Tag Archives: Regulation

Every Move You Make

By Robin Hanson · November 21, 2011 9:30 am · Comments (32)

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”

By Robin Hanson · October 24, 2011 10:49 am · Comments (32)

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

By Robin Hanson · August 29, 2011 10:20 am · Comments (59)

Ramone:

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

By Robin Hanson · August 25, 2011 7:10 pm · Comments (12)

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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IP+ Like Barbed Wire?

By Robin Hanson · July 21, 2011 8:00 am · Comments (50)

“Without barbed wire the Plains homestead could never have been protected from the grazing herds and therefore could not have been possible as an agricultural unit.” (1931) …

English common law made livestock owners responsible for damages by roaming livestock, assigning the responsibility to fence in livestock. In contrast, the American colonies adopted legal codes that required farmers to fence out others’ livestock. Without a “lawful fence,” farmers had no formal entitlement to compensation for damages by others’ livestock. …

From 1880 to 1900, the introduction and near-universal adoption of barbed wire [in the US west] greatly reduced the cost of fences, relative to the predominant wooden fences, especially in counties with the least woodland. Over that period, … average crop productivity increased relatively by 23% in counties with the least woodland, controlling for crop-specific differences among counties and crop-specific statewide shocks. The increased productivity was entirely among crops more susceptible to damage from roaming livestock. … This increase in agricultural development appears partly to reflect farmers’ increased ability to protect their land from encroachment. (more)

Before the invention of barbed wire, it just didn’t make sense to build fences around farms in areas with little wood. Thus, it didn’t make as much sense to farm, near where others raised livestock. If you farmed, nearby livestock might just come and eat or trample your crops. In such times and places, many ranchers probably thought that “natural law” favored ranching, not farming, and favored property in animals more than property in land.

But the kinds of property and activity that makes sense depends on the available institutions and technology. Before barbed wire, it make less sense to farm, or to enforce property rights in land against roaming animals. But after barbed wire, farming and land property rights made a lot more sense.

Similarly, the kinds of innovation activities and intellectual property rights that make sense depend on available institutions and technologies. I’m happy to admit that today intellectual property (IP) is not obviously a good idea. Such property can create large “anti-commons” transaction and enforcement costs that greatly raise the cost of combining old ideas into valuable new ideas. Such costs often outweigh the social benefits of the incentives to create IP, in order to sell it. Today, it is often better to rely on other social incentives to innovate, incentives that don’t require such expensive support.

But if true, this is a sad fact about our limited abilities, not a fundamental natural law or right. You have no fundamental right to enjoy the innovations produced by others without compensating them. You owe them, at least your gratitude. Yes for now it may be best to let you take innovations freely without paying, since the alternative seems too expensive. But you have no right to expect that situation to last forever, any more than ranchers had a right to expect they could forever let their animals trample nearby farms.

Just as farmers developed barbed-wire, someday I expect IP advocates will develop better forms of intellectual property, and better technologies for marking, sharing, and enforcing such property. Using such innovations, I expect we will allow more and stronger intellectual property, and more of the world economy will focus on developing such property. Which, like barbed-wire, will mostly be a good thing.

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Why Hate Anti-Star Trek?

By Robin Hanson · July 18, 2011 10:15 am · Comments (94)

A comment at my recent post on how innovation might be >50% of future GDP points us to a Thursday post by Matt Yglesias, favorably citing a December post by sociologist Peter Frase, who imagines an “Anti-Star Trek” society. Frase says that Star Trek society is:

A communist society. There is no money, everyone has access to whatever resources they need, and no-one is required to work. Liberated from the need to engage in wage labor for survival, people are free to get in spaceships and go flying around the galaxy for edification and adventure.

Frase says an Anti-Star Trek society shares the same access to replicators and “unlimited” energy, but is instead a hellish “system based on money, profit, and class power” because it enforces intellectual property in the designs replicators use. So, horrors, people who want to use the latest designs, rather than old or donated designs, need some sort of income, which Frase says they might get by creating and selling new designs, marketing and advertising them, or making and enforcing lawsuits.

Now it should be noted that Star Trek fiction has many cases of people using money and trading. Even setting that aside, replicators need both matter and energy as input, and neither could ever be in infinite supply. So even an ideal “communist” Star Trek must enforce limited budgets of access to such things. Lawyers and guardians would need to adjudicate and enforce such limits.

In both the Star Trek and Anti-Star Trek societies, the main source of long term value seems to be the accumulation of better designs. Yet Frase (and apparently Yglesias) is horrified to imagine that the people who contribute this main value might get paid for their contributions. After all, this might lead to unequal “classes,” where some own more than others. This even though Star Fleet displays lots of hierarchy and inequality, and spends large budgets that must come at the expense of private budgets.

The far future seems to have put Frase in full flaming far mode, declaring his undying allegience to a core ideal: he prefers the inequality that comes from a government hierarchy, over inequality that comes from voluntary trade. Sigh.

Frase also greatly underestimates how much we can spend on innovation:

People to come up with new things to replicate, or new variations on old things, … is never going to be a very large source of jobs, because the labor required to create a pattern that can be infinitely replicated is orders of magnitude less than the labor required in a physical production process in which the same object is made over and over again.

Yes the labor to create any one design might be small, but to find good designs we must search a vast space of possible designs. To search for good designs, we create candidates, try them out, diagnoses their failings, and then seek better variations. This can use up practically unlimited labor.

Quotes from the Frase post: Continue reading "Why Hate Anti-Star Trek?" »

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Regulating Gossip

By Robin Hanson · July 17, 2011 11:35 am · Comments (22)

Did you know that people gossip about you? You don’t know who they are, or what they say, and sometimes they say things that (you think) are not true. Important decisions, like whether you get invited to parties, recommended for jobs, or even married, hang on such gossip. Yet there is almost no regulation of it! Government officials don’t track it, or check it for accuracy. There are no standards for what sources people can use in gossip, or how they state their opinions. You aren’t even notified when people gossip about you. Gossip is a virtually impenetrable system in which people, particularly the most vulnerable, have little insight into the forces shaping their welfare. We must have reform!

Sound over the top? Consider:

Information … comes from thousands of everyday transactions that many people do not realize are being tracked: auto warranties, cellphone bills and magazine subscriptions. It includes purchases of prepaid cards and visits to payday lenders and rent-to-own furniture stores. It knows whether your checks have cleared and scours public records for mentions of your name. Pulled together, the data follow the life of your wallet far beyond what exists in the country’s three main credit bureaus. [Firms sell] that information for a profit to lenders, landlords and even health-care providers. …

Who is worthy of credit? The answer increasingly lies in the “fourth bureau” — companies such as L2C that deal in personal data once deemed unreliable. … Federal regulations do not always require companies to disclose when they share your financial history or with whom, and there is no way to opt out when they do. No standard exists for what types of data should be included in the fourth bureau or how it should be used. No one is even tracking the accuracy of these reports. That has created a virtually impenetrable system in which consumers, particularly the most vulnerable, have little insight into the forces shaping their financial futures. (more)

The consequences of ordinary gossip are just as big as with firm gossip on customer finance. And it would be possible to have stronger regulations on ordinary gossip. Yes such regulations couldn’t be perfectly enforced, but then neither can regulations on firm finance gossip. The main reason we don’t have such regulations is that people dislike them. The same people who may well support more regulation on firm gossip on your finances. Why?

It seems to come down to the usual: we are more willing to regulate firms than individuals, and to regulate activity where money is involved than other activity.

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Respect Forecast Accuracy

By Robin Hanson · July 13, 2011 11:05 am · Comments (13)

The topic at Cato Unbound this month is “What’s Wrong with Expert Predictions.” Dan Gardner and Philip Tetlock’s lead essay points out a puzzling lack of interest in forecast accuracy:

Corporations and governments spend staggering amounts of money on forecasting, and one might think they would be keenly interested in determining the worth of their purchases and ensuring they are the very best available. But most aren’t. They spend little or nothing analyzing the accuracy of forecasts and not much more on research to develop and compare forecasting methods. Some even persist in using forecasts that are manifestly unreliable. … This widespread lack of curiosity … is a phenomenon worthy of investigation.

My response essay considers this puzzle. The editor summarizes:

Robin Hanson argues that most people aren’t interested in the accuracy of predictions because predictions often aren’t about knowing the future. They are about affiliating with an ideology or signaling one’s authority. … He suggests that one way to make predictions more accurate might be to lift both the social stigma and legal prohibitions against gambling.

Key quotes:

Even if disinterest in forecast accuracy is explained by forecasting being only a minor role for pundits, academics, and managers, might we still hope for reforms to encourage more accuracy? …

Hope … mainly comes from the fact that we pretend to care more about forecast accuracy than we actually seem to care. We don’t need new forecasting methods so much as a new social equilibrium, one that makes forecast hypocrisy more visible to a wider audience, and so shames people into avoiding such hypocrisy. …

It isn’t enough to devise ways to record forecast accuracy—we also need a new matching social respect for such records. Might governments encourage a switch to more respect for forecast accuracy? Yes: by not explicitly discouraging it!

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Coworker vs. Class Envy

By Robin Hanson · July 12, 2011 3:00 pm · Comments (21)

Almost half of all workers in the U.S. “are either contractually forbidden or strongly discouraged from discussing their pay with their colleagues.” … Researchers … found that employees who know what their peers make—especially if their salaries are below median earnings—were more dissatisfied with their jobs than their peers who knew nothing. (more)

Imagine a national law banning citizens from talking about each other’s income. Similar to the way firm rules against discussing coworker incomes raise job satisfaction, a law against discussing citizen incomes would also probably make people more satisfied. Yet I predict that if such a law were actually passed, a huge public outcry would spell political disaster for supporting politicians. People would wail about the horrors of totalitarianism and suppressing class consciousness, and call for revolution if needed to repeal it.

Yet most who work at firms with no-salary-talk rules are probably ok with it. Few refuse to apply for jobs at such firms, or even demand substantially higher salaries to work there. In fact, there’s a decent case to make that people are on average willing to accept lower salaries to work at such firms. After all, if not such policies would cost firms more in salaries, with few obvious compensating benefits.

This example highlights how differently we act in workplaces vs. national political forums. When talking national politics we refuse to compromise on key ideals that we hardly care about in workplaces. Voting is indeed a far fest, while we submit hyper-farmer style to domination at work.

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Regulating Cool

By Robin Hanson · June 22, 2011 12:00 pm · Comments (44)

The [US FDA] unveiled a plan designed … to shock customers with images of tobacco’s impact: sick smokers exhaling through a tracheotomy hole, struggling for breath in an oxygen mask and lying dead on a table with a long chest scar. Starting next year, cigarette cartons, packs and advertising will feature these and six other graphic warnings, replacing the discreet admonitions that cigarette manufacturers have been required to offer since 1966. …

Some of the images, particularly the warning depicting a diseased mouth, are specifically aimed at dispelling the notion for teens that smoking is cool. “We want kids to understand smoking is gross, not cool, and there’s really nothing pretty about having mouth cancer or, you know, making your baby sick if you smoke,” said FDA Commissioner Margaret A. Hamburg. “So some of these are very driven to dispelling the notion that somehow this is cool, and makes you cool.” (more)

Pause to consider the logic here. We decide it is not a good idea to let the government ban this product, or to require a doctor’s prescription to consume it. We think everyone should be allowed to consume it if they choose. But, we also decide it is a good idea to let government to decide if this product can seem “cool.” In general, the idea must be that if people see the wrong things as cool, the government can require appearance changes, changes the government guesses will make those overly-cool things seem less cool.

For example, if too many kids see not going to college as cool, well then maybe only college students and graduates should be allowed to wear certain sorts of cool clothing. Or if too many think going to the beach is cool, resulting in too much skin cancer, we could broadcast uncool music at the beach.

The basic question is when should the government ban an activity versus merely discouraging it, and what sort of discouragements it should wield. Discouraging activity via reducing its appearance of “cool” seems to me especially hard for distant slow federal regulators to manage — what things seem “cool” often varies in quite subtle ways over short times and between subcultures. Is there any argument that this sort of discouragement is especially useful, to compensate for such added difficulty?

Actually, I see a fundamental contradiction in the idea of government regulating “cool.” While we have many social processes which tell us about what others might approve or disapprove, the “cool” process seems inherently decentralized, and not to be mediated by authorities. We the masses are supposed to each decide what we think is “cool,” and we are not supposed to accept declarations by teachers, employers, etc. on the subject. Whatever authorities recommend as a good idea, it can only accidentally be “cool.”

“Cool” just doesn’t seem the sort of thing government can actually regulate.

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