Quotulatiousness

October 20, 2017

Why the Lights Are Still Off in Puerto Rico

Filed under: Economics, Government, USA — Tags: , , , , — Nicholas @ 06:00

ReasonTV
Published on 19 Oct 2017

The government set the stage for a post-hurricane catastrophe.
—–
Puerto Rico was set up for disaster well before Hurricane Maria hit. Revoked tax breaks, needlessly expensive imports, and crippling debt all led to a shoddy infrastructure that’s still without power on most of the island.

On the latest “Mostly Weekly,” Andrew Heaton explores: how did Puerto Rico get screwed over well before the lights went out, and how do we get them back on?

Mostly Weekly is hosted by Andrew Heaton with headwriter Sarah Rose Siskind.
Script by Sarah Rose Siskind with writing assistance from Andrew Heaton, Brian Sack, and Justin Monticello
Edited by Sarah Rose Siskind and Austin Bragg
Produced by Meredith and Austin Bragg.
Theme Song: Frozen by Surfer Blood.

October 18, 2017

Cognitive bias – it can be a problem for the “nudgers”, too

Filed under: Economics, Europe, Government — Tags: , , , — Nicholas @ 05:00

Ilya Somin says that replacing private decisions with “rational” government nudges does not guarantee that there are no cognitive biases still being expressed:

Economist Richard Thaler recently won the 2017 Nobel Prize in economics for his important work documenting widespread cognitive errors in human decision-making. All too often, people fail to act as rationally as conventional economic models assume, and at least some of those errors are systematic in nature. Such errors can lead to mistakes that greatly diminish our health, happiness, and welfare.

Thaler and many other behavioral economics scholars argue that government should intervene to protect people against their cognitive biases, by various forms of paternalistic policies. In the best-case scenario, government regulators can “nudge” us into correcting our cognitive errors, thereby enhancing our welfare without significantly curtailing freedom.

Irrational Nudgers

But can we trust government to be less prone to cognitive error than the private-sector consumers whose mistakes we want to correct? If not, paternalistic policies might just replace one form of cognitive bias with another, perhaps even worse one. Unfortunately, a recent study suggests that politicians are prone to severe cognitive biases too – especially when they consider ideologically charged issues. Danish scholars Caspar Dahlmann and Niels Bjorn Petersen summarize their findings from a study of Danish politicians:

    We conducted a survey of 954 Danish local politicians. In Denmark, local politicians make decisions over crucial services such as schools, day care, elder care and various social and health services. Depending on their ideological beliefs, some politicians think that public provision of these services is better than private provision. Others think just the opposite. We wanted to see how these beliefs affected the ways in which politicians interpreted evidence….

    In our first test, we asked the politicians to evaluate parents’ satisfaction ratings for a public and a private school. We had deliberately set up the comparison so one school performed better than the other. We then divided the politicians into two groups. One group got the data — but without any information as to whether the school was public or private. The schools were just labeled “School A” and “School B.” The other group got the exact same data, but instead of “School A” and “School B,” the schools’ titles were “Public School” and “Private School.”

    If politicians are influenced by their ideologies, we would expect that they would be able to interpret the information about “School B” and “School A” correctly. However, the other group would be influenced by their ideological beliefs about private versus public provision of welfare services in ways that might lead them to make mistakes….

    This is exactly what we found. Most politicians interpreting data from “School A” and “School B” were perfectly capable of interpreting the information correctly. However, when they were asked to interpret data about a “Public School” and a “Private School” they often misinterpreted it, to make the evidence fit their desired conclusion.

Even when presented additional evidence to help them correct their mistakes, Dahlmann and Petersen found that the politicians tended to double down on their errors rather than admit they might have been wrong. And it’s worth noting that Denmark is often held up as a model of good government that other countries should imitate. If Danish politicians are prone to severe ideological bias in their interpretation of evidence, the same – or worse – is likely to be true of their counterparts in the United States and elsewhere.

October 13, 2017

QotD: The danger of sewer gas

Filed under: Health, Quotations, USA — Tags: , — Nicholas @ 01:00

Confined space entry training dwells on sewer gas a lot. Sewer gas is the chemical equivalent of both barrels to the forehead, so it’s worth the attention. There is a long laundry list of things you need to be aware of, and equipment you need to have on hand to deal with potential sewer gas exposure. The first man is required to enter the confined space wearing a harness which is attached to a winch on a tripod placed over the hole. If he’s incapacitated, the second man yanks him out without doubling down on the problem by jumping in after him. This never happens. The first man goes in without any equipment, and the second man dives in after him and dies on top of him.

Here in Maine, it happened a year or two ago. OSHA prosecuted the owner of a business that lost two men in a sewer because of sewer gas. OSHA didn’t care that the company had trained the men for confined space entry. OSHA didn’t care that the company had supplied the men with all the equipment necessary to do the job safely. The workers left all the equipment in the truck and went in the hole and died, even though they must have known the risk. OSHA prosecutes the business because it’s easier than speaking ill of the dead.

I have a long experience with exactly the type of person who ends up dead in a sewer. Without knowing any particulars of the case, I can tell you that no workman will use any safety device of any kind that interferes with smoking cigarettes — and they all smoke. You can train them and yell at them and equip them to a fare-thee-well, but the moment they’re out of your sight, they’ll do exactly as they please. Texting while driving is the poindexter version of this phenomenon.

Sippican Cottage, “Interestingly, ‘Malfunction of Unknown Provenance’ Is the Name of My Men Without Hats Tribute Band. But I Digress”, Sippican Cottage, 2016-02-25.

October 6, 2017

Regulation and the unregulated sharing economy

Filed under: Australia, Bureaucracy, Business, Government — Tags: , , , — Nicholas @ 03:00

This particular article talks about the situation in Australia, although it’s quite similar here in Canada:

Living in Australia sometimes feels like living in a bureaucrats’ version of a spaghetti western. The heroes are the brave and all-knowing public servants, while the villains are the naughty people who are too foolish to realise that government knows best.

Politicians and bureaucrats alike want to regulate first, ask questions later. It seems barely a week passes without someone trumpeting the expansion of the nanny state. And with each new crackdown, ban or tax, our freedom gets that little bit smaller.

Whereas once the government would at least go through the motions of citing things like market failure, all it takes now is for a politician to want to look tough or be seen ‘doing something’. So it is with the proposed regulation of short-term accommodation platforms like Airbnb and Stayz.

Sharing our home with someone is as old as time. Who has not stayed with a family member or friend, or the friend of a friend? The difference these days is that it is much easier. Technology allows us to stay in someone’s home nearly anywhere in the world.

The immense popularity of these platforms is simply staggering. Globally, Airbnb has just passed four million listings, more than the rooms of the top five hotel brands worldwide. Australia is particularly fertile ground for the company, with almost one in five adults having an account. The company claims Airbnb is the “most penetrated market in the world”.

For government, the platforms are confronting. With no red tape or government involvement, travellers are protected, bad apples ejected and quality maintained via hosts and guests providing reviews of each other using sophisticated technology and a trusted online marketplace. Airbnb says that, on average, a host could have a new reservation every day for over 27 years before experiencing a single bad incident. A track record like that would be the envy of any pub, hotel, motel or caravan park in the country.

The so-called sharing economy challenges the idea that people need red tape, regulations or government to keep them safe from harm. But that does not stop some from trying. Currently, the NSW Government is toying with a grab bag of Big Brother and nanny-state policies ranging from new taxes and caps, to licences, planning approval and complete bans.

No modern government has ever seen a healthy, flourishing market without feeling the need to insert itself into the process, usually justified by the need to “protect” consumers.

September 26, 2017

When virtue signalling is more important than tens of thousands of jobs

Filed under: Britain, Business, Government — Tags: , , , , — Nicholas @ 05:00

In Spiked, Brendan O’Neill slams the (mostly left-leaning) critics of Uber for their blatant two-faced attitudes:

The satire writes itself these days. For the past 16 months, ever since voters said No to the EU, the supposed liberal set has been signalling its virtue over migrant workers. These Remainer types have filled newspaper columns and dinner-party chatter with sad talk about foreigners losing the right to travel to and work in Britain. Yet now these same people have chortled as London mayor Sadiq Khan and his pen-pushers at Transport for London (TfL) have refused to renew Uber’s licence in the capital. Which means 30,000 people will lose work. Many of them migrants. They cry over migrant workers one day, and laugh as they lose their livelihoods the next.
Anyone would think their overriding concern is less with migrants’ right to work than with their own insatiable need to engage in political posturing. And right now, when it’s trendy to be anti-capitalist, to sneer at Silicon Valley fat-cats who make apps that employ people in far from ideal conditions, the posture that guarantees one’s spot in liberal circles is to be Uberphobic. Sticking it to Uber, making a spectacle of one’s haughty disdain for the vagaries of life in 21st-century capitalist society, takes precedence over concern for workers themselves. Welcome to 2017, where it’s cool to be anti-capitalist but not pro-worker.

[…]

One of the ugliest sentiments behind Uberphobia is the idea that this service is a threat to the public, especially women. Darkly, the new left is at one with the anti-migrant hard right on this question: both have cheered Uber’s licence loss on the basis that women of London must be protected from unregulated drivers. Let’s get this into perspective. Last year it was revealed that between February 2015 and February 2016 there were 32 allegations of sexual assault against Uber drivers in London. There were a total of 154 allegations against all taxi and car firms, meaning Uber made up a minority of complaints. What’s more, there are millions of Uber journeys in London every year, so the chances of assault are minuscule. It’s the same in the US. There was scandal when it was revealed that Uber had received complaints from women who said they had been raped by drivers. It received five complaints between 2012 and 2015, which means 0.0000009% of car journeys involved an alleged act of rape. Uber is very safe indeed.

It is hard to avoid the conclusion that, from both leftish feminists and the hard right, the panic about Uber is driven partly by fear of unregulated foreign men driving around our cities. The state must regulate, they say — and they mean it must regulate both business and foreigners, both fat cats and untrustworthy outsiders, both moneymen and migrants. Cheering as migrant workers lose their work and being complicit in the depiction of migrant drivers as a rapacious threat: sections of the liberal-left have really exposed their prejudices through their posturing against Uber. The tragedy of Uberphobia is that it confirms that even anti-capitalism is now virtue-signalling. It is no longer a serious call to improve working people’s lives; it is just the fleeting thrill of shouting ‘Down with Uber!’ without ever letting the issue of its drivers’ livelihoods cross your pristine, virtuous mind.

September 25, 2017

London’s foolish Uber ban

Filed under: Britain, Business, Government — Tags: , , — Nicholas @ 03:00

Iain Murray on the decision by London bureaucrats (backed by the Lord Mayor) to ban Uber in favour of established cab companies:

When I lived in London in the 1990s, I had to use pricey Black Cabs to get around the city at night. However, heaven help you if you wanted to go South of the Thames (as I did when I lived there) after midnight – Black Cabs would just refuse to take you. On one occasion I watched in horror as the cab driver got out and literally started a fight with a driver who had cut him off – and he kept the meter running throughout the fracas.

London’s days of high prices, uncertainty, and danger ended when Uber started operating there in 2012. It went on to dominate the London private hire car market. Today, that was all thrown out as Transport for London (TfL), an Uber competitor in that it runs the Tube and franchises bus services, revoked Uber’s license to operate.

Safety First?

The decision was ostensibly based on health and safety grounds. TfL said:

“TfL considers that Uber’s approach and conduct demonstrate a lack of corporate responsibility in relation to a number of issues which have potential public safety and security implications. These include:

  • Its approach to reporting serious criminal offences.
  • Its approach to how medical certificates are obtained.
  • Its approach to how Enhanced Disclosure and Barring Service (DBS) checks are obtained.
  • Its approach to explaining the use of Greyball in London – software that could be used to block regulatory bodies from gaining full access to the app and prevent officials from undertaking regulatory or law enforcement duties.”

These grounds are puzzling. Uber has a dedicated team responsible for working with the police regarding incidents with cars that use the Uber app – something London’s Black Cabs lack. Uber’s drivers go through exactly the same background checks and approval processes that Black Cab drivers do. And Uber denies that the Greyball feature has ever been used in London.

Moreover, accusations of violence, especially sexual violence, by Uber app drivers are overblown. As Reuters reports, “Of the 154 allegations of rape or sexual assault made to police in London between February 2015 and February 2016 in which the suspect was a taxi driver, 32 concerned Uber, according to the capital’s police force.” If Uber was uniquely bad in having drivers who attempted sexual assaults, that share should be much higher.

On Saturday night, Perry de Havilland reported on the petition to rescind the TfL decision:

The #SaveYourUber petition has, as of 10:45 pm in London, attracted 600,000+ names, and one of them is mine.

Of course the best way to save Uber is to get rid of Sadiq Khan and make the issue politically radioactive.

September 19, 2017

Ontario is getting exactly what they deserve in legalized marijuana

Filed under: Cancon, Government, Law — Tags: , , , — Nicholas @ 06:00

Pessimists, you can collect your winnings at the till. Optimists? Haven’t you learned yet? You expected a vibrant, dynamic free market in pot where your favourite budtender would be able to offer you a wide selection of high quality product to choose from? Forget it, Jake, it’s Ontario. Chris Selley explains why the pessimists got it right in the betting on how Ontario would choose to implement the legal marijuana market in 2018:

For nearly 15 years, I and other free market lunatics have been trying to impress upon Ontarians just how insane our liquor retail system is. Yet we still hear the same ludicrous arguments in its favour. “The LCBO makes tons of money for the province.” (Alberta makes tons of money from liquor sales too, without owning a single store.) “Public employees can be trusted to keep booze out of children’s hands.” (The Beer Store isn’t public. Nor are the scores of privately run “agency stores” in rural areas across Ontario.) “The LCBO provides good jobs.” (Not to real product experts it doesn’t — they would be far better off in a free market jurisdiction. And if the government’s role is to make good retail jobs, why not nationalize groceries?) “LCBO stores are pleasant. Liquor stores in the U.S. are gross.” (Nope! You’re just going to the wrong liquor stores.)

This hopeless mess is the foundation for Ontario’s new marijuana plan — and we’re hearing the same arguments in its favour. Last week, two columnists in the Toronto Star and one in the Globe and Mail spoke approvingly of the fact it would create “good unionized jobs.” The two Star columnists also mentioned the money that would accrue to the treasury.

“I’m fine with the profits going to the public purse instead of private businesspeople,” wrote one.

“Why wouldn’t the government seek to maximize revenues in the same way that it profits from alcohol and tobacco sales?” asked the other.

Even after all these years, it makes me want to tear my hair out: for the love of heaven, the “high-paying jobs” motive and the “profit” motive are at odds with each other. You cannot claim both as priorities. One way or the other, the government will take its cut on marijuana sales. The overhead costs of running its own stores, paying its own employees government wages, will simply eat into that cut.

If you can live with Ontario’s liquor situation, but you think your favourite budtender should be able to get a government licence to keep her “dispensary” up and running after legalization kicks in, my sympathy is non-existent. You either support consumer choice or you don’t. Ontario doesn’t, and that will never change until tipplers and tokers take up arms together.

September 16, 2017

QotD: The US housing market

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

… up until fairly recently, the home mortgage market was the most conservative financial market out there. The market was not a big money maker because risks were very low and the money was steady. The home mortgage market was the realm of community banks who held the mortgages as assets for the life of the loan. It was the 3-6-3 lifestyle. Borrow from the financial markets at three percent, make home mortgages at six percent and hit the links at 3:00 PM. That all changed in the early 1990’s when Democrat policymakers passed the Community Reinvestment Act and then forced banks to make loans that were far more risky in areas that the banks, for good reasons traditionally stayed away from. Then through Fannie Mae and Freddie Mac the “policymakers” bundled the good and bad paper and sold it on the financial markets creating the current mess. What I don’t understand is how increased home ownership was supposed to increase rents.

Home ownership has been a policy of multiple administrations since WW2, as has suburbanization. There are a bunch of reasons for this. One big one was that the policymakers were, for a bunch of reasons, not fond of urban life. It was considered dirty, old fashioned and perhaps most importantly a big target. This was not a small consideration to people coming back from all those ruined cities overseas.

John C. Carlton, “Who ‘Stole’ The Country’s Wealth, The Rich, Or Government ‘Policy Makers?'”, The Arts Mechanical, 2015-10-16.

August 24, 2017

Words & Numbers: Child Labor Was Wiped Out by Markets, Not Government

Filed under: Business, Economics, Government — Tags: , , , , — Nicholas @ 05:00

Published on 23 Aug 2017

In 1938 the US government passed the Fair Labor Standards Act mandating a forty hour work week, establishing a minimum wage, and prohibiting child labor. Because of legislation like this, government is often credited for making the American work environment safer and more fair. Yet, as Antony Davies and James Harrigan demonstrate with historical data, market forces were already making things easier on the American worker long before the FLSA.

Learn More:
https://fee.org/articles/child_labor_was_wiped_out_by_markets_not_government
https://youtu.be/0zq-2cKENOc

http://www.politifact.com/truth-o-meter/statements/2015/sep/09/viral-image/does-8-hour-day-and-40-hour-come-henry-ford-or-lab/

https://fee.org/articles/child_labor_was_wiped_out_by_markets_not_government

Data:

http://www2.census.gov/prod2/statcomp/documents/CT1970p1-05.pdf
See page 170 for average weekly work hours.
See page 134 for child labor rates.

August 17, 2017

Safe injection sites go rogue … to save lives

Filed under: Cancon, Health, Law — Tags: , , , , — Nicholas @ 03:00

In the National Post, Chris Selley wonders why the federal government has been so slow to come around to accepting the overall harm reduction offered by legal safe injection sites:

I suspect this generation of policymakers, and the previous one especially, will struggle to explain to their grandchildren just what on earth they thought they were doing about opioid addiction. I don’t mean the likes of Donald Trump, who seems to think a get-tough policing approach — a “war on drugs,” perhaps — might get the job done. I mean smart, reasonably compassionate Canadians, by no means all conservatives, whose worries about safe injection sites in particular look bizarre even today, when people are still using them.

“It’ll attract rubadubs” — as if Vancouver’s Downtown Eastside was a middle-class utopia before Insite set up shop. “There’ll be needles in the streets” — more than if the safe injection site weren’t there, you mean? And, of course: “Addicts should go to treatment instead” — as if people haven’t been trying and failing to get and stay clean this whole time; as if the alternative, on a day to day basis, might be not waking up the next morning to go get treatment.

To its credit, the Liberal government in Ottawa has loosened the regulatory reins. There are nine approved “supervised consumption sites” up and running across the country: five on the Lower Mainland, one in Kamloops, and three in Montreal. Six more, in Victoria, Ottawa, Toronto and Montreal, are approved and awaiting inspections. An additional 10 are in the approval process; four in Edmonton applied more than three months ago; one in Ottawa has been in the works, officially, since February.

This looks like progress, and to a great extent it is. But on Sunday, a group of activists in Toronto implicitly asked another trenchant question: why does it take so bloody long to set up a supervised injection site? Why are we waiting? It’s just clean needles, chairs and tables, overdose treatment medication, a nurse and a phone.

August 4, 2017

Harry Potter and the Economic Segregation of Muggles

Filed under: Books, Economics, Liberty, Media — Tags: , , , — Nicholas @ 06:00

Published on 3 Aug 2017

Harry Potter contains a ton of incredible lessons about society, authoritarianism, and the power of love and individualism in the face of people who would exclude others based on group identity. But something people don’t think about as much are some of the economic lessons that we can draw from a world segregated into wizards and muggles.

On this episode of Out of Frame, we take a look at what the world might look like if magic and non-magic people were actually allowed to trade and interact with each other without the Ministry of Magic obliviating and arresting people for it.

For a transcript of this episode and more engaging content, visit:
www.FEE.org

August 2, 2017

Ontario has scared off foreign home-buyers, but bureaucratic delays still make housing more expensive

Filed under: Bureaucracy, Business, Cancon, Economics — Tags: , , , , — Nicholas @ 04:00

Josef Filipowicz and Steve Lafleur explain why Ontario’s recent crack-down on foreign home-buyers in the Greater Toronto Area still leaves one of the biggest barriers to affordable housing untouched:

The Ontario Legislature in Queen’s Park, Toronto. (via Wikimedia)

According to a recent announcement from Queen’s Park, 4.7 per cent of properties purchased in Ontario’s Greater Golden Horseshoe (between April 24 and May 26) were acquired by foreign individuals or corporations. This in the wake of the raft of measures announced in April including a 15 per cent “Non-Resident Speculation Tax” ostensibly aimed at improving housing affordability.

It’s difficult to say how this portion of the housing market — foreign buyers — ultimately impacts the cost of buying or renting in Canada’s biggest urban region, and it’s far too soon to estimate the effects of the myriad of policy changes the Ontario government is introducing. But what we do know is that the laws of supply and demand apply to housing, and it’s hard to believe that a small percentage of buyers are responsible for the massive appreciation of housing prices in the GTA over the past decade. Rather than focus on a small tranche of buyers, we should focus on ensuring that regulations don’t prevent the supply of new housing from meeting demand.

[…]

So what’s preventing cities in the Greater Golden Horseshoe from issuing more building permits?

In short, red tape at city hall. Between 2014 and 2016, Fraser Institute researchers surveyed hundreds of homebuilders across Canada to better understand how government regulation affects their ability to obtain permits. In the Greater Golden Horseshoe, it typically takes one-and-a-half years to obtain a permit in this region, and per-unit costs to comply with regulation amount to almost $50,000. Approval timelines can also be affected by the need to rezone property. Approximately two-thirds of new homes in the region require this procedure, which adds 4.3 months (on average) before builders can obtain permits.

Another deterrent to more supply is local opposition to new homes. Survey results show that council and community groups in Toronto, King Township and Oakville are more likely to resist the addition of new units in their neighbourhoods, effectively preventing newcomers from moving in.

Update, 3 August: Mission accomplished. Toronto home sales plummeted 40 percent in July.

July 31, 2017

Craft brewers are good examples of “evasive entrepreneurs”

Filed under: Business, Government, USA — Tags: , — Nicholas @ 04:00

Rosemarie Fike explains why craft brewers almost always push tours of their premises and souvenir glasses, mugs, coasters, and T-shirts:

This summer I’ve been enjoying a lot of microbrewery tours — even though the main attraction isn’t the “tour” I pay for, but the free beer that comes with it. In fact, the breweries must know that’s why people come. So why don’t they just drop this tour façade and sell us the beer?

Regardless of which brewery you visit, you pay a mere $10 for a pint glass with the brewery’s logo on it. As a thank you for purchasing the pint glass, they then grant three tickets you can redeem for free “samples” — which are actually full-sized beers.

There are also usually food vendors and live music. This atmosphere combined with the inexpensive libations draw sizeable crowds to these “tours” — where only a handful of patrons actually tour the facility.

But why do the breweries insist upon selling us the pint glasses, when most of us only really want what goes inside?

In conversation with the brewery owners, I learned that the breweries in my town aren’t legally allowed to sell beer directly to consumers in the way a bar can. But there’s nothing in the law preventing them from giving their product away.

In response to those incentives, they sell customers a pint glass (or charge them for the “tour”) and rent some of their property out to food vendors to subsidize the cost of getting their product into the hands of eager consumers without technically charging them for it.

It’s far from an ideal situation for these businesses, but it allows them to introduce new people to their product and to earn some revenue in the process — even if it’s less revenue than they could earn if they were allowed to just sell people the beer. It’s a clever arrangement and a perfect example of evasive entrepreneurship.

July 27, 2017

The EU is so abstruse that career UK civil servants are “not up to the task of understanding the complexities of EU processes and regulations”

Filed under: Britain, Bureaucracy, Europe, Politics — Tags: , , — Nicholas @ 04:00

Samizdata‘s Natalie Solent linked to this article at Geopolitical Futures, saying that it suggests the kind of artificial, obfuscated complexity that kept ancient Egyptian priests in their secure and powerful positions for centuries:

In recent weeks, EU negotiators have claimed that the British negotiators of Brexit are not sufficiently sophisticated to understand the complex issues being dealt with, and that, in essence, it is frustrating for EU negotiators to deal with unskilled negotiators. I have found that dealing with unskilled negotiators has frequently created opportunities for me, but apparently the EU wants to have a better team to play against.

A great deal of this is, of course, political maneuvering. The EU desperately wants to avoid a British withdrawal from the bloc. By making this charge, it hopes to discredit the British negotiating team and sow distrust between the British public and the negotiators. Implicit in what is being said is that the British team is going to fail to get a good deal for Britain, and that therefore the risks of Brexit for Britain are pyramided. Why the EU wouldn’t keep this fact secret, and negotiate a superb deal for itself, is a mystery, but the posture is almost that the EU wants to save the British from their own stupidity.

It’s not a bad maneuver, but it unravels at a certain point. The British team consists of well-educated and experienced civil servants. In claiming that this team is not up to the task of understanding the complexities of EU processes and regulations, the EU has made the strongest case possible against itself. If these people can’t readily grasp the principles binding Britain to the EU, then how can mere citizens understand them? And if the principles are beyond the grasp of the public, how can the public trust the institutions? We are not dealing here with the complex rules that allow France to violate rules on deficits but on the fundamental principles of the European Union and the rights and obligations – political, economic and moral – of citizens. If the EU operating system is too complex to be grasped by British negotiators, then who can grasp it?

The EU’s answer to this is that the Maastricht treaty, a long and complex document, can best be grasped by experts, particularly by those experts who make their living by being Maastricht treaty experts. These experts and the complex political entities that manage them don’t think they have done a bad job managing the European Union. In spite of the nearly decade long economic catastrophe in Southern Europe, they are content with their work. In their minds, the fault generally lies with Southern Europe, not the EU; the upheaval in Europe triggered by EU-imposed immigration rules had to do with racist citizens, not the EU’s ineptness; and Brexit had to do with the inability of the British public to understand the benefits of the EU, not the fact that the benefits were unclear and the rules incomprehensible. The institutionalized self-satisfaction of the EU apparatus creates a mindset in which the member publics must live up to the EU’s expectations rather than the other way around.

July 14, 2017

The Peltzman Effect

Filed under: Economics, Government, Health, USA — Tags: , , , — Nicholas @ 05:00

The odd situation where increasing the safety of an activity by adding protective gear is offset by greater risk-taking by the participants:

In the 1960s, the Federal Government — in its infinite wisdom — thought that cars were too unsafe for the general public. In response, it passed automobile safety legislation, requiring that seat belts, padded dashboards, and other safety measures be put in every automobile.

Although well-intended, auto accidents actually increased after the legislation was passed and enforced. Why? As [Professor of Economics Steven E.] Lansburg explains, “the threat of being killed in an accident is a powerful incentive to drive carefully.”

In other words, the high price (certain death from an accident) of an activity (reckless driving) reduced the likelihood of that activity. The safety features reduced the price of reckless driving by making cars safer. For example, seatbelts reduced the likelihood of a driver being hurt if he drove recklessly and got into an accident. Because of this, drivers were more likely to drive recklessly.

The benefit of the policy was that it reduced the number of deaths per accident. The cost of the policy was that it increased the number of accidents, thus canceling the benefit. Or at least, that is the conclusion of University of Chicago’s Sam Peltzman, who found the two effects canceled each other.

His work has led to a theory called “The Peltzman Effect,” also known as risk compensation. Risk compensation says that safety requirements incentivize people to increase risky behavior in response to the lower price of that behavior.

Risk compensation can be applied to almost every behavior involving risk where a choice must be made. Economics tells us that individuals make choices at the margin. This means that the incentive in question may lead the individual to do a little more or a little less of something.

[…]

The fact that incentives reduce or increase behavior is an economic law: Landsburg posits that “the literature of economics contains tens of thousands of empirical studies verifying this proposition and not one that convincingly refutes it.” Incentives change the effectiveness of government policy and shape day-to-day life.

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