December 16, 2014

America’s “terribly warped justice system”

Filed under: Law, Liberty, USA — Tags: , , , , — Nicholas @ 00:03

Conrad Black talks (partly from first-hand experience) of how badly served the United States is by its justice system:

… everyone in the United States, from the president and the wealthiest and most admired citizens down, is, in some measure, a victim of this now terribly warped justice system. No one is safe and everyone pays for it. The legal cartel is riveted on the back of the country like a horse-leech and extracts $1.8 trillion a year from the American economy as the legislators and regulators add 4,000 new measures with weighty sanctions each year, for the delectation of their confrères at the bar. At any time, 1 percent of the entire adult population is incarcerated, at a cost of about $150 billion annually and usually in unconstitutionally inhuman conditions; another 6 or so percent of all adults, male and female, are awaiting conviction (99.5 percent of those tried are convicted, an absurdly implausible number rivaled only by North Korea) or are under supervised release by often pettifogging probation officers at further great cost to the country. There are 48 million convicted felons in the United States, and even if decades-old unstigmatizing offenses such as failing a breathalyzer or being disorderly at a fraternity party are omitted, this means that approximately 15 percent of American adult males are designated felons. This is an absurd and barbarous number achieved by equal-opportunity multi-ethnic injustice, albeit unevenly applied. It presents African Americans a chance to form an invincible coalition in whose victory they would be the principal winners.

Though evidence of police and prosecution abuse pours in through the media every week, the majority of Americans, personally unaffected by the failings of the system, complacently believes that they live in a society of laws envied by the world. Neither supposition is correct. The United States has six to twelve times as many incarcerated people per capita as other prosperous democracies: Australia, Canada, France, Germany, Japan, and the United Kingdom. This appalling state of affairs has developed gradually over the last 40 years, as the percentage of prosecutions resolved by (very often) abusive applications of the plea-bargain system without a trial has risen from about 80 (an unheard of number in other democratic countries) to 97. The percentage of incarcerated people among the population has multiplied by five in that time, so the U.S. today has 5 percent of the world’s people, but 25 percent of its incarcerated people (and 50 percent of its lawyers – counting only those countries in which a serious professional entry course is required to practice that occupation).

The Supreme Court has sat like a shelf of suet puddings while the criminal-justice system has become a conveyor belt to the country’s bloated and corrupt prison system, and lawyers have become an immense industry, hiding its avarice behind a fog of insipid pieties about the rule of law (which, as the phrase was meant by the authors of the Bill of Rights, can scarcely be said to exist in the U.S.). New York federal judge Jed S. Rakoff wrote in the New York Review of Books on November 20 that the traditional American notion of the day in court is “a mirage” because of the corruption of the plea-bargain system, in which inculpatory evidence is extorted from witnesses in exchange for immunity from prosecution, including for perjury. Every week there is some new exposé of horror stories of prosecutorial abuse, yet prosecutors enjoy an absolute immunity, even when it is revealed that they have committed crimes of obstruction of justice, as in the infamous Connick v. Thompson decision of 2011: An innocent man spent 14 years on death row because prosecutors willfully withheld DNA evidence they knew would, and ultimately did, acquit him; the U.S. Supreme Court narrowly overruled the damage award to the wrongfully convicted Mr. Thompson on a spurious technicality.

December 14, 2014

Google to Spain: “Buh-bye!”

Filed under: Business, Europe, Media — Tags: , , , — Nicholas @ 00:04

Spanish legislation imposing a special tax on Google has resulted in Google erasing Spain from their Google News business plan altogether:

Back in October, we noted that Spain had passed a ridiculously bad Google News tax, in which it required any news aggregator to pay for snippets and actually went so far as to make it an “inalienable right” to be paid for snippets — meaning that no one could choose to let any aggregator post snippets for free. Publishers have to charge any aggregator. This is ridiculous and dangerous on many levels. As we noted, it would be deathly for digital commons projects or any sort of open access project, which thrive on making content reusable and encouraging the widespread sharing of such content.

Apparently, it’s also deathly for Google News in Spain. A few hours ago, Google announced that due to this law, it was shutting down Google News in Spain, and further that it would be removing all Spanish publications from the rest of Google News. In short, Google went for the nuclear option in the face of a ridiculously bad law:

    But sadly, as a result of a new Spanish law, we’ll shortly have to close Google News in Spain. Let me explain why. This new legislation requires every Spanish publication to charge services like Google News for showing even the smallest snippet from their publications, whether they want to or not. As Google News itself makes no money (we do not show any advertising on the site) this new approach is simply not sustainable. So it’s with real sadness that on 16 December (before the new law comes into effect in January) we’ll remove Spanish publishers from Google News, and close Google News in Spain.

Every time there have been attempts to get Google to cough up some money to publishers in this or that country, people (often in our comments) suggest that Google should just “turn off” Google News in those countries. Google has always resisted such calls. Even in the most extreme circumstances, it’s just done things like removing complaining publications from Google News, or posting the articles without snippets. In both cases, publishers quickly realized how useful Google News was in driving traffic and capitulated. In this case, though, it’s not up to the publishers. It’s entirely up to the law.

December 2, 2014

QotD: Bureaucratic job satisfaction

Filed under: Bureaucracy, Quotations — Tags: , — Nicholas @ 00:01

I realized a long time ago that a very large number of people in a modern economy are paid to do things that not only fail to add to the economic product of the country, but on the contrary reduce it, insofar as they obstruct others from producing as much as they otherwise might.

There is, as every petty official knows, a great deal of pleasure to be had from the obstruction of others, especially if they appear to be more fortunate, better placed, richer, or more intelligent than oneself. There is a pleasure in naysaying, all the greater if the naysayer is able to disguise from the victim the fact that he is not only doing his duty but gratifying himself. Indeed, there are many jobs, meaningless in themselves, in which the power to say no is the only non-monetary reward.

Theodore Dalrymple, “The Gross Domestic Pissants”, Taki’s Magazine, 2014-04-20

December 1, 2014

Baylen Linnekin on the FDA’s latest bad idea

Filed under: Bureaucracy, Business, Health, USA — Tags: , , — Nicholas @ 00:03

In Reason, Baylen Linnekin looks at the FDA’s soon-to-be-implemented rules on menu labelling:

Earlier this week, the FDA released rules that will force food sellers around the country to provide point-of-sale calorie information to consumers. The rules cover chain restaurants, vending machines, “movie theaters, sports stadiums, amusement parks, bowling alleys and miniature golf courses that serve prepared foods.” The rules apply to foods and beverages — including beer, wine, and spirits — sold at these places.


Farley’s enthusiasm might have been tempered by research showing mandatory menu-labeling doesn’t work — and may even be counterproductive.

Because the new rules will cost more than a billion dollars not to stop the obesity epidemic and maybe make it better, some who have to spend that money aren’t pleased.

For example, that potato salad you buy at your grocery deli counter will fall under the new rules. That doesn’t sit well with grocery store owners.

“Grocery stores are not chain restaurants, which is why Congress did not initially include them in the law,” said National Grocers Association president and CEO, Peter J. Larkin in a statement. “We are disappointed that the FDA’s final rules will capture grocery stores, and impose such a large and costly regulatory burden on our members.”


As I wrote last year, the NRA, which represents restaurant chains across the country, supported the national menu-labeling rule as a shield against a growing, costly, and unworkable patchwork of different state and local menu-labeling laws.

It’s the same reason that food manufacturers, facing mandatory GMO-labeling pressure in dozens of states, counties, and cities around the country, are pushing for Congress to pass a uniform national GMO-labeling law.

Do I understand why the restaurant industry and food manufacturers are pushing for one bad federal law instead of hundreds or thousands of worse laws at the state and local level? Absolutely. Do I support such laws? Not at all.

November 30, 2014

Bad politics, bad economics and the “great chocolate shortage”

Filed under: Africa, Economics, Government — Tags: , , , — Nicholas @ 00:04

Tim Worstall explains that the fuss and bother in European newspapers about the “market failure” in the chocolate supply is actually a governmental failure (a market sufficiently bothered by legislation and regulation):

The last few days have seen us regaled with a series of stories about how the world is going to run out of chocolate. That would be, I think we can all agree, almost as bad as running out of bacon. So it’s worth thinking through the reasons as to why we might be running out. After all, cocoa, from which chocolate is made, is a plant, it’s obviously renewable in that it grows each season. So how can we be running out of something we farm? The answer is, in part at least, that there’s some bad public policy at the root of this. As there usually is when something that shouldn’t happen does.

Here’s the basic story in a nutshell:

    A recent chocolate shortage has seen cocoa farmers unable to keep up with the public’s insatiable appetite for the treat–and the world’s largest chocolate producers, drought, Ebola and a fungal disease may all be to blame.

Much of the world’s chocolate comes from West Africa so the disruption by the Ebola outbreak is one obvious part of it. But the shortage is not something immediate, it’s something that has been coming for some years. Ebola is right now, not a medium term influence. Drought similarly, that’s a short term thing, and this is a medium term problem. It’s also true that as the world gets richer more people can afford and thus desire that delicious chocolate.


Ahhh…the government is paying the farmers £1 a kg or so and the market is indicating that supply and demand will balance at £1.88 a kg. So, what we’ve actually got here is some price fixing. And the price to the producers is fixed well below the market clearing price (although the government most certainly gets that market price). So, we’ve a wedge in between the prices that consumers are willing to pay for a certain volume and the price that the farmers get for production. So, therefore, instead of it being the price that balances supply and demand we end up with an imbalance of the supply and demand as a result of the price fixing.

This is how it always goes, of course, whenever anyone tries to fix a price. If that price is fixed above the market clearing one then producers make more than anyone wants to consume (think the EU and agriculture, leading to butter mountains and wine lakes). If the price is fixed below the market clearing one then producers don’t make as much as people want to consume. This is why it’s near impossible to get an apartment anywhere where there is rent control. And if prices are fixed at the market clearing price then why bother in the first place? Quite apart from the fact that we’ve got to use the market itself to calculate the market clearing price.

November 26, 2014

Michael Geist – Uber’s privacy problem

Filed under: Business, Cancon — Tags: , , , — Nicholas @ 07:36

Michael Geist looks at one of the less obvious issues in the Uber dispute with Canadian regulators:

The mounting battle between Uber, the popular app-based car service, and the incumbent taxi industry has featured court dates in Toronto, undercover sting operations in Ottawa, and a marketing campaign designed to stoke fear among potential Uber customers. As Uber enters a growing number of Canadian cities, the ensuing regulatory fight is typically pitched as a contest between a popular, disruptive online service and a staid taxi industry intent on keeping new competitors out of the market.

My weekly technology law column (Toronto Star version, homepage version) notes that if the issue was only a question of choosing between a longstanding regulated industry and a disruptive technology, the outcome would not be in doubt. The popularity of a convenient, well-priced alternative, when contrasted with frustration over a regulated market that artificially limits competition to maintain pricing, is unsurprisingly going to generate enormous public support and will not be regulated out of existence.

While the Uber regulatory battles have focused on whether it constitutes a taxi service subject to local rules, last week a new concern attracted attention: privacy. Regardless of whether it is a taxi service or a technological intermediary, it is clear that Uber collects an enormous amount of sensitive, geo-locational information about its users. In addition to payment data, the company accumulates a record of where its customers travel, how long they stay at their destinations, and even where they are located in real-time when using the Uber service.

Reports indicate that the company has coined the term “God View” for its ability to track user movements. The God View enables it to simultaneously view all Uber cars and all customers waiting for a ride in an entire city. When those mesh – the Uber customer enters an Uber car – they company can track movements along city streets. Uber says that use of the information is strictly limited, yet it would appear that company executives have accessed the data to develop portfolios on some of its users.

November 24, 2014

Allow more competition in the broadband marketplace

Filed under: Bureaucracy, Government, Technology, USA — Tags: , , — Nicholas @ 00:03

At Techdirt, Karl Bode points out the existing problem with lack of competition in the US broadband industry is largely due to various levels of government meddling with the market:

While Title II is the best net neutrality option available in the face of a lumbering broadband duopoly, it still doesn’t fix the fact that the vast majority of customers only have the choice of one or two broadband options. It’s this lack of competition that not only results in net neutrality violations (as customers can’t vote down stupid ISP behavior with their wallet), but the higher prices and abysmal customer service so many of us have come to know and love. Stripping away protectionist state laws can help a little, as can the slow rise of services like Google Fiber. But even these efforts can only go so far in blowing up a broadband duopoly, pampered through regulatory capture and built up over a generation of campaign contributions.

One solution is the return to the country’s barely-tried implementation of unbundling and network open access, or requiring that the nation’s subsidy-slathered monopolists open their networks to allow other competitors to come in and compete. There are many variations of this concept, and it’s something Google Fiber promised in its markets before backing away from it (much like their vocal support of net neutrality). Obviously being forced to compete is an immensely unpopular concept for the nation’s incumbent ISPs. Given that those companies dictate and often literally write the nation’s telecom laws, these requirements were eliminated in a number of policies moves starting in 2001 and culminating in the FCC’s Triennial Review Remand Order of 2004 (pdf).

This was amazingly presented at the time as a way to improve competition and spur investment, but primarily resulted in a bloodbath as dozens of consumer-friendly, smaller independent ISPs and CLECs were killed off, perpetuating and further cementing the noncompetitive duopoly we have today.


Despite the fact this model clearly works, it’s never considered in policy discussions as a serious possibility. Why? Quite simply because the incumbent providers don’t want it. Through the use of their various PR folk, astroturfers, think tankers, fauxcademics and assorted hired mouthpieces, they’ve successfully managed to utterly vilify the concept, painting it as the very worst sort of government meddling in (not actually) free markets. Instead, we’ve chosen to head down the path of letting the nation’s duopolists dictate telecom policy, and the end result should at this point be painfully obvious to everyone. Well, except the industry lobbyists who still somehow insist we’re all living in a competitive broadband Utopia.

November 19, 2014

Net Neutrality is a good thing, right?

Net Neutrality is back in the news thanks to President Obama making a PR push to the regulators who may (or may not) be crafting regulations to bring the internet under government supervision:

Because this issue is still in the FCC’s hands, no one can know for sure what rules the agency will adopt. One important question, though, is: will neutrality apply to wireless services or only to cable-based ISPs, such as Comcast, Time Warner, and AT&T? In addition, will failure to preserve the status quo slow down the speed at which Internet connections and broadband capacity expand (because ISPs won’t be able to shift more of the expansion costs onto the “hogs”)? And what exactly is wrong with ISPs wanting to charge content providers higher prices for more bandwidth and faster, more reliable downloads?

More certain, however, is that regulations requiring “net neutrality” will end up benefiting the large, established ISPs. Incumbent firms have gained from “common carrier” regulation throughout U.S. history. As a matter of fact, the FCC predictably will be captured (if it has not already been) by the very companies President Obama wants to regulate “in the public interest.”

The president’s call to action sounds eerily similar to demands for federal railroad regulation that ultimately led to the creation of the Interstate Commerce Commission in 1887. Until it was put out of business in the early 1980s by President Jimmy Carter, the ICC allowed the railroads and, later, motor carriers and pipelines to charge prices exceeding competitive levels, thereby trying its best to protect the carriers’ profits at consumers’ expense.

William Shugart follows up on his original post:

The source of today’s online bottleneck can be traced back to local and regional government authorities, who quickly recognized the benefits (to them personally) of creating and granting exclusive franchises to one ISP that would, for the term of the contract, be a monopolist. (Government officials can extract more rents if they negotiate with only a handful of contestants.) Given that only one ISP would “win” the right to provide online content to local customers, the local monopolists also recognized a benefit of exclusive franchises: They would have the freedom to discriminate against some content suppliers by adding extra fees for privileged access.

So, a simple solution to the absence of net neutrality is readily available: Foster competition between ISPs.

Some people might raise the objection that, in this realm, robust competition for consumer dollars is unlikely because the suppliers of connections to the Internet are “natural monopolists”. In fact, ISPs are not “natural monopolists” as some commentators would have us believe. They are local government-granted monopolies. (Even Frederic Scherer, the author of the influential textbook Industrial Market Structure and Economic Performance, wrote that such claims of “natural monopoly” are “trumped up.”) Competition between ISPs nowadays is a contest for the favors of mayors and city councils who ultimately will determine who will win the exclusive franchise; it is not competition for the business of paying customers.

November 13, 2014

QotD: Unintended consequences

Filed under: Business, Economics, Europe, Government, Quotations — Tags: , , — Nicholas @ 00:01

After World War II, many left-wing European governments wanted to do something about unemployment. As I discuss extensively in my book, unemployment is about the worst thing that can happen to you in a modern democracy, short of death or dismemberment. So they passed laws making it very, very difficult to fire workers. In Italy, for example, a judge could reverse a layoff decision, not because you’d fired the worker unjustly, but because the judge didn’t think you needed to cut staff. Hurrah! Finally, workers were protected from the dark specter of unemployment!

Well, not quite. Workers were thrilled; employers were terrified. Now hiring a worker meant you were stuck with them unless they committed some absolutely flagrant offense — like, say, emptying the till and running out the door.

That’s a hell of a commitment to make to someone you barely know. So employers didn’t want to hire scary strangers; they wanted to hire close friends and family. Or, better yet, no one at all. Youth unemployment in many of these nations was staggering. The insiders had a great deal, but people without jobs found themselves consigned to a series of temporary, not-very-well-paid contracts. Or the dole.

The lesson is that when you make it harder to exit, you also make people reluctant to enter.

Megan McArdle, “Can Limiting Divorce Make Marriage Stronger?”, Bloomberg View, 2014-04-16

November 12, 2014

Decoding the phrase “national food policy”

Filed under: Bureaucracy, Government, Health, Politics, USA — Tags: , , — Nicholas @ 00:04

In The Federalist, Daniel Payne explains what the food nannies really mean by the term “national food policy”:

In the past I have used the term “food system” as shorthand for the industrial paradigm of food production, but for Bittman et al. to talk about the “food system” in such a way exposes it for the ridiculous concept it really is. There is no “food system,” not in the sense of a truly unified body of fully interdependent constituent parts: the “food system” is actually composed of millions of individuals acting privately and voluntarily, in different cities, counties, and states, as part of different companies and corporations and individual businesses, in elective concert with each other and with the rest of the world. To speak if it as a single “system” is deeply misguided, at least insofar as it is not a single entity but an endlessly complex patchwork of fully autonomous beings.

Thus when the authors write about “align[ing] agricultural policies,” they are not speaking in some ill-defined abstract about government policy; they are talking about forcing actual farmers to grow and do things the authors want. When they write of the Environmental Protection Agency and the U.S. Department of Agriculture monitoring “food production,” they are actually advocating that these federal agencies go after and punish people who are not farming in the way the authors want them to farm — and all this without Congress having passed a single law.

The authors are advocating, in other words, for a kind of executive dictatorship over the nation’s farmers, farms, and food supply. While it is unsurprising that they would use this dictatorship to attack the people who grow the food, it is also undeniable that this “national food policy” would target consumers as well. Such a “food system” cannot exist, after all, without people who are willing to purchase and consume its products.

The authors are not merely fed up with their big agribusiness boogeymen; they are also fed up with you for buying agribusiness products, and they want to use the government to make you stop. That you have broken no laws now, and will have broken no laws even after this “policy” goes into effect, is immaterial. They wish for the government to boss you around simply because your shopping purchases displease them. That they are too cowardly to come right out and say so is very telling of who they are—as men, and as advocates of the “public health.” Shame on them for being too spineless to tell the truth of their motives.

QotD: Europe’s banking trap

Filed under: Economics, Europe, Quotations — Tags: , , , , — Nicholas @ 00:01

Banking is a service, […] and a service has a cost associated with it. Modern banking has all kinds of fees and charges associated with it. But depositors are often charged for keeping too low a balance in their savings or checking accounts, not too large a balance. What’s going on here?

Central banks have created this monster via the regimen of ZIRP (Zero Interest Rate Policy). This is a way of implementing Keynesian stimulus, but central banks have run up against the liquidity-trap wall: interest rates cannot fall below zero. Monetary policy stops working at the zero-interest boundary.

For central banks, the problem is that in a slow-growth economy (or actually a recessive one) a paradox arises where rational behavior on the part of savers leads to bad results: consumers save their money out of concern for the future, but the economy — starved of the cash that fuels it — slows still further. This is the argument behind Keynesian stimulus; inject more (newly-printed) money into the economy until people stop being scared and start spending freely again (with their own money and borrowed money). The danger of inflation looms, however, so central banks try to implement various regimes to keep it under control (with varying degrees of success).

This theory founders on the shoals of reality, alas. It’s rational for people to save money, particularly during bad times, because people believe their currency stock to be an appreciating (or at least a constant-value) asset. But when a sovereign inflates (devalues) its currency to solve a short term economic problem, they run the risk of damaging confidence in the currency itself. Inflation may inject some nitrous oxide into the engine of the economy for a short time, but the outcome may be a blown engine (i.e., a ruined currency, as it was during the Weimar era).

When people lose trust in a fiat currency, it’s nearly impossible to restore confidence in it. Trust is all a fiat currency has — without trust, fiat currency is just worthless paper. This is really the core of the sound-money argument: deflation is bad because it can stall an economy and make debt servicing murderously difficult, but inflation is worse because it wrecks the currency itself. Hard-money currency regimes may be somewhat prone to deflationary cycles, but at least they never go to zero value; they always retain some value. Fiat currencies can go to zero.

Monty, “DOOM: The Wrath of Draghi”, Ace of Spades H.Q., 2014-11-06.

November 10, 2014

The incessant nagging of the food nannies

Filed under: Britain, Bureaucracy, Health, USA — Tags: , , — Nicholas @ 07:53

Patrick Basham on the nanny staters’ need to nag us about our food choices, even though most of their efforts are counter-productive:

Calorie counts on menus and menu boards are the food police’s unsubtle attempt to educate us into making ‘better’ choices. Most of us neither need nor appreciate this bureaucratic nudge.

In America, such mandates are included in the Affordable Care Act (‘Obamacare’) that kicked in this year. So, national restaurant chains are now required to disclose calorie counts in their menus. And three years ago in the UK, then-health secretary Andrew Lansley asked restaurants to ‘voluntarily’ label food with calorie counts.

Proponents of this policy believe that consumers are generally uninformed about their restaurant meals, especially the calorie counts. Therefore, providing consumers with this information will make a substantial difference to both what, and how much, people eat and, consequently, enable them to lose weight.

These assumptions are wrong. The scientific evidence strongly suggests that calorie counts are ineffective and potentially counter-productive for certain consumers. In fact, the vast majority of this evidence was available long (and in some cases, decades) before these regulations were rolled out.

Calorie counts do not produce the behavioural changes that their proponents envision. For example, over a decade of nutritional labelling, including calorie content, of processed food has failed to have any significant impact on obesity levels. Furthermore, studies have found that providing nutritional labelling brings about no net nutritional gains because consumers have a defined ‘nutrient budget’. This means that consumers tend to reward themselves for calorie or fat deprivation, for example, by increasing their calorie or fat content with another dish at the same meal or at a latter meal.

[…] consumers see labelling, particularly about calories, as a form of government warning: ‘Don’t eat this food, it has too many calories!’ The research evidence demonstrating the failure of such warnings is legion. In fact, such warnings can be profoundly counter-productive, as they can lead not only to the information being ignored, but to behaviour directly at odds with the health-based message. Identifying menu items as low-calorie or healthy can antagonise customers who see this as attempting to interfere with their freedom of choice.

This calorie count policy is also deeply inappropriate. The evidence suggests that it is not regulation designed to provide information for ‘informed’ choices, but regulation designed to change supplier and consumer behaviour based on the assumption that the regulator knows best.

Calorie counts are nothing more than a form of soft stigmatisation in which the government attempts to use calories to declare otherwise legal foods as, in some way, illegitimate. In effect, calories are really shorthand for the fact that certain foods are deemed ‘bad’.

November 9, 2014

Rent-seekers and crony capitalists love big government

Filed under: Bureaucracy, Government — Tags: , , , , — Nicholas @ 10:38

One of the reasons I’m a small-government fan is that the less the government tries to do, the less opportunity for rent-seekers and crony capitalists to batten on the inevitable opportunities that big government provides when it controls and regulates far beyond its competence:

A nice little point being made over in the New York Times, that for all of the public rhetoric about free markets and competition it’s not actually true that the Republicans are entirely pro-free market and pro-competition at all levels of governance. There’s an explanation for this too, an explanation that comes from the late economist Mancur Olsen. That explanation being about the level of the system that decides what will happen on a particular matter and thus where the special interests will try to capture governance.

    Republicans have hailed Uber, the smartphone-based car service, as a symbol of entrepreneurial innovation that could be strangled by misplaced government regulation. In August, the Republican National Committee urged supporters to sign a petition in support of the company, warning that “government officials are trying to block Uber from providing services simply because it’s cutting into the taxi unions’ profits.”

Josh Barro then goes on to point out that while the national Republican party might be saying such fine words when we get down to the people who actually regulate taxi rides then local Republicans can be just as pro-taxis and anti-Uber as any group of Democrats.

[…] More likely, to me at least, is that Mancur Olsen had it exactly right. His point being that over time democracy will end up being a competition between special interests for control of that democratic apparatus. The basic background insight is spread costs and concentrated benefits. One analogy is the pig and the chicken deciding what to have for breakfast. If they decide upon bacon and eggs then the chicken is interested but the pig is rather committed there. So it is with the regulation of producers and the competition that they might faced. US consumers of sugar might be paying $50 a year each to protect US sugar producers (that number’s not right but it’s not far off, it’s not $5 each nor $500) but rationally, when there’s so much else for us to think about, it’s sensible enough for us to not get very excited nor angry about this. But the sugar producers are making millions a year out of that same system of restrictions and subsidies. They’re very interested indeed in making sure that it continues.

We who take taxis or Uber are quite interested in Uber (and Lyft and all the others) being able to continue in business. But it’s not the end of our lifestyle if the regulatory apparatus is able to stifle them. But for the people who, for example, own taxi medallions in NYC then the replacement of the traditional taxi market by Uber will mean the potential loss of up to $1 million for each medallion. They’re very much more interested in crimping Uber’s style than we consumers are in expanding it.

Olsen went on to point out that the special interests are obviously more interested than we are in the details of regulation. And they’ll concentrate their efforts at whatever level of the regulatory and democratic system it is that affects their direct interests. Contributing to election campaigns, making their views known and so on, wheeling and dealing to promote their interests.

October 25, 2014

Destroying the “too big to fail” meme

Filed under: Britain, Economics — Tags: , , , — Nicholas @ 10:09

In the Telegraph, Allister Heath makes a case for the looming end to the economically disastrous notion that certain entities are “too big to fail”:

Bank bail-outs have been a cultural catastrophe for those of us who support free markets, low taxes and enterprise. During the 1980s and 1990s, much of the British public came to accept and even embrace capitalism, in return for a simple deal: profits and losses would both have to be privatised. Clever entrepreneurs, savvy traders or brilliant footballers would be encouraged to make money; but companies and investors that placed the wrong bets would be allowed to fail, with no pity.

Not only did this trigger an explosion in prosperity, it also helped shift the British mindset towards a much more pro-enterprise position. The rules of the game felt fair: risk and reward went hand in hand. The government would serve as an umpire, not a supporter of vested interests.

But the crisis of 2007-09 put an end to this implicit bargain, at least in the eyes of vast swathes of the public. They saw large institutions bailed out at great public expense, and with substantial amounts of taxpayer money put at risk. It started to look as if — when it came to the banking industry at least — risk had been socialised while profits remained private. To many members of the public, it was a case of heads you win and tails we lose. Profits were retained by a small elite, while losses were spread much more broadly — or so it felt.

Needless to say, the reality was more complex. Shareholders of bailed-out banks often lost everything. But bondholders were rescued, institutions survived, staff contracts were not ripped up and the process of creative destruction was severely derailed. And while big beasts were kept afloat, many smaller firms went bust and many ordinary folk lost their jobs. This is one reason — together with an incorrect narrative of the causes of the crisis which wrongly absolves governments and central banks — for increased support for punitive tax and government meddling in prices and wages.

So why did governments turn their back on capitalism and suddenly refuse to let market forces do their work? The uncontrolled failure of a major financial institution has a much broader, system-wide impact than the uncontrolled failure of a hair salon. Under traditional bankruptcy law, however, both would be treated in the same way, which simply makes no sense. One needs a different approach to tackle the failure of major banks or insurers — a proper Plan B. With the right institutions in place, there need not be such a thing as “too big to fail”. With the correct planning and tools, even the largest of financial firms can be dismantled sensibly without wiping out millions of depositors and triggering another Great Depression.

October 9, 2014

“Political barriers make it harder to innovate with atoms than with bits”

Filed under: Bureaucracy, Law, Technology — Tags: , , , , — Nicholas @ 08:30

Virginia Postrel on the barriers that slow down — or completely stop — innovation in far too many non-digital fields:

… I sympathize with science-fiction writer Neal Stephenson and venture-capitalist Peter Thiel, whose new books lament the demise of grand 20th-century dreams and the optimistic culture they expressed. “I worry that our inability to match the achievements of the 1960s space program might be symptomatic of a general failure of our society to get big things done,” writes Stephenson in the preface to Hieroglyph, a science-fiction anthology hoping “to rekindle grand technological ambitions through the power of storytelling.” In Zero to One, a book mostly about startups, Thiel makes the argument that “we have to find our way back to a definite future, and the Western world needs nothing short of a cultural revolution to do it.”

Their concerns about technological malaise are reasonable. As I’ve written here before, “political barriers have in fact made it harder to innovate with atoms than with bits.” It’s depressing to see just about any positive development — a dramatic decline in the need for blood transfusions, for instance — greeted with gloom. (“The trend is wreaking havoc in the blood bank business, forcing a wave of mergers and job cutbacks.”)

When a report about how ground-penetrating radar has mapped huge undiscovered areas of Stonehenge immediately provokes a comment wondering whether the radar endangers the landscape, something has gone seriously wrong with our sense of wonder. “There’s an automatic perception … that everything’s dangerous,” Stephenson mused at a recent event in Los Angeles, citing the Stonehenge example, “and that there’s some cosmic balance at work — that if there’s an advance somewhere it must have a terrible cost. That’s a hard thing to fix, but I think that if we had some more interesting Apollo-like projects or big successes we could point to it might lift that burden that is on people’s minds.”

Postrel argues that Stephenson’s fix would not work, and that our nostalgia for the early days of the Space Age blind us to the reality that most Americans in that era did not believe that the money for the Apollo missions was well spent (with the brief exception of July, 1969). She makes the point that our culture has changed significantly and those attitudinal changes are much more of the reason for today’s hesitancy and doubt about progress:

We already have plenty of critics telling us that our creativity and effort are for naught, our pleasures and desires absurd, our civilization wicked and destructive. We live in a culture where condemnatory phrases like “the ecosystems we’ve broken” are throwaway lines, and the top-grossing movie of all time is a heavy-handed science-fiction parable about the evils of technology and exploration. We don’t need Neal Stephenson piling on.

The reason mid-20th-century Americans were optimistic about the future wasn’t that science-fiction writers told cool stories about space travel. Science-fiction glamour in fact worked on only a small slice of the public. (Nobody else in my kindergarten was grabbing for You Will Go to the Moon.) People believed the future would be better than the present because they believed the present was better than the past. They constantly heard stories — not speculative, futuristic stories but news stories, fashion stories, real-estate stories, medical stories — that reinforced this belief. They remembered epidemics and rejoiced in vaccines and wonder drugs. They looked back on crowded urban walk-ups and appreciated neat suburban homes. They recalled ironing on sweaty summer days and celebrated air conditioning and wash-and-wear fabrics. They marveled at tiny transistor radios and dreamed of going on airplane trips.

Then the stories changed. For good reasons and bad, more and more Americans stopped believing in what they had once viewed as progress. Plastics became a punch line, convenience foods ridiculous, nature the standard of all things right and good. Freeways destroyed neighborhoods. Urban renewal replaced them with forbidding Brutalist plazas. New subdivisions represented a threat to the landscape rather than the promise of the good life. Too-fast airplanes produced window-rattling sonic booms. Insecticides harmed eagles’ eggs. Exploration meant conquest and brutal exploitation. Little by little, the number of modern offenses grew until we found ourselves in a 21st century where some of the most educated, affluent and cultural influentially people in the country are terrified of vaccinating their children. Nothing good, they’ve come to think, comes from disturbing nature.

Emphasis mine.

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