The evidence is in. Again. Socialism and government statism is the only way to eliminate income inequality.
As reported in Reuters, a 3 university study of conditions in Venezuela has shown that 90% of citizens now live in poverty. But socialism can only achieve so much. The other 10% must suffer in abject affluence so that the 90% can have income equality.
That in Venezuela income equality necessitates poverty is a design feature of the policy and not a fault.
Venezuela has also demonstrated that socialism can not only eliminate income inequality, it can also eliminate obesity. There was no need to deploying a sugar tax, when the income equalization policies achieved the same ends. You see, Venezuelans reported losing an average of 11 kilograms in 2017. This was on top of losing an average of 8 kilograms in 2016.
Viva Venezuela. Viva Chavez. Viva Maduro.
“I Am Spartacus”, “Nirvana – income equality and a truly fair society”, Catallaxy Files, 2018-02-23.
March 16, 2018
March 14, 2018
Ontario’s tax dollars at work
At Worthwhile Canadian Initiative, Frances Woolley shows the picture that will define Ontario politics for years to come:
In Ontario, public sector employees earn more than private sector employees. Many workers in the private sector earn the minimum wage, or only slightly above minimum wage. The peak of the public sector earnings distribution is much higher, at twenty-something dollars per hour, and there are a good number of public sector workers earning $40 or $50 an hour.
There are many things missing from this picture. Most importantly, it excludes highly-paid self-employed professionals, such as doctors, lawyers, and accountants, as well as entrepreneurs and business owners. It also excludes self-employed people in the trades, such as plumbers, electricians and contractors. The numbers are non-trivial: 13 percent of Ontario workers are self-employed. A good chunk of the upper part of the private sector earnings distribution is missing from the picture. On the other hand, the hourly wage distribution above excludes non-wage benefits that are more common in the public than the private sector, such as employer contributions to health insurance and pension plans.
Furthermore, the picture does not take into account the differences in the nature of work in the public and private sector. Many public sector jobs, such as nursing, social work, and teaching, require relatively high levels of skill and education. There are private sector jobs that require skill and education as well – but, as noted earlier, many of those jobs are carried out by self-employed professionals, so are not in the graph.
Even noting the exclusions, it’s striking that the old trade-off between public and private sector jobs — that civil servants got lower pay but better benefits and job security — has long since ceased to function. Civil servants, on the whole, now get higher pay than private sector workers, but have retained or even improved the benefits advantage over their private counterparts … and also still retain the job security that private workers can only dream of.
March 13, 2018
Trump Is ‘Destroying’ Regulations
ReasonTV
Published on 12 Mar 2018The president’s first year of slowing down regulations shattered previous records. But will politics and legislative inaction stall things from here?
—–
With his tariffs on aluminum and steel, family-separating crackdowns on nonviolent illegal immigrants, and authoritarian musings about executing drug dealers, President Donald Trump can be a libertarian’s nightmare.Except when it comes to regulatory reform.
The Competitive Enterprise Institute (CEI), a Washington, D.C.-based free market think tank that focuses on the administrative state, tallied up the number of regulations in Trump’s first year in office and found, “This is the lowest count since records began being kept in the mid-1970s.” CEI Vice President for Policy Clyde Wayne Crews told Reason that, “I haven’t seen personally anything like the regulatory reductions that have taken place.”
What’s producing these results? In part, the president’s early executive orders mandating that with every new regulation two old ones get killed, and that the net imposed regulatory cost of each agency and department be zero. Trump has also appointed some real reformers to change the way the executive branch does business: Scott Gottlieb at the Food and Drug Administration (FDA), Ajit Pai at the Federal Communications Commission, Betsy DeVos at the Department of Education, and Rick Perry at the Department of Energy.
Chief among the anti-bureaucratic bureaucrats is Neomi Rao, administrator of the obscure-sounding but important Office for Regulatory Affairs (OIRA), which applies cost-benefit analyses to proposed regulation while making sure it still aligns with legislative intent. Rao, who came to the administration after founding the Center for the Study of the Administrative State at George Mason University’s Antonin Scalia Law School, tells Reason that, “We have done more in our first year than any president since we’ve been keeping records, which is back to Reagan.”
President Trump appears genuinely enthusiastic about this push, talking up FDA reforms in both of his State of the Union addresses, and crowing at a December red-tape-cutting ceremony that, “The never-ending growth of red tape in America has come to a sudden screeching and beautiful halt.”
But Crews warns that a midterm will be much harder for Trump to navigate than the comparative honeymoon of 2017. “I think in 2018, he’s going to have a much tougher time meeting the goal,” Crews said. “When you’re acting alone as president and you can’t make law on your own, the barrier that you run into is you run out of low-hanging fruit.”
Produced by Matt Welch and Alexis Garcia. Camera by Todd Krainin, Ian Keyser, Mark McDaniel, and Jim Epstein.
The economic argument for carbon taxes
Tim Worstall explains what a carbon tax is supposed to do, as opposed to what many environmental activists want it to do:
The essential economic analysis is that carbon emissions are an “externality.” There are costs to third parties of the freely chosen activities of consenting adults. If there aren’t such third party costs then the adults get to consent – as long as your bedroom contains only those freely consenting adults then what goes on there is up to you. But if there are those third party costs – say, the noise from the enjoyments causes lost sleep among the neighbours – then some societal power to force an adjustment seems reasonable enough.
Again, economics analyses here by suggesting that we’ll get too much, or too many, of those third party costs if people aren’t paying for them. If we’ve not got to pay to soundproof the orgy then we’ll have more orgies than if we do. It’s fair that we insist upon such soundproofing perhaps. But sometimes we cannot insist upon such direct actions – then we’ve got to try and change the price system. Which is what the carbon tax does.
There are benefits to using fossil fuels – transport, heat, cooking and so on. Given current technological levels immediate banning would mean billions die – commonly thought to be a Bad Thing. But there are those costs imposed upon others as well in the climate change the emissions cause. The answer is that we look to that greatest good of the greatest number, the utilitarian answer. Where emissions produce more value than the damage they cause – including over time – then we want them to continue. Where they don’t then we want them to stop. That way we get the maximum possible value being created and thus all humans – over time – are as rich as we can be given current technologies.
Calculating what this number is, this tax rate, is also known as determining the social cost of carbon emissions. The Stern Review may or may not have exactly the right number but it’s a good enough starting point, $80 per tonne CO2. Say 50 cents or so per gallon of gas. Slap that tax on and we’ve corrected the price system. People who use gas are now paying the environmental costs of their use. So, anything they use it for must create greater value than the damage being caused. We’re copacetic at this point, we’ve the optimal level of emissions.
Note that this logic still works whatever you think of the rate. 1 cent or $100 a gallon, the logic is still the same, we’re only arguing over what is that social cost of carbon. Stick a tax on of whatever it is and we’re done.
Even if climate change isn’t a problem, or isn’t happening, we do still need some tax revenues somewhere. It’s also better to tax consumption than incomes or capital, better to tax things inelastic in demand with respect to price than those elastic. Fossil fuel consumption taxation is a consumption tax and the demand for fossil fuels is, in the short to medium term at least, inelastic. We’re fine with fuel taxation therefore.
For a quick backgrounder on the concept of externalities, MR University did a video on this a few years back. For reasons to worry that your government might not be quite as revenue-neutral in imposing a Pigouvian tax, Warren Meyer also has doubts.
March 10, 2018
Remy: I Like it, I Love it
ReasonTV
Published on 8 Mar 2018After years of complaining about Washington’s fiscal irresponsibility, Remy is finally in office and ready to make a change.
———-Parody written and performed by Remy
Produced and Edited by Austin Bragg
Music tracks and backing vocals by Ben KarlstromLYRICS:
Spent four to eight years complaining about all the cash we spend
Asking for your vote and money, we need limited governmentAbout how these deficits are costing us a trillion a pop
But vote for me, I’ll be as stingy as a GameStopAnd then I got elected and took over DC
Cutting back on all spending is what I would do you’d thinkBut I like it, I love it, I want some more of it
A wall so tall you can’t climb above it
Don’t know what it is about the spending that I covet but
I like it, I love it, I want some more of itThe Founding Father Daddies tried to teach me currency
Now my spending list is longer than a CVS receipt
Now I’m keeping old programs and taking out loans
I’m scrapping spending caps and I’m cranking out dronesI’m adding more spending, I’m throwing a parade
My list is shovel-ready (so is most of what I say)Cuz I like it, I love it, I want some more of it
I talk a lot, it turns out I’m bluffing
Don’t know what it is about the spending that I covet but
I like it, I love it, I want some more of it
March 8, 2018
Trump’s ideology is more like psychology
Jonah Goldberg on how Trump’s instincts are far more significant to his behaviour than any residual attachment to an ideology:
On the left, there’s an enormous investment in the idea that Trump isn’t a break with conservatism but the apotheosis of it. This is a defensible, or at least understandable, claim if you believe conservatism has always been an intellectually vacuous bundle of racial and cultural resentments. But if that were the case, Commentary magazine’s Noah Rothman recently noted, you would not see so many mainstream and consistent conservatives objecting to Trump’s behavior.
Intellectuals and ideologically committed journalists on the left and right have a natural tendency to see events through the prism of ideas. Trump presents an insurmountable challenge to such approaches because, by his own admission, he doesn’t consult any serious and coherent body of ideas for his decisions. He trusts his instincts.
Trump has said countless times that he thinks his gut is a better guide than the brains of his advisers. He routinely argues that the presidents and policymakers who came before him were all fools and weaklings. That’s narcissism, not ideology, talking.
Even the “ideas” that he has championed consistently — despite countervailing evidence and expertise — are grounded not in arguments but in instincts. He dislikes regulations because, as a businessman, they got in his way. He dislikes trade because he has a childish, narrow understanding of what “winning” means. Foreigners are ripping us off. Other countries are laughing at us. He doesn’t actually care about, let alone understand, the arguments suggesting that protectionism can work. Indeed, he reportedly issued his recent diktat on steel tariffs in a fit of pique over negative media coverage and the investigation into Russian election interference. His administration was wholly unprepared for the announcement.
News emanating from the White House is always more understandable once you accept that Trumpist policy is downstream of Trump’s personality.
March 3, 2018
QotD: Elite incompetence
Most people, most of the time, are perfectly happy to let elites run the country. After all, it seems to make the elites happy to run run things, and as long as they’re reasonably competent at it, and do it reasonably unobtrusively, no one much seems to care. But when elite competence is compromised by faulty ideology and cronyism, people become unhappy. And when the elite response to complaints is dismissal or insult, political problems begin to bloom. People begin to think about politics. They begin to do things. It is no coincidence, as our Soviet friends used to say, that the last decade has seen the rise of the TEA Party, the Occupy Movement, and the Trump phenomenon. People of all political stripes are becoming unhappy.
I think we’re about to watch the elites start paying a price for their incompetence, inattention and contempt. Euroskepticism is on the rise elsewhere in Europe. If EU membership were put to a popular vote in the Netherlands, Spain, or Sweden, there is a good chance that Leave would win there, too. Indeed, it’s possible that a vote to leave the EU might even win in France, the nation for whom creating and strengthening the EU has been the primary policy goal for 60 years.
Perhaps the “Vote Remain, you virulent racist!” PR campaign for staying in the EU needs a bit more thought.
Dale Franks, “Vote Properly, You Virulent Racist!”, Questions and Observations, 2016-06-28.
March 2, 2018
Sean Gabb on the ever-more-likely “hard Brexit” option
Sean Gabb hasn’t read the full text of the draft treaty of withdrawal from the European Union, but does offer some general points that do not depend on the details in that document:
I wish the Referendum had not been called. Nobody in or near power had so much as the vaguest idea of how to leave the European Union. Nearly two years on, nobody still knows what to do or how to do it. The politicians are all incompetent or dishonest, or both. The politicians in charge called an election, and were so sure of winning it that they effectively lost it. The politicians most likely to replace them are probably more incompetent, and certainly more dishonest. The other European powers and the European powers have now had time to recover from their initial shock, and are behaving like that spurned and vindictive wife. Though I repeat that I have not read it, I have no doubt their draft treaty is the modern equivalent of the Versailles Diktat. They are pushing this on us because they want to deter any other member state from trying to leave. I also suspect they are pushing it because, for the past three centuries, they have been repeatedly stuffed by us, and they now want to do some stuffing of their own.
If we accept the draft treaty, or anything like it, we shall have exchanged an equal membership of the European Union for satellite status. We shall have limited control over our internal regulations. We shall have limited control over our borders. We shall have consented to a unification of Ireland on the most humiliating terms. If, unable to negotiate better terms, our leaders tell us that we should stay in after all, that will involve still more humiliation. What little authority we ever had to negotiate opt-outs from inconvenient regulations will have evaporated. We shall be forced to join the Euro and the Schengen Agreement. Any future British “No!” will be met with pitying smiles and firm insistence. I will say nothing about the prospects for civil disorder in this country.
On the bright side, the draft treaty – if as bad as I am told it is – makes everything much simpler that it was. The Tory ultras strike me as no less corrupt and dishonest than everyone else. I think little of the people concerned. But their plan, such as it is, has become the only plan on offer.
Whether she is profoundly stupid is beside the point. Our main problem with Theresa May is that she appears to be unable to make up her mind. Well, I think it was Abba Eban who said that, when everything else has been tried and seen to fail, people will often do the right thing. Here for what they are worth, are my proposals for Mrs May:
- Reject the draft treaty without further discussion;
- Propose a free trade treaty to cover goods and services, and call for a joint committee to examine how all present and future European regulations can be imposed and verified in this country for those things alone that are exported into the European Union;
- Tell the Irish that they can avoid a hard border with Ulster by joining us outside the European Union;
- Put up whatever cash may be needed in the short term to keep Ulster from economic collapse;
- Tell the Americans that, if they want any kind of future alliance, they should give us their full backing, and be prepared to make an emergency free trade agreement;
- Tell everyone to plan for an economic shock next April, and make collective preparations for dealing with it.
By this point, it seems it’d be a major concession on the part of the EU negotiators to agree not to hold the formal signing of the agreement in that railway carriage at Compiègne.
Canada’s foreign policies, in the wake of recent Prime Ministerial mis-steps
Ted Campbell suggests that our current foreign policy goals have been seriously undermined by the — shall we say “disappointing” — outcomes of Prime Minister Trudeau’s Chinese and Indian trips:
[Former senior Canadian diplomat David] Mulroney begins by saying that: “The best that can be said about Prime Minister Justin Trudeau’s visit to India is that it may prompt a review, if not a complete rethinking of a Canadian foreign policy that appears to be seriously off the rails. We have some hard lessons to learn … [and] … At the very least, the Prime Minister’s debacle in India should encourage smart people in Ottawa to zero in on what isn’t working.” That’s good thinking. At the end of every major campaign, an especially after campaigns in which things go awry, good military commanders convene a board of senior officers to consider “lessons learned,” in the hope that they will not make the same mistakes next time. sadly, especially today, the lessons learned are all too quickly forgotten even if the analysis was rigorous enough in the first place.
“Most worrying,” David Mulroney says, “is a fundamental and puzzling failure at the level of policy implementation, something that appears to be compounded by the Prime Minister’s own impetuosity. Flying to India before the big meeting with Prime Minister Narendra Modi was in the bag, much like heading off to Beijing on a free-trade themed visit without any reasonable expectation that a deal was doable, exposes Mr. Trudeau to a degree of prolonged public skepticism that comes to define the visit itself.” In other words: Justin Trudeau goes off “half cocked” as we soldier say … not ready for action. That is, I suspect, in part because his team in the Prime Minister’s Office (PMO), was brilliant on the campaign trail in 2015 but is really unqualified to advice the leader of the government of the G7 nation; that poor quality of policy advice matters because Justin Trudeau was, and still is, to be sure, “just not ready” for the job he was handed. But his
officecampaign team wants to get and keep him in the public eye because that’s part of the 2019 campaign strategy … this time it failed because they really didn’t understand the business at hand.[…]
But India is not just any country, as Mr Mulroney explains: “India isn’t our friend. It is a rising regional power beset with a range of domestic problems, including serious human rights issues. It takes a prickly approach to global issues that is often at odds with traditional Canadian policies in areas ranging from trade policy to nuclear disarmament … [and, he says] … The Indian diplomats I worked with could be wonderfully pleasant after the official day was done. But, for the most part, they brought a formidably ruthless precision to their pursuit of India’s interests in the world. While they might ultimately agree to grant Canada a concession, this was always a product of hard and often heated negotiations. They never conceded a point because they liked us or because we are home to a large Indo-Canadian community.” Further, he adds that “My experience with Chinese diplomats was entirely similar.” Although never at the same level as Mr Mulroney, I worked in the international arena as a senior officer, especially in one sector (global radio-communications which included arranging for the expansion of mobile communications in the 1990s. My Chinese and Indian colleagues were, indeed, fine men and women but they, just like me, were there ~ Geneva, a lot, but everywhere from Washington, London, Canberra and Tokyo to Beijing ~ defending their interests. “friendship,” even long standing alliances didn’t count for anything. Billions of dollars were at stake, profits and losses would hinge on how we ~ engineers and lawyers and businessmen and soldiers from dozens of countries ~ managed to slice up the radio spectrum to allow these new services to thrive. The Chinese and Indian delegates were just as professional, just as technically qualified, just as hard nosed as the Americans, Brits and Canadians.
“Long before the election of U.S. President Donald Trump,” David Mulroney says, “it should have been clear to us that the world is changing in ways that do not align with traditional Canadian views, interests and values. If we’re smart, the rise of countries like China and India can certainly contribute to our prosperity, and with hard work, we should be able to find common cause on important issues such as global warming … [but, he adds] … the rise of these assertive and ambitious Asian powers will almost certainly challenge global and regional security. Both will also continue to reject traditional Canadian notions about global governance and human rights, and neither will be particularly squeamish about interfering in Canadian affairs.” Sunny ways, feminism and being green don’t count for much; they are very certainly not a sound foundation upon which to build a foreign policy. We have to start thinking about our vital interests in the world ~ about what they are and about how we can and will protect and promote them: that’s the basis of a grand strategy. It was also the kind of thinking that Stephen Harper hated: he wanted to deal with issues incrementally, linking them together, sometimes, into a coherent web but never allowing them to become too important in and of themselves. That was bad enough but I’m persuaded that Justin Trudeau doesn’t think about those “big ideas” at all … because, I fear, they are, simply, quite beyond his comprehension.
QotD: Cronyism
… I would argue that we don’t have truly free trade or, increasingly, a free economy in the United States. The Progressives always look at the rising income inequality and maintain that it’s the inevitable result of capitalism. That’s hogwash, of course, and Proggies believe it because they’re dolts. But the problem in this country isn’t free trade — we have precious little of it — or unrestricted capitalism, since we have precious little of that as well. The issue behind rising income inequality isn’t capitalism, it’s cronyism. Income isn’t being redirected to the 1% because capitalism has failed, it’s happening because we abandoned capitalism in favor of the regulatory crony state and its de facto collusion between big business/banking interests and a government that directs capital to favored political clients, who become “too big to fail”. It doesn’t matter, for instance, whether the president is a Democrat or Republican, because we know the Treasury Secretary will be a former — and future — Goldman Sachs executive.
Indeed, what we call “free trade” nowadays isn’t the Theory of Comparative Advantage in action. It’s corporations being allowed to ship jobs to low wage countries overseas to offset the cost of regulatory burdens in the US that restrict competition from new entrants to the market. That works great for large corporations. Not only do they get to offset the regulatory costs by overseas production, but slower job growth in the US flattens domestic wages, too, and sends millions out of the labor force altogether. For working people, the biggest financial rewards from the current “free trade” regime seem mainly reaped by large business and banking interests. Again, people know if their own lives are better or worse than they used to be, and if the promises of elites have been born out by their own experience.
Dale Franks, “Vote Properly, You Virulent Racist!”, Questions and Observations, 2016-06-28.
March 1, 2018
South Africa to amend constitution to allow land expropriation without compensation
The South African parliament has voted overwhelmingly to change the nation’s constitution to allow the government to expropriate land without compensation:
The motion was brought by Julius Malema, leader of the radical Marxist opposition party the Economic Freedom Fighters, and passed overwhelmingly by 241 votes to 83 against. The only parties who did not support the motion were the Democratic Alliance, Freedom Front Plus, Cope and the African Christian Democratic Party.
It was amended but supported by the ruling African National Congress and new president Cyril Ramaphosa, who made land expropriation a key pillar of his policy platform after taking over from ousted PM Jacob Zuma earlier this month.
“The time for reconciliation is over. Now is the time for justice,” Malema was quoted by News24 as telling parliament. “We must ensure that we restore the dignity of our people without compensating the criminals who stole our land.”
According to Bloomberg, a 2017 government audit found white people owned 72 per cent of farmland in South Africa.
ANC deputy chief whip Dorries Eunice Dlakude said the party “recognises that the current policy instruments, including the willing-buyer willing-seller policy and other provisions of Section 25 of the Constitution may be hindering effective land reform”.
ANC rural affairs minister Gugile Nkwinti added: “The ANC unequivocally supports the principle of land expropriation without compensation. There is no doubt about it, land shall be expropriated without compensation.”
Thandeka Mbabama from the Democatic Alliance party, which opposed the motion, said there was a need to right the wrongs of the past but expropriation “cannot be part of the solution”.
“By arguing for expropriation without compensation, the ANC has been gifted the perfect scapegoat to explain away its own failure,” she said in a statement.
“Making this argument lets the ANC off the hook on the real impediments — corruption, bad policy and chronic underfunding. Expropriation without compensation would severely undermine the national economy, only hurting poor black people even further.”
Samizdata‘s Johnathan Pearce comments on the move:
The unfolding of South Africa’s history is a tragedy, and it is easy to see why there is an element of “score-settling” at work here. Apartheid, let it not be forgotten, was introduced in the late 1940s at the behest to some degree of the white trade union movement, keen to bolster its bargaining power. Even if you were a private entrepreneur who wanted to hire non-whites for certain jobs, for example, you couldn’t. (Minimum wage laws operated in ways that hurt, not helped, non-whites.) The system was as absurd and vile as the Jim Crow laws of the US, or other examples of serfdom and oppression down the ages. It had to go; for anyone who supports a free market economy, apartheid and its cousins are absurd as well as wrong.
But the solution of seizing white-owned land, regardless of the honesty or provenance of it, and giving it to people via a political carve-up, turns the injustices inherited from the old regime on their head, creating a new form of racism. Two wrongs do not make a right. And further, one suspects that the land seizures are an attempt to deflect attention from the failings of the existing regime. Compare and contrast how, for example, the “Asian tigers” threw off their old colonial masters and focused on getting seriously rich, not least by respecting property rights. And wherever one looks, there does seem a pretty tight correlation between respect for property rights – indeed their very existence – with prosperity and happiness more broadly. Hernando de Soto has made something of a career pushing the point that the world needs more property rights, spread among more people. (Check out this recent lecture by Niall Ferguson on the same sort of issue.)
February 26, 2018
QotD: Regulations in the EU
As for the idea that the individual should be as free as possible from state coercion, this is regarded as the ultimate Anglophone fetish. Whenever the EU extends its jurisdiction into a new field — decreeing what vitamins we can buy, how much capital banks must hold, how herbal remedies are to be regulated — I ask what specific problem the new rules are needed to solve. The response is always the same: “But the old system was unregulated!” The idea that absence of regulation might be a natural state of affairs is seen as preposterous. In Continental usage “unregulated” and “illegal” are much closer concepts than in places where lawmaking happens in English.
Daniel Hannan, Inventing Freedom: How the English-speaking peoples made the modern world, 2013.
February 24, 2018
Is Unemployment Undercounted?
Marginal Revolution University
Published on 25 Oct 2016You may recall from our previous video that to be counted in the official unemployment rate in the U.S., you have to be an adult without a job and have actively looked for work within the past four weeks. That means that if someone has given up looking for a job, even if they want one, they are no longer counted under the official definition.
Does this mean that unemployment is undercounted? In other words, is the unemployment rate in fact higher than is reported?
Some have claimed this to be the case. However, unemployment is a tricky statistic. It’s important to consider that adults without jobs can fall into different categories. Many retirees, for example, are willing to leave retirement and take a job for the right price. If we are counting people that aren’t actively looking for employment, shouldn’t the retirees also be considered unemployed?
The simplest solution to this conundrum is to only count unemployed adults actively seeking work.
But what about discouraged workers — those who are unemployed and have not sought work in the past four weeks, but have sought work in the past year. Should we consider them in our calculations?
There are actually six different unemployment rates measured by the U.S. Bureau of Labor Statistics. The various rates have less and more stringent criteria. The official rate, called U3, falls somewhere in the middle. Another rate, called U4, does include discouraged workers in its calculation. All six rates follow a similar track over time.
So while the official unemployment rate may not be perfect, it does provide us with a good indicator of the state of the labor market and where it’s headed.
February 18, 2018
The legal loophole that allows profiteering scumbags like Martin Shkreli to gouge the public
The US pharmaceutical market is a long way from a freely competitive environment, largely due to the amount of regulatory oversight required by lawmakers and enforced by the Food and Drug Administration (FDA). Among all the regulatory checks and balances, there’s one weird trick that allows predatory companies to reap excess profits legally — the “restricted distribution” loophole:
For immunocompromised adult patients who have the toxoplasmosis parasite, the FDA recommends taking 50 to 75 milligrams of Daraprim a day for up to three weeks, followed by half that dosage for an additional four to five weeks. So at the high end, an adult course of Daraprim therapy for a U.S. patient used to cost around $1,350 total.
While that might not seem cheap, it was a drop in the bucket compared to the cost after Turing Pharmaceuticals, Shkreli’s company, bought the rights to Daraprim and jacked the price up to $750 per pill in 2015. That move increased the cost of one course of treatment to around $75,000.
At that point you might have expected another company to jump in and start offering a generic version of the drug. But Shkreli used a regulatory loophole to keep that from happening.
You see, when a generic manufacturer wants to create a cheap version of a branded drug, it has to buy thousands of doses from the manufacturer in order to run comparison tests. Generic manufacturers use the results of these tests to prove to the FDA that their version is identical to the branded drug that the agency has already approved.
More often than not, the company that holds the marketing and distribution rights to a branded drug will sell those comparison doses to the generic manufacturer without being obstructionist, because that’s the trade-off for receiving a 20-year monopoly by way of a drug patent: The branded manufacturer gets to charge whatever they want for years and years without facing competition, and in exchange for that government-backed monopoly, it’s supposed to sell equivalency samples to generic companies.
But what if the company is run by an unscrupulous asshole like Martin Shkreli? Then it might opt to put the drug into what’s called “restricted distribution,” which means no distributor anywhere can sell comparison samples to a generic manufacturer.
The FDA originally created the concept of restricted distribution to limit the availability of drugs that might be dangerous. Methadone, for instance, was first approved in the 1940s as a painkiller. In the 1970s, the FDA restricted its availability because regulators didn’t want the opioid used for anything other than the treatment of opioid dependence. Even today, methadone can be dispensed only in highly regulated settings and only for one approved reason.
In 2007, Congress empowered the FDA to create an entire system of safety controls beyond restricted distribution, and the agency now requires the manufacturers of certain substances to develop Risk Evaluation and Mitigation Strategies (REMS) to prevent misuse and abuse of potentially problematic compounds.
The list of approved drugs that the FDA says must have an REMS is here. Daraprim is not on that list. You can’t get high off it. It’s not habit forming. Yes, the FDA label says it can be carcinogenic after long periods of use, and that it might cause birth defects if used in high doses by pregnant women. These potential effects are serious, but there is no post-market data suggesting that Daraprim is causing more harm than benefit in the intended patient population. Shkreli’s company put Daraprim into restricted distribution to boost their profits, not protect patients.
February 11, 2018
Bay area food entrepreneurs shut down by local health authorities
In Reason, Baylen Linnekin recounts the rise and fall of Josephine, an online operation intended to connect home cooks with willing buyers:
A dozen or so years ago, as my friend Dave was planning a move from Washington, D.C., to Philadelphia, he used the need to clean out his fridge before the move as an excuse to offer a half-empty jar of homemade kimchi for sale on Craigslist. While I don’t think the kimchi sold, Dave’s effort opened my eyes to the seemingly limitless possibilities of homemade online food sales.
The truth is that while those possibilities are limited theoretically only by imagination, they very often bump up in the real world against — to paraphrase Waylon Jennings — the limits of what the law will allow.
That truth was evident last week, when Bay Area food startup Josephine announced it will close its doors in March.
As I described in a Sacramento Bee op-ed in support of Josephine last year, the company launched nearly four years ago with a mission to provide cooks who are typically underrepresented in restaurant leadership — including women and immigrants — with a platform by which to sell home-cooked meals with their neighbors.
It’s a cool idea. And it worked quite well for a time. That is, as I noted, until local health officials “sent cease-and-desist letters to several Josephine cooks.”
Josephine responded by trying to work with lawmakers and regulators, pushing a bill in the state legislature that would provide some legal avenue for its cooks. Despite the fact that the bill is now moving through the California legislature, the company decided its passage would be too late for Josephine and its funders.
Josephine didn’t have to die. The regulations that have made it impossible for the company to operate should have died instead. But its fate mimics that of other similar home-food startups. A similar New York-based startup, Umi Kitchen, flamed out last year after just four months of operations. I wrote an appreciation of Forage Underground Market, the inventive San Francisco food swap that was shuttered by California state and local health authorities, way back in 2012. And I predicted at the time the food underground movement was just beginning to blossom.
