safe Drinking Water Act] significantly more frequently and are less likely to be penalized for violations.”

Researchers David Konisky and Manny Teodoro viewed records of more than 3,000 power plants, 1,000 hospitals and 4,200 water utilities. Some of their findings include:
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Blog author: jballor
Thursday, October 15, 2015
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664975_084I saw The Martian this week and was struck by the number of resonant themes on a variety of is issues, including creation, creativity, innovation, entrepreneurship, exploration, work, suffering, risk, and civilization.

I won’t be exploring all of these in the brief reflections below, but will simply be highlighting some salient features. The film communicates something seriously important about the threefold relations of human beings: to God, to one another, and to the creation.

There will be some potential spoilers in the discussion below the jump after this line.
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ssn-gunsThe Obama administration is pushing to ban Social Security beneficiaries from owning guns if they lack the mental capacity to manage their own financial affairs.

When I first heard this claim, I assumed it must be a false rumor circulating on social media and less-than-reputable websites. Instead, it turns out, if the L.A. Times can be trusted, to be true account of the White House’s intentions.

The push is intended to bring the Social Security Administration in line with laws regulating who gets reported to the National Instant Criminal Background Check System, or NICS, which is used to prevent gun sales to felons, drug addicts, immigrants in the country illegally and others.

A potentially large group within Social Security are people who, in the language of federal gun laws, are unable to manage their own affairs due to “marked subnormal intelligence, or mental illness, incompetency, condition, or disease.”

There is no simple way to identify that group, but a strategy used by the Department of Veterans Affairs since the creation of the background check system is reporting anyone who has been declared incompetent to manage pension or disability payments and assigned a fiduciary.

According to the LAT, the policy change would affect about 4.2 million adults who receive monthly benefits that are managed by “representative payees.”

The first question the Obama administration should have asked before implementing the “solution” was “Is there a problem?” Are there currently a lot of Social Security recipients who pose a threat to themselves and others by owing a firearm?” The second question they needed to ask was if incompetency in financial matters is the standard, must they also take guns away from everyone in Congress?
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