Category Archives: regulation

CEI’s Battered Business Bureau: The Week in Regulation

topeka shiner
This week in the world of regulation:

  • Last week, 68 new final regulations were published in the Federal Register. There were 84 new final rules the previous week.
  • That’s the equivalent of a new regulation every 2 hours and 28 minutes — 24 hours a day, seven days a week.
  • All in all, 1,998 final rules have been published in the Federal Register this year.
  • If this keeps up, the total tally for 2013 will be 3,646 new final rules.
  • Last week, 1,750 new pages were added to the 2013 Federal Register, for a total of 43,686 pages.
  • At its current pace, the 2013 Federal Register will run 78,572 pages.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. One such published last week, for a total of 17 so far in 2013.
  • The total estimated compliance costs of this year’s economically significant regulations ranges from $5.78 billion to $10.39 billion.
  • So far, 138 final rules that meet the broader definition of “significant” have been published in 2013.
  • So far this year, 333 final rules affect small business; 30 of them are significant rules.

Highlights from final rules published last week:

  • Last week’s economically significant regulation comes courtesy of the Affordable Care Act. By changing eligibility requirements for Medicaid and the Children’s Health Insurance Program (CHIP), the federal government hopes to save $465 million in spending over five years. The rule contains nary a word about compliance costs, so I am scoring this rule as zero-cost in our running compliance cost tally.
  • The Topeka shiner is a federally endangered fish. The biggest ones are a few inches long. The Fish and Wildlife Service is establishing a “nonessential experimental population” of them in northern Missouri.
  • Just in time for a record-breaking summer heat wave, the Energy Department issued new energy conservation standards for room air conditioners. The rule also affects clothes dryers.

For more data, go to TenThousandCommandments.com.

Regulation of the Day 232: Pulling a Rabbit Out of a Hat

rabbit in magician hat
Marty Hahne is a magician in Missouri. He has been putting on magic shows for kids for almost 30 years under the nom de guerre Marty the Magician. Back in 2005, he got in trouble with the USDA. Turns out he was using an unlicensed rabbit for his grand finale of pulling a rabbit out of a hat. Hahne quickly found out that the USDA’s regulations for magicians’ rabbits, in force since 1966, are both strict and extensive.

Eight years later, the agency is still harassing him. Here are some of the indignities the USDA is inflicting on Hahne and his animal assistant:

Hahne has an official USDA license, No. 43-C-0269, for Casey — a three-pound Netherland dwarf rabbit with a look of near-fatal boredom. The rules require Hahne to pay $40 a year, take Casey to the vet and submit to surprise inspections of his home.

Also, if Hahne plans to take the rabbit out of town for an extended period, he must submit an itinerary to the USDA. The 1966 law that started all of this was four pages long. Now, the USDA has 14 pages of regulations just for rabbits.

Now, under new regulations, “animal exhibitors” such as Hahne are required to file written disaster plans to the USDA covering at least 21 types of disaster, from broken air conditioners to hurricanes. Hahne’s disaster plan for Casey is 28 pages long, and is considered short for its genre. An attorney was kind enough to draft it for him pro bono.

When the Washington Post picked up on Hahne’s story, it spread like wildfire on weird news sites, and the Internet had a collective belly laugh at the USDA’s expense. After this blow to its pride, the agency reluctantly announced that Secretary Tom Vilsack has ordered a review of the regulations, insisting that “common sense be applied.”

This is not the same as saying the agency will liberalize its strict magicians’ rabbit policy. But the phrase “common sense” does imply it.

The FTC’s Uneasy Relationship with Innovation

The Sherman and Clayton Acts form the backbone of U.S. antitrust policy. But another piece of legislation gives the government the power to regulate business practices on scales smaller than monopoly. In 1914, President Woodrow Wilson signed the Federal Trade Commission Act into law, which created the FTC. In particular, section 5 of the FTC Act  should give pause to America’s entrepreneurs. It states:

“Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices… are hereby declared unlawful.”

Deceptive business practices should be, and are, illegal. Fraud has been against the law for a long time. The worrying part is the term “unfair methods of competition,” which the law never defines.

Congress could have enumerated which business practices were to be made illegal, but it chose not to. FTC Commissioner Joshua Wright, in a recent policy statement, cites (p.3) a Senate Committee Report on the 1914 FTC Act noting “that there were too many unfair practices to define, and after writing 20 of them into the law it would be quite possible to invent others.” So Congress delegated its lawmaking authority over to the new FTC.

Its primary reason for doing so was a then-fashionable Progressive Era emphasis on scientific, expert management. Congressmen, being generalists, lack the specialized knowledge that full-time agency employees have. Since the agencies know better, they should be given wide discretion as to defining what constitutes an unfair business practice.

A public choice theorist might add that delegation also allows Congress to shift blame away from itself when FTC actions prove unpopular. Delegation could also give members plausible deniability if the FTC decides to punish businesses for political or ideological reasons.

Commissioner Wright’s policy statement attempts to give more clarity to what business practices the FTC will and will not allow, and he even addresses some public choice concerns. Some of his major principles:

  • Consumer harm is the rationale for antitrust policies, not competitor harm.
  • Maintaining the competitive process is more important than maintaining certain individual competitors.
  • The FTC is not allowed to punish businesses to advance public policy goals. It may only intervene for economic reasons, such as when the competitive process is in danger.
  • An unfair business practice will have the effect of “increased prices, reduced output, diminished quality, or weakened incentives to innovate.” (p.7)

He goes on to provide several examples of business practices that are and are not allowed.

Wright also cites a wise quote from Ronald Coase, who won the economics Nobel in 1991. It neatly sums up the antitrust enterprise:

“[If] an economist finds something – a business practice of one sort or another – that he does not understand, he looks for a monopoly explanation. And as in this field we are very ignorant, the number of ununderstandable practices tends to be very large, and the reliance on a monopoly explanation, frequent.”

Coase’s observation has consequences for the tech sector, which relies heavily not just on new, continuously evolving technologies, but on new business practices that haven’t been tried before. Without a prior track record of how a practice works, it is difficult for the defendant to prove that it increases efficiency, or or for the plaintiff to prove it is anti-competitive. The result is a lot of legal uncertainty in a sector that already has more uncertainty than most.

Hopefully Wright’s efforts to clarify the FTC’s muddled enforcement criteria will bear some fruit. Until then, watch out, especially if you’re a tech company trying out new, untested business practice. As Coase has warned, It may come back to haunt you.

CEI’s Battered Business Bureau: The Week in Regulation

homer bart truckers
This week in the world of regulation:

  • Last week, 84 new final regulations were published in the Federal Register, despite the July 4th holiday. There were 78 new final rules the previous week.
  • That’s the equivalent of a new regulation every 2 hours — 24 hours a day, seven days a week.
  • All in all, 1,930 final rules have been published in the Federal Register this year.
  • If this keeps up, the total tally for 2013 will be 3,650 new final rules.
  • Last week, 1,371 new pages were added to the 2013 Federal Register, for a total of 41,936 pages.
  • At its current pace, the 2013 Federal Register will run 78,139 pages.
  • 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, for a total of 16 so far in 2013.
  • The total estimated compliance costs of this year’s economically significant regulations ranges from $5.78 billion to $10.39 billion.
  • So far, 132 final rules that meet the broader definition of “significant” have been published in 2013.
  • So far this year, 324 final rules affect small business; 28 of them are significant rules.

Highlights from final rules published last week:

For more data, go to TenThousandCommandments.com.

Great Moments in Government

Economic Stall Speed

Richard Rahn’s otherwise-excellent column in today’s Washington Times cites Wayne Crews’ and my research on regulatory costs. He also cites our colleague Matthew Melchiorre’s new paper on European austerity.

Regulation Causes Inflation

Over at the American Spectator, I show why an unintentional and unavoidable side effect of regulation is inflation:

In their book Democracy in Deficit, Nobel-winning economist James Buchanan and co-author Richard Wagner observed that government spending can create inflation “[t]o the extent that resources utilized by government are less productive than resources utilized by the private sector…” The same principle applies to regulation…

Imagine a simplified economy that consists of just two things: 100 dollars and 100 apples, with the price of an apple being one dollar each. If new regulations pass that make it harder to produce apples, the next year there are only 90 apples produced. Their price goes up from $1 to $1.11.

Read the whole thing here.

CEI’s Battered Business Bureau: The Week in Regulation

california desert grapes
This week in the world of regulation:

  • Last week, 78 new final regulations were published in the Federal Register, despite the July 4th holiday. There were 80 new final rules the previous week.
  • That’s the equivalent of a new regulation every 2 hours and 9 minutes — 24 hours a day, seven days a week.
  • All in all, 1,846 final rules have been published in the Federal Register this year.
  • If this keeps up, the total tally for 2013 will be 3,623 new final rules.
  • Last week, 1,461 new pages were added to the 2013 Federal Register, for a total of 40,565 pages.
  • At its current pace, the 2013 Federal Register will run 78,615 pages.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. One such rule was published last week, for a total of 16 so far in 2013.
  • The total estimated compliance costs of this year’s economically significant regulations ranges from $5.78 billion to $10.39 billion.
  • So far, 130 final rules that meet the broader definition of “significant” have been published in 2013.
  • So far this year, 312 final rules affect small business; 28 of them are significant rules.

Highlights from final rules published last week:

For more data, go to TenThousandCommandments.com.

CEI Podcast for July 3, 2013: The EPA’s Assault on State Sovereignty

EPA_logo
Have a listen here.

William Yeatman discusses his new study, “The U.S. Environmental Protection Agency’s Assault on State Sovereignty.”

CEI’s Battered Business Bureau: The Week in Regulation

school-lunch
This week in the world of regulation:

  • Last week, 80 new final regulations were published in the Federal Register. There were 96 new final rules the previous week.
  • That’s the equivalent of a new regulation every 2 hours and 6 minutes — 24 hours a day, seven days a week.
  • All in all, 1,768 final rules have been published in the Federal Register this year.
  • If this keeps up, the total tally for 2013 will be 3,605 new final rules.
  • Last week, 1,461 new pages were added to the 2013 Federal Register, for a total of 39,104 pages.
  • At its current pace, the 2013 Federal Register will run 78,208 pages.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. One such rule was published last week, for a total of 15 so far in 2013.
  • The total estimated compliance costs of this year’s economically significant regulations ranges from $5.78 billion to $10.39 billion.
  • So far, 124 final rules that meet the broader definition of “significant” have been published in 2013.
  • So far this year, 306 final rules affect small business; 28 of them are significant rules.

Highlights from final rules published last week:

  • This week’s economically significant rule sets national standards for school lunches and breakfasts. The rule does not include a cost estimate, claiming that “it is not possible to define a level of disease or cost reduction expected to result from implementation of the rule.” This is a basic failure of transparency. That the Food and Nutrition Service is unwilling to include cost-benefit analysis implies that even the agency believes that this rule’s effect on childhood obesity will be imperceptible. I have placed this rule’s costs at the bare minimum of $100 million needed for it to qualify for its economically significant status. Given the multi-billion dollar costs of other federal school lunch rules, this is could be a severe underestimate.
  • It took the Forest Service nearly two pages to define what a ski area is.
  • The Coast Guard is establishing 23 different safety zones, security zones, and the like for fireworks shows and other summer events across the country.
  • The Postal Service is updating its refund and exchange policies.
  • New safety standards for infant walkers and swings.
  • The National Park Service is changing its policies regarding protesting and pamphleteering in national parks.

For more data, go to TenThousandCommandments.com.