Category: Technology and Regulation

Blog author: dpahman
Wednesday, September 10, 2014
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I have spoken in the past in favor of net neutrality, writing,

Whoever is responsible for and best at enforcing it, net neutrality had this going for it: it was a relatively stable, relatively open playing-field for competition…. [T]he fact that companies tried to get around it via copyright protection privileges shows that it was, in fact, doing something to enforce freedom of competition. Now, without it, there is an opportunity for concentration of power…. As [Walter] Eucken illustrated, concentration can lead to instability, and instability leads to popular calls for state regulation, which tend in practice toward cronyism. Certainly, such a trajectory is not inevitable, but it is now more likely, giving good reason for pause at the idea that we do not need net neutrality — or something like it — in the future.

This week, House minority leader Nancy Pelosi voiced her support for net neutrality as well. So why would I object? Because the measures that Pelosi proposes give much more power to the government, following the trajectory outlined above in the direction of over-regulation. (more…)

Reading through the German economist Walter Eucken’s work The Foundation of Economics (1951), I came across one of the most helpful charts for economic analysis I have yet to find. In it, Eucken gives every possible form of market in a single table:

Eucken Chart

The Foundation of Economics, p. 158

Eucken adds four qualifications that are important to keep in mind:

  1. “These forms of market are actual forms which have been or are to be found in actual economic life (often blended with one another, and existing alongside the forms of a centrally directed economy). They are not given a priori. They are discovered with their distinguishing characteristics by studying the planning data of those taking part in the market….”
  2. “Under each particular form of market a man can act according to different principles, for example, that of maximum net receipts or that of optimum output….”
  3. “Each of these forms of market can appear in four types: both open, both closed, or closed on either side only.”
  4. “Fixing of prices by the state occupies a special position, since it can follow any form of market and has different effects accordingly…. For example, the significance of coal prices being fixed by the state varies according to whether perfectly competitive, oligopolistic, or monopolistic supply, or some other form of market, exists, or whether both sides of the market are open, or whether the supply side is closed by an investment veto. Governmental price-fixing is to be treated as a variant of the different market forms and not as a special market form of its own.”

So, what does this amount to? (more…)

eparulesA few weeks ago I wrote about how some leaders of the religious left were supporting the EPA’s proposed new regulations on greenhouse gas emissions from existing fossil fuel-fired electric generating units. At the time I wrote, “While there may be some religious liberals who have been duped into thinking the new proposals will actually affect climate change, most are just signaling their allegiance to the Obama administration and the Democratic Party.”

After I wrote that sentence I wondered if I had been too harsh. Was it possible that these liberal religious leaders had looked at the actual evidence and concluded that the changes would indeed affect climate change? It turns out that the answer must be “no.” There is simply no reason to believe the regulations will have an impact. In fact, using a climate model emulator that was in part developed through EPA support, researchers at the CATO Institute found that the new regulations’ effect on climate change is so minuscule as to be almost immeasurable:
(more…)

Blog author: jcarter
Thursday, August 14, 2014
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keep-calm-and-insert-platitude-1A platitude is a flat, dull, or trite remark, especially one uttered as if it were fresh or profound. Politicians love platitudes, which is why we have laws with names like the Clean Air Act, the Pure Food Act, the Fair Sentencing Act, and the Anti-Puppy Kicking Act (okay, I made up that last one). Since no one is for dirty air, impure food, unfair sentencing, puppy-kicking, who could possibly oppose such legislation?

But the devil, as they say, is in the details. Which is why, as Donald J. Boudreau says, “Platitudes are a poor basis for policy.”

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What just happened with Obamacarehealthcaregov site?

In a two-to-one decision, the U.S. Court of Appeals for the District of Columbia Circuit dealt a serious blow to Obamacare by ruling the government may not provide subsidies to encourage people to buy health insurance on the new marketplaces run by the federal government.

What did the court decide?

Section 36B of the Internal Revenue Code, enacted as part of the Patient Protection and Affordable Care Act (Obamacare) makes tax credits available as a form of subsidy to individuals who purchase health insurance through marketplaces—known as “American Health Benefit Exchanges,” or “Exchanges” for short.

This provision authorized low-income Americans to receive tax credits for insurance purchased on an Exchange established by one of the fifty states or the District of Columbia. (The credits were for household incomes between 100 and 400 percent of the federal poverty line.) But the Internal Revenue Service interpreted the wording broadly to authorize the subsidy also for insurance purchased on an Exchange established by the federal government.

The court ruled that a federal Exchange is not an “Exchange established by the State,” and section 36B does not authorize the IRS to provide tax credits for insurance purchased on federal Exchanges.

Can you explain that without the legalese?
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“Politics makes strange bedfellows,” said Charles Dudley Warner. And nowhere is that more true than in the political alliances that form around regulation.

In a 1983 paper, regulatory economist Bruce Yandle coined the catch-phrase “Bootleggers and Baptists” for the observation that regulations are often supported by peculiar alliances who have very different end-goals in mind.

Yandle explains the Bootleggers and Baptists theory of regulation in this video by LearnLiberty.

(Via: Art Carden)

bitcoin-wallBitcoin is dead, long live Bitcoin.

A few weeks ago the IRS killed off any chance that Bitcoin could become a mainstream currency. That’s probably for the best since it clears the way for it to become something much more important: the world’s first completely open financial network.

Timothy B. Lee has a superb article explaining why this could be transformative. Lee highlights one particularly helpful innovation:

One obvious application is international money transfers. Companies like Western Union and Moneygram can charge as much as 8 percent to transfer cash from one country to another, and transfers can take as long as 3 days to complete. In contrast, Bitcoin transactions only take about 30 minutes to clear, and Bitcoin transaction fees could be a lot less than 8 percent.

An “alternative to Western Union” doesn’t sound revolutionary, does it? Now look at this graphic produced by The Daily Mail which shows how much money is being sent by migrants to their families back home.
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Last week was one of mixed blessings for those engaged in the U.S. political process. On the positive side, the U.S. Supreme Court – by a 5-4 margin – struck down overall limits on campaign contributions. Unfortunately, the pendulum swung in the opposite direction for Brendan Eich, co-founder and chief executive officer of Mozilla, who resigned after the Los Angeles Times disclosed his $1,000 contribution in support of California’s 2012 Proposition 8.

Eich’s unfortunate circumstances bring to mind the many proxy resolutions submitted to a plethora of companies each year by so-called religious shareholders such as As You Sow and the Interfaith Center for Corporate Responsibility. These resolutions bleat endlessly of the need for transparency in corporate lobbying, political expenses and donations to the American Legislative Exchange Council and The Heartland Institute. The call for transparency, however, is a ruse – what’s most important is shaming the companies publicly so they’ll give up fighting for their First Amendment rights. (more…)

american heroIn a fascinating essay in Mosaic, Charles Murray examines the spirit of innovation in America. He asks,

As against pivotal moments in the story of human accomplishment, does today’s America, for instance, look more like Britain blooming at the end of the 18th century or like France fading at the end of the 19th century? If the latter, are there idiosyncratic features of the American situation that can override what seem to be longer-run tendencies?

The author of Human Accomplishment: The Pursuit of Excellence in the Arts and Sciences, Murray amassed data from virtually all of human history, across cultures and in vast categories of human endeavor. He believes that there are patterns to innovation, creativity and advancement, and that certain cultural standards support and encourage this, while others degrade it. Murray makes the case that America is floundering, if not fading, when it comes to innovation and invention. (more…)

IKEA-Refugee-Shelter3When looking for solutions to humanity’s problems, conservatives and libertarians tend to prefer turning first to free markets rather than government. The reason for such a preference is often misunderstood, and can be difficult to explain since it appears paradoxical: free markets are often better at serving human needs than governments because free markets make it easier to fail.

As Arnold Kling explains, the best way to deal with failure depends on the institution. An individual needs to fail with a fallback position, a small startup firm needs to fail quickly, and a large, established firm needs to fail gracefully. But government, says Kling, cannot do any of these things well.

Of the many things that governments do poorly, failing is probably the worst. That is why governments rarely produces significant innovations. To produce innovative ideas, products, processes, or services requires testing what works and adjusting what doesn’t until you find the right formula. In a free market, the actions of consumers provide a signal to individuals and firms that they are doing well – or that they are failing.

If a company is failing, they have an incentive to adjust — and are pressured by competitors to adjust quickly — in order to give the customer what they need. They are often faced with a brutal, binary choice: innovate or fail. Government agencies, in contrast, tend to lack such feedback mechanisms and the ability to adjust quickly precisely because they have a low fear of failure. Even if they are unable to innovate and serve the needs of their “customers” they will likely stay in business due to bureaucratic inertia.
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