Quotulatiousness

November 10, 2020

The amazing mental gymnastics that lead to the US Supreme Court’s unanimous decision in Wickard v. Filburn in 1942

Filed under: Economics, Government, History, Law, USA — Tags: , , , — Nicholas @ 03:00

Antony Davies and James R. Harrigan explain how a farmer growing wheat on his own land to feed his own cattle somehow transmogrified into an interstate commerce activity that could be regulated by the federal government:

Panorama of the west facade of United States Supreme Court Building at dusk in Washington, D.C., 10 October, 2011.
Photo by Joe Ravi via Wikimedia Commons.

… who ended up being tasked with deciding what Article One, Section Eight actually meant? Herein lies the wrinkle that enables all manner of constitutional mischief in the United States. The institution that ended up deciding what the federal government is empowered to do is itself a branch of the federal government. And it should come as no surprise that when push comes to shove, the Supreme Court routinely finds in favor of empowering the federal government.

This sort of mischief flowered fully in the decade following ratification of the 21st Amendment. In 1942, the Supreme Court decided a case, Wickard v. Filburn, in which farmer Roscoe Filburn ran afoul of a federal law that limited how much wheat he was allowed to grow.

A careful reader might, and should, ask where the federal government’s right to legislate the wheat market is to be found — because the word “wheat” is nowhere to be found in the Constitution. Be that as it may, the federal government’s aim was clear enough. It was to keep the price of wheat high enough for farmers to remain profitable. The Agricultural Adjustment Act of 1938 put an upper limit on how much wheat farmers were allowed to grow, which would serve to keep prices high by limiting supply.

Roscoe Filburn had grown 12 more acres of wheat than the law allowed. But not only did he not sell the excess wheat outside of his home state, but he also didn’t sell it at all. He used the wheat from those 12 acres to feed his cattle. Filburn was very clearly not engaging in commerce, let alone interstate commerce, yet the Supreme Court found (unanimously) that because Congress had the authority to regulate interstate commerce, Congress also had the authority to prohibit Filburn from growing those 12 acres of wheat for his own use. The Supreme Court’s “reasoning”?

Had Filburn not fed his cattle that excess wheat, he would have been forced to purchase wheat on the open market. And even if he purchased wheat that was grown within his home state, doing so would have made less wheat available within his home state for other wheat buyers. Consequently, some wheat buyers within his home state would then have had to buy wheat from outside the state. Therefore, Filburn’s non-commercial activity was, according to the Supreme Court, interstate commerce.

The mental gymnastics that went into this ruling made just about any activity interstate commerce by definition. Since Wickard, any time Congress has wanted to exercise power not authorized by the Constitution, lawmakers have simply had to make an argument that links whatever they want to accomplish to interstate commerce. Why? Because they know they can get away with it.

November 2, 2020

Federal government to web giants: “BOHICA!”

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

Michael Geist provides an unauthorized backgrounder on the Canadian government’s quixotic attempt to shakedown the likes of Netflix for money to give to “struggling” Canadian media companies:

Canadian Heritage Minister Steven Guilbeault, 3 February 2020.
Screencapure from CPAC video.

Canadian Heritage Minister Steven Guilbeault is set to introduce his “Get Money from Web Giants” Internet regulation bill on Monday. Based on his previous public comments, the bill is expected to grant the CRTC extensive new powers to regulate Internet-based video streaming services. In particular, expect the government to mandate payments to support Canadian content production for the streaming services and establish new “discoverability” requirements that will require online services to override user preferences by promoting Canadian content. The government is likely to issue a policy direction to the CRTC that identifies its specific priorities, but the much-discussed link licensing requirement for social media companies that Guilbeault has supported will not be part of this legislative package.

These reforms mark the culmination of a dramatic reversal in government digital policy. After then-Heritage Minister Melanie Joly unveiled her 2017 digital cancon strategy that focused on market-based solutions and emphasized exports of Canadian culture, extensive lobbying gradually let to a major policy flip flop. The CRTC reversed its prior position on Internet streaming regulation in 2018 with a regulate-everything approach, the deeply flawed Yale report released earlier this year provided the blueprint for CRTC-led regulation, and Guilbeault jumped on board with a declaration that his top legislative priority was to “get money from web giants.”

On Monday, the government will undoubtedly line up the lobby groups that supported the reform to provide positive quotes, suggest reforms will lead to billions in new revenues, and claim the bill ensures regulatory fairness by requiring that everyone contribute. Yet much of the policy is based on fictions: that this levels the playing field, that there is a Cancon crisis, that discoverability requirements respond to a serious concern, that this will result in quick payments to the industry, that this is consistent with net neutrality, or that consumers will not bear the costs of reform.

None of this is true. But beyond those issues – each discussed in further detail below – this most notably represents a significant new source of speech regulation. We do not require government authorization to publish newspapers, blog posts, or to simply voice our views in a public forum. That we require governmental authorization in the form of licensing for broadcasters was largely justified in furtherance of cultural policies on the grounds of limited access to scarce spectrum. That justification simply does not apply to the Internet, no matter how many times Guilbeault refers to the inclusion of Internet companies within the “broadcast system.” This is not a matter of Internet exceptionalism. Laws and regulations such as taxation, competition, privacy, and consumer protection are all among the rules that apply regardless of whether the service is offline or online. But speech regulation by the CRTC should require a far better justification than the lure of “free money” from Internet companies.

October 22, 2020

Carbon taxes may be the most efficient way to address GHG emissions, but no government has implemented them properly

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

I was persuaded by the economic arguments in favour of a carbon tax to address the externaly of greenhouse gas emissions, but I’ve long been skeptical that governments would actually implement them in a way to minimize economic distortion. A report from the Fraser Institute this week shows I was right to be doubtful, as none of the 31 OECD countries in the study have managed to introduce some form of carbon pricing without political “tinkering” … rather than replacing inefficient regulations, taxes and mandates with the carbon tax, they’ve generally just added carbon pricing on top of existing rules, making the carbon pricing scheme merely another tax grab that fails to achieve the stated goals:

Most economists consider human-made greenhouse gas (GHG) emissions an unintended negative externality of production and consumption. A negative externality occurs when the effects of producing or consuming goods and services impose costs on a third party which are not reflected in the prices charged for said goods and services. In the context of GHG emissions, this negative externality is calculated using the “social cost of carbon,” which is the future damage to society (adjusted to present value) of one additional tonne of carbon emitted to the atmosphere today.

Governments have a wide variety of policy alternatives to address the negative externality of emissions depending on the degree and depth of the policy intervention. They can either mandate individuals and firms to change their behaviour through com­mand-and-control regulations, grant subsidies and tax credits to foster cleaner energy sources, or use market-based mechanisms to correct the misalignment of incentives. It is widely acknowledged that carbon pricing, one of these market tools, is the most cost-effective policy to reduce emissions, as it relies on price signals and trade to provide flex­ibility to economic agents as to where and how emissions mitigation occurs.

[…]

This report includes thirty-one high-income OECD countries, where each country has either implemented a carbon tax, an ETS [emissions trading system], or a combination of both pricing mechan­isms. Carbon taxes are being implemented in 14 of them whereas 25 of these countries have their emissions covered by an ETS. Our analysis finds that, on average, 74 percent of carbon tax revenues in high-income OECD countries go directly into their general budget with no earmarking for any specific expenditure, while 12 percent are ring-fenced for environmental spending, and only 14 percent for revenue-recycling measures. This means that most governments are using carbon taxes as a revenue-raising tool rather than a mechanism to internalize the negative externalities of emissions in a cost-effective man­ner. Additionally, the vast majority of ETS revenues are being used to artificially acceler­ate the use of renewable energy sources, infrastructure, and technology.

The study also finds that no high-income OECD country has used carbon pricing to repeal emission-related regulations, but instead have introduced new ones following the adoption of the carbon tax or the ETS. Emissions caps, mandated fuel standards, technology-based standards, and renewable power mandates are just some examples of these regulations that undermine the cost-effectiveness of carbon pricing mechanisms. The majority of high-income OECD countries have a combination of support schemes for renewable energy sources, carbon pricing tools, and command-and-control regulations.

Overall, no high-income OECD country is following the textbook model of an optimal carbon pricing system, undermining their theoretical efficiency by design and implementation.

October 1, 2020

Far from being in trouble, Canadian film and TV investment has nearly doubled in the last 10 years

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

The Canadian government — particularly Canadian Heritage minister Steven Guilbeault — is eager to pass legislation to “get money from the web giants” and their primary justification is the claim that Canadian TV and movie funding has been shrinking. As Michael Geist explains, that’s a pants-on-fire lie:

CMPA Profile – Financing, Sources: CMPA Profile 2019, 2016, 2013

Canadian Heritage Minister Steven Guilbeault has said that his top legislative priority is to “get money from web giants.” While much of the attention has focused on his ill-advised plan to require Facebook to obtain licences for linking to news articles, his first legislative step is likely to target Internet streamers such as Netflix, Amazon and Disney with new requirements to fund Canadian content and to increase its “discoverability” by making it more prominent for subscribers. Based on his comments at several town halls, Guilbeault is likely to also create new incentives for supporting indigenous and persons of colour in the sector with a bonus for those investments (potentially treating $1 of investment as $1.50 for the purposes of meeting Cancon spending requirements). Much of the actual implementation will fall to the CRTC, which will be granted significant new regulatory powers and targeted with a policy direction.

Guilbeault’s case for establishing new mandated payments is premised on the claim that support for the film and television sector is declining due to the emergence of Internet streaming services, which have resulted in decreased revenues for the conventional broadcast sector and therefore lower contributions to Cancon creation. In fact, Guilbeault recently told Le Devoir that without taking action there would be a billion dollar deficit in support in the next three years. He says that his objective is to actually generate a few hundred million more per year in local production by the Internet streamers. In other words, he’s expecting roughly $2 billion in new investment over three years in Cancon from U.S. entities due to his planned regulations (moving from a billion dollar deficit to a billion dollars in extra spending).

While Guilbeault frames these regulatory requirements as a matter of fairness and “rebalancing”, industry data over the past decade tell a much different story. Indeed, there has been record setting film and television production in recent years, much of it supported by companies such as Netflix. CRTC chair Ian Scott last year said that Netflix is “probably the biggest single contributor to the [Canadian] production sector today.” While that is not entirely true – the data suggests that Canadian taxpayers are the biggest contributor with federal and provincial tax credits consistently the largest source of financing – the claim that there is a billion dollar deficit coming or that foreign streamers do not contribute to film and television production in Canada without a regulatory requirement is simply false.

September 23, 2020

Federal minister admits the Libranos’ plan is a shakedown to “get money from web giants”

Filed under: Cancon, Government, Media, Politics, Technology — Tags: , , , , — Nicholas @ 03:00

Michael Geist on a rare moment of honesty from Canadian Heritage Minister Steven Guilbeault on the federal government’s atrocity of an internet regulation plan:

Canadian Heritage Minister Steven Guilbeault, 3 February 2020.
Screencapture from CPAC video.

As Canadian Heritage Minister Steven Guilbeault prepares an Internet regulation plan that features the prospect of licences for linking, undermining net neutrality, and trade sanctions, he has typically argued that “it’s about fairness”, suggesting that foreign companies unfairly benefit from the Canadian market at the expense of domestic companies. Yet when Guilbeault appeared at a production sector town hall last week, he was far more candid. Guilbeault told the sector that in a minority government situation, his department had to choose between a massive bill changing “everything under the sun” or to slice it up into smaller pieces. Having chosen the piecemeal approach, Guilbeault pointed to his top priority: get money from the foreign Internet companies (his exact words at 47:58 were “the most pressing thing we needed to do was to get oxygen into the system, which is money. And go and get that money where that money is. Which is web giants.”)

In certain respects, the acknowledgement that this amounts to little more than a shakedown makes sense. CRTC Chair Ian Scott has said that Netflix is now probably the largest contributor to film and television production in Canada and the sector enjoyed record production numbers pre-COVID-19, so the data simply does not support claims that the streamers are hurting the industry. As for the news sector, the Minister has failed to deliver millions in promised tax credits and seemingly now wants an alternative that involves creating a licensing regime for linking to content.

Yet if the goal is simply a matter of wanting more money from Internet companies that can be used to support Canadian cultural policies, it is not clear why this is a matter for the Heritage Minister. Everyone wants more money from the Internet companies and countries around the world have a credible argument that the huge global Internet revenues should be more equitably apportioned among them. In other words, the way to “get money from web giants” is for Finance Minister Chrystia Freeland to tax them on their revenues. Those tax revenues would go into general tax revenues and can be spent in an transparent manner without the need for specialized subsidy programs. This isn’t easy. The U.S. unsurprisingly objects to a potential reduction in its tax revenues, which means that Canada must find allies with other countries in seeking global solutions on tax. Further, Guilbeault candidly recently told a publisher town hall that changes to the tax code is far more difficult than direct program spending.

The problem with Guilbeault’s preference for direct program spending subsidized by Internet companies is that it raises a host of complications and negative effects. For example, mandated Canadian content spending for companies such as Netflix could require the companies to pay into a fund that supports Canadian content production. However, the current rules make it challenging for those same companies to access those funds for their own productions. That leads to either a trade challenge (and the possibility of tariffs against key Canadian sectors such as dairy and steel) for being forced to pay into a system that is inaccessible to foreign providers or a reform to the system that would open things up to foreign providers and in the process undermine the competitiveness of domestic producers and broadcasters who are more reliant on tax credits and funding programs.

September 13, 2020

QotD: Price controls versus reality

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

Economic reality is not optional. Government-imposed price ceilings and price floors — although believed by those who view prices as arbitrary results of bargaining or of “power” relationships as merely changing the distribution of economic gain or pain — distort people’s view of economic reality. Price controls prevent people as consumers (including as employers of workers) and as producers (including as workers) from seeing economic reality as clearly as possible. Blinded by minimum-wage commands and other price controls, people act in ways that are the opposite of the ways that those who support the price controls ostensibly want people to act. Rent control, for example, prompts landlords and potential landlords to offer fewer rental units on the market. Minimum-wage commands lead employers to employ fewer low-skilled workers.

Non- (and poor) economists, seeing only that which is in front of their noses, observe the government-controlled prices and conclude that the results of these controls must be just what the government publicly proclaims it wishes these results to be. “Look! Rents are lower with rent controls! Wages are higher with minimum wages! We have helped the poor!”

Those who fall for such superficial appearances, of course, do not grasp the nature of market forces and the role of prices. But the naiveté of such people runs much deeper: they are the sort of people who believe that if the messenger is forced to lie, the underlying reality changes, with the lie thereby converted into truth. Such people, in other words, believe in miracles. They believe that state officials performing incantations can miraculously change economic reality.

Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2018-05-16.

September 11, 2020

Canadian government heading toward “the worst of all worlds on Internet regulation”

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

Michael Geist on the bull-headed determination of the Canadian federal government — and specifically Heritage Minister Steven Guilbeault — to “solve” a problem by introducing savagely anti-consumer internet regulations:

Canadian Heritage Minister Steven Guilbeault, 3 February 2020.
Screencapure from CPAC video.

The harm that will come from these policy choices is difficult to overstate. By focusing the tax burden on sales taxes rather than technology company revenues, consumer costs will go up and the company profits will be left untouched. The CRTC powers will lead to years of hearings and follow-on litigation, yielding few tangible benefits for creators. The mandated Cancon contributions will spark trade wars and make Canada a less attractive market for new services leading to fewer choices and less competition, while the link licensing requirement will result in blocked sharing of news articles on social media sites that hurts both Canadians and media organizations. All the while, the issues that really matter – privacy, anti-competitive behaviour, online hate, misinformation, a fair share of tech corporate profits – are left largely untouched.

How did the government end up with the worst of all worlds on Internet regulation?

The starting point was the 2015 election in which it committed to no new Netflix taxes (prompted by a Conservative pledge on the issue) and subsequent consultations on everything from copyright to digital cultural policy. The result was then-Heritage Minister Melanie Joly struggling to honour the no-tax commitment, while satisfying increasingly vocal demands from some stakeholders for one. Those calls increased after the results of her cultural policy consultation were released, which largely focused on a rejection of new Internet taxes and support for net neutrality.

In the aftermath of the Cambridge Analytica scandal, worries about Russian election interference, and Christchurch massacre broadcast live online, the policy winds shifted and the government was clearly looking to become more active on the Internet regulation file. That led to Election Act provisions that were generally viewed as successful. It also paved the way for a 2019 election platform that was far aggressive on social media and the Internet, with commitments to address everything from privacy to hate speech online.

[…]

If the government were to address the real concerns, there would be long-overdue privacy reforms, a more aggressive approach on competition issues, measures to address online hate and misinformation, and pursuit of a global agreement on fair taxation of technology company revenues. If it wants to support increased film production from indigenous groups or help the news sector, it can make those policy choices and use general tax revenues without creating a massive regulatory infrastructure.

Instead, it is turning to the harmful policies noted above that raise consumer costs (digital sales taxes), regulate online Cancon with mandated spending requirements (even though the industry has record production led by Netflix), dispense with any pretense of maintaining net neutrality, lead to blocked sharing of news articles (mandated licence for social media sites merely for linking to news content), and result in services avoiding the Canadian market (market interference in payments from services such as Spotify). Much of this will be overseen by the newly empowered CRTC, leading to lengthy hearings that primarily benefit lawyers. After having badly mishandled Canadian digital policy, the government now seems content to take a pass on the important issues and leave the controversial non-issues to the regulator and the courts.

August 29, 2020

Recreating British Railways?

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

Adrian Quine looks at the long-term results of the partial privatization of British Railways, and the current British government’s options to address some of the problems:

Wikimedia caption – “This is the Bring Back British Rail, a reverse image of the old BR logo, (now used by the TOC’s) to show we are heading the wrong way with Rail in the UK”

If there is one thing free marketeers and large state socialists agree on, it would be the terrible state/private hybrid ownership structure of our railways currently supported by the government. While large state socialists won’t be happy until the private sector is squeezed out of the system, market liberals view the Conservative government’s actions as creeping renationalisation.

The private-sector entrepreneurs that built many of Britain’s railways in the 19th century had – through a process of market discovery – settled on vertical integration, with the same firm owning the track and operating the trains. But, when railways were returned to private sector in the late 1990s, the government created one national infrastructure company (Railtrack), 25 train-operating companies (TOCs), 3 freight operating companies, 3 rolling-stock leasing companies, 13 infrastructure service companies and other support organisations. The Office of Passenger Rail Franchising was tasked with selling franchises to the TOCs, while the Office of the Rail Regulator (ORR) regulated the infrastructure. This artificial and fragmented structure was designed to give the impression of competition.

Despite these constraints, in the early days of John Major’s flawed privatisation some of the more enterprising private train operators managed to bring innovation to the sector, including improved marketing and very low-cost “yield managed” advance fares. Where allowed, competition between different operators brought improved customer service, additional direct trains and lower ticket prices. However, the flaws in the initial privatisation soon became apparent with failed franchises leading to increased government intervention and renationalisation by subsequent governments.

While attempts were made to downplay the significance of July’s decision by the Office of National Statistics to put train operators on the public balance sheet, it is in fact only the latest in a worrying string of signals about the direction in which the railway and Boris Johnson’s government are headed. In June, the transport secretary Grant Shapps announced to a parliamentary select committee plans to introduce concessions across the rail network. Private operators will simply be paid a set fee to provide a basic service – another nail in the coffin for commercial investment or innovation.

Attention is now turning to what the government will do when the current “Emergency Measures Agreements” – hastily put in place to ensure trains kept running when passenger numbers nosedived by 95% as lockdown began – comes to an end in September.

An InterCity 125 power car in British Rail livery at Manchester Piccadilly in October 1976.
Photo by Dave Hitchborne via Wikimedia Commons.

August 20, 2020

QotD: Manipulating minimum wage laws to harm your competitors

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

I would be very surprised if careful research of the history of this Oregon statute did not reveal a producer group — or producer groups — who benefitted materially from the minimum-wage-induced stifling of competition.

The logic of such rent-creating legislation is plain: producer group A competes for many of the same customers against producer group B. Producer group A, however, uses for its production a mix of inputs (most importantly, capital and labor) that differs from the mix used by producer group B. Also, producer group B might compete most effectively against producer group A not by producing outputs as nearly identical as possible to that of A but, instead, by producing “substitute” goods or services that sell at prices lower than those charged by producer group A.

For example, producer group A might consist of locally owned restaurants with tablecloths and serving food freshly prepared by skilled chefs, while producer group B consists of chain restaurants serving food less exquisite but priced much lower. Members of producer group A are upset that producer group B is competing successfully for some diners who would likely otherwise eat more frequently at the restaurants of producer group A. What are the members of producer group A to do?

They could accept the fact that competition is not tortious — indeed, that economic competition is healthy for the economy at large — and do nothing other than compete harder to win more consumer patronage. That’d be the honest and honorable path to take. But government is in the picture, standing ready to escort those with little interest in honesty and honor down the rent-seeking path.

“So just pass legislation outlawing chain restaurants in our state,” suggests the leader of producer group A.

“Wish I could,” responds Sen. Slimey, “but that’s too blatant. Plus, it might not pass muster with the courts. But I’ve got an alternative plan that’s just as good.”

“Do tell!” exclaims the leader of producer group A.

“Well, I understand,” replies Sen. Slimey, “that the restaurants run by producer group B use many more low-skilled workers in their kitchens than your restaurants use.”

“That’s correct. We serve only fine food, so we hire experienced, high-skilled chefs, whose market wages are high.”

“So,” observes Sen. Slimey, “let’s enact a statute that raises the minimum wage above the average wage now paid to the average worker in producer group B’s restaurants, but lower than the average wage paid to workers in your — producer group A’s — restaurants.”

“Brilliant!” declares the leader of producer group A, who sees immediately that, while the minimum-wage legislation will on its face — de jure — apply to all restaurants, it will in fact have a differentially harsh effect on the restaurants in producer group B. The minimum wage will artificially raise producer group B’s costs of operation, causing them to reduce their outputs. One consequence of producer group B’s reduced outputs will be artificially increased demand for meals served at producer group A’s restaurants.

Sen. Slimey smiles, knowing that the news media, as well as most of the intellectuals in town, will applaud him for his apparent humanity and “Progressive” values. It’s a win-win for Sen. Slimey and for members of producer group A. And too few people will pay close-enough attention to the members, workers, and customers of producer group B to suspect that Sen. Slimey is anything other than a socially conscious public servant.

Don Boudreaux, “Doing Bad By Pretending to Do Good”, Café Hayek, 2018-05-13.

August 19, 2020

He calls it “unintended consequences”. I disagree … these consequences are very much intended

Filed under: Business, Economics, Government, Politics, Technology, USA — Tags: , , , , , , , — Nicholas @ 03:00

Brad Polumbo is being far too generous to Californian politicians by saying the impending collapse of the state’s entire gig economy was not the intended result of passing “worker protection” laws that penalized success:

UBER 4U by afagen is licensed under CC BY-NC-SA 2.0

This Friday, Uber and Lyft are set to entirely shut down ride-sharing operations in California. The businesses’ exit from the Golden State will leave hundreds of thousands of drivers unemployed and millions of Californians chasing an expensive cab. Sadly, this was preventable.

Here’s how we got to this point.

In September of 2019, the California state legislature passed AB 5, a now-infamous bill harshly restricting independent contracting and freelancing across many industries. By requiring ride-sharing apps such as Uber and Lyft to reclassify their drivers as full employees, the law mandated that the companies provide healthcare and benefits to all the drivers in their system and pay additional taxes.

Legislators didn’t realize the drastic implications their legislation would have; they were simply hoping to improve working conditions in the gig economy. The unintended consequences may end up destroying it instead.

Here’s why.

AB 5 went into effect in January, and now, a judge has ordered Uber and Lyft to comply with the regulation and make the drastic transformation by August 20. Since compliance is simply unaffordable, the companies are going to have to shut down operations in California.

Their entire business model was based upon independent contracting, so providing full employee benefits is prohibitively expensive. Neither Uber nor Lyft actually make a profit, and converting their workforce to full-time employees would cost approximately $3,625 per driver in California. As reported by Quartz, “that’s enough to boost Uber’s annual operating loss by more than $500 million and Lyft’s by $290 million.”

Essentially, California legislators put these companies in an impossible position. It makes perfect sense that they’d leave the state in response. It’s clear that despite the good intentions behind the ride-sharing regulation, this outcome will leave all Californians worse off.

August 10, 2020

FDR’s “New Deal” and the Great Depression

Filed under: Economics, Government, History, USA — Tags: , , , , , , , — Nicholas @ 03:00

The Great Depression began with the collapse of the stock market in 1929 and was made worse by the frantic attempts of President Hoover to fix the problem. Despite the commonly asserted gibe that Hoover tried laissez faire methods to address the economic crisis, he was a dyed-in-the-wool progressive and a life-long control freak (the Smoot-Hawley Tariff Act which devasted world trade was passed in 1930). Franklin D. Roosevelt won the 1932 election by promising to undo Hoover’s economic interventions, yet once in office he turned out to be even more of a control freak than Hoover. His economic and political plans made Hoover’s efforts seem merely a pale shadow.

For newcomers to this issue, “New Deal” is the term used to describe the various policies to expand the size and scope of the federal government adopted by President Franklin Delano Roosevelt (a.k.a., FDR) during the 1930s.

And I’ve previously cited many experts to show that his policies undermined prosperity. Indeed, one of my main complaints is that he doubled down on many of the bad policies adopted by his predecessor, Herbert Hoover.

Let’s revisit the issue today by seeing what some other scholars have written about the New Deal. Let’s start with some analysis from Robert Higgs, a highly regarded economic historian.

    … as many observers claimed at the time, the New Deal did prolong the depression. … FDR and Congress, especially during the congressional sessions of 1933 and 1935, embraced interventionist policies on a wide front. With its bewildering, incoherent mass of new expenditures, taxes, subsidies, regulations, and direct government participation in productive activities, the New Deal created so much confusion, fear, uncertainty, and hostility among businessmen and investors that private investment, and hence overall private economic activity, never recovered enough to restore the high levels of production and employment enjoyed in the 1920s. … the American economy between 1930 and 1940 failed to add anything to its capital stock: net private investment for that eleven-year period totaled minus $3.1 billion. Without capital accumulation, no economy can grow. … If demagoguery were a powerful means of creating prosperity, then FDR might have lifted the country out of the depression in short order. But in 1939, ten years after its onset and six years after the commencement of the New Deal, 9.5 million persons, or 17.2 percent of the labor force, remained officially unemployed.

Writing for the American Institute for Economic Research, Professor Vincent Geloso also finds that FDR’s New Deal hurt rather than helped.

    … let us state clearly what is at stake: did the New Deal halt the slump or did it prolong the Great Depression? … The issue that macroeconomists tend to consider is whether the rebound was fast enough to return to the trendline. … The … figure below shows the observed GDP per capita between 1929 and 1939 expressed as the ratio of what GDP per capita would have been like had it continued at the trend of growth between 1865 and 1929. On that graph, a ratio of 1 implies that actual GDP is equal to what the trend line predicts. … As can be seen, by 1939, the United States was nowhere near the trendline. … Most of the economic historians who have written on the topic agree that the recovery was weak by all standards and paled in comparison with what was observed elsewhere. … there is also a wide level of agreement that other policies lengthened the depression. The one to receive the most flak from economic historians is the National Industrial Recovery Act (NIRA). … In essence, it constituted a piece of legislation that encouraged cartelization. By definition, this would reduce output and increase prices. As such, it is often accused of having delayed recovery. … other sets of policies (such as the Agricultural Adjustment Act, the National Labor Relations Act and the National Industrial Recovery Act) … were very probably counterproductive.

Here’s one of the charts from his article, which shows that the economy never recovered lost output during the 1930s.

August 6, 2020

Congress legislating on high tech is like your Grampa telling you how to play your favourite online game

Filed under: Bureaucracy, Business, Government, Politics, Technology — Tags: , , , , , — Nicholas @ 05:00

Brad Polumbo on the notion that the politicians in Washington (or Ottawa, or London, or Canberra, …) are in any way capable of sensibly regulating the high tech sector:

While many principled small-government conservatives, such as Sen. Rand Paul, still back a free-market approach to tech policy issues, Hawley is not an outlier by any means.

Indeed, President Trump has also backed the regulation of social media companies to combat perceived anti-conservative bias. And the most popular conservative media personality in the country, Fox News host Tucker Carlson, regularly rails against Big Tech — even agreeing with progressive proposals to use the heavy hand of government antitrust regulation to break up companies such as Facebook and Google.

So, if major figures from both parties can agree on regulating Big Tech, it must be a good idea, right? Not so fast.

From left to right, the intentions behind these regulatory proposals are often good. After all, most reasonable people would likely share Democrats’ desire to see Big Tech better handle misinformation, “fake news,” and foreign election interference, while conservative Republicans’ calls for political neutrality online are no doubt appealing in the abstract.

Unfortunately, in their haphazard rush to score political points through government action, would-be regulators from both parties are forgetting the inevitable “knowledge problem” that plagues any central planners who try to dictate the minutiae of complicated industries from the halls of Washington, DC.

Economic philosopher Friedrich A. Hayek diagnosed this fatal flaw of government control in his seminal work “The Use of Knowledge in Society.”

    “If we can agree that the economic problem of society is mainly one of rapid adaptation to changes in the particular circumstances of time and place,” Hayek wrote. “It would seem to follow that the ultimate decisions must be left to the people who are familiar with these circumstances, who know directly of the relevant changes and of the resources immediately available to meet them.”

    “We cannot expect that this problem will be solved by first communicating all this knowledge to a central board which, after integrating all knowledge, issues its orders,” he continued. “We must solve it by some form of decentralization. But this answers only part of our problem. We need decentralization because only thus can we insure that the knowledge of the particular circumstances of time and place will be promptly used.“

July 25, 2020

QotD: The real life implications of “positive” rights

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

… these same people want the government to provide them with free health care, and if they got their full way, other “positive liberties” (to quote Obama) including free college, free housing, free food, guaranteed income, guaranteed jobs.

[…] the moment all your necessities are furnished by someone else, someone else gets to make all the decisions for you. I mean, if your health is paid for by the taxes of your fellow citizens, and the government aka the nation looks after your every need: should they pay for your health if you insist on smoking or drinking? Or should those resources be husbanded for people who take better care of themselves? Okay, Sarah, but isn’t there a point to individual responsibility? Why shouldn’t you be required to take minimal care of yourself, so you get the benefits of the government’s care, which as you say someone else pays for.

Ah, but there’s the rub. See, ultimately, there’s always something some of us say or do that can be used to justify denying care or giving only palliative care. For instance, I’m overweight, which seems to be one of the remaining sins in the current lexicon. Sure, I gained tons of weight over 20 years of untreated hypothyroidism, even though I was starving myself for a long portion of those. But hey, I allowed myself to be overweight. So my prognosis is poor. Why spend money on me, when someone else could have better results?

Hell, even when it comes to my autoimmune. I’m a poor prospect, so why give me top of the line care?

If the government controlled other things, it would be exactly the same. Food? Sure, I break out in eczema all over when I eat a diet rich in carbs. But hey, flour and rice are cheap, and why should I get a specialized diet, since I’m only a writer who isn’t even a leftist or a supporter of the state, and besides my prospects of survival are poor?

College? Sure you want to be an economist, but your teachers say you’re cheeky and talk back, and the state doesn’t need that. What we need right now are pipe fitters. Here, you can take this six week course.

When the state is paying the bill, the state gets to decide what is better for you. The European constitution gives you the right to “death with dignity” because death with dignity is much cheaper than expensive treatments with a low chance of survival. After all this money is for everyone, you know?

And like the NHS, in Britain, they won’t even let you seek treatment outside their tender mercies. Why should they? They pay for you. That means in the end they decide what to spend on you. They own you. And if you went outside their system and your kid got cured? It would look pretty bad for them, wouldn’t it? Why should they allow you to do that? And besides, peasant, you have a bad attitude.

Sarah Hoyt, “Slouching Into Shackles”, According to Hoyt, 2018-04-27.

June 23, 2020

QotD: Scientific discoveries despite “research” and “planning”

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

We live in a culture of “research” and “planning.” I’m not against honest research (which is rare), but mortally opposed to “planning.” The best it can ever achieve is failure, when some achievement comes despite its ham-fisted efforts. Countless billions, yanked from the taxpayers’ pockets, and collected through highly professional, tear-jerking campaigns, are spent “trying to find a cure” for this or that. When and if it comes, it is invariably the product of some nerd somewhere, with a messy lab. Should it be noticed at all, more billions will be spent appropriating the credit, or more likely, suppressing it for giving “false hope.” The regulators will be called in, as the police are to a crime scene.

For from the “planning” point of view, the little nerd has endangered billions of dollars in funding, and thus the livelihoods of innumerable bureaucratic drudges. That is, after all, why they retain the China Wall of lawyers: to prevent unplanned events from happening. But glory glory, sometimes they happen anyway.

David Warren, “That’s funny”, Essays in Idleness, 2018-03-08.

June 20, 2020

Opposition to home schooling is merely a side-issue for those who want government to control everything

Filed under: Education, Government, Liberty, Politics, USA — Tags: , , , , , — Nicholas @ 03:00

Kerry McDonald recently took part in a debate with a Harvard academic who has called upon governments to ban homeschooling. She’s written up some of the things she took away from the discussion and from the many questions submitted before the event:

While this event was framed as a discussion about homeschooling, including whether and how to regulate the practice, it is clear that homeschooling is just a strawman. The real issue focuses on the role of government in people’s lives, and in particular in the lives of families and children. In her 80-page Arizona Law Review article that sparked this controversy, Professor Bartholet makes it clear that she is seeking a reinterpretation of the US Constitution, which she calls “outdated and inadequate,” to move from its existing focus on negative rights, or individuals being free from state intervention, to positive rights where the state takes a much more active role in citizens’ lives.

During Monday’s discussion, Professor Bartholet explained that “some parents can’t be trusted to not abuse and neglect their children,” and that is why “kids are going to be way better off if both parent and state are involved.” She said her argument focuses on “the state having the right to assert the rights of the child to both education and protection.” Finally, Professor Bartholet said that it’s important to “have the state have some say in protecting children and in trying to raise them so that the children have a decent chance at a future and also are likely to participate in some positive, meaningful ways in the larger society.”

It’s true that the state has a role in protecting children from harm, but does it really have a role in “trying to raise them”? And if the state does have a role in raising children to be competent adults, then the fact that two-thirds of US schoolchildren are not reading proficiently, and more than three-quarters are not proficient in civics, should cause us to be skeptical about the state’s ability to ensure competence.

I made the point on Monday that we already have an established government system to protect children from abuse and neglect. The mission of Child Protective Services (CPS) is to investigate suspected child abuse and punish perpetrators. CPS is plagued with problems and must be dramatically reformed, but the key is to improve the current government system meant to protect children rather than singling out homeschoolers for additional regulation and government oversight. This is particularly true when there is no compelling evidence that homeschooling parents are more likely to abuse their children than non-homeschooling parents, and some research to suggest that homeschooling parents are actually less likely to abuse their children.

Additionally, and perhaps most disturbingly, this argument for more state involvement in the lives of homeschoolers ignores the fact that children are routinely abused in government schools by government educators, as well as by school peers. If the government can’t even protect children enrolled in its own heavily regulated and surveilled schools, then how can it possibly argue for the right to regulate and monitor those families who opt out?

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