Category Archives: Publications

New #NeverNeeded Paper: Price Gouging

Massive shortages happened almost instantly when it became clear that the coronavirus would require a nationwide lockdown. Grocery stores almost instantly cleared out of frozen foods, non-perishables, hand sanitizer, and, bizarrely, toilet paper. Stores dealt with the shortages in different ways. But one of those ways, raising prices, is almost universally unpopular. In fact, 36 states have anti-price gouging legislation on the books. Both Commerce Secretary Wilbur Ross and an Amazon vice president have called for federal price gouging legislation.

In a new paper, I explain that price gouging legislation is a bad idea, regardless of one’s feelings about price gouging. The main reasons are:

  • Private companies have their own anti-price gouging responses. Moreover, they can evolve in ways regulation cannot, and more quickly. For example, Amazon’s artificial intelligence (AI) algorithms for policing price gouging among its third-party sellers turned out to have unintended consequences. But unlike Congress, they don’t have to wait until the political winds blow just right before doing something about it. Part of trial is error, and that’s okay. Without mistakes, there is no learning.
  • Price controls make shortages worse.
  • Rent-seeking. Big companies such as Amazon have already invested in AI algorithms and other anti-price gouging measures to prevent their third-party sellers from price gouging. Their smaller competitors have not. Amazon’s call for federal legislation likely has a bit more than good PR behind it.
  • Anti-price gouging measures don’t actually reduce prices. They reduce money prices at a tradeoff: non-money prices go up even more. These non-money price increases include worse shortages, longer searches, waiting lines, longer shipping times, lower quality, and in some cases, more black market activity.
  • There is no objectively correct mix of money- and non-money prices during a crisis. Different people have different needs and different preferences. Legislation, by imposing one single standard, does no favors to people’s diverse situations.

The whole paper is here. I touched on a few other price gouging tradeoffs here. CEI’s #NeverNeeded website is here.

How to Make #NeverNeeded-Style Reforms Stick

There are lots of good regulatory reform ideas out there. The ideas with the most staying power share a common theme. They don’t just treat this or that rule. They treat the larger rulemaking system that keeps churning out those harmful rules. With a tough economic recovery ahead once masks, prudence, and treatments defeat COVID-19, now is a good time to implement them.

In a recent paper, I outlined two institution-level reform ideas: an independent Regulatory Reduction Commission, and automatic sunsets for all new rules. For those who don’t have time for the paper-length version, there is now an op-ed version, courtesy of Inside Sources. It concludes:

Dealing with COVID-19’s health and economic effects are the two top political priorities right now. Nothing else even comes close. As policymakers find and eliminate never-needed regulations that are blocking recovery, they must also reform the system that made those rules possible in the first place.

If left untreated, that regulatory sludge will build back up, and stifle the next emergency response in ways no one can predict today. Repeal is not enough.

We also need resilience.

The whole piece is here. The original paper is here. For more regulatory reform resources, see neverneeded.cei.org.

Pandemics, #NeverNeeded Regulations, and Ten Thousand Commandments

Over at Inside Sources, Wayne Crews and I have a piece summarizing the main findings of Wayne’s new 2020 edition of Ten Thousand Commandments, plus some reforms that will help with the virus response and economic recovery:

The only thing in a typical family’s budget that costs more than regulation is housing—which itself is made more expensive by zoning ordinances, tariffs on steel and lumber, and arcane mortgage regulations….

Just as every gallon of milk has an expiration date, every new regulation should have an automatic sunset. That way, if a rule proves unworkable or goes obsolete, it will automatically go away. …

Congress should create an independent commission to go through large parts of the 185,000 pages of federal rules each year and send lawmakers a package of harmful or old rules to repeal with a single up-or-down vote.

Read the whole piece here. The 2020 edition of Ten Thousand Commandments is here. More resources are at CEI’s #NeverNeeded website.

California’s #NeverNeeded AB5 Is Harming the Coronavirus Response

California’s AB5 law was already backfiring before the COVID-19 pandemic hit. The legislation intends to reclassify many California-based independent contractors as formal employees in an attempt to raise their wages and benefits. It has instead cost thousands of jobs—many of which are home-based and quarantine-friendly.

California legislators have reportedly been mulling an “oops” bill that would offer exemptions from AB5 requirements. Over in the Orange County Register, I argue that exemptions are not enough. AB5 should be repealed outright:

While offering exemptions has the virtue of requiring politicians to admit their policies are hurting people, it has three significant problems.

One, exemptions take time to process. We don’t have that right now. …

Two, the officials who grant exemptions would gain great power. There is a risk some would use this power to enrich themselves. California legislators would also be tempted to bully companies for campaign contributions by dangling AB5 exemptions.

Three, exemptions would give favored businesses a government-granted advantage over competitors.

Read the whole piece here. I weighed in earlier on AB5 here. Ryan Radia’s CEI study on AB5 is here.

Deregulation Is an Effective Pandemic Defense

Over at RealClearMarkets, Iain Murray and I outline the major points of CEI’s just-released #NeverNeeded paper, which identifies regulations harmful to the coronavirus response:

During a pandemic, regulations should not get between sick people and health care, or between hungry people and food. This also applies in normal times. …

As Congress gears up for a Phase 4 stimulus, it is crucial that regulatory reform be part of the package. The top two priorities now are keeping people safe and minimizing economic damage, in that order. Regulatory sludge, as legal scholar Cass Sunstein calls it, is harming both objectives.

Read the whole thing here. The #NeverNeeded paper is here. CEI’s #NeverNeeded wesbsite is here. And you can contribute your ideas to the #NeverNeeded hashtag on Twitter.

CEI Releases #NeverNeeded Paper

My CEI colleagues have quickly compiled a short paper full of #NeverNeeded regulations that should be repealed in the wake of the coronavirus. These rules not only prevent effective response right now, but they make the country less able to deal with future crises. Now is the time to do some serious regulatory housekeeping. I contributed a few bits here and there, but this paper is a joint effort by CEI’s entire staff, ranging from transportation to health care to internet access to the regulatory process itself.

Read the whole thing here.

The #NeverNeeded Regulatory Reduction Commission

Over at the Washington Examiner, I propose a Regulatory Reduction Commission to act as a permanent watchdog to prevent #NeverNeeded regulations from hindering the next pandemic response. It would work like this:

First, no amendments should be allowed to the committee’s package. The vote must be straight up-or-down. The commission’s purpose is to avoid vote-trading and back-scratching. …

Second, the committee would be relatively small to reduce bargaining costs and make consensus easier to reach. It would also be bipartisan, so neither party can stack the deck when it is in power.

Third, the committee’s design has to account for the sheer size of the problem. … So it would tackle, say, five of the Code of Federal Regulations’ 50 titles per year in a 10-year rotation.

Read the whole piece here.

More regulatory reform ideas that could strengthen future crisis responses are in CEI’s Ten Thousand Commandments annual report.

The Minimum Wage Tax Increase

By far the most common criticism of minimum wages is that they cost jobs. This is incomplete—the data often show smaller job losses than one would expect after minimum wages go up. This is because workers earn more than wages—they also get non-wage pay such as insurance, free food and parking, and more. When regulations cause wage pay to go up, employers cut non-wage pay to pay for it. Job cuts happen, but they tend to be a last resort. I recently wrote a paper on these underappreciated tradeoffs.

The most underappreciated minimum wage tradeoff is a tax increase on the poor, which for some people would exceed $2,000. When untaxed non-wage pay is converted to taxable wages, workers pay higher taxes, without necessarily making more money. If a $15 minimum wage passes, it could cost some workers more than $2,000 in taxes, in addition to all the other non-wage pay cuts that come with a minimum wage increase.

I try to shine some light on this in an op-ed for Inside Sources:

To afford higher wages, employers cut back on other benefits, like health insurance, workplace leave flexibility, free meals, free parking or tuition reimbursement. That’s a real loss to workers, considering that non-wage pay is mostly tax-free.

By incentivizing employers to convert nonwage benefits to wages,  minimum wage advocates are, probably unknowingly, proposing a massive tax increase on the poor.

For some workers, this would mean a tax increase of up to $2,370 per year at a $15 per hour minimum wage. Depending on which state a worker lives in and other factors, shifting untaxed non-wage pay over to taxable wages could also expose some minimum wage earners to income tax liability, sales taxes and other taxes.

Read the whole thing here. My paper “Minimum Wages Have Tradeoffs” is here.

Ex-Im Reauthorization Vote Today in the House

Over in the Washington Examiner, I have a piece about the Ex-Im reauthorization bill that the House of Representatives will vote on today. I argue that even if this year’s battle ends in defeat, it has already been a significant nearly five-year-long victory, with guaranteed chances for victory in the future:

The Nobel-winning economist Ronald Coase once wrote, “An economist who, by his efforts, is able to postpone by a week a government program which wastes $100 million a year (which I would call a modest success) has, by his action, earned his salary for the whole of his life.” Over the period from 2014 to 2018, Ex-Im’s reduced activity spared taxpayers from nearly $48 billion of risk exposure, or nearly $12 billion per year. Ex-Im’s total portfolio decreased by $52 billion, or an average of $13 billion per year. This is more than a modest success.

Due to Ex-Im’s reauthorization requirement, reformers will have another opportunity in a few years — a lesson in institutional design that should be applied to other agencies.

Read the whole thing here.

Conservatives Should Oppose Ex-Im, Too

Over at CNS News, I argue that conservatives should favor closing the Export-Import Bank, even though President Trump supports the agency:

Finally, an underappreciated point is how Ex-Im can make some U.S. businesses less competitive. When Ex-Im offers favorable financing for a foreign airline to buy a Boeing plane, that airline often directly competes with U.S. airlines such as American, United, or Southwest. Often, Ex-Im can only help one U.S. business by hurting others. Besides being zero-sum, this opens up a fierce lobbying game with predictable ethical consequences. The Trump administration supports Ex-Im as part of its larger trade agenda. In practice, Ex-Im turns out to undermine it.

Read the whole piece here. My recent paper on Ex-Im is here.