Published on 11 May 2015
The American ideal of limited government on life support. Is it time for civil disobedience? Charles Murray says yes. Murray has been writing on government overreach for more than 30 years. His new book, By The People, is a blueprint for taking back American liberty. Jonah Goldberg sits down with Murray to discuss civil unrest in Baltimore, the scope of the government, and why bureaucrats should wear body cameras.
According to AEI scholar, acclaimed social scientist, and bestselling author Charles Murray, American liberty is under assault. The federal government has unilaterally decided that it can and should tell us how to live our lives. If we object, it threatens, “Fight this, and we’ll ruin you.” How can we overcome regulatory tyranny and live free once again? In his new book, By the People: Rebuilding Liberty Without Permission (Crown Forum, May 2015), Murray offers provocative solutions.
May 16, 2015
The governments of these United States, from the federal to the local level, have managed to insinuate themselves between citizens and their property at every point of significance. In that, our governments are very much like most other governments, liberal and illiberal, democratic and undemocratic. We have allowed ourselves to be in effect converted from a nation of owners to a nation of renters. But while medieval serfs had only the one landlord, we have a rogue’s gallery of them: the local school board, the criminals at the IRS, the vehicle-registry office, etc. Never-ending property taxes ensure that as a matter of economic function, you never really own your house — you rent it from the government. Vehicle registration fees and, in some jurisdiction, outright taxes on automobile ownership ensure in precisely the same way that you never really own your car: You rent it from the government. Stock portfolio? Held at the sufferance of politicians. A profitable business? You’ll keep what income they decide you can keep. Your own body? Not yours — not if you use it for profitable labor.
A Who down in Whoville? You should be so lucky: Welcome to Whomville, peon.
Kevin D. Williamson, “Property and Peace”, National Review, 2014-07-20.
May 15, 2015
David Henderson explains:
Of the 80 million acre feet a year of water use in California, only 2.8 million acre feet are used for toilets, showers, faucets, etc. That’s only 3.5 percent of all water used.
One crop, alfalfa, by contrast, uses 5.3 million acre feet. Assuming a linear relationship between the amount of water used to grow alfalfa and the amount of alfalfa grown, if we cut the amount of alfalfa by only 10 percent, that would free up 0.53 million acre feet of water, which means we wouldn’t need to cut our use by the approximately 20 percent that Jerry Brown wants us to.
What is the market value of the alfalfa crop? Alexander quotes a study putting it at $860 million per year. So, assuming, for simplicity, a horizontal demand curve for alfalfa, a cut of 10% would reduce alfalfa revenue by $86 million. (With a more-realistic downward-sloping demand for alfalfa, alfalfa farmers would lose less revenue but consumers would pay more.) With a California population of about 38 million, each person could pay $2.26 to alfalfa growers not to grow that 10%. Given that the alfalfa growers use other resources besides water, they would be much better off taking the payment.
May 13, 2015
Fred Frailey discusses the U.S. Department of Transportation mandate that all crude oil trains longer than 69 cars must be equipped with electronic brakes by 2021 or they will restrict the speed of oil trains to 30 MPH at all times. The current standard braking system for railroads in North America is pneumatic, which have worked well for decades, but have inherent problems as modern trains have gotten longer and heavier. One of the biggest problems is that pneumatic brakes have a relatively long activation time — when the engineer operates the brake in the lead locomotive, it takes quite some time for that to propagate all the way through the train. This creates situations which can cause derailments as the lead cars begin to slow down, while the rest of the train is still travelling at full speed.
The preferred replacements are called electronically controlled pneumatic brakes (ECP), where instead of the brakes operating by pressure changes in the air line, the brakes would be controlled by a separate electronic circuit that would allow simultaneous brake application in all cars in the train.
It seems electronic braking has no friends in the railroad industry. I find this puzzling. Research I’ve read suggests there is both a safety and business case to be made. One explanation for the bum’s rush being given ECP comes from someone whose career was immersed in railroad technology: “The mechanical departments say the ECP brakes don’t save enough on wheels and brake shoes to justify implementation. The track departments say that ECP brakes don’t reduce rail wear enough to justify implementation. Transportation departments say that ECP brakes don’t save enough fuel to justify implementation. And improved train running times, improved train dynamics, and improved engineer performance are all soft-dollar savings which don’t count. No one ever bothers to sum up total benefits.” Silos, in other words.
So I’ll make the case for ECP. (By the way, the standards were developed two decades ago by the same AAR that now vigorously opposes their implementation.) A train equipped with electronic braking is hard-wired, allowing instant communication from airbrake handle in the locomotive to every brake valve on the cars. The principal advantages are that all brakes instantly apply and release at the same time, the air supply is continually charged, engineers can gradually release and reapply brakes, and undesired emergency braking (dynamiters, they’re called) virtually disappear. In-train forces, such as slack roll-in and roll-out, are greatly reduced, and that lessens the risk of derailment. Moreover, stopping distance is reduced 40 to 60 percent, permitting higher train speeds and higher speeds approaching restricting signals. Longer trains are possible. Longer trains run at higher speeds increase the capacity of the railroad network. Because air is always charging, braking power is inexhaustible; plus, a train can stop and instantly restart. Brakes, draft gear, wheels, and bearings require less maintenance. Existing federal regulations would allow train inspections every 5,000 miles instead of the present 1,500 or 1,000 miles.
Those are a lot of advantages. In a report commissioned by the Federal Railroad Administration in 2005, the consulting company Booz Allen Hamilton estimated the cost of full implementation of ECP at $6 billion and the measurable savings (not including added network capacity) at $650 million a year. Booz recommended that ECP conversion begin with coal trains loaded in Wyoming’s Powder River Basin, then to other types of unit trains (presumably including intermodal trains), and finally the rest of the car fleet — all in a 15-year time frame. “As applied to western coal service,” its report stated, “the business case is substantial,” with a recovery of all costs within three years.
Several things are going on here. Silos are one. Nobody is looking at the big picture, just his or her little piece of it. The boys in the Mechanical Silo could care less about increased network capacity. The occupants of the Finance Silo don’t want to divert cash flow away from share buybacks, their favorite toy. Most of those in the CEO Silo didn’t come up on the operating side and are probably bored by the subject. In a conservative, mature business like railroading, risk taking and even forward thinking are not rewarded. And the cost of hard-wiring the car fleet would primarily be borne by shippers, who own most of the equipment, whereas railroads would reap the benefits. How to share the benefits with car-owning shippers leads to very difficult negotiations.
One of the factors in the financial crisis of 2007-2009 that is mentioned too infrequently is the role of banking capital sufficiency standards and exactly how they were written. Folks have said that capital requirements were somehow deregulated or reduced. But in fact the intention had been to tighten them with the Basle II standards and US equivalents. The problem was not some notional deregulation, but in exactly how the regulation was written.
In effect, capital sufficiency standards declared that mortgage-backed securities and government bonds were “risk-free” in the sense that they were counted 100% of their book value in assessing capital sufficiency. Most other sorts of financial instruments and assets had to be discounted in making these calculations. This created a land rush by banks for mortgage-backed securities, since they tended to have better returns than government bonds and still counted as 100% safe.
Without the regulation, one might imagine banks to have a risk-reward tradeoff in a portfolio of more and less risky assets. But the capital standards created a new decision rule: find the highest returning assets that could still count for 100%. They also helped create what in biology we might call a mono-culture. One might expect banks to have varied investment choices and favorites, such that a problem in one class of asset would affect some but not all banks. Regulations helped create a mono-culture where all banks had essentially the same portfolio stuffed with the same one or two types of assets. When just one class of asset sank, the whole industry went into the tank,
Well, we found out that mortgage-backed securities were not in fact risk-free, and many banks and other financial institutions found they had a huge hole blown in their capital.
Warren Meyer, “When Regulation Makes Things Worse — Banking Edition”, Coyote Blog, 2014-07-07.
May 2, 2015
Last month, Megan McArdle pointed out that the state of California is reacting to the water shortages in one of the least effective ways by mandating rationing, rather than addressing the absurd under-pricing of the resource:
I’ve seen a lot of apocalyptic writing about California only having a year of water left (not true), and I’ve heard some idle talk about whether California can continue to grow. But California’s problem is not that it doesn’t have enough water to support its population. Rather, the problem is that its population uses more water than it has to. And the reason people do this is that water in California is seriously underpriced, as Marginal Revolution‘s Alex Tabarrok notes. While the new emergency rules do include provisions for local utilities to raise rates, that would still leave water in the state ludicrously mispriced. According to Tabarrok, the average household in San Diego pays less than 80 cents a day for the 150 gallons of water it uses. This is less than my two-person household pays for considerably less water usage, in an area where rainfall is so plentiful that the neighborhood next door to me has a recurrent flooding problem.
Artificially cheap water encourages people to install lush, green lawns that need lots of watering instead of native plants more appropriate to the local climate. It means they don’t even look for information about the water efficiency of their fixtures and appliances. They take long showers and let the tap run while they’re on the phone with Mom. In a thousand ways, it creates demand far in excess of supply.
Having artificially goosed demand, the government then tries to curb it by mandating efficiency levels and outlawing water-hogging landscaping. Unfortunately, this doesn’t work nearly as well as pricing water properly, then letting people figure out how they want to conserve it. For one thing, you can only affect large and visible targets, such as appliance manufacturers or lawns. For another, people will often try to evade your regulations — my low-flow showerhead came with handy instructions on how to remove the flow restrictor. And, perhaps most important, you limit the potential conservation to the caps. So people have an efficient dishwasher but don’t consider doing small loads by hand; they have a low-flow showerhead but don’t consider taking shorter showers. In short, no one is looking for ways to conserve more than whatever you’ve mandated. This may be enough to temporarily manage the current crisis, but it does nothing to set California’s water usage on a more sustainable path.
May 1, 2015
Devin Nunes debunks the common claim that California’s farmers use “80 percent” of the available water in the state:
As the San Joaquin Valley undergoes its third decade of government-induced water shortages, the media suddenly took notice of the California water crisis after Governor Jerry Brown announced statewide water restrictions. In much of the coverage, supposedly powerful farmers were blamed for contributing to the problem by using too much water.
“Agriculture consumes a staggering 80 percent of California’s developed water, even as it accounts for only 2 percent of the state’s gross domestic product,” exclaimed Daily Beast writer Mark Hertsgaard in a piece titled “How Growers Gamed California’s Drought.” That 80-percent statistic was repeated in a Sacramento Bee article titled, “California agriculture, largely spared in new water restrictions, wields huge clout,” and in an ABC News article titled “California’s Drought Plan Mostly Lays Off Agriculture, Oil Industries.” Likewise, the New York Times dutifully reported, “The [State Water Resources Control Board] signaled that it was also about to further restrict water supplies to the agriculture industry, which consumes 80 percent of the water used in the state.”
This is a textbook example of how the media perpetuates a false narrative based on a phony statistic. Farmers do not use 80 percent of California’s water. In reality, 50 percent of the water that is captured by the state’s dams, reservoirs, aqueducts, and other infrastructure is diverted for environmental causes. Farmers, in fact, use 40 percent of the water supply. Environmentalists have manufactured the 80 percent statistic by deliberately excluding environmental diversions from their calculations. Furthermore, in many years there are additional millions of acre-feet of water that are simply flushed into the ocean due to a lack of storage capacity — a situation partly explained by environmental groups’ opposition to new water-storage projects.
April 30, 2015
In City Journal, Myron Magnet reviews a new book by Philip Hamburger on the rise and rise of the regulatory state:
We conservatives like to complain about overregulation and point to this or that destructive rule, but few of us go so far as Philip Hamburger does in his immensely important Is Administrative Law Unlawful?, published last year. A Columbia law professor, Hamburger indicts the entire structure of executive-agency rulemaking as illegitimate. It’s not just the regulations that have to go but the regulators as well, since their job is to fling down the Constitution and dance on it.
For over 400 pages of a 511-page, doorstopper-weight text, Hamburger counts the ways in which the slithery Medusa’s head of executive-branch agencies — from the Interstate Commerce Commission and the National Labor Relations Board to the Environmental Protection Agency and the Consumer Financial Protection Bureau, all spitting out the venom of administrative law — constitutes a flagrant affront to the Constitution. For starters, the Constitution lodges all legislative power in Congress, which therefore cannot delegate its lawmaking function. So it’s forbidden for Congress to pass a law creating an executive-branch agency that writes rules legally binding on citizens — for example, to set up an agency charged with making a clean environment and then to let it make rules with the force of law to accomplish that end as it sees fit. “The power of the legislative,” as the Founding Fathers’ tutelary political philosopher, John Locke, wrote, is “only to make laws and not to make legislators.” And if Congress can’t delegate the legislative power that the Constitution gives it, it certainly cannot delegate power that the Constitution doesn’t give it — namely, the power to hand out selective exemptions from its laws, which is what agencies do when they grant waivers.
Second, Constitution architect James Madison, following political theorist Baron de Montesquieu, saw the separation of powers as an essential bulwark of American liberty. But administrative agencies, which make rules, carry them out, and adjudge and punish infractions of them, blend together legislative, executive, and judicial powers in one giant anti-constitutional Cuisinart. Moreover, judicial power is as undelegatable as legislative power, since the Constitution lodges all of it in the judicial branch. So third, while administrative judges may look “just like real judges,” says Hamburger, they are no such thing — and not only because the Constitution makes it impossible for them to be so but also because, unlike real judges, their sole duty, rather than using their independent and expert judgment to carry out the law of the land, is to carry out the policy of their agency, as set and overseen by their department chief or the relevant cabinet secretary who in turn oversees him. As Justice William Howard Taft pronounced, an administrative tribunal is “miscalled a court.”
At VinePair, Kathleen Willcox explains why the “organic” label on your wine may be little more than a marketing ploy:
A lot of the buzz and imagery about organics appears to be just that – empty sound bites and gimmicks created by folks eager to cash in on the increasingly lucrative organic market. Where does that leave us? Not in an easy place.
Falling for marketers’ ploys is practically a full-time occupation in America (I’m not the only one who’s bought multiple cartons of fat-free ice cream hoping, this time, to finally find “creamy fat-free vanilla bliss” right?). Consumers’ perception of what organic agriculture is vs. the reality, and the halo of virtue with which it is bequeathed (and conventional agriculture’s implicit pair of devil’s horns) is, arguably, one of the biggest boondoggles in our culture today. More than half of Americans (55%) go organic because they believe it’s healthier. Meanwhile, there is really no evidence to back that assumption up. And even organic farmers use pesticides (sorry random lady at the bar). They just happen to be “natural.”
It’s never been a better time for organic marketers and companies. The market for organic food and beverages worldwide was estimated to be $80.4 billion in 2013 and is set to reach $161.5 billion in 2018, a compound annual growth rate of 15% per year. North America has the biggest market share, and will be responsible for roughly $66.2 billion by 2018.
But in the rush to get organic products out the door (and fulfill the public’s desire for healthier, more environmentally responsible products), some producers are often doing little more than following the letter of the USDA law to earn the “organic” label, consequences to the environment and our overall health be damned. In fact, from what producers and studies revealed, it may actually be worse for the environment and your body to buy organic wine from a large manufacturer instead of buying wine produced from grapes on a smaller vineyard sprayed judiciously with synthetic pesticides by a hands-on farmer.
April 10, 2015
One kind of regulation that was actually intended to harm the poor, and especially poor minorities, was zoning. The ostensible reason for zoning was to address unhealthy conditions in cities by functionally separating land uses, which is called “exclusionary zoning.” But prior to passage of the Civil Rights Act of 1968, some municipalities had race-based exclusionary land-use regulations. Early in the 20th century, several California cities masked their racist intent by specifically excluding laundry businesses, predominantly Chinese owned, from certain areas of the cities.
Today, of course, explicitly race-based, exclusionary zoning policies are illegal. But some zoning regulations nevertheless price certain demographics out of particular neighborhoods by forbidding multifamily dwellings, which are more affordable to low- or middle-income individuals. When the government artificially separates land uses and forbids building certain kinds of residences in entire districts, it restricts the supply of housing and increases the cost of the land, and the price of housing reflects those restrictions.
Moreover, when cities implement zoning rules that make it difficult to secure permits to build new housing, land that is already developed becomes more valuable because you no longer need a permit. The demand for such developed land is therefore artificially higher, and that again raises its price.
Sandy Ikeda, “Shut Out: How Land-Use Regulations Hurt the Poor”, The Freeman, 2015-02-05.
April 7, 2015
At Slate Star Codex, Scott Alexander recently reviewed David Friedman’s latest revision to his 1973 book, The Machinery of Freedom (sometimes called The Machinery of Friedman by libertarian wags). Scott wasn’t totally sold on Friedman’s proposals, but he posted several highlights from the book, including this discussion of how the US government was persuaded to regulate the railroad industry and then the airlines:
One of the most effective arguments against unregulated laissez faire has been that it invariably leads to monopoly. As George Orwell put it, “The trouble with competitions is that somebody wins them.” It is thus argued that government must intervene to prevent the formation of monopolies or, once formed, to control them. This is the usual justification for antitrust laws and such regulatory agencies as the Interstate Commerce Commission and the Civil Aeronautics Board.
The best historical refutation of this thesis is in two books by socialist historian Gabriel Kolko: The Triumph of Conservatism and Railroads and Regulation. He argues that at the end of the last century businessmen believed the future was with bigness, with conglomerates and cartels, but were wrong. The organizations they formed to control markets and reduce costs were almost invariably failures, returning lower profits than their smaller competitors, unable to fix prices, and controlling a steadily shrinking share of the market.
The regulatory commissions supposedly were formed to restrain monopolistic businessmen. Actually, Kolko argues, they were formed at the request of unsuccessful monopolists to prevent the competition which had frustrated their efforts.
It was in 1884 that railroad men in large numbers realized the advantages to them of federal control; it took 34 years to get the government to set their rates for them. The airline industry was born in a period more friendly to regulation. In 1938 the Civil Aeronautics Board (CAB), initially called the Civil Aeronautics Administration, was formed. It was given the power to regulate airline fares, to allocate routes among airlines, and to control the entry of new firms into the airline business. From that day until the deregulation of the industry in the late 1970s, no new trunk line — no major, scheduled, interstate passenger carrier — was started.
The CAB had one limitation: it could only regulate interstate airlines. There was one major intrastate route in the country — between San Francisco and Los Angeles. Pacific Southwest Airlines, which operated on that route, had no interstate operations and was therefore not subject to CAB rate fixing. Prior to deregulation, the fare between San Francisco and Los Angeles on PSA was about half that of any comparable interstate trip anywhere in the country. That gives us a good measure of the effect of the CAB on prices; it maintained them at about twice their competitive level.
In this complicated world it is rare that a political argument can be proved with evidence readily accessible to everyone, but until deregulation the airline industry provided one such case. If you did not believe that the effect of government regulation of transportation was to drive prices up, you could call any reliable travel agent and ask whether all interstate airline fares were the same, how PSA’s fare between San Francisco and Los Angeles compared with the fare charged by the major airlines, and how that fare compared with the fare on other major intercity routes of comparable length. If you do not believe that the ICC and the CAB are on the side of the industries they regulate, figure out why they set minimum as well as maximum fares.
April 6, 2015
In Reason, Baylen Linnekin talks about wine corks and over-cautious would-be regulators:
We flew into Lisbon and drove across the Spanish border to San Vicente de Alcantara, near Caceres, where DIAM makes many of its corks. Once there, our daylong activities included a detailed tour of the DIAM factory and a visit to the nearby cork forest where DIAM obtains cork, which is made from the bark of the eponymous tree.
As I learned on the DIAM tour, the company’s agglomerated corks are made from natural cork that’s first pulverized. The impurities are then removed. Finally, the pure cork that remains is glued back together into the familiar wine cork shape.
Agglomerated corks have two key benefits over competing corks. First, they cost less than natural corks. Second, they eliminate the problem of cork “taint,” a musty taste caused by the presence of a substance found in cork, TCA, that often ruins wines before they’re ever opened.
Sounds great. Still, concern was raised by a wine writer last month, who suggested, quite wrongly in my opinion, that agglomerated corks may be illegal.
The writer, Lewis Purdue of Wine Industry Insight, suggested that the binding agent used by agglomerated cork makers could be leeching into wine. That agent, TDI, is listed as a potential carcinogen. If it were to migrate from cork to wine, that would be bad.
But testing by DIAM and others has shown no detectable level of TDI in wine, meaning there’s no evidence the substance migrates from cork to wine. DIAM also says, firmly, that no such migration occurs.
“Of course we guarantee there’s no TDI migration,” said François Margot, a sales manager with DIAM, told Wine Business writer Cyril Penn.
In that case, there’s no problem, says the FDA. As the FDA explains, agency rules generally permit food packaging to come into contact with food so long as it’s not “reasonably expected to result in substances becoming components of” food.
Why any fuss over agglomerated corks? It stems not from any FDA interest but, rather, from a push by competitors of agglomerated cork makers.
I dislike the kind of composite corks produced by companies like DIAM, but they’re still better than the plastic or other non-cork wine bottle closures a lot of American wineries are using these days.
March 31, 2015
In the past (when I watched more TV than I do today), I often wished for cable services to be unbundled, so I could just access the channels showing things I wanted to watch. The bundles always seemed to be carefully constructed so that I had to select multiples to get each of the channels I liked. It seemed obvious that my cable bill would be much lower on that basis. But, I was probably wrong then, as Megan McArdle points out:
Here’s the truth: You don’t want your cable to be unbundled. You just want to pay less for it.
Seriously, guys, you like bundling. You know how I know this? You seek it out in your consumer products. You want your hotel to give you free Wi-Fi and you don’t want it to charge you by the towel. Many of you go on all-inclusive vacations and cruises. You buy mobile-phone contracts to get a “free” phone rather than pay by the minute. You are constantly — and I mean constantly — complaining that your health insurance is not more comprehensive, even though this would just mean you’d pay more for the insurance. And I won’t even get started on your agonized wails when airlines started charging you to check a bag and stopped providing a “free” plate of congealed mystery meat. You buy books and subscribe to magazines rather than pay by the article or the chapter. You love bundles. What you hate is the size of your cable bill.
Why do you like bundling? Because you don’t want to have to think about it. Oh, sure, there are people who would like to spend their days obsessively managing their minutes, reading and towels in order to save 5 percent, but the rest of us would rather not spend our time worrying about blowing the Wi-Fi budget. So we go for the all-inclusive package.
Now think about cable bundling. The Great Unbundling Fallacy is the belief that if you pay $150 now for 1,000 channels, you ought to be able to pay, say, $25 a month for the channels that you watch. Unfortunately, as with our hotel example, it doesn’t work that way.
In our example, right now you’re paying $150 a month for a large array of cable channels but only watch, say, 15 to 20 of them on a regular basis. In our simplified example, we’ll say that 100 million other subscribers are also paying $150 a month for a large array of channels, of which they each only watch 15 to 20, though not the same 15 to 20 as you. Let’s assume that revenue is distributed to channel operators roughly according to the number of eyeballs they attract, which is basically true — ESPN gets much higher fees than some crafting channel, because many people will subscribe to cable to get ESPN, while few will do so to watch a knitting program.
So what happens when you unbundle? How much do you have to pay for your channels?
That’s right: $150. You aren’t cross-subsidizing the channels you don’t watch, but all those other people aren’t cross-subsidizing all the channels they don’t watch, so you have to make up for that lost revenue. The price for each channel goes up until you’re paying about what you were before. By one estimate, average savings from unbundling would be about 35 cents a month. [PDF]
Update: Fixed link.
March 30, 2015
Political beliefs affect what one wants to be true. People are pretty good at persuading themselves that what they want to be true is true.
That works in both directions in the context of arguments about climate change. People who share my political views are suspicious of government regulation, CAGW (Catastrophic Anthropogenic Global Warming) provides an argument in favor of more government regulation and is used as such an argument at present, so we naturally want to look for arguments against CAGW.
On the other side, it’s my experience that people who think global warming is a terrible problem that must be dealt with are also, by some odd coincidence, people who think the things that need to be done to deal with it are things most of which ought to be done anyway, that the real cost is low or negative. They are likely to put that point in terms of creating a cleaner, more sustainable world. From their standpoint, CAGW provides arguments to persuade people to do things they want done, so they naturally want to look for arguments in favor of CAGW.
David D. Friedman, “Global Warming and Wishful Thinking”, Ideas, 2014-06-09.
March 17, 2015
Take it away, Tamara:
The FAA says no posting of drone footage on YouTube?
That’s a good one, Canute. Have fun with that.
Anyone want to start a betting pool on how long before we have a drone footage on YouTube of another drone hovering along with a Guy Fawkes mask over its camera?