Category Archives: Uncategorized

CEI Press Release: CEI Criticizes European Union’s Antitrust Decision Against Google

Posted on July 18, 2018 | Comments Off on CEI Press Release: CEI Criticizes European Union’s Antitrust Decision Against Google

The European Union announced its decision today to fine Google $5 billion in an antitrust case involving the tech giant’s Android operating system. Competitive Enterprise Institute (CEI) regulatory experts lamented the decision.

CEI fellow Ryan Young said the following about the news:

The European Union’s $5 billion antitrust decision against Google’s Android operating system could cause immense consumer harm by requiring Google to provide an inferior product for no good reason.

The decision is reminiscent of the EU’s similarly baseless crusade against Microsoft in the 1990s and 2000s. Not only are Google’s Android operating system, Chrome browser, Maps, Calendar, and other applications already available free of charge to consumers, but Google provides consumers easy access to competitors’ software through its Google Play app store.

Just as consumers used Microsoft’s own Internet Explorer browser to install Firefox and other competing software they liked better, unsatisfied Google users have easy, often free access to competing products. They can also leave the Google ecosystem entirely by buying an Apple iPhone. The real threat to innovation and consumers here is the EU, not Google.

CEI Vice President for Policy Wayne Crews also commented on the decision:

Dominance and popularity are not the same as a coercive monopoly. The European Commission is behaving in protectionist fashion, not in a manner benefitting consumers, and the fines are inappropriate, unwarranted, and plain wrong. Google is no monopoly, as the existence of Apple’s iPhone and other options attest; and there is always some new disruptive technology on the horizon (remember the MySpace monopoly? The AOL one?).

Different vendors have the right to test out different business models without interference from regulatory authorities, and consumers have the right to accept or reject them. And the core justification, the European Commission’s idea that people, otherwise capable of downloading millions of files on Play and iPhone mobile stores, cannot substitute a search engine or other preinstalled app is absurd on its face.

There are many ways that predatory antitrust adventurism, such as that of the European Commission and the United States alike, must be reformed to prevent future damage to the technology sector. The very phrase “competition commissioner” is internally contradictory, and stands in stark contrast to the phrase free enterprise.

Read more from CEI’s Wayne Crews: “European Regulators Wrong on Google Fine, Wrong on Antitrust Policy”

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Posted in Antitrust, Economics, Innovation, International, Media Appearances, Uncategorized

Trump, Tariffs, and the Future of Free Markets

Posted on July 11, 2018 | Comments Off on Trump, Tariffs, and the Future of Free Markets

The Detroit News ran a column of mine, “Will Trump’s Tariffs Kill Free Markets?”

The short answer: no. Classical liberal institutions are strong, enduring, and embedded in American culture. Politicians are none of those things. They pass from the scene after a few years, limiting the damage they can do.

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Posted in Economics, Publications, Trade, Uncategorized

A Quick Lesson in Antitrust: Netflix and Comcast

Posted on July 9, 2018 | Comments Off on A Quick Lesson in Antitrust: Netflix and Comcast

Every time a major corporate merger is announced, pundits predictably warn of impending doom if regulators allow it to happen. Here’s an example from Susan P. Crawford’s 2012 book Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age (Kindle edition location 2098):

The absence of any effective regulatory regime or oversight over the cable giant makes it unlikely that Netflix will ever be able to challenge Comcast. Comcast has a number of options that will make it extremely difficult for independently provided, directly competitive professional online video to challenge its dominance.

Now that a few years have passed and the dust has settled from the Comcast-NBC merger, how has it affected Netflix? Rather differently than Crawford feared, as any student of Schumpeter could have predicted. Here is an excerpt from last week’s cover story in The Economist, “The Tech Giant Everyone is Watching”:

This year its entertainment output will far exceed that of any TV network; its production of over 80 feature films is far larger than any Hollywood studio’s. Netflix will spend $12bn-13bn on content this year, $3bn-4bn more than last year. That extra spending alone would be enough to pay for all of HBO’s programming—or the BBC’s. … Its ascent has mirrored the decline of traditional television viewing: Americans between the ages of 12 and 24 watch half as much pay-TV today as they did in 2010.

Within a year of Crawford’s book, Netflix began producing high-quality original content, an innovation she did not foresee. Her whole project was a waste of time and effort.

The lesson here is that pundits and regulators don’t know any better than you or I how a merger will turn out. And unlike investors and entrepreneurs, they don’t have their own money at stake, so they don’t have any incentive to innovate or react to changing conditions.

Of course, another lesson is that pundits and agencies will not heed that first lesson. As the same Economist story points out, “Some suspect that Netflix harbours ambitions to monopolise tv.” So the cycle repeats itself, and likely for no good reason.

For more antitrust lessons, see Wayne Crews’ study The Antitrust Terrible 10: Why the Most Reviled “Anti-competitive” Business Practices Can Benefit Consumers in the New Economy.

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Posted in Antitrust, Books, Economics, Uncategorized

Ancient Openness

Posted on July 8, 2018 | Comments Off on Ancient Openness

Openness and globalization have a long pedigree. Just count all the different cultural traditions mixing in this single paragraph, and keep in mind these guys didn’t have trains, cars, or planes:

In 668 Pope Vitellius sent Theodore of Tarsus, who had studied in Athens, to be Archbishop of Canterbury. His friend Adrian, who accompanied him, was an African, a Greek and Latin scholar. It was he who, with the Irish, propagated the culture of the ancients among the Anglo-Saxons.

-Henri Pirenne, Mohammed and Charlemagne, p. 127.

Aristotle was on to something when he described man as a social animal.

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Posted in Books, History, Uncategorized

Wages, Productivity, and Trade

Posted on July 8, 2018 | Comments Off on Wages, Productivity, and Trade

An iron law of labor economics is that wages are tied to productivity. Something for China trade hawks to ponder:

First, an irresistibly competitive China is a figment of the fevered imagination, since the real cost of labour will tend to remain in line with productivity.
-Martin Wolf, Why Globalization Works, p. 183.

This is why, as Chinese workers become more productive and thus higher-paid, labor-intensive industries such as textiles and basic assembly are leaving China for even lower-wage countries such as Indonesia and Bangladesh. The real key to prosperity is a mix of liberal economic institutions which enable high productivity (classically liberal, not left-liberal), and cultural institutions that value peace and prosperity. If China’s slow and stuttering cultural and economic liberalization continues, not only will it cease to be a security threat or an intellectual property thief, its people will become rich. And they will do so by enriching others through mutual exchange.

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Posted in Books, Economics, Trade, Uncategorized

This Week in Ridiculous Regulations

Posted on June 25, 2018 | Comments Off on This Week in Ridiculous Regulations

Summer officially began last week, and federal regulators celebrated with new regulations ranging from almond kernel computing to rough diamonds.

On to the data:

  • Last week, 77 new final regulations were published in the Federal Register, after 57 the previous week.
  • That’s the equivalent of a new regulation every two hours and 11 minutes.
  • Federal agencies have issued 1,571 final regulations in 2018. At that pace, there will be 3,246 new final regulations. Last year’s total was 3,236 regulations.
  • Last week, 1,283 new pages were added to the Federal Register, after 1,317 pages the previous week.
  • The 2018 Federal Register totals 29,715 pages. It is on pace for 61,395 pages. The all-time record adjusted page count (which subtracts skips, jumps, and blank pages) is 96,994, set in 2016.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. Three such rules have been published this year, one in the last week.
  • The running compliance cost tally for 2016’s economically significant regulations is $319.1 million.
  • Agencies have published 53 final rules meeting the broader definition of “significant” so far this year.
  • In 2018, 267 new rules affect small businesses; 15 of them are classified as significant.

Highlights from selected final rules published last week:

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

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Posted in regulation, Uncategorized

Last Chance for the 115th: Options for Regulatory Reform

Posted on June 19, 2018 | Comments Off on Last Chance for the 115th: Options for Regulatory Reform

Note: this is my contribution to a series at CEI’s blog. Links to other posts by my colleagues below.

This June here at OpenMarket we’ll be looking at what the 115th Congress, which began January 3, 2017 and runs through January 3, 2019, has accomplished so far and what might still be achieved for limited government and free markets before it’s over. Read more about the Competitive Enterprise Institute’s recommendations for legislative reform here. 

With a possible party change in play this November in one or both chambers of Congress, the time might be now or never to pass substantive regulatory reform. President Trump is amenable to reform legislation, and both chambers of Congress have GOP majorities. A number of bills are already in play, and some have even passed the House.

While Trump’s early executive orders have helped to slow the growth of new regulations, the next president can undo them as easily as Trump enacted them, with the stroke of a pen. Permanent reform requires Congress to act, and the current favorable political winds might be changing direction as we speak.

I recently compiled a short list of active regulatory reform legislation; nothing has changed since then. I reprint the list below, and encourage Congress to act on them while they still can. And if the GOP retains congressional control past November, there is much more they can do then. For now, this may have to do:

  • REINS Act: This bill, which has passed the House four times now, would require Congress to vote on all new regulations costing more than $100 million per year. The goal is to increase elected officials’ oversight over unelected agency officials’ rulemaking. See also my paper on REINS here.
  • Regulatory Accountability Act: This bill, which has passed the House, packages six reform bills in one. Reforms include stricter disclosure requirements for agencies regarding new rules; making judicial review of regulations easier; stricter disclosure for rules affecting small businesses and nonprofits; require benefit-cost analysis for more regulations; monthly agency reports on upcoming regulations and other activities; and require a plain-language 100-word summary for proposed new regulations.
  • Regulatory Improvement Act: This bill would establish an independent commission to comb through select parts of the 178,000-page Code of Federal Regulations. The Commission would send Congress an omnibus package of redundant, obsolete, or harmful rules to eliminate. The RIA’s lead sponsor is a Democrat, which might make Republicans squeamish about giving the other team a victory. But they should pass the bill anyway. Not only would this be a positive political gesture, it’s a needed housekeeping chore that deserves to be expanded upon in future sessions of Congress.
  • GOOD Act: Neither chamber has passed this bill yet. It would alleviate the problem of regulatory “dark matter” by improving access to guidance documents that agencies issue. Agencies sometimes circumvent the legally required notice-and-comment rulemaking process by simply inserting regulations into these guidance documents.

With the Senate staying in session for most of its usual summer recess, it has no excuse for not at least putting these bills to a vote. They will boost the economy in the short and long run, which sits well with voters. And with a willing executive happy to sign them, they are easy political victories.

Read previous posts in the “Last Chance for the 115th” series:

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Posted in Reform, regulation, Uncategorized

Minimum Wage Proposal Divides D.C. Workers, Voters

Posted on June 18, 2018 | Comments Off on Minimum Wage Proposal Divides D.C. Workers, Voters

Washington, D.C. has a $12.50 per hour minimum wage, increasing to $13.25 on July 1. But for tip-earning workers, such as servers and bartenders, the minimum is $3.33 per hour ($3.89 as of July 1)—tips are supposed to make up the difference. And if they don’t, then employers make up the shortfall. Ballot initiative 77, due for a vote on Tuesday, would raise tipped workers’ minimum wage to match non-tipped workers’ minimum wage in steps through 2026. It would also index D.C.’s minimum wage to the Consumer Price Index so it would automatically annually increase after it reaches $15.00 in 2020. The proposal has divided the restaurant community.

Both sides have good points. Some restaurant owners favor a set wage because it gives them more stability in planning their costs. Some workers prefer that arrangement, too. They know, coming into work, roughly how much they’ll make on a given shift.

But some restaurant owners would rather pay the low wage, even if they sometimes have to randomly supplement it if business is slow or customers are stingy tippers. It lets them print lower prices on their menus, and there can be tax advantages in reporting lower wages. And some servers also prefer lower wages with higher tips because they walk out of work every night with cash in their pocket. They don’t have to wait two weeks for a paycheck. And if they go the extra mile for a good customer, tips can be very lucrative.

So who’s right? They all are. And that’s why ballot initiative 77 is a bad idea. It’s anti-choice.

Restaurateurs and their employees should be allowed to agree on any working arrangement they both see fit. Nothing is stopping restaurants from having a policy of paying its servers a higher wage and discouraging tipping. If that’s what some people prefer, they should be free to choose it, and are. And if some restaurants and workers prefer the low wage/high tip model, they should be free to pursue that, too. The choice should be made by people, not by legislation.

Customers are just as divided. Some prefer walking into a restaurant knowing that what’s printed on the menu is what they’ll pay. Others prefer being able to reward good service with a high tip, or repay bad service with a small tip. Everyone’s different. And they shouldn’t all be shoehorned into one model.

As for the other part of ballot initiative 77, indexing the minimum wage to inflation so it automatically goes up every year—voters should tread carefully. Some workers will benefit, but at a cost to others. Hour cuts, firings, workers never hired at all, non-wage benefit cuts, cuts to on-the-job perks like free parking and meals, and more are all unintended consequences that follow minimum wage hikes. Iain Murray and I have written about those tradeoffs here and here.

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Posted in Economics, Elections, Minimum Wage, Uncategorized

An Honest Politician

Posted on June 16, 2018 | Comments Off on An Honest Politician

From page 427 of Douglas Irwin’s Clashing Over Commerce: A History of U.S. Trade Policy:

When asked why he had supported President Hoover’s bid for a flexible tariff provision but now opposed Roosevelt’s similar request, Harold Knutson (R-MN) replied: “Frankly, I know the purpose of this legislation is to lower rates. If I thought for a minute that it was proposed to raise rates to meet the present conditions, I would vote for this legislation and be glad of the opportunity to do so.”

Both sides have good points in the strategic debate over achieving short-term results vs. the long-term sanctity of process and procedure. I personally lean towards preserving process, even when it leads to defeats on policy issues. Never give yourself powers you wouldn’t want the other side to have, and all that. Kudos to Knutson for being the rare man in Washington who made plain where he stood, even if it’s opposite me.

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Posted in Books, Economics, Political Animals, Trade, Uncategorized

Last Chance for the 115th: Stop the President from Unilaterally Raising Tariffs

Posted on June 16, 2018 | Comments Off on Last Chance for the 115th: Stop the President from Unilaterally Raising Tariffs

Note: this is my contribution to a series at CEI’s blog. Links to other posts by my colleagues below.

This June here at Open Market we’ll be looking at what the 115th Congress, which began January 3, 2017 and runs through January 3, 2019, has accomplished so far and what might still be achieved for limited government and free markets before it’s over. Read more about the Competitive Enterprise Institute’s recommendations for legislative reform here. 

Article I, section 8 of the U.S. Constitution gives Congress the exclusive power of the purse. Under no circumstances may the president unilaterally raise taxes. And yet, President Trump has done just that with new tariffs. So far, Trump has enacted 25 percent levies on steel and 10 percent levies on aluminum. He is also threatening to raise tariffs on foreign cars, among other measures. How is he getting away with it?

Our existing trade laws have loopholes. These are mostly related to national  security. Section 232 of the Trade Expansion Act of 1962 contains one such loophole; Sections 201 and 301 of the Trade Act of 1974 contain similar loopholes. The White House is exploiting them as best it can, causing both economic and diplomatic harm to the United States.

Even with an active imagination, it is difficult to imagine a German-made BMW 5 Series as a threat to national security. And even if the rest of the world were to completely cut us off from importing steel, the U.S. military uses less than a twentieth of existing domestic output. Every trade action Trump has taken or is considering is security-unrelated.

When Canadian Prime Minister Justin Trudeau confronted Trump about just what national security threat Canada posed that would justify the steel and aluminum tariffs, Trump was reduced to mumbling something about the War of 1812.

Congress’ job, then, is to prevent such abuses of executive power and reclaim the power of the purse. Two bills in the Senate would work in that direction; at least one of them deserves to pass.

Sen. Mike Lee (R-UT)’s Global Trade Accountability Act of 2017 would require congressional review of any attempted unilateral tariff increases. The president would still be able to lower tariffs unilaterally, which is both good economics and good foreign policy.

Sen. Bob Corker (R-TN), along with a slew of cosponsors in both parties including Sen. Lee, also introduced a bill to require congressional review of any unilateral tariff increase from the president invoking Section 232.

Right now, the Corker bill seems to have more momentum behind it, though the administration has already announced its opposition to the bill. We don’t know yet if the President would veto the bill or not, but the Senate should force his hand and make him explain himself if he does. The time to act is now, before President Trump commits another unforced economic and diplomatic error.

Read previous posts in the “Last Chance for the 115th” series:

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Posted in Uncategorized