Tag Archives: Regulation

Regulatory Differences

I recently discussed a puzzling regulatory difference: our applying work hour limits less to high than low status jobs. Many took me to be advocating fewer limits for low status jobs, and were eager to point out good reasons for work hour limits. But our not having a good reason for putting more work hour limits on high vs. low status jobs can equally well support adding more limits to high status jobs, rather than fewer limits on low status jobs.

John Cochrane similarly discussed a puzzling regulatory difference:

Ken Rogoff put in this little zinger

Medical care … fails to satisfy several of the basic requirements necessary for the price mechanism to produce economic efficiency, beginning with the difficulty that consumers have in assessing the quality of their treatment.

… really, Et tu Ken? It’s hard to know if the car mechanic is doing a good job. Get ready for the Federal takeover of the car industry. I can’t tell B grade exterior from A grade interior plywood, so we need a Federal takeover of home rehab.

Many readers probably take this as an argument for less medical regulation, and are eager to argue for or against that position. But pointing out that we have a similar difficulty assessing car mechanic and doctor quality can equally well argue for regulating car mechanics more, instead of regulating doctors less.

In general, people seem far more eager to collect respectable arguments for or against various specific regulations, than to consider the coherence of a pattern of regulations they endorse. They are satisfied to offer arguments for why janitors should have work hour limits, why musicians should not, why doctors should be highly regulated, and why car mechanics should not, all without much noticing or caring how much they treat similar cases differently.

This suggests that there is a lot of rationalization going on. That is, rather than choosing some principles and then consistently applying them, people instead pick various random policy positions and then search for justifications. There seems to be only weak pressures to even notice much less reduce how they and their arguments treat similar things differently.

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Over-Regulated Flight

Over-regulation is delaying the automation of flight:

Time was when a uniformed man would close a metal gate, throw a switch, and intone, “Second floor- men’s clothing, linens, power tools …” and the carload of people would glide upward. Now each passenger handles the job with a punch of a button and not a hint of white-knuckled hesitation. … And back in the day, every train had an “engineer” in the cab of the locomotive. Then robo-trains took over intra-airport service, and in the past decade they have appeared on subway lines in Copenhagen, Detroit, Tokyo, and other cities. …

Automation … runs oceangoing freighters, the crews of which have shrunk by an order of magnitude in living memory. … Today, the U.S. military trains twice as many ground operators for its unmanned aerial vehicles (UAVs) as pilots for its military jets. Its UAVs started off by flying surveillance millions, then took on ground attack; now they are bering readied to move cargo and evacuate wounded soldiers.

In the sphere of commercial flight, too, automation has thinned the cockpit crew from five to just the pilot and copilot, whose jobs it has greatly simplified. Do we even need those two? Many aviation experts think not. ….

Still, UAVs have yet to find a place in even the humblest parts of the aviation business – surveying traffic jams, say, or snooping on celebrity weddings. Such work has not yet been approved for routine purposes, even when the aircraft is small and controlled by a human on the ground. …

Technical problems are hardly the entire explanation. The military has proved this time and again. … For nearly two decades, automatic landing systems have been able to drop and stop a jet on the fog shrouded deck of an aircraft carrier. … “There’s no harder job for a pilot than landing on an aircraft carrier.” …

Pilotless commercial flight is overdue … Civilian UAVs could easily and profitablyt be deployed to survey infrastructure and carry cargo. … Already, … an airliner’s software typically takes over flight secods after takeoff, handles the landing – and most of what happens in between. The pilot just “babysits.” … Global Hawk .. is able to fly itself home and land on its own if it loses its satellite link with its ground station. ..

As significant as the technical hurdles are, however, by far the biggest impediment to pilotless flight lies in the mind. People who otherwise retain a friendly outlook toward futuristic technologies are quick to declare that they’d never board a plan run by software. (more)

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Em City By Combo Auction

Yesterday I outlined how combinatorial auctions could help our cities better coordinate their land use and utility capacity, without granting great discretion to a central power. But I ended with:

It would be very hard to get agreement to change to this system from today’s system of property rights and regulatory restrictions. I despair of it happening in our comfortable and change-averse cities. So we might have to wait until a big disruption creates lots of other change. (more)

Two years ago I pointed to a big-enough future disruption:

Rich stable nations … feel little inclination to consider big disruptive changes. … This frustrates rich-nation would-be-rebels like me who see our business, legal, political, etc. institutions as far from optimal. … If you long to say “come the revolution,” you might wait three to fifteen decades for the “em rev“, the whole brain emulation revolution. …

Rapid [em] growth will require huge rapid changes in economic organization, and supporting changes to business, legal, and political institutions. … Locations vying to be one of those [first em] centers may be open to big institutional change. … So if you have a favorite radical change you’d like the world to consider, you might give some thought to how your change could support a local em rev. (more)

The first em cities may be especially open to change regarding how cities are run. How might combinatorial auctions help them?

Here are my best guesses about (mid-em-era) em cities. City centers would mainly house computers, mostly running brains, and supporting infrastructure, e.g., power, cooling, structural support, part swapping paths, security, leakage containment, etc.

City centers would mostly house ems in virtual bodies doing office work, meeting often with other city workers. In most meetings, brains would stay put and just send signals; physical movement would be much rarer. Em minds would be sped-up relative to human minds as far as possible, until doubling an em’s mental speed much more than doubled its computing costs.

Outside of city centers there would be more ems in physical bodies, mostly small, helping with physical activities such as mining, harvesting, manufacturing, transportation, dumping, etc. Air cooling in the periphery would give way to water cooling closer in, and perhaps molten salt cooling very close.

All this would put a huge premium on inner city computer speed, density, and bandwidth. Cities would be very 3D, and city center computers would likely have very small physical structures generating lots of heat, making cooling crucial. Also important would be power sources, and physical paths for the replacement of devices and parts.

Today big computing centers are centrally planned, mostly with uniform parts and regular structures. But this level or coordination is may be infeasible for large cities, where diverse organizations make coordination expensive and change hodge-podge. In such a context, combinatorial auction might help improve coordination.

In am em city combinatorial auction, bids for locations could specify:

  1. spatial volume, shape, and orientation
  2. part swapping portal locations and sizes
  3. line of sight to outside, or to specific parties
  4. surface temperature and chemical corrosively limits
  5. amount and form of power and cooling, with price limits
  6. specific chemicals piped in, fluid garbage piped out
  7. communication distance from other particular residents
  8. time delay and expense to move hardware out and in
  9. support force tensors (including weight) get, support can give
  10. max stress-strain to support during earthquake
  11. limits on incoming, outgoing vibration distributions
  12. chances of incoming, limits on outgoing, leakage
  13. chance of explosive destruction, correlation with distant backups
  14. legal rules covering disputes with neighbors
  15. time commitments on each of these, and penalties for violations

As with cities today, winning allocations would say who gets what spaces with what supporting utilities, limits, etc. Competitive utility suppliers could also bid their prices to use particular spaces to supply particular utility amounts to particular locations. and futures markets about future winning bids might help estimate opportunity costs of commitment. Auction revenue could pay for utility fixed costs and repay city investors, and futarchy might choose the basic auction rules.

Yes, there’s a lot we don’t know about the future, and I could get some things wrong here. Even so, it seems worth thinking about what the future might be like, and when big institutional changes might be feasible.

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The Protection Exception

We have many regulations, justified in many ways. One common type of regulation prevents people from making and enforcing certain voluntary agreements, and one common justification for such regulation is that we protect people from hurting themselves via such agreements. For example:

Chief Justice Robert Bauman ruled in favour of the section of the [Canadian] Criminal Code outlawing polygamous unions. … Bauman said while the law does infringe on religious freedom, it is justified given the harm polygamy causes to children, women and society. (more)

However, almost every such protection comes with one huge loophole, big enough to drive many a truck through: we let people emigrate to other countries. For example, we protect you and your kids from the harms of voluntary polygamy agreements, except that you and your kids may move to a nation that allows polygamy. The same applies to pretty much any other regulatory protection we offer, such as protections against buying unsafe products, hiring unlicensed professionals, paying for sex, or selling yourself into slavery. You are allowed to do any of these things as long as you first move to another nation that allows it.

This raises an obvious question: why do we allow this huge hole in the “protections” we maintain? It would seem to me more consistent to either:

  1. Prevent people from moving to nations that do not preserve the protections we think important, or
  2. Let locals make voluntary agreements that violate our basic protections, as long they plausibly demonstrate that they are so committed to such arrangements that they’d consider leaving the nation to get them.

Its seems pointless to consistently let people leave the nation to evade our “protections,” since after they leave, they aren’t protected. What gives?

Added 11p: Some responses to comments: Continue reading "The Protection Exception" »

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Japan’s Fat Tax

This has been going on for three years, yet I just learned of it:

In 2008, Japan’s Ministry of Health passed the ‘metabo’ law and declared war against obesity. …

Japanese people are normally envied for their lean physiques. In fact, the OECD ranks them, with only 3% population obesity, one of the least obese developed countries. … Comparing the time periods 1976-1980 and 1996-2000, prevalence of obese boys and girls increased from 6.1% and 7.1% to 11.1% and 10.2%. …

The law mandates that local governments and employers add a waist measurement test to the annual mandatory check up of 40-75 year olds. For men and women who fail the test and exceed the maximum allowed waist length of 33.5 and 35.4 inches, they are required to attend a combination of counseling sessions, monitoring through phone and email correspondence, and motivational support. …

Employers or local government … are required to ensure a minimum of 65% participation, with an overall goal to cut the country’s obesity rates by 25% by year 2015. Failure to meet these goals results in fines of almost 10% of current health payments. (more)

Even before Japanese lawmakers set the waistline limits last year, the International Diabetes Federation (IDF) amended its recommended guidelines for the Japanese. The new IDF standard is 90 centimeters (35.4 inches) for men and 80 centimeters (31.5 inches) for women. But the Japanese government has yet to modify its limits. (more; HT Melanie Meng Xue)

Two interesting patterns:

  1. Japanese waist limits are stricter on men, yet since men are taller health-based rules would be stricter on women.
  2. The thinnest rich nation (Japan) passed a big law to make itself thinner just as the biggest medical spending nation (USA) debated a big law (Obamacare) ensuring it would spend more on medicine.

My tentative explanations:

  1. Most societies find it easier to disrespect/mistreat/etc. low status men than low status women.
  2. National policy is more about reaffirming and supporting symbols of national pride than about addressing national needs. The USA is proud of its medicine and Japan is proud of its thinness.

Note that that if you want to regulate health it makes far more sense to regulate weight than medicine, since weight is far more related to health than medicine.

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Alcohol As Placebo

A week ago I had dinner with a respected drug policy expert who disapproves of drug legalization because he sees big negative externalities from alcohol use, and expects legalizing other drugs to make that worse. Which makes some sense. But the picture changes once one realizes that alcohol’s disruptive effects are mostly in our heads:

We Brits believe that alcohol has magical powers – that it causes us to shed our inhibitions and become aggressive, promiscuous, disorderly and even violent.

But we are wrong. In high doses, alcohol impairs our reaction times, muscle control, co-ordination, short-term memory, perceptual field, cognitive abilities and ability to speak clearly. But it does not cause us selectively to break specific social rules. It does not cause us to say, “Oi, what you lookin’ at?” and start punching each other. Nor does it cause us to say, “Hey babe, fancy a shag?” and start groping each other.

The effects of alcohol on behaviour are determined by cultural rules and norms, not by the chemical actions of ethanol. There is enormous cross-cultural variation in the way people behave when they drink alcohol. … In … the vast majority of cultures, … drinking is not associated with these undesirable behaviours … Alcohol is just a morally neutral, normal, integral part of ordinary, everyday life – about on a par with, say, coffee or tea. …

This variation cannot be attributed to different levels of consumption. … Instead the variation is clearly related to different cultural beliefs about alcohol. … This basic fact has been proved time and again … in carefully controlled scientific experiments – double-blind, placebos and all. To put it very simply, the experiments show that when people think they are drinking alcohol, they behave according to their cultural beliefs about the behavioural effects of alcohol. …

Those who most strongly believe that alcohol causes aggression are the most likely to become aggressive when they think that they have consumed alcohol. … These experiments show that even when people are very drunk, if they are given an incentive (either financial reward or even just social approval) they are perfectly capable of remaining in complete control of their behaviour – of behaving as though they were totally sober. …

If I were given total power, I could very easily engineer a nation in which coffee would become a huge social problem. … I would restrict access to coffee, thus immediately giving it highly desirable forbidden-fruit status. Then I would issue lots of dire warnings about the dangerously disinhibiting effects of coffee. I would make sure everyone knew that even a mere three cups (six “units”) of coffee “can lead to anti-social, aggressive and violent behaviour”, and sexual promiscuity, thus instantly giving young people a powerful motive to binge-drink double espressos, and a perfect excuse to behave very badly after doing so. (more; HT Rob Wiblin)

Sometimes we want to behave well, and be around others who behave well, and sometimes we want to behave “badly,” and behave around others who behave badly. We also sometimes want to (often hypocritically) signal our disapproval of bad behavior, and pay costs to “do something” about it.

Our culture has coordinated to support all of these options, by coordinating to see alcohol and other “drugs” as inducing bad behavior. Clever eh? While we can signal our disapproval of bad behavior by opposing drugs, including their legalization, it is far less clear how much such actions actually reduce bad behavior. If we completely eliminated the symbolic items by which we now we identify situations where bad behavior is expected and tolerated, I expect we would quickly pick substitute symbols, and continue on with bad behavior. Because the fact is, much as we often want to signal disapproval of bad behavior, we nearly as often really enjoy behaving “badly.”

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Every Move You Make

Soon the police will always be watching every public move you make:

A vast system that tracks the comings and goings of anyone driving around the District. … More than 250 cameras in the District and its suburbs scan license plates in real time. ..

With virtually no public debate, police agencies have begun storing the information from the cameras, building databases that document the travels of millions of vehicles. … The District [of Columbia] … has more than one plate-reader per square mile, the highest concentration in the nation. Police in the Washington suburbs have dozens of them as well … creating a comprehensive dragnet that will include all the approaches into the District. … The data are kept for three years in the District. … Police can also plug any license plate number into the database and, as long as it passed a camera, determine where that vehicle has been and when. …

The tag readers … cost about $20,000 each. … The District has 73 readers; 38 of them sit stationary and the rest are attached to police cars. D.C. officials say every police car will have one some day. … The District’s … officers make an average of an arrest a day directly from the plate readers. … There are no laws governing how or when Washington area police can use the tag reader technology. … 37 percent of large police agencies in the United States now use license plate reader technology. (more; also)

As prices rapidly fall, this will be widely deployed. Unless there is a public outcry, which seems unlikely at the moment, within twenty years most traffic intersections will probably have tag readers, neighboring jurisdictions will share databases, and so police will basically track all cars all the time. With this precedent, cameras that track pedestrians and people in cars via their faces and gaits will follow within another decade or two.

If firms tried to set up camera networks to collect and sell similar info, I would expect an outcry and regulations to stop them. But police will be not only be allowed to continue, they’ll probably also usually succeed in intimidating citizens away from recording police interactions with citizens, no matter what the official rules say.

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It’s Called “Stock”

There’s something the federal government can do right now to help students caught by our terribly unjust higher-education financing system. … Under an income-contingent loan system, … students pay a fixed percentage of their income toward their loans. Payments are automatically deducted from their paychecks by the IRS. .. After an extended time period of 20 or 30 years, any remaining debt is forgiven. … The concept has been proven to work—Australia and Britain have used it for years— and … the Nobel Prize-winning economist Milton Friedman proposed the idea all the way back in 1955. …

Because student loans can almost never be discharged in bankruptcy, defaulted loans can haunt students for a lifetime. … That is insane. A similar-sounding federal program, called income-based repayment, is now on the books and is scheduled to become somewhat more generous starting in 2014. But the program is administratively complicated, involving income-eligibility caps and requiring students to reapply every year. (more)

Yup, it can be easier to fund investments via “loans” whose repayment amounts are set to be a proportion the venture’s net income. This is usually called “stock,” however, and proposals for private sector stock in individual future income are usually criticized as “slavery.” Especially if such stock claims on income are exempt from the usual bankruptcy evasions. But to most folks the same policy doesn’t seem like slavery if the government does it, just like we refuse to call conscription slavery.

Some argue that the government needs to make student loans because private loan markets fail in this case. But if they fail, it is mainly because we purposely hobble private investors by not allowing them the tools we are allow governments to ensure a return on their investment. This is how a lot of market failures go these days – they are real failures, but failures caused in large part by refusing to allow private actors all the tools we allow governments.

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Economists’ Best Advice


I am a proud resident of Fairfax County, in the U.S. state of Virginia. Today, I want to warn my fine fellow Fairfax folk: we interact too promiscuously with outsiders! For example, we are allowed to buy things made outside Fairfax, and leave the county to travel or work. Fairfax firms can even choose outsiders as investors, employees, and suppliers.

Such promiscuous interaction risks polluting our precious purity with uncontrolled contamination! Surely we choose to live in oh-so-fair Fairfax because we believe in Fairfax exceptionalism, in our exceptional mix of climate, culture, attitudes, laws, personalities, etc. Yet we allow any of us to risk corrupting this exceptionality via unrestricted mixing with outsiders. For example, we let outsiders move here who might vote for politicians who also don’t share our political values. And lets not forget that terrorists might slip in.

Much of this mixing surely also hurts Fairfax locals who compete with outsiders. Fairfax residents who drive to other counties to eat restaurant meals take business away from Fairfax restaurants. Fairfax firms that hire workers living in other counties take jobs away from Fairfax workers. Fairfax people who read books and blogs written by outsiders take readers away from Fairfax authors. Sure, sometimes we benefit from mixing with outsiders, and sometimes enough to compensate for losses to locals. But no one can prove that this is always the case, or even usually the case.

So, dear fellow Fairfax folks, we simply must be more careful! I’m not saying we should never interact with outsiders, but we must be more selective. There must be oversight – we can’t just let any of us decide for themselves how much they’ll pollute or harm the rest of us.

Convinced? No? What if Ramone had talked about Virginia, instead of Fairfax – would he have made sense then? If not, then why would the same arguments make sense when applied to the United States? Sure clever folk can think up arguments that apply better to nations than to states or counties, just as they can think up reasons why it is better to let in goods or investments than workers. But it seems quite unlikely that such arguments are actually the main reason most people more easily accept exchanging people between counties and states than between nations, or accept outside goods and investment more than workers.

It seems far more likely that people are invoking ancient classifications and fears, regardless of their appropriateness for today’s world. We probably habitually see the invasion of people as more threatening than things, and see workers from other counties and states more as “us”, relative to “them” from other nations. So to believe that our barriers to immigration are for the best, you have to believe in a lucky accident.

Bryan Caplan recently posted on a Michael Clemens article which mentioned: economists typically estimate that eliminating barriers to moving workers would roughly double world GDP, a far bigger gain than eliminating barriers to moving goods or capital! For this reason economists disagree with the public, and favor open immigration:

[In] a questionnaire sent to 210 Ph.D. economists randomly selected from the American Economic Association, … few economists believe that current U.S. immigration levels are too high (16.7%)—although many (29.5%) are neutral on the matter. (more)

Question: “Please tell me if you think it is a major reason the economy is not doing better than it is, a minor reason, or not a reason at all. (0 = Not a reason at all”; 1 = “Minor reason”; 2 = “Major reason”)” Mean answers: Public: 1.22, Economists: 0.2 (more)

We economists tend to expect open immigration to increase overall wealth and value (and liberty), and to reduce inequality. Furthermore, this seems to be the biggest gain we consistently identify. You might not always listen to or believe we economists, but if you can ever be persuaded by us, please let it be on this, economists’ strongest recommendation: open those borders!

Added 7p: Fairfax County is the third richest county in the U.S., and the richest large (>.4M pop) county, and neighbors the two richer but smaller ones.

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Learn From A&P

Law and policy matters for innovation. Sometimes it matters by promoting innovation, and someday I hope we’ll have better intellectual property rights to better promote innovation. But today, and for much of history, law and policy has mattered mostly by hindering innovation. For example:

In a new book, Levinson explains how local mom-and-pop stores — with their limited selections, high prices and nonstandard packaging — paved the way for national chains like the A&P to swoop in and dominate the grocery industry. … “People get misty-eyed at the thought of the independent store — maybe it had some unique product, maybe we had more choices than we have today — but the truth was exactly the opposite.” ….

A&P … opened its first small grocery store in 1912. Unlike traditional mom-and-pop stores, the A&P had no telephone, no credit lines and no delivery options. They also had lower prices. .. “It stocked only items that were fast-sellers. … It had limited hours. It had a single employee. … Within eight years, this approach turned their company into the largest retailer in the world.” … Controlling both the retail store and the supply chain gave the A&P a huge advantage over corner grocery stores because the A&P could run the factories at a lower cost. In addition, the A&P started to bypass wholesalers and go directly to distributors for various products. …

Competitors were not happy. Efforts to limit chain stores grew in the 1920s, when states and localities began passing laws designed to help independent merchants. … “Now, you’ve got these gigantic companies like A&P dominating retailing and wholesaling and not leaving a chance for the average guy. That was the basis of the complaint.”

State laws were passed to force manufacturers to sell to all stores at the same price and to tax merchants with multiple stores in a case. An antitrust suit was also filed against the A&P, claiming that it had become a food monopoly because it controlled all aspects of manufacturing, retailing and wholesaling. But the movement lost steam in the late 1930s, when the economy started to pick up. (more)

A&P introduced major innovations, and was punished for it by the regulatory system. For now, law and policy can most help innovation by getting more out of the way. Whether it will actually do so, however, is far from obvious.

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