Monthly Archives: October 2013

Towards a More Transparent Fed

Iain Murray and I have a piece in today’s American Spectator breaking down the new paper we co-wrote with John Berlau about questions we would like Janet Yellen to answer, whether in her confirmation hearing or elsewhere. The main point is transparency:

Transparency is essential for a public body that takes trillion dollar decisions. We need to know what she feels about the possibility of auditing the Fed. Indeed, Senator Rand Paul has already announced that he will place a hold on her nomination until he sees some progress with his Federal Reserve Transparency Act bill — something that Senate Majority Leader Reid used to support. If and when Professor Yellen does come before a confirmation hearing, Senators need to make her views on these questions transparent to the nation too.

Read the whole thing here. The full paper is here.

CEI Podcast for October 30, 2013: Bringing Transparency to the Consumer Financial Protection Bureau

cfpb
Have a listen here.

George Mason University law professor and Mercatus Center senior scholar Todd Zywicki discusses his paper, “The Consumer Financial Protection Bureau: Savior or Menace?” His thesis is that this “independent agency inside another independent agency, presided over by a single director who is insulated from presidential removal,” which is also immune to Congress’ power of the purse, is a return to a Nixon-era approach to agency structure. He gives several recommendations for improving actual consumer protection.

Questions for Janet Yellen

janet yellen
The Federal Reserve is arguably the government’s most important agency, even if it is (nominally) independent. It has control over the price system, the most fundamental part of any economy. It also exercises significant power over the banking sector, and in recent years has taken to doing large favors for Wall Street. These are all reasons why Janet Yellen’s nomination for Fed Chair needs to be carefully vetted. To that end, my CEI colleagues John Berlau and Iain Murray and I put together some questions about several facets of the Fed’s mission we would like to Yellen answer, whether during her confirmation hearing or elsewhere. You can read the short WebMemo here. Here is one of our questions about inflation:

Many observers expect you to pursue an inflationary stimulus, and believe this is likely a reason for your nomination. If your actions are already expected, will markets not take these expected price level changes into account in advance? If so, do you believe this would blunt the employment impact of any monetary expansion? Would you respond to these pre-existing expectations with an unexpectedly high inflationary policy?

As John, Iain, and I write, Yellen’s credentials are not in question. But the policies she might pursue as Fed Chair are. Read more here.

CEI’s Battered Business Bureau: The Week in Regulation

AmericanStandard
The government has been back in business for more than a week now, and the Federal Register is now reflecting it. Monday continued the slow shutdown pace, with just 1 regulation and 60 pages. Tuesday saw that spike to 16 regulations and 537 pages, and it has stayed elevated since. Friday’s Federal Register contained 27 new final regulations and 17 proposed regulations in its 329 pages. The pace of new rules is definitely above normal, but not like the deluge witnessed after the Gingrich-Clinton shutdowns, where 82 regulations were published in one day. A normal day has about 15 rules, and right now we’re seeing about 20. We’ll see what the coming week brings.

On to the data:

  • Last week, 78 new final regulations were published in the Federal Register. There were 3 new final rules the previous week.
  • That’s the equivalent of a new regulation every 2 hours and 9 minutes.
  • All in all, 2,950 final rules have been published in the Federal Register this year.
  • If this keeps up, the total tally for 2013 will be 3,613 new final rules.
  • Last week, 1,792 new pages were added to the 2013 Federal Register, for a total of 63,942 pages.
  • At its current pace, the 2013 Federal Register will run 77,225 pages, which would be good for fifth all time. The current record is 81,405 pages, set in 2010.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. No such rules were published last week, leaving the total at 34 so far in 2013.
  • The total estimated compliance costs of this year’s economically significant regulations ranges from $6.53 billion to $11.93 billion.
  • So far, 269 final rules that meet the broader definition of “significant” have been published in 2013.
  • So far this year, 566 final rules affect small business; 79 of them are significant rules.

Highlights from selected final rules published last week:

For more data, see Ten Thousand Commandments and follow @10KC and @RegoftheDay on Twitter.

CEI Podcast for October 24, 2013: The Social Cost of Carbon

wheat-field-golden-grain
Have a listen here.

Like anything else, carbon emissions have both costs and benefits. Marlo Lewis, a Senior Fellow in CEI’s Center for Energy and Environment, discusses a new study finding that the carbon debate has some nuance to it, after all.

The Question Has Officially Been Answered

Express (UK): Seven workers change one traffic light bulb

The Limits of Human Understanding

The knowledge problem is more than a pet theory among economists. It is a biological fact:

[T]he capacity of any explaining agent must limited to objects with a structure possessing a degree of complexity lower than its own. If this is correct, it means that no explaining agent can ever explain objects of its own kind, or of its own degree of complexity, and, therefore, that the human brain can never fully explain its own operations.

-F.A. Hayek, The Sensory Order, 185.

This implies that the human brain is therefore incapable of fully understanding society, currently comprised of more than 7 billion separate human brains–none of which can fully understand themselves, not to mention their 7 billion colleagues.

The Sensory Order is a work of theoretical psychology. But it has very clear empirical implications for economics, not to mention policymakers and regulators. Think of this limitation as a reason why the law of unintended consequences continues to have so many real-world examples.

CEI’s Battered Business Bureau: The Week in Regulation

herring school
Since Congress and the president reached a deal on the debt ceiling, this is the second and final special shutdown edition of the Battered Business Bureau. This week’s was the smallest Federal Register this analyst has ever seen, with a grand total of 3 rules and 60 pages. Thursday’s edition was just 5 pages long, the lowest total of the entire shutdown.

The post-shutdown deluge of rules will likely start on either Monday or Tuesday. Expect to see very different numbers in next week’s edition.

On to the data:

Last week, 3 new final regulations were published in the Federal Register. There were 6 new final rules the previous week.

  • That’s the equivalent of a new regulation every 56 hours.
  • All in all, 2,872 final rules have been published in the Federal Register this year.
  • If this keeps up, the total tally for 2013 will be 3,602 new final rules. Keep in mind the shutdown is artificially lowering this projection; it was 3,687 last week. It should be back to its usual 3,700+ range after next week.
  • Last week, 60 new pages were added to the 2013 Federal Register, for a total of 62,150 pages.
  • At its current pace, the 2013 Federal Register will run 76,918 pages, which would be good for fifth all time – keep in mind, though, the light shutdown week artificially lowers this projection. The actual page count will likely be much closer to 80,000. The current record is 81,405 pages, set in 2010.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. No such rules were published last week, leaving the total at 34 so far in 2013.
  • The total estimated compliance costs of this year’s economically significant regulations ranges from $6.53 billion to $11.93 billion.
  • So far, 258 final rules that meet the broader definition of “significant” have been published in 2013.
  • So far this year, 550 final rules affect small business; 75 of them are significant rules.

Instead of the usual highlights from selected final rules, here are all of them, since there were only three:

The Coast Guard a established temporary safety zone in the Tennessee River near Florence, Alabama For a boat race, and another one for a fireworks show in Oyster Bay, New York.

For more data, see Ten Thousand Commandments and follow @10KC and @RegoftheDay on Twitter.

Regulators Revving Up

An otherwise-excellent roundup of regulatory shutdown coverage in The Hill‘s RegBlog quotes yours truly.

In more important news, the regulatory ramp-up that I have predicted won’t happen until at least Tuesday. Monday’s Federal Register is already online, and contains just one regulation and 60 pages.

Markets in Everything: Rat Tails

During the Korean War, the Chinese government accused the U.S. of engaging in germ warfare–air-dropping canisters filled with germs and bacteria-infused insects and pests not just in Korea, but in China, too. The accusation sounds ridiculous now, but at the time, it sounded somewhat plausible. General MacArthur, after all, openly mused about using nuclear bombs in Korea, and nearby Japan used biological weapons just a few years earlier during World War II.

The propaganda campaign caused a nationwide scare, as well as major cleanup efforts. As historian Frank Dikötter explains on p. 148 of his new book, The Tragedy of Liberation: A History of the Chinese Revolution 1945-1957,
the campaign also caused a most unusual market to form:

From north to south, people were also required to kill the ‘five pests,’ namely flies, mosquitoes, fleas, bedbugs[,] and rats. In Beijing every person had to produce the tail of one rat every week. Those who greatly exceeded the quota were allowed to fly a red flag over the gate of their house, while those who failed had to raise a black flag. An underground market in tails rapidly developed.

Market orders emerge, even during some of history’s darkest hours.