Prosecutors, and regulators more generally, like vague standards that are impossible to enforce consistently. It gives them a great deal of discretion in whom they target and how. It is a threat that can be wielded to force pleas to lesser crimes or other “voluntary” actions that obviate the need for a messy trial they might lose.
Megan McArdle, “California Accidentally Legalizes Campus Sex”, Bloomberg View, 2014-09-23.
September 25, 2015
QotD: The danger of vague laws
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September 24, 2015
Ontario takes baby steps toward liberalizing the beer market
At the Toronto Beer Blog, a less-than-enthused look at the latest changes to minimally change the just-barely-beyond-prohibition-era rules for selling beer in Ontario:
This has been a noisy day in the wonderful world of beer sales in Ontario. The Liberal government released the details of the new 195 page master agreement between The Beer Store, the Province (LCBO), and the new kids on the block, grocery stores.
Much of the information is what we heard when they announced it with the budget. Some more details have come out. If you read my thoughts in April, you will remember I was not happy. I’m still not.
The good from today’s news is there are some clear definitions of what constitutes a grocery store (10 000 sq/feet dedicated to groceries, not primarily identified as a pharmacy); that the 20% craft shelf space is for both grocery stores and The Beer Store, and that there cannot be a fee to get listed (though we all know how effectively the province enforces pay-to-play in bars around the province); and that they have some novel system to divide sales licenses between both huge chains and independent grocers.
The old news about shared shipping for smaller breweries and no volume limit for a second on-site retail location are accurate, and very good news.
But here’s the thing: This is just more Ontario political craziness.
This is to “level the field”, apparently for small brewers, who nobody would suggest get a fair shake in the current system.
But what could have been an actual leveling of the playing field, turned out to be more insanity and government control and meddling. And remember, I’m saying that as a sworn lefty nutjob, who generally thinks having controls and regulations is a good thing.
Remember, these are not the ravings of a far-right-wing free-enterprise-maniac … these are the regrets of a self-described “sworn lefty nutjob”:
A level playing field would be one where anybody could apply for a license to sell beer, and do it. A brewery can pick and choose who they sell to, as a retailer can choose who they do business with. Nobody would need to guarantee a percentage of shelf space, because the market would control what products were successful and got shelf space.
This isn’t a level playing field, it’s just a bunch of new rules to try to counter how horrible we’ve allowed our playing field to get. Yes, it will be more convenient for people who shop at one of the 450 stores that have a license. But the agreement still favours The Beer Store heavily (for instance, grocers are limited in the volume they can sell. They can exceed the limit, but then have to pay a fine to the LCBO who distribute it to, you guessed it, the breweries who own The Beer Store to offset their lost sales. Seriously).
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September 21, 2015
Command and Control Solutions
Published on 18 Mar 2015
What happened to the cleanliness of your clothes after the U.S. Department of Energy issued new washing machine requirements? The requirements — which require washers to use 21% less energy — mean that washers actually clean clothes less than they used to. Is “command and control” an efficient way to achieve the desired outcome (which is less pollution)? Rather than a standard requirement, such as the Department of Energy issued, a tax on electricity would provide users with greater flexibility in their washing—and would prompt people to purchase machines that use energy more efficiently and keep their clothes clean.
Are there times when a command and control solution to a problem makes the most sense? We look at the eradication of smallpox as one example.
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September 18, 2015
What is killing small US businesses? Compliance costs and regulatory overstretch
Okay, perhaps the headline is a bit strong, but Warren Meyer explains why even “small” businesses need to be bigger than ever in order to be able to file all the appropriate government forms, rather than concentrating on serving their customers and growing their client base:
Over the last four years or so we have spent all of this capacity on complying with government rules. No capacity has been left over to do other new things. Here are just a few of the things we have been spending time on:
- Because no insurance company has been willing to write coverage for our employees (older people working seasonally) we were forced to try to shift scores of employees from full-time to part-time work to avoid Obamacare penalties that would have been larger than our annual profits. This took a lot of new processes and retraining and new hiring to make work. And we are still not done, because we have to get down another 30 or so full-time workers for next year.
- The local minimum wage movement has forced us to rethink our whole labor system to deal with rising minimum wages. Also, since we must go through a time-consuming process to get the government agencies we work with to approve pricing and fee changes, we have had to spend an inordinate amount of time justifying price increases to cover these mandated increases in our labor costs. This will just accelerate in the future, as the President’s contractor minimum wage order is, in some places, forcing us to raise camping prices by an astounding 20%.
- Several states have mandated we use e-Verify on all new employees, which is an incredibly time-consuming addition to our hiring process.
- In fact, the proliferation of employee hiring documentation requirements has forced us through two separate iterations of a hiring document tracking and management system.
- The California legislature can be thought of as an incredibly efficient machine for creating huge masses of compliance work. We have to have a whole system to make sure our employees don’t work over their meal breaks. We have to have detailed processes in place for hot days. We have to have exactly the right kinds of chairs for our employees. We have to put together complicated shifts to meet California’s much tougher overtime rules. Just this past year, we had to put in a system for keeping track of paid sick days earned by employees. We have two employee manuals: one for most of the country and one just for California and all its requirements (it has something like 27 flavors of mandatory leave employers must grant). The list goes on and on. So much so that in addition to all the compliance work, we also spent a lot of work shutting down every operation of ours in California, narrowing down to just 3 contracts today. There has been one time savings though — we never look at any new business opportunities in CA because we have no desire to add exposure to that state.
Does any of this add value? Well, I suppose if you are one who considers it more important that companies make absolutely sure they offer time off to stalking victims in California than focus on productivity, you are going to be very happy with what we have been working on. Otherwise….
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September 17, 2015
Regulatory tangle may shut down major US railroads in December
A safety regulation for US common-carrier railroads is due to come into effect at the end of December, but the railroad companies are already warning that they may not be able to comply and that the only legal course of action under the current rules would be to shut down:
In a candid letter to a U.S. senator, BNSF Railway’s chief executive, Carl Ice, said September 9 that BNSF would in effect shut down most of its network rather than violate a federal law mandating that positive train control be operational by December 31. CSX Transportation has said it, too, questions whether it should violate federal laws, and other Class I carriers are likely to follow suit. This set up the real possibility of a national transportation crisis at the beginning of 2016. The public may be unaware of how closely the U.S. economy is tied to railroads, but the reality is that without railroads, this country will quickly cease to function normally. Imagine, for instance, no electricity to heat homes.
[…]
The Surface Transportation Board, which regulates railroads, in effect came to the aid of BNSF and other railroads this past week. Its chairman, Daniel Elliott, wrote to Thune to say that railroads can “lawfully suspend service for various reasons, including safety.” In other words, Elliott is saying that the common carrier obligation of railroads is not absolute. Elliott added that CSX has expressed sentiments similar to those of BNSF.
So what does this all mean? I take railroads at their word that they have diligently tried to install PTC by the deadline. Six years ago Congress thought it was giving railroads enough time to do this, and railroads did not object then to that deadline. But implementation has been a disaster. The technology being put in place is largely new. FRA was slow to issue necessary rules. Signal engineers able to put all the pieces together have been in short supply. And then for more than a year everything ground to a halt because the Federal Communications Commission would not issue permits for construction of radio towers and antennae.
Further, as Ice points out to Thune, PTC is full of bugs as railroads roll it out on their networks. Says Ice: “We are seeing the PTC system trigger unnecessary braking events in which trains are stopped with a full-service brake application. This means that significant work has to occur before the train can re-start. These kinds of delays are numerous and cumulatively consume railroad capacity.”
What railroads have sought is an extension of the deadline, something that Congress has thus far refused to act upon because the votes to permit an extension aren’t there. Now the industry is beginning to say fine, we will not disobey the law and as a result we will be able to offer only a fraction of the service our customers depend upon.
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September 14, 2015
Cash is still king … and we’d be insane to abolish it
In the Telegraph last month, Matthew Lynn made the case against eliminating cash:
Trying to get a plumber in France? In the rather unlikely event that you can actually find one who isn’t still on his grandes vacances, gone above his permitted 35 hours a week, or indeed long since relocated himself to South Kensington, then you’ll also have to make sure that you can pay by cheque or bank transfer.
From today, France is banning the use of cash for transactions worth more than €1,000, or slightly more than £700. On one level, that is about combating crime and terrorism. But on another, it is also part of a growing movement among academics and now governments to gradually ban the use of cash completely. It is inefficient, oils the underground economy, and makes it harder for central banks to manage the economy, or so runs the argument.
Much like gold, it is a “barbarous relic”, as some publications loftily dismiss it. The trouble is, cash is also incredibly efficient. And it is a crucial part of a free society. There is no convincing case for abolition.
When it comes to creeping state control, it is no surprise to find the French out in front. In the wake of this year’s attack on the Charlie Hebdo office, the government has clamped down on the use of cash. The maximum permitted transaction has been reduced from €3,000 to €1,000, and any cash withdrawal of more than €10,000 will be automatically flagged up to the police (tourists have a higher limit, but even that is being reduced to €10,000 – just in case you are planning on ordering some very expensive wine on your next trip to Paris).
[…]
In reality, cash is far too valuable to be given up lightly. In truth, the benefits of abolition are largely oversold. While terrorists and criminals may well use cash to buy weapons, or deal in drugs, it is very hard to believe that they would not find some other way of financing their operations if it was abolished. Are there really any cases of potential jihadists being foiled because they couldn’t find two utility bills (less than three months old, of course) in a false name to open an account? The web is full of false payment systems and anonymous names.
Nor is clamping down on the black economy such a big deal. Admittedly these things are hard to measure, but according to research by the London School of Economics, the black economy only accounts for 10pc of British GDP, which is the fourth lowest in the EU. Many of the people working in it are below the tax threshold anyway, and certainly below the VAT threshold. So the tax collected even if you clamped down completely is unlikely to amount to more than 1pc of GDP. As for negative interest rates, do we really want those? Or have we concluded that central bankers are doing more harm than good with their attempts to manipulate the economy?
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September 2, 2015
Seattle is considering implementing rent control
Megan McArdle on the things Seattle may learn — painfully — if they fail to heed the experiences of other cities that have implemented rent control:
So I see that Seattle is considering rent control. For a columnist who covers economic issues, this is a little bit like hearing that residents are debating how big to make the reet pleats on their zoot suits. It’s hard to get economists to agree on much of anything, but as Alex Tabarrok notes, this is an area of rare consensus among economists: Rent control creates more problems than it solves.
If you want a vivid example of what those problems look like, you can do no better than a letter written by a resident of Stockholm to the good citizens of Seattle, quoted by Tabarrok: “Seattle, you need to ask your citizens this: How would citizens like it if they walked into a rental agency and the agent told them to register and come back in 10 years? … Stockholm City Council now has an official housing queue, where 1 day waiting = 1 point. To get an apartment you need both money for the rent and enough points to be the first in line. Recently an apartment in inner Stockholm became available. In just 5 days, 2000 people had applied for the apartment. The person who got the apartment had been waiting in the official housing queue since 1989!”
Now, Stockholm is extreme. But the general effect always goes in the same direction. Rent control creates two classes of tenants: people who have the right to rent at below-market rates, and renters who would like to get a long-term lease on an apartment, but cannot, or must pay through the nose for a limited number of uncontrolled properties. Meanwhile, landlords let the quality of the existing stock decline and become very reluctant to build new housing that they can’t make a profit on.
This is not some sort of arcane secret that has not reached the policy analysts in our nation’s fair metropolises. They’re well aware of what rent control does. So why is it ever on the table?
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August 28, 2015
Google and the (bullshit) European “right to be forgotten”
Techdirt‘s Mike Masnick points and laughs at a self-described consumerist organization’s attempt to force Google to apply EU law to the rest of the world, by way of an FTC complaint:
If you want an understanding of my general philosophy on business and economics, it’s that companies should focus on serving their customers better. That’s it. It’s a very customer-centric view of capitalism. I think companies that screw over their customers and users will have it come back to bite them, and thus it’s a better strategy for everyone if companies focus on providing good products and services to consumers, without screwing them over. And, I’m super supportive of organizations that focus on holding companies’ feet to the fire when they fail to live up to that promise. Consumerist (owned by Consumer Reports) is really fantastic at this kind of thing, for example. Consumer Watchdog, on the other hand, despite its name, appears to have very little to do with actually protecting consumers’ interests. Instead, it seems like some crazy people who absolutely hate Google, and pretend that they’re “protecting” consumers from Google by attacking the company at every opportunity. If Consumer Watchdog actually had relevant points, that might be useful, but nearly every attack on Google is so ridiculous that all it does is make Consumer Watchdog look like a complete joke and undermine whatever credibility the organization might have.
In the past, we’ve covered an anti-Google video that company put out that contained so many factual errors that it was a complete joke (and was later revealed as nothing more than a stunt to sell some books). Then there was the attempt to argue that Gmail was an illegal wiretap. It’s hard to take the organization seriously when it does that kind of thing.
Its latest, however, takes the crazy to new levels. John Simpson, Consumer Watchdog’s resident “old man yells at cloud” impersonator, recently filed a complaint with the FTC against Google. In it, he not only argues that Google should offer the “Right to be Forgotten” in the US, but says that the failure to do that is an “unfair and deceptive practice.” Really.
As you know by now, since an EU court ruling last year, Google has been forced to enable a right to be forgotten in the EU, in which it will “delink” certain results from the searches on certain names, if the people argue that the links are no longer “relevant.” Some in the EU have been pressing Google to make that “right to be forgotten” global — which Google refuses to do, noting that it would violate the First Amendment in the US and would allow the most restrictive, anti-free speech regime in the world to censor the global internet.
But, apparently John Simpson likes censorship and supporting free speech-destroying regimes. Because he argues Google must allow such censorship in the US. How could Google’s refusal to implement “right to be forgotten” possibly be “deceptive”? Well, in Simpson’s world, it’s because Google presents itself as “being deeply committed to privacy” but then doesn’t abide by a global right to be forgotten. Really.
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August 26, 2015
Organic food recalls on the rise
It must be a trend if even the New York Times is reporting on the increasing number of food safety recalls involving organic food:
New data collected by Stericycle, a company that handles recalls for businesses, shows a sharp jump in the number of recalls of organic food products.
Organic food products accounted for 7 percent of all food units recalled so far this year, compared with 2 percent of those recalled last year, according to data from the Food and Drug Administration and the Department of Agriculture that Stericycle uses to compile its quarterly report on recalls.
In 2012 and 2013, only 1 percent of total units of food recalled were organic.
Kevin Pollack, a vice president at Stericycle, said the growing consumer and corporate demand for organic ingredients was at least partly responsible for the increase.
“What’s striking is that since 2012, all organic recalls have been driven by bacterial contamination, like salmonella, listeria and hepatitis A, rather than a problem with a label,” Mr. Pollack said. “This is a fairly serious and really important issue because a lot of consumers just aren’t aware of it.”
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August 22, 2015
Coming soon to Massachusetts (maybe) – pot pubs
In Forbes, Jacob Sullum looks at the finalized ballot initiative to be presented to Massachusetts voters in the next general election:
When the Campaign to Regulate Marijuana Like Alcohol in Massachusetts unveiled the text of its 2016 legalization initiative this month, the group highlighted several features of the measure but omitted the most interesting one. The Regulation and Taxation of Marijuana Act would allow consumption of cannabis products on the premises of businesses that sell them, subject to regulation by the state and approval by local voters.
That’s a big deal, because until now no jurisdiction has satisfactorily addressed the obvious yet somehow touchy question of where people can consume the cannabis they are now allowed to buy. The legalization initiatives approved by voters in Colorado, Washington, Oregon, and Alaska all promised to treat marijuana like alcohol, which implies allowing venues similar to taverns where people can consume cannabis in a social setting. Yet all four states say businesses that sell marijuana may not let customers use it on the premises.
Although a few “bring your own cannabis” (BYOC) clubs have popped up to accommodate people who want to use marijuana outside their homes from time to time, the legality of such establishments is a matter of dispute. The result is that people can openly buy marijuana without fear, but they still have to consume it on the sly, just like in the bad old days. The problem is especially acute for visitors from other states, since pot-friendly hotels are still pretty rare.
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August 20, 2015
How Buildings Learn – Stewart Brand – 4 of 6 – “Unreal Estate”
Published on 10 Jun 2012
This six-part, three-hour, BBC TV series aired in 1997. I presented and co-wrote the series; it was directed by James Muncie, with music by Brian Eno.The series was based on my 1994 book, HOW BUILDINGS LEARN: What Happens After They’re Built. The book is still selling well and is used as a text in some college courses. Most of the 27 reviews on Amazon treat it as a book about system and software design, which tells me that architects are not as alert as computer people. But I knew that; that’s part of why I wrote the book.
Anybody is welcome to use anything from this series in any way they like. Please don’t bug me with requests for permission. Hack away. Do credit the BBC, who put considerable time and talent into the project.
Historic note: this was one of the first television productions made entirely in digital— shot digital, edited digital. The project wound up with not enough money, so digital was the workaround. The camera was so small that we seldom had to ask permission to shoot; everybody thought we were tourists. No film or sound crew. Everything technical on site was done by editors, writers, directors. That’s why the sound is a little sketchy, but there’s also some direct perception in the filming that is unusual.
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August 17, 2015
Food fears and GMOs
Henry I. Miller and Drew L. Kershen on the widespread FUD still being pushed in much of the mainstream media about genetically modified organisms in the food supply:
New York Times nutrition and health columnist Jane Brody recently penned a generally good piece about genetic engineering, “Fears, Not Facts, Support GMO-Free Food.” She recapitulated the overwhelming evidence for the importance and safety of products from GMOs, or “genetically modified organisms” (which for the sake of accuracy, we prefer to call organisms modified with molecular genetic engineering techniques, or GE). Their uses encompass food, animal feed, drugs, vaccines and animals. Sales of drugs made with genetic engineering techniques are in the scores of billions of dollars annually, and ingredients from genetically engineered crop plants are found in 70-80 percent of processed foods on supermarket shelves.
Brody’s article had two errors, however. The first was this statement, in a correction that was appended (probably by the editors) after the article was published:
The article also referred imprecisely to regulation of GMOs by the Food and Drug Administration and the Environmental Protection Agency. While the organizations regulate food from genetically engineered crops to ensure they are safe to eat, the program is voluntary. It is not the case that every GMO must be tested before it can be marketed.
In fact, every so-called GMO used for food, fiber or ornamental use is subject to compulsory case-by-case regulation by the Animal and Plant Health Inspection Service (APHIS) of USDA and many are also regulated by the Environmental Protection Agency (EPA) during extensive field testing. When these organisms — plants, animals or microorganisms — become food, they are then overseen by the FDA, which has strict rules about misbranding (inaccurate or misleading labeling) and adulteration (the presence of harmful substances). Foods from “new plant varieties” made with any technique are subject to case-by-case premarket FDA review if they possess certain characteristics that pose questions of safety. In addition, food from genetically engineered organisms can undergo a voluntary FDA review. (Every GE food to this point has undergone the voluntary FDA review, so FDA has evaluated every GE food on the market).
The second error by Brody occurred in the very last words of the piece, “the best way for concerned consumers to avoid G.M.O. products is to choose those certified as organic, which the U.S.D.A. requires to be G.M.O.-free.” Brody has fallen victim to a common misconception; in fact, the USDA does not require organic products to be GMO-free.
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August 15, 2015
Still suffering from the injustices of a caste system? Just apply capitalism
Swaminathan S. Anklesaria Aiyar explains how the introduction of free market practices is rapidly undermining the ancient caste system in India:
Karl Marx was wrong about many things but right about one thing: the revolutionary way capitalism attacks and destroys feudalism. As I explain in a new study, in India, the rise of capitalism since the economic reforms of 1991 has also attacked and eroded casteism, a social hierarchy that placed four castes on top with a fifth caste — dalits — like dirt beneath the feet of others. Dalits, once called untouchables, were traditionally denied any livelihood save virtual serfdom to landowners and the filthiest, most disease-ridden tasks, such as cleaning toilets and handling dead humans and animals. Remarkably, the opening up of the Indian economy has enabled dalits to break out of their traditional low occupations and start businesses. The Dalit Indian Chamber of Commerce and Industry (DICCI) now boasts over 3,000 millionaire members. This revolution is still in its early stages, but is now unstoppable.
Milind Kamble, head of DICCI, says capitalism has been the key to breaking down the old caste system. During the socialist days of India’s command economy, the lucky few with industrial licenses ran virtual monopolies and placed orders for supplies and logistics entirely with members of their own caste. But after the 1991 reforms opened the floodgates of competition, businesses soon discovered that to survive, they had to find the most competitive inputs. What mattered was the price of your supplier, not his caste.
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August 8, 2015
Election issue – the Netflix tax, “much ado about nothing?”
Michael Geist looks at the major federal party leaders’ reactions to discussion of a “Netflix tax”:
As part of the digital strategy discussion, I stated that questions abound, including “are new regulations over services such as Netflix on the horizon?”
Prime Minister Stephen Harper addressed that question yesterday with a video and tweet in which he pledged that the Conservatives will never tax digital streaming services like Netflix and Youtube. Harper added that the Liberals and NDP have left the door open to a Netflix tax, but that he is 100% opposed, “always has been, always will be.” Both opposition parties quickly responded with the NDP saying they have not proposed a Netflix tax and the Liberals saying they have never supported a Netflix tax and do not support a Netflix tax.
So is this much ado about nothing?
Not exactly. First, there are groups and provincial governments that support a Netflix tax or mandated contribution to fund the creation of Canadian content. These include the Ontario and Quebec governments along with many creator groups. Earlier this year, I obtained documents under the Ontario Freedom of Information and Protection of Privacy Act that showed that the Ontario government spent months working toward a recommendation to expand the regulation of new media, including Canadian content requirements and increased regulation of foreign online video providers.
Second, while the Liberals and NDP have not proposed a Netflix tax, they have called for requirements that online video providers disclose revenues, Canadian content availability, and subscriber numbers to Canadian regulators. This is a very soft form of regulation that Netflix and Google have rejected as beyond the power of the Broadcasting Act. Providing information to allow for more informed regulatory analysis does not seem particularly unreasonable, but the companies unsurprisingly fear that that analysis could ultimately lead to calls for more regulation or payments.
Third, the real Netflix tax is the prospect of a levying sales taxes on digital products such as music downloads or online video services. It was the Conservatives that raised this possibility in the 2014 budget, launching a consultation on the issue that garnered supportive comments from companies such as Rogers, which noted that Canadian-based online video services such as Shomi operate at a disadvantage since they collect GST/HST, but Netflix does not. With many countries moving toward some form of digital taxation (as I noted in a January 2015 column on the issue, the real challenge lies in the cost of implementation), it seems inevitable that Canada will do the same in order to level the playing field and recoup a growing source of revenue. The Conservatives would presumably seek to differentiate between a generally applicable sales tax and a tax or fee targeting online streaming services, though many may feel it is a distinction without a difference.
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August 4, 2015
Alex Tabarrok explains the “Happy Meal fallacy”
Another post from last month that I’m just getting around to linking:
Some restaurants offer burgers without fries and a drink. These restaurants cater to low-income people who enjoy fries and drinks but can’t always afford them. To rectify this sad situation a presidential candidate proposes The Happy Meal Act. Under the Act, burgers must be sold with fries and a drink. “Burgers by themselves are not a complete, nutritious meal,” the politician argues, concluding with the uplifting campaign slogan, “Everyone deserves a Happy Meal!”
But will the Happy Meal Act make people happy? If burgers must come with fries and a drink, restaurants will increase the price of a “burger.” Even though everyone likes fries and a drink they may not like the added benefits by as much as the increase in the price of the meal. Indeed, this must the case since consumers could have bought the meal before the Act but chose not to. Requiring firms to sell benefits that customers value less than their cost makes both firms and customers worse off.
The Happy Meal Fallacy is fairly obvious when it comes to happy meals but now let’s consider the debate over the gig economy and the hiring of employees versus contractors. Employees are entitled to benefits that contractors are not. Thus the standard conclusion is that classifying workers as contractors “is great for employers but potentially terrible for workers.” Wrong. Employees get their wages with fries and a drink while contractors get wages only. Would a law requiring firms to provide all workers with fries and a drink help workers?
If firms are required to provide benefits to contractors they will lower the contractor wage. But how do we know the extra benefits aren’t worth the reduction in wages? If the extra benefits were worth more to workers than they cost firms, firms would have eagerly provided these benefits as a way of increasing profits. Firms can profit whenever buyers are willing to pay more for a product than its cost. Benefits are a product that workers buy from firms.
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