Category Archives: Public Choice

Regulation of the Day 1: Taxpayer-Funded Advertising for Mushrooms

Posted on June 5, 2009 | Comments Off on Regulation of the Day 1: Taxpayer-Funded Advertising for Mushrooms

This is the first installment of an occasional series that shines a little light on what the regulatory state is up to.

Today’s Regulation of the Day comes to us from the Agricultural Marketing Service (5,500 employees, $1.3 billion 2008 budget). Farmers are apparently unique among businesses in being unable to promote themselves, and therefore need help from the federal government.

Page 26,984 of the 2009 Federal Register contains a proposed rule titled “Amendments to Mushroom Promotion, Research, and Consumer Information Order and Referendum Order.”

Basically, large mushroom producers will vote in a referendum to decide if they like proposed changes in federal mushroom policy. Also at issue is membership apportionment on the all-important Mushroom Council.

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Posted in Public Choice, Regulation of the Day

The Permanent Campaign

Posted on January 17, 2009 | Comments Off on The Permanent Campaign

Good people generally do not become president. Good people don’t even want to be president.

Why? Power is one reason. There is nothing dignified or noble about seeking power over other human beings.

Morality in politics is that of Thrasymachus in Plato’s Republic: might makes right. No parent would teach that to their child. It is wrong.

The brutal campaigns are the other reason good people shy away from political careers. A successful campaign for even minor office requires months of the candidate prostrating himself before people he’s never met.

He has to tailor his opinions to match the median voter’s. He dares not follow his own heart or mind; he’d lose for sure.

Good people carry themselves with pride and dignity. The man or woman who voluntarily endures the modern campaign has neither.

Pundits started talking years ago about the notion of the “permanent campaign.” It used to be a cynical joke at the expense of a politician whose powerlust was a little too obvious; proper decorum demanded such impulses to be kept below the surface.

Decorum has declined. People who play for the Red Team are already jockeying to position themselves as their team’s nominee. More than three years from now.

The Blue Team already knows who their nominee will be. And he’s already begun campaigning for a second term. His first has not yet even begun.

The Politico‘s Ben Smith reports that President Obama has even named his permanent campaign: Organizing for America. This is unprecedented.

Smith describes it as a “potentially hugely, uniquely powerful tool, enhancing the muscle of the official who is already the most powerful man in America.”

Power. Always power. Politicians are terrible little creatures. May our children aspire to better things.

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Posted in Elections, Executive Power, Philosophy, Political Animals, Public Choice, The Partisan Mind

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A New Regulatory Order?

Posted on June 17, 2008 | Comments Off on A New Regulatory Order?

Harvard economist Larry Summers has some ideas for a new regulatory order in the Financial Times. In typical Summers fashion, his recommendations are moderate. His moderation comes at the cost of ignoring incentives.

His first principle is “no regulatory competition.” Regulators shouldn’t compete against each other. Let’s take this principle to its logical conclusion. Only one regulator would be allowed — that would be the federal government. As with most monopolies, bad incentives abound.

It is a good thing that, say, investment firms are free to move to New Jersey if New York’s regulations are too stringent. Or if taxes are too high; the same arguments apply to tax competition. “Forum shopping” gives regulators more incentive to be reasonable.

Summers also expresses concern over regulatory capture. His concern is legitimate, but there’s no correlation with forum shopping, as he implies. Regulatory capture happens when something is regulated. The only way to stop regulatory capture is to stop regulating, period.

When constructing a regulatory order, we have three choices: 1) no regulators, 2) a single regulator (the federal government), and 3) multiple, competing regulators (the states).

I think I know which I prefer. Failing that, I’ll take the third option.

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Posted in Economics, Political Animals, Public Choice, regulation

FCC to Nullify Millions of Contracts?

Posted on June 11, 2008 | Comments Off on FCC to Nullify Millions of Contracts?

My colleague Alex Harris is drooling over the latest version of Apple‘s iPhone. In true CEI spirit he added, “Regulators better not get in my way.” Sorry to say, Alex, but tomorrow the FCC is holding a hearing that may do just that.

Here’s what’s happening. Monthly service is cheap, but phones themselves are expensive. A good one costs hundreds of dollars. Many people can’t afford to buy them outright, or don’t want to. Since phone companies want to sell phones, they’ve found a way around that: spread the cost out over time.

Providers often sell their phones cheaply, sometimes even at a loss. Then they make their money back by locking the customer in for a set period of time, usually a year or two. If the customer wants out before then, they have to pay an early termination fee.

The FCC ‘s hearing tomorrow will discuss ways to regulate early termination fees. The fees are unpopular, even though they allow more people to afford better phones.

Some people have complained because they found out about the fees only after signing a legally-binding contract; not everyone can be bothered to read fine print. The FCC claims it is looking out for these people.

They are not. The fees are a good thing. They lower the cost of entry into the cell phone market. Without early-termination clauses, a lot of people would be priced out of cell phone ownership, period. Others would only be able to afford a low-end phone. The FCC’s proposals would hurt these people.

That doesn’t matter when there’s a chance to be seen “doing something.” Ergo, the FCC is considering violating the sanctity of millions of contracts. In Washington, good publicity trumps the rule of law. I wish it were for a better reason than people not reading what they sign.

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Posted in Economics, Law, Political Animals, Public Choice

Crafty Regulators

Posted on May 30, 2008 | Comments Off on Crafty Regulators

Contrary to popular belief, regulators tend to be very clever people. They know the rules of the game, and they know to how to use them to their advantage.

The latest example of bureaucratic perfidy is a recent decision by EU officials to raise tariffs on some high-tech goods from the United States. This doesn’t seem like a smart policy at first glance. It will make goods more expensive for European consumers. The tariffs might also be a violation of the Information Technology Agreement. The U.S. is not pleased, and is launching a WTO case.

There are two ingenious ways that revenue-hungry EU regulators are gaming the system.

One is taking advantage of how bureaucratized the WTO is. The current dispute is only in the first step right now, which is a formal consultation between the WTO and the EU. I believe the next step involves a strongly worded letter.

The EU regulators who imposed the tariffs know that the case will take years to decide. Their tariffs — and revenues — will stand untouched until then. They know they can violate free trade agreements almost at will, and years will pass before they’ll have to answer for it. Very clever.

The second spark of regulatory intelligence is a creative interpretation of the Information Technology Agreement (ITA). Under the agreement, computer monitors are duty-free, but televisions are not. So the EU is arguing that people are using larger computer monitors primarily as televisions, and not as computer monitors. That way they can be taxed.

Of course, only the people actually buying and using large computer monitors can say what they’re using them for. But the regulators have made a good enough argument to stall the WTO.

These are some very smart people. What a shame then, that they are using their talent to hinder trade instead of to free it.

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Posted in Economics, Public Choice, regulation

Sometimes Bad Legislation Is Good

Posted on April 25, 2008 | Comments Off on Sometimes Bad Legislation Is Good

Florida’s legislature sure gets a lot done. This is especially impressive since they’re a part-time legislature, in session for only 60 days each year.

Last month they moved to regulate toilet paper quantities in restaurants.

Now they’re trying to solve the most pressing, urgent problem facing their fine state: fake testicles on the back of trucks.

Some people think this a waste of time. They’re right. But I think legislators aren’t being wasteful enough. Any time they spend on inanities like TruckNutz is time not spent strangling the state’s education and health care systems.

As a bonus, the bill’s own sponsor doubts his ban will become law. But he still tied up the Senate by having them vote on it. Since it passed, now the Assembly will have to waste time voting on it.

Kudos, I say.

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Posted in Economics, Political Animals, Public Choice

Election 2008

Posted on January 31, 2008 | Comments Off on Election 2008

I don’t vote. Sometimes people ask me why. My answer changes from year to year. I try to make it as short as possible. For example, in 2004, I gave two reasons: George Bush and John Kerry.

There’s a lot more to it than that, of course. Opportunity costs. My vote would only affect the result if it was a tie breaker, which is unlikely. I’d be risking (gasp!) jury duty. If I genuinely like a third party candidate, they will lose even with my vote. And so on.

But simply saying the candidates’ names is usually enough to get my point across.

My answer is a bit longer this year, since the nominees aren’t yet settled. But I’ll be back down to two short reasons soon enough. Maybe even after Super Tuesday.

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Posted in Economics, Elections, Political Animals, Public Choice

Government, Technology, and Growth

Posted on January 29, 2008 | Comments Off on Government, Technology, and Growth

I’m reading Bill Easterly’s The Elusive Quest for Growth for a class right now. It asks and answers the question of how to make poor countries rich. It’s a good read. I find I disagree with many details, but the core message is simple and true: people respond to incentives.

As I said, there are parts that I don’t buy into. Here’s an example:

Brazil moved more slowly into the computer revolution than necessary because of a government ban on PC imports, a misguided attempt to promote the domestic PC industry, a classic attempt by vested interests to hijack technological progress. (p. 186)

What does he conclude from this experience? “The government should subsidize technological imitation.” (ibid)

He ignores his own advice that incentives matter. As Brazil showed us, government’s incentives often hurt growth. Ask any public choice theorist.

Quibbles aside, it’s a good book. I recommend it.

And if any of my classmates read this, I’m interested in your thoughts.

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Posted in Development Economics, Economics, Public Choice, Technology

Charity and Government

Posted on January 22, 2008 | Comments Off on Charity and Government

An editorial in today’s new York Times, entitled “Charity Begins in Washington,” calls for greater government involvement in charity:

Critics of government spending argue that America’s private sector does a better job making socially necessary investments. But it doesn’t. Public spending is allocated democratically among competing demands.

Allocated democratically among competing demands? Government does not work that way.

Public sector charity is allocated by politicians making political calculations. Yes, the private sector is imperfect. But it doesn’t have half the systemic problems that government charity has. Inefficiency, politicization, rent-seeking, corruption, people gaming the system, you name it. All the good intentions in the world can’t change that.

Charity does not, and should not begin in Washington. It begins with you, me, and everyone else who wants to help our fellow man.

Some things are too important to be left to government. Charity is one of them.

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Posted in Economics, Political Animals, Public Choice

Hillary: The Movie

Posted on January 17, 2008 | Comments Off on Hillary: The Movie

There’s a documentary coming out attacking Hillary Clinton. It’s called Hillary: The Movie. The FEC now says the movie is an “electioneering communication,” and they must disclose who their donors are.

I poked around the movie’s website and looked at the previews. It is shallow, partisan hackery. And of course it’s intended to hurt Sen. Clinton’s candidacy. That’s the point!

My point is that political speech shouldn’t be treated any differently than any other kind of speech. The FEC has no business here; it is a shame that McCain-Feingold gives them that power. No criticizing candidates!

The people behind the movie think Clinton’s policies are bad for the country. This is their way of expressing that. I doubt the movie is any good; Ann Coulter is in it, for one. But they have the right to speak their minds, and their funders have the right to anonymity, no matter what the FEC says.

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Posted in Elections, Free Speech, Political Animals, Public Choice, The Partisan Mind