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Archive for the ‘Regulation’ Category

Thomas Sowell is a great economist, but his expertise extends to other fields of study. Everything from history to education.

But he’s also famous for being a great communicator, with dozens of well-known quotes.

I use one of them on my rotating banner because it succinctly summarizes why the left has to rely on emotional appeals rather than rigorous evidence.

For purposes of today’s column, I want to cite one of his other quotes, this one dealing with the fact that tradeoffs are an inevitable reality.

Simply stated, if you want more of one thing, you have to accept less of another thing.

And this has important implications for regulatory policy – especially about the value of cost-benefit analysis.

Let’s look at two examples.

First, here’s the abstract from a study by Jordan Nickerson from MIT and David Solomon from Boston College.

Since 1977, U.S. states have passed laws steadily raising the age for which a child must ride in a car safety seat. These laws significantly raise the cost of having a third child, as many regularsized cars cannot fit three child seats in the back. Using census data and stateyear variation in laws, we estimate that when women have two children of ages requiring mandated car seats,they have a lower annual probability of giving birth by 0.73 percentage points. Consistent with a causal channel, this effect is limited to third child births, is concentrated in households with access to a car, and is larger when a male is present (when both front seats are likely to be occupied). We estimate that these laws prevented only 57 car crash fatalities of children nationwide in 2017. Simultaneously, they led to a permanent reduction of approximately 8,000 births in the same year, and 145,000 fewer births since 1980, with 90% of this decline being since 2000.

This raises all sorts of challenging questions, such as what’s the value of a life saved compared to the value of lives that might have existed (a philosopher might have a different answer than an actuary at the Social Security Administration!).

And let’s not forget that you seemingly could save more lives if there were mandatory 5-mph speed limits, but that policy also has tradeoffs that could produce more deaths elsewhere.

For what it’s worth, I think parents should get to decide whether they need a car seat for a 7-year old (and thus have more children), but I’m not going to pretend there are no negative consequences.

Let’s look at another example.

In a post for Marginal Revolution, Prof. Alex Tabarrok of George Mason University points out that you can save lives in India by selling cars with abysmally low safety ratings.

These cars are very inexpensive. A Renault Kwid, for example, can be had for under $4000. In the Indian market these cars are competing against motorcycles. Only 6 percent of Indian households own a car but 47% own a motorcycle. Overall, there are more than five times as many motorcycles as cars in India. Motorcycles are also much more dangerous than cars. …The GNCAP worries that some Indian cars don’t have airbags but forgets that no Indian motorcycles have airbags. Even a zero-star car is much safer than a motorcycle. Air bags cost about $200-$400…and are not terribly effective. (Levitt and Porter, for example, calculated that air bags saved 550 lives in 1997 compared to 15,000 lives saved by seatbelts.) At $250, airbags would increase the cost of a $5,000 car by 5%. A higher price for automobiles would reduce the number of relatively safe automobiles and increase the number of relatively dangerous motorcycles and thus an air bag requirement could result in more traffic fatalities.

Unlike the issue of car seats for kids, there’s no moral ambiguity on this topic.

Indians should be allowed to buy “unsafe” cars because there will be far fewer fatalities and serious injuries.

By the way, cost-benefit analysis is not a panacea. Benjamin Zycher of the American Enterprise Institute wrote a few years ago that such analysis can be counterproductive if you have a biased and ideologically driven bureaucracy such as the Environmental Protection Agency.

But even halfway competent and fair cost-benefit analysis would be very helpful in the world of public policy.

Then again, politicians and bureaucrats probably have incentives to not produce that kind of information..

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In my fantasy country of Libertaria, there is no Department of Labor, no regulation of employment contracts between consenting adults, and no favoritism for either labor or management.

In the real world, the relevant question is the degree of regulation and intervention. Especially compared to other nations, which is why the the Employment Flexibility Index is a useful measuring stick.

The Employment Flexibility Index is a quantitative comparison of regulatory policies on employment regulation in EU and OECD countries. …Higher values of the Employment Flexibility Index reflect more flexible labor regulations.

The good news, for American workers and American companies, is that the United States has the second-best system among developed nations, trailing only Denmark (another reason why pro-market people should appreciate that Scandinavian nation).

It’s hardly a surprise that France is in last place, notwithstanding President Macron’s attempt to push policy in the right direction.

It’s worth noting that the United States has much less regulation of labor markets than the average European nation. Which may help to explain why American living standards are so much higher.

Let’s review some academic research on the issue of employment regulation.

In an article for the Harvard Journal of Law & Public Policy, Professor Gail Heriot of the University of San Diego Law School explains how regulations discourage job creation and also may encourage discrimination.

there’s a demographic out there that we ought to be worrying about, it is young people, the perennial newcomers to the economy. Well-meaning employment laws primarily benefit those who already have jobs, often at the expense of those who do not.For low-skilled young people trying to get their first jobs, the most immediate threat may be the steep minimum wage hikes adopted recently in various cities.…young people even with great educational credentials are unknown quantities to employers and, hence, risky to hire, especially in a legal environment in which employee terminations can lead to costly legal disputes. he best way for employers to avoid being wrongly accused of a Title VII violation is to avoid hiring someone who could turn out to be litigious if things do not work out. That creates a perverse incentive to avoid hiring the first African American or the first woman in a particular business or department. A law that was intended to end discrimination in hiring, thus, ends up encouraging it instead.

In a Cambridge University working paper, Maarten de Ridder and Damjan Pfajfar found that wage rigidities, which are driven in part by red tape, are correlated with greater levels of economic damage when there is an adverse policy shock.

We find considerable variation in downward nominal wage rigidities across states and over time. Our estimates of nominal rigidities are positively related to state minimum wages, unionization,union bargaining power, and the size of services and government in employment and negatively to labor mobility. …We therefore focus on nominal wage rigidities when assessing the transmission of policy shocks. We find that states with greater downward nominal wage rigidities experience larger and more persistent increases in unemployment and declines in output after monetary policy shocks. …Similar results also hold for exogenous changes in taxes… States with higher nominal rigidities experience larger increases in unemployment and declines in output after a tax increase compared to states that are more flexible. We further show that institutional factors that could drive wage rigidities—like minimum wages and right-to-work-legislation—have a similar effect. States with a higher minimum to median wage ratio and those without right-to-work legislation experience larger and more persistent effects of monetary and tax policy shocks. Combined, these results firmly corroborate the hypothesis that resistance to wage cuts deepens policy shocks.

And in an article for Regulation, Warren Meyer explains that red tape and intervention is particularly bad news for unskilled workers.

The government makes it too difficult, in far too many ways, to try to make a living employing unskilled workers. …In the 1950s, 1960s, and 1970s, there was a wave of successful large businesses built on unskilled labor (e.g., ServiceMaster, Walmart, McDonalds). Today, investment capital and innovation attention is all going to companies that create large revenues per employee with workers who have college educations and advanced skills. …the mass of government labor regulation is making it harder and harder to create profitable business models that employ unskilled labor. For those without the interest or ability to get a college degree, the avoidance of the unskilled by employers is undermining those workers’ bridge to future success

Let’s close by looking at a chart from a 2018 presentation by Martin Agerup.

He shows that red tape doesn’t even provide meaningful job security for those who are already employed.

The bottom line is that so-called employment protection legislation is very bad news for those who are looking for jobs while offering no measurable benefit for those who have jobs (especially if we compare living standards across nations).

If we want more jobs, the best prescription is less government.

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Most people say the key feature of capitalism is competition. Hard to argue with that characterization, but I would go one step further and say that it is one of the consequences of competition – “creative destruction” – that best captures why free markets make it possible for entrepreneurs to deliver mass prosperity.

But what’s the key feature of government? Is it waste? Dependency? Corruption?

Those are all good answers, but perhaps “unintended consequences” should be first on the list. Courtesy of Reason, here are three examples.

I’ve previously written about both ethanol subsidies and so-called employment protection legislation, two of the three examples were already familiar to me.

I wasn’t aware, however, that businesses resorted to big concrete edifices to get around Vermont’s billboard ban (though I have read, in a classic case of baptists and bootleggers, that big companies such as hotel chains sometimes try to thwart competition from small businesses by teaming up with environmentalists to ban billboards).

In the world of fiscal policy, there are many example of unintended consequences.

I’ll conclude by asking an open question: Can anyone give an example of a positive unintended consequence of government?

This isn’t a joke query. I assume there are a few examples, even if I can’t think of any of them.

P.S. Here’s a humorous example of an unintended consequence.

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California is a fascinating state for people who follow public policy. It has some immense advantages, such as climate, coastline, and natural resources.

But it also has high taxes, absurd regulations, a bloated bureaucracy, and a costly welfare state.

The net result of all these factors is mixed. There are some sectors that are still thriving, such as high tech, but there’s also evidence that the Golden State is losing ground.

And the comparative data will probably get worse over time because many taxpayers and businesses are now fleeing to lower-tax states.

Since I specialize in public finance, I’m tempted to say bad fiscal policy is California’s biggest problem. And that may actually be the case.

But if someone asks me for an example of what’s wrong with the Golden State, I’m going to direct them to this story in the Los Angeles Times.

The California Legislature on Monday approved a $100-million plan to bolster California’s legal marijuana industry, which continues to struggle to compete with the large illicit pot market nearly five years after voters approved sales for recreational use. …State officials initially expected to license as many as 6,000 cannabis shops in the first few years, but permits have been issued only for 1,086 retail and delivery firms. In 2019, industry officials estimated there were nearly three times as many unlicensed businesses as ones with state permits. …The $100 million would go to local agencies with the most provisional licenses for growing, manufacturing, distribution, testing and retail operations. Some of the money can be used by cities offering equity funding to cannabis businesses owned by people of color.

Yes, you read correctly.

The state did a smart thing (removing legal prohibitions on marijuana), but did it in the worst possible way (burdening the sector with high taxes and red tape).

As a result, there’s still a very robust black market.

Here are some additional details about how politicians and bureaucrats have made it difficult to operate a legal business.

Many cannabis growers, retailers and manufacturers have struggled to make the transition from a provisional, temporary license to a permanent one renewed on an annual basis — a process that requires a costly, complicated and time-consuming review. …some face two to four years to get through the licensing process. Many would face the prospect of shutting down, at least temporarily, if they don’t get a regular license by current state deadlines, Kiloh said. …Supporters of legalization blame the discrepancy on problems that they say include high taxes on licensed businesses, burdensome regulations… A key requirement to convert from a provisional license is to conduct a CEQA review to indicate how pot farms and other cannabis businesses will affect the surrounding water, air, plants and wildlife, and to propose ways to mitigate any harms. However, Kiloh said, some cities are just setting up ordinances and staffing to process licenses, meaning many businesses cannot meet the looming deadline. …industry officials note the money will go to a small fraction of California cities, and only those that have already decided to allow cannabis businesses. …said Kiloh, owner of the Higher Path cannabis store in Sherman Oaks. “The real problem is CEQA analysis is a very arduous process,” he added. “I think it would be good to have more reform of the licensing system instead of just putting money to it.”

Wow, provisional licenses, permanent licenses, CEQA analysis, taxes, regulations, reviews, and ordinances.

Sounds like my regulatory obstacle course. No wonder so many buyers and sellers of pot prefer the black market.

And Mr. Kiloh is correct. The solution is to deregulate, not to dump more money into the system.

No wonder California is a mess.

P.S. The late (and great) Walter Williams joking speculated whether California should set up East German-style border controls to prevent taxpayers from escaping.

P.P.S. There is a pro-secession group in California, though they should be careful what they wish for.

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I’ve written many times about the value of cost-benefit analysis for government policy.

My go-to example is that a nationwide 5-mph speed limit would reduce traffic fatalities, but the resulting economic damage would be so pervasive that there would a net reduction in life expectancy.

In other words, the indirect effects would outweigh the direct effects.

But that’s just a theoretical example.

We now have a real-world case study thanks to a remarkably short-sighted decision about the Johnson & Johnson vaccine by bureaucrats at the Food and Drug Administration (FDA).

Ronald Bailey of Reason is very blunt about the deadly consequences.

The U.S. Centers for Disease Control and Prevention (CDC) and the Food and Drug Administration (FDA) issued a statement today “recommending a pause in the use” of Johnson & Johnson’s COVID-19 vaccine…based on six cases of a rare blood clot disorder in people who had been inoculated with the one-dose vaccine. There have been six cases out of 6.8 million people who have already been inoculated with the vaccine. The blood clot incidents all occurred in women between the ages of 18 and 48. Those odds amount to one in 1.13 million, which is comparable to your annual chances of being struck by lightning (1 in 1.22 million). For comparison, a November 2020 meta-analysis in The Lancet found that more than one in five very ill hospitalized and post-mortem* COVID-19 patients experienced venous thromboembolism—that is, blood clots in their veins. A 2010 study in the Journal of American Preventive Medicine reported that the annual incidence of thromboembolism between the ages of 15 and 44 was about 1.5 cases per 1,000 people. In addition, the risk of blood clots from taking oral contraceptives is about 1 in 1,000 annually. …By focusing on the not-yet-proven, very low risk of blood clots versus the known risks of the increased misery, hospitalizations, and deaths that the Johnson & Johnson vaccine would have prevented, our overly cautious public health bureaucrats will likely cause more sickness and deaths among Americans than would otherwise have occurred.

Just in case you’re tempted to dismiss the above article because of Reason‘s libertarian perspective, Philip Bump’s article in the Washington Post makes the same point about tradeoffs.

It’s easy to imagine the internal debate at the Centers for Disease Control and Prevention upon learning that six cases of a rare, dangerous blood clot have been found in women who received the Johnson & Johnson vaccine. Allowing the vaccine to be distributed while experts reviewed the cases risks exposing more people to the possible problem. Pausing distribution, though, runs a different risk… Given that about 6.8 million doses of the Johnson & Johnson vaccine have been administered and that there have been only six such incidents, the rate at which those red dots occur is about 1 in 1.1 million vaccinations. …By way of comparison, every year about 12 in 100,000 Americans die in a car crash. …more than 561,000 people in the United States have died of covid-19, the disease caused by the virus. That’s about 1.8 percent of the 31.2 million people who have contracted it. Given the effectiveness of the Johnson & Johnson vaccine in preventing serious illness and death, vaccinating 6.8 million people could have…protected millions of people probably prevented thousands of deaths — with six problematic incidents.

Mr. Bump makes the broader point that each of us make cost-benefit decisions every day.

Nearly everything we do is a balance between risk and reward. Driving down the street, as mentioned above. Walking outside, where a meteorite could suddenly slam into your skull. Sitting on your couch, where your floor could give way or an electrical fire could break out or a bear could crash through your window. None of these things is likely, so we don’t worry about them, but they could. We draw a balance.

The people on Twitter who can do math (regardless of ideology) were united in their disdain for what the bureaucrats did.

Such as:

And:

And:

And:

And:

And:

And that’s just a very small sampling.

For my modest contribution to this discussion, I want people to have liberty to take the J&J vaccine, regardless of the shameful actions of the bureaucrats in Washington (or their counterparts at the state level).

Indeed, I also want them to have the freedom to take the AZ vaccine.

Let adults make their own choices about costs and benefits, about risks and rewards.

That means they can choose vaccines (or not), as well as whether to vape, to own a gun, to donate/sell organs, or to try experimental treatments.

Liberty is not only a good principle, it also generates the best health outcomes.

P.S. To learn more about the harmful policies of the FDA, click here and here.

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Back in 2010, I narrated this video on money laundering for the Center for Freedom and Prosperity, mostly to help people understand that governments are imposing huge costs on both industry and consumers without any offsetting benefits (such as reductions in crime).

As you can tell from the video, I’m not a big fan of anti-money laundering (AML) laws and know-your-customer (KYC) regulations.

And in the 11-plus years since the video was released, I’ve shared lots of additional data about the costly futility of the government anti-money laundering laws and regulations.

That’s the bad news.

The good news (sort of) is that more people are noticing that the current approach is an expensive failure. Even some folks from the establishment media are waking up to the problem, as illustrated by an article in the latest edition of the Economist.

…banks remain the Achilles heel in the global war on money-laundering, despite the reams of regulations aimed at turning them into front­line soldiers in that conflict. However, closer examination suggests that the global anti-money-laundering (AML) system has serious structural flaws, largely because governments have outsourced to the private sector much of the policing they should have been doing themselves. …Money-laundering was not even a crime across much of the world until the 1980s. Since then countries from Afghanistan to Zambia have been arm-twisted, particularly by America, into passing laws. …This has turned AML compliance into a huge part of what banks do and created large new bureaucracies. It is not unusual for firms such as HSBC or JPMorgan Chase to have…more than 20,000 overall in risk and compliance.

Here’s some of the evidence cited in the article.

A study published last year…concluded that the global AML system could be “the world’s least effective policy experiment”, and that compliance costs for banks and other businesses could be more than 100 times higher than the amount of laundered loot seized. A report based on a survey of professionals, published last year by LexisNexis, an analytics firm, found that worldwide spending on AML and sanctions compliance by financial institutions (including fund managers, insurers and others, as well as banks) exceeds $180bn a year. …the numbers tell of a war being lost. …Statistics on how much is intercepted by authorities are patchy. A decade-old estimate by the United Nations Office on Drugs and Crime put it at just 0.2% of the total. In 2016 Europol estimated the confiscation rate in Europe to be a higher but still paltry 1.1%.

Sounds like a damning indictment right?

But I wrote that the article was only “sort of” good news. That’s because the writers at the Economist fail to reach the logical conclusion.

Instead of junking the current system, they want to double down on failure.

…governments need to work harder collectively to make the AML system fit for purpose.

This is akin to looking at welfare programs, realizing that they create dependency and weaken families, but then supporting even more redistribution.

Sadly, I suspect the new evidence cited in the article won’t lead to more sensible thinking in Washington, either.

  • Democrats don’t care if the current approach is failing since they see anti-money laundering laws as a way of destroying financial privacy, which they think is necessary to collect more tax revenue.
  • Republicans don’t care if the current approach is failing because they mindlessly support a tough-on-crime approach, regardless of whether it actually produces positive results.

Indeed, politicians in DC recently expanded AML laws.

I guess the moral of the story is that politicians can always take a bad situation and make it worse.

P.S. I’m batting .500 in my career as a global money launderer.

P.P.S. Here’s Barack Obama’s satirical encounter with AML laws and KYC rules.

P.P.P.S. Speaking of Obama and money laundering, I fear Biden will resuscitate his reprehensible “Operation Chokepoint.”

P.P.P.P.S. I also fear Biden will continue support for asset forfeiture, another disgusting policy that is a part of money-laundering policy.

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When I did my final assessment of Trump’s economic record, I gave him credit for cutting red tape in some areas, but also noted that he increased government intervention in other areas.

…there were some very positive moves on regulation, but they were partly offset by areas where Trump increased intervention (coal subsidies, property rights, Fannie/Freddie, and international tax rules, for instance).

I did give him credit, on net, for moving regulatory policy in the right direction. In other words, the good things he did regarding red tape outweighed the bad things.

But that’s a judgement call, in part because it’s rather difficult to measure the myriad forms of regulation from dozens of different bureaucracies, but also because there’s no agreement on how to measure success (is it a victory, for instance, to reduce the rate of increase in red tape?).

To see how this is challenging, let’s see what various experts wrote about Trump’s regulatory track record.

A new study, authored by Professors Cary Coglianese, Natasha Sarin, and Stuart Shapiro, pours cold water on Trump’s claim that he successfully reduced economic intervention.

Both the extent and impact of the Administration’s efforts to eliminate regulation are considerably less substantial than President Trump and his supporters have claimed. …We recognize that the Trump Administration has repealed or modified a series of agency regulations adopted under the Obama Administration, and even that the Administration has adopted a smaller number of new regulations deemed significant than other recent administrations. Yet overall the reality of regulatory elimination is rather unremarkable… The Administration has accomplished markedly little compared to what it has claimed. … in measuring levels of regulatory activity,researchers rely on a variety of sources of data, including overall pages in the Federal Register and the CFR,the incidence of new rules published in the Federal Register,and the number of actions listed in the semi-annual regulatory agenda. …The Code of Federal Regulations (CFR) is the authoritative source of all existing regulatory requirements on the books. …Growth continued in the Obama Administration to 185,053 pages in 2016. If President Trump’s claim to have eliminated 25,000 pages were correct, we would expect to see no more than160,000 pages in the CFR by now. But, quite to the contrary, the count as of the end of 2019 was185,984 pages—actually a somewhat greater number of pages, not fewer.

Here’s Figure 1 from the paper, which does confirm that there was not a 25,000-page reduction in red tape.

Though if you focus on the last couple of years, it is obvious that the rate of increase slowed significantly. Depending on one’s perspective, that is either a victory or a smaller defeat.

The authors do acknowledge that the number of pages isn’t even the right way to measure regulatory burden.

So they then examine the claim that the Trump Administration had more initiatives to reduce rather than increase red tape.

A count of pages in the CFR is only an indirect proxy for regulatory obligations. …Another way to look at what the Trump Administration has done by way of deregulation would be to look not at pages but at the number of actual rules. …Although the President and his supporters have claimed various levels of deregulatory activity—from 7 to 22 rules removed for every new rule added—these claims are false or misleading. …The lists overcount deregulatory actions by including withdrawals of proposals that were never finalized, delays in effective dates which do not eliminate regulations, non-regulatory actions such as the repeal of guidance documents, and even proposed deregulatory actions rather than completed ones. In addition, when comparing deregulatory actions to regulatory ones, the White House only counts new regulations designated as “significant,” while they count deregulatory actions of any magnitude or level of significance… rather than there being more deregulatory actions than other actions, as the Trump Administration’s claims have implied, there was, in fact, just the opposite. Overall about three completed actions in the regulatory agenda appear for every action designated as deregulatory.

The bottom line, based on their assessment, is that Trump didn’t accomplish much, particularly when compared to what happened under Carter and Clinton.

…in terms of“dramatic regulatory relief,” nothing the Trump Administration has done compares to the deregulation of the airlines, rail, and truck transportation that was executed by the Carter Administration in the late 1970s. Prior to that time, these major sectors of the economy—along with others, such as natural gas and telecommunications—were subject to regulations of prices and outputs—an inefficient form of regulation that advantaged incumbent firms but at the expense of consumers. President Carter championed major deregulatory initiatives that loosened the government restrictions on the air, rail, and transport sectors.Retrospective analysis indicates that the deregulation of these industries resulted in $70 billion in annual consumer benefits. …the evidence does not support the Trump Administration’s claims to have engaged in a dramatic scaling back of government regulation. More pages were removed from the CFR in the Clinton Administration than the Trump Administration. A more substantial unleashing of market forces occurred from the deregulatory changes made in the Carter Administration. And the Trump Administration has done at least as much regulating as it has deregulating.

For what it’s worth, Clinton was much more market oriented than most people realize. And Carter, while misguided in some areas, did a very good job on regulation.

So it’s not necessarily a knock on Trump to say he fell short of those two presidents.

Now let’s look at a pro-Trump perspective.

Professor Casey Mulligan of the University of Chicago early last year offered an upbeat assessment of the former president’s performance in tackling regulations.

In just three years the administration has reversed hundreds of regulations, many of which drone on for hundreds of pages. …Many of the regulations reversed had been written and implemented at the behest of special interests, including large banks, trial lawyers, major health insurance companies, big tech companies, labor unions, and foreign drug manufacturers. …the Council of Economic Advisers (CEA)…dedicated a great deal of manpower preparing a comprehensive and rigorous assessment of deregulation since 2017. That report, released in June, concluded that the past three years of deregulation is comparable to, and probably exceeds, any deregulatory episode in modern U.S. history. …the CEA report estimates that over the next five to 10 years, the deregulatory efforts of the Trump administration will increase annual real incomes in the United States by $3,100 per household.

I wrote about the above-mentioned report from the CEA in the summer of 2019. The CEA’s goal was to present Trump’s policies favorably, so I certainly don’t object to some skepticism from outsiders, but I also noted that, “the underlying assumptions aren’t overly aggressive” and “even modest improvements in growth lead to meaningful income gains over time.”

In a column for the Hill, James Broughel of the Mercatus Center analyzed Trump’s track record and concluded that some good things happened.

…the president issued Executive Order 13,771 soon after taking office. Its “2 for 1” requirement received the most attention: Two regulations must be identified for elimination each time a new one is put forward. However, perhaps more important is the “regulatory budget” it set up, which essentially set a cap on new regulatory costs executive branch agencies can impose. …A look at the data suggests the cap is largely working. On Jan. 20, 2017 — Trump’s inauguration day — there were 1,079,601 regulatory restrictions on the books. By Dec. 6, 2019, that number stood at 1,077,822. While the code has not declined substantially by this measure — and the administration should acknowledge that aggregate cuts to-date have been modest — it’s rare to see a code fail to grow across an entire presidential term.

Incidentally, the Mercatus measure of “regulatory restrictions” almost certainly is better than other measures of red tape, so it’s disappointing that Coglianese, Sarin, and Shapiro failed to include it in their analysis.

But if we’re simply looking at the volume of “significant rules,” here’s a tweet from James Pethokoukis showing that the increase in red tape dramatically slowed once Trump took over.

Philip Wallach of the R Street Institute examined Trump’s track record on red tape in an article for National Review in late 2019 and he thought the glass was half empty rather than half full.

Regulation became one area where conservatives wary of Trump allowed themselves high hopes. Trump’s experiences as a developer left him with a bone-deep skepticism of regulations. …There have been some real bright spots for deregulators. Many of the Obama administration’s aggressive and legally dubious environmental rules have been stalled or rolled back, including the Waters of the United States rule, Corporate Average Fuel Economy standards for tailpipe emissions, and the Clean Power Plan, which regulated greenhouse-gas emissions from existing power plants. The Endangered Species Act will be interpreted so as to make it less burdensome. Promises to scrap Obamacare may have gone unfulfilled, but the administration has quietly and constructively made the program more flexible for states and individuals. …the Trump administration…to an unprecedented degree…has…issu[ed] far fewer new regulations than any of its predecessors.

As you can see, it’s important to define success. Is it a victory to have “far fewer new regulations”?

Or, as you can see in the following excerpt from Wallach’s article, is it a victory to cut red tape by less than Obama increased it?

These triumphs notwithstanding, three years in, hopes of a thoroughgoing overhaul have been dashed. …hitting the pause button, however unusual, does not a revolution make. The hoped-for transformation of the administrative state is nowhere to be found. …In 2018, the administration sought to show its relative merit by noting that, through its first two years, the Obama administration had imposed $245 billion in regulatory costs. The Trump administration’s negative $33 billion in costs imposed at that point certainly was a lot less than $245 billion. But the comparison cuts harder in the other direction: The administration is admitting that it is coming nowhere close to reversing the costs imposed even by the Obama administration — let alone the decades of regulatory burdens built up previously. …the administration’s math allows it to take credit for deregulatory policies as soon as they are promulgated, without paying any attention to whether they are carried through. …the administrative state has been more discomfited than deconstructed by the Trump administration.

Last but not least, former Obama official Cass Sunstein opined for Bloomberg back in 2018 that Trump’s main achievement was to slow the tide of new regulations.

Is President Donald Trump dismantling the regulatory state? Not close. …let’s take a broader perspective. Under George W. Bush, the Office of Information and Regulatory Affairs approved about 2,500 final regulations. Under Barack Obama, it approved about 2,100 final regulations. …By comparison, the Trump administration has repealed … dozens of finalized regulations. …about 2 percent of the number of regulations finalized over the past 16 years. …Much more fundamentally, he’s substantially slowed the flow of new ones. …From Bush’s inauguration to Sept. 1, 2002, the Office of Information and Regulatory Affairs approved about 400 proposed regulations and about 500 final regulations. From Obama’s inauguration to Sept. 1, 2010, the Office of Information and Regulatory Affairs approved about 270 proposed regulations and about 470 final regulations. …the Bush and Obama administrations look pretty similar… The Trump administration is a big outlier. From Trump’s inauguration to the present, the Office of Information and Regulatory Affairs approved about 170 proposed regulations and about 160 final regulations. That’s a major reduction.

So what’s my two cents?

The obvious conclusion is that the Trump Administration did some good things to ease the nation’s regulatory burden, but there was no major paradigm shift.

The United States had a lot of red tape when Trump took office and it had a lot of red tape when Trump left office, though he definitely slowed the rate of increase.

But a slower rate of increase is still not good news, as illustrated by the fact that the Fraser Institute calculates that America’s score on red tape has declined slightly since 2016.

Indeed, the overall score for economic liberty in the United States has declined slightly since Obama left office, which is evidence for my argument that Trump delivered an incoherent mix of good policies (taxes, for instance) and bad policies (trade, for instance).

P.S. Trump’s Jekyll-Hyde record on economic policy is one of the reasons why I prefer Reaganism over Trumpism. The establishment doesn’t like either of those options, but I very much prefer the one that unambiguously reduces the size and scope of government.

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While I freely self-identify as a libertarian, I don’t think of myself as a philosophical ideologue.

Instead, I’m someone who likes digging into data to determine the impact of government policy. And because I’ve repeatedly noticed that more government almost always leads to worse outcomes, I’ve become a practical ideologue.

In other words, when looking at at an issue, I now have a default assumption that government is going to be the problem, not the solution.

I think more people will share my viewpoint if they peruse this chart from Mark Perry.

It shows changes in prices for selected goods and services over the past 21 years, and the inescapable conclusion (as I noted when writing about the 2014 version of his chart) is that we get higher relative prices in sectors where there’s the most government intervention.

Especially healthcare and higher education.

By contrast, we see falling relative prices (and sometimes falling absolute prices!) in sectors where there is little or no government intervention.

Here’s some of Mark’s description of what we can learn from his chart.

I’ve updated the chart above with price changes through the end of last year. During the most recent 21-year period from January 2000 to December 2020, the CPI for All Items increased by 54.6% and the chart displays the relative price increases over that time period for 14 selected consumer goods and services, and for average hourly wages. …Various observations that have been made about the huge divergence in price patterns over the last several decades… The greater (lower) the degree of government involvement in the provision of a good or service the greater (lower) the price increases (decreases) over time, e.g., hospital and medical costs, college tuition, childcare with both large degrees of government funding/regulation and large price increases vs. software, electronics, toys, cars and clothing with both relatively less government funding/regulation and falling prices.

By the way, I can’t resist also calling attention to Mark’s data on what’s happened over time to prices for various health care services and procedures.

We find that prices have skyrocketed in areas of the healthcare sector where government plays a big role, especially hospital care.

By contrast, prices have been steady (or even falling!) in areas of the healthcare sector where competitive markets are allowed to operate, most notably for cosmetic procedures.

It’s almost as if it makes sense to have a default assumption that government is the problem rather than the solution.

P.S. While the data in Mark’s chart tell a depressing story about the harmful effect of government intervention, he shares one bit of good news in his article.

The annual increase in college tuition and fees of only 1.4% last year was the smallest annual increase in the history of the CPI for college tuition and fees going back to 1978, and the only annual increase ever below 2%. That increase is far below the average annual increase in college tuition of nearly 7% over the last 42 years. So perhaps the “higher education bubble” is finally starting to show signs of deflating?

I hope he’s right, but worry he’s wrong.

P.P.S. Sadly (but predictably), some people seem to think government-caused price increases are a reason to support more government intervention.

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In my five-part series on coronavirus and the failure of big government (here, here, here, here, and here), the Food and Drug Administration (FDA) received some unflattering attention.

Whether we’re examining its performance regarding equipment, testing, or vaccines, the bureaucracy has hindered the private sector’s ability to quickly and effectively respond to the pandemic.

Today, let’s devote an entire column to problems with the FDA.

Historically, the big issue is that the bureaucracy is too cautious and risk-averse.

The argument from the FDA is that a lengthy and expensive process for approving drugs is necessary to avoid the risk of a drug with bad side effects.

And there are benefits to that approach, with thalidomide being the obvious example.

However, there are also costs. Most notably, the FDA’s onerous approval process means that it takes a long time before consumers get access to many life-saving and life-improving drugs.

The net result is that the FDA has killed more people than it has saved.

If you think that is hyperbole, read this summary of academic research from the Independent Institute.

…requiring a lot of testing has at least two negative effects. First, it delays the arrival of superior drugs. During the delay, some people who would have lived end up dying. Second, additional testing requirements raise the costs of bringing a new drug to market; hence, many drugs that would have been developed are not, and all the people who would have been helped, even saved, are not. …three bodies of evidence suggest that the FDA kills and harms, on net. …It is difficult to estimate how many lives the post-1962 FDA controls have cost, but the number is likely to be substantial; Gieringer (1985) estimates the loss of life from delay alone to be in the hundreds of thousands (not to mention millions of patients who endured unnecessary morbidity). …Deaths owing to drug lag have been numbered in the hundreds of thousands. …in recent years thousands of patients have died because the FDA has delayed the arrival of new drugs and devices

Oh, and it’s worth mentioning that the FDA process means companies much charge higher prices to compensate for the expensive approval process.

But let’s look at where we are today and explore the FDA’s role in fighting the coronavirus.

We’ll start with this tweet about the bureaucracy’s unhelpful role last year as the pandemic was getting worse.

But I mostly want to focus on what the FDA is doing today to make our lives less safe.

Professor Garret Jones of George Mason University has a column in the Washington Examiner excoriating the bureaucracy’s deadly delays in approving another vaccine.

Good enough for Britain. Good enough for the European Union. Not good enough for the United States. That’s what the U.S. Food and Drug Administration thinks about the evidence for the Oxford-developed, AstraZeneca-made COVID-19 vaccine: the cheap, refrigerator-friendly, easy-to-transport injection that, so far at least, is 100% successful at keeping people with COVID-19 out of the hospital. The Oxford vaccine has been given to more than a million British citizens, and the EU is now scrambling to find as many doses as it can… So why hasn’t the Oxford vaccine been approved for use in the U.S.? Because the FDA made clear that AstraZeneca needed to finish its lengthy trials in the U.S., above and beyond the trials AstraZeneca had already run in the United Kingdom, Brazil, and South Africa. …My colleague at George Mason University, Alex Tabarrok, refers to the “invisible graveyard” — those dead because lifesaving drugs and vaccines were delayed or never invented. Every day we delayed vaccine approval in 2020 was a day that COVID-19 could spread unabated, killing people in the U.S. in the hundreds of thousands. And that deadly delay continues in 2021. …The FDA should approve the Oxford vaccine immediately. Since it doesn’t require fancy freezers, it will easily reach small towns and local clinics in a way that current COVID-19 vaccines in the U.S. can’t.

Since I have friends who have died from the virus, it’s infuriating that the FDA is hindering the approval and deployment of the AstraZeneca vaccine.

Heck, I would love the chance to get it myself, yet a bunch of cossetted bureaucrats are telling me that my life should be at risk instead.

If you’re wondering why the FDA is mindlessly causing needless danger and death, this tweet from Professor Jones may tell us everything we need to know (he also mentioned Pelosi’s unhelpful role in the column cited above).

Why is she putting people’s lives at risk?

Is it because she reflexively supports red tape? Is it because she’s getting campaign contributions from Pfizer and is trying to keep a competing vaccine off the market? Is it because Astra-Zeneca’s vaccine was developed in the U.K. and she opposed Brexit?

I don’t know the answer, but I’m 99.99 percent sure she’s already been vaccinated and isn’t at risk like the rest of us.

What about the FDA’s motivations?

Dr. Henry Miller’s recent column in the Wall Street Journal has some insight on why the bureaucracy is willing to put our lives in danger.

…countless patients could benefit, if Food and Drug Administration regulators were less risk-averse. I know that from firsthand experience. …As the head of the FDA’s evaluation team, I had a front-row seat. …during the early 1970s, as the supply of animal pancreases declined and the prevalence of diabetes increased, fears of drug shortages spread. Around the same time, a new and powerful tool—recombinant DNA technology, or gene splicing—became available. …Eli Lilly & Co. immediately saw the technology’s promise for producing human insulin… Insulins had long been Lilly’s flagship products, and the company’s expertise was evident in the purification, laboratory testing and clinical trials of Humulin, its new human insulin. Lilly’s scientists painstakingly verified that their product was pure and identical to pancreatic human insulin. …In May 1982 the company submitted to the FDA a voluminous dossier providing evidence of the product’s safety and efficacy. …My team and I were ready to recommend approval after four months’ review. But when I took the packet to my supervisor, he said, “Four months? No way! If anything goes wrong with this product down the road, people will say we rushed it, and we’ll be toast.” That’s the bureaucratic mind-set. …A large part of regulators’ self-interest lies in staying out of trouble. One way to do that, my supervisor understood, is not to approve in record time products that might experience unanticipated problems.

Sadly, this FDA mindset hasn’t changed.

As a result, Americans are needlessly dying.

P.S. Professor Alex Tabarrok has another example of senseless regulation from the FDA.

P.P.S. Here’s my column on the CDC’s unhelpful role in dealing with the pandemic.

P.P.P.S. And here’s what I wrote about the international bureaucrats at the World Health Organization.

P.P.P.P.S. When dealing with other advanced nations, we should adopt the principle of “mutual recognition” so our consumers have the option of benefiting from products approved elsewhere, such as the Astra-Zeneca vaccine.

P.P.P.P.P.S. In an all-too-typical example of Mitchell’s Law, politicians and bureaucrats have created a process than makes drugs very expensive. They then respond by agitating for price controls rather than fixing the underlying problem.

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Since both political parties have sent good and bad people to the White House, I don’t think it makes much sense to compare all Democratic presidents vs all Republican presidents.

But we can learn a lot by looking at the track record of specific presidents. I’ve done that with several past chief executives (Wilson, Hoover, FDR, Nixon, Reagan, Bush I, Clinton, Bush II, and Obama), and today we’re going to assess Trump’s performance.

The bottom line, as you can see from the chart, is that he did really well in some areas and really poorly in other areas, so his overall record was flat. Or perhaps slightly negative.

The bottom line is that Trump was good on taxes and bad on spending and trade.

And there were some very positive moves on regulation, but they were partly offset by areas where Trump increased intervention (coal subsidies, property rights, Fannie/Freddie, and international tax rules, for instance).

By the way, I’d like to give Trump a negative grade for his failure to address entitlements, but, in the interest of fairness, I only include actual policy changes.

Having given my big-picture assessment, here are some columns and articles that offer interesting insights.

We’ll start with some pro-Trump analysis. Professor Casey Mulligan opined in the Wall Street Journal that he restored growth (until the coronavirus, of course).

The Obama administration promulgated hundreds of new federal regulations that protected certain special interests from market competition. The beneficiaries included large banks, trial lawyers, big tech, major health-insurance companies, labor unions and foreign drug manufacturers. President Trump promised to undo all that, and in many cases succeeded, sometimes with the help of a Republican Congress. …Mr. Trump also helped remove government obstacles to innovation and competition in health care. Democrats will tell you that the first calendar-year drop in retail prescription drug prices in 46 years was mere coincidence, not the result of deregulation. …The Fed and the Obama economic team overpredicted growth almost every year from 2010-16. When growth failed to meet their rosy predictions, Mr. Obama’s advisers blamed the poor economic performance on America itself. …No one in Washington predicted that small business optimism would skyrocket to record levels when Mr. Trump was elected, that real wages would grow again (especially for blue-collar workers), that business formation would hit 20th-century highs, or that poverty and unemployment rates would quickly fall to record lows for Hispanics and African-Americans.  …Although Mr. Trump’s economic policy was imperfect, it was preferable by a long shot to Mr. Obama’s, which punished work, hiring and success rather than rewarding them. 

And here’s a chart that definitely makes Trump look good compared to Obama.

Those numbers will look much worse once 2020 numbers are included, but I won’t blame Trump for coronavirus-caused economic havoc (though I also don’t give him full credit for the good data in 2019).

Now let’s look at some less-than-flattering analysis.

Jeffrey Tucker of the American Institute for Economic Research lists some of Trump’s statist policies.

From 2015, even from his first public speeches following his presidential run, it was clear that Donald Trump was not a conservative in the Reagan tradition… This is not an American ideal. It’s not about freedom, rights, the rule of law, much less the limits on government. …Trump’s first year began with a more traditional Republican agenda of tax cuts, deregulation, and non-progressive court appointments. …That all changed on January 22, 2018. …This was the beginning of the trade war that would expand to Europe, Canada, Mexico, most of Asia, and ultimately the entire world. …What he ended up seeking was nothing short of trade autarky. …In addition to this calamity, US government spending soared 47% while the money supply registered record increases as measured by M1. The effects of this debt and money printing will be felt through next year.

Rick Newman wrote for Yahoo that Trump’s fiscal performance makes him an honorary Democrat.

Trump’s last-second objection to the $900 billion coronavirus relief bill Congress approved after eight months of negotiation is an unexpected Christmas gift for Democrats. Trump says the $600 direct payment to most Americans contained in the bill is too small. He wants $2,000. Trump could have insisted on this while Congress was drafting the bill… Democrats are gleeful. They’d happily accept a supersized stimulus payment, and even better, they now get to watch Republicans battle each other as they try to figure out what to do about Trump. Some Congressional Republicans think $2,000 is too generous, and there’s no chance of that getting into the bill unless other provisions come out. 

Newman was focusing on Trump’s spending proclivities during the pandemic, but the assertion that “maybe Trump’s a Democrat” applies to his fiscal record during his first three years as well.

P.S. I didn’t rank Trump on monetary policy for the same reason I didn’t rank Obama on that issue. Simply stated, I think both of them pursued a misguided Keynesian approach of easy money and artificially low interest rates, but we don’t have firm evidence (yet) of negative consequences.

P.P.S. I also didn’t give Trump a grade, positive or negative, regarding coronavirus. The federal government failed, but those failures largely were independent of the White House.

P.P.P.S. I generally approved of Trump’s judicial appointments, but don’t includes judges in my assessments of economic policy (though I may have to change my mind if they restore the Constitution’s protections of economic liberty and limits on the power of Washington).

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Yesterday was my review of the best and worst policy developments in 2020.

Today, I’ll share my hopes and fears for 2021.

These are not predictions (economists have a terrible track record when try to make forecasts). Instead, these are merely good and bad things that might plausibly happen.

We’ll start with the positives.

Gridlock – I don’t necessarily think Biden is a hard-core leftist, but his fiscal agenda is terrible. I want him to have an excuse to put those policies on the back burner, and that will happen if Republicans control the Senate and we have “gridlock.” Simply stated, I’d rather nothing happen in Washington than have bad things happen. By the way, I’ll openly admit to being a hypocrite on this issue. At some point, I hope there will be a White House and a Congress that want to reform the tax code and fix entitlements. When that happens, I won’t want any obstacles.

Supreme Court tosses civil asset forfeiture – I’m recycling this item from last year because I’m hopeful that it’s just a matter of time before the Justices toss out this wretched policy that literally allows government to steal property from people who have not been convicted of any crime, or even charged with any wrongdoing.

Trade liberalization – To be charitable, Trump was a disaster on trade. Biden almost certainly will move policy in the right direction, including a restoration of the World Trade Organization‘s ability to settle disputes.

I used to list the collapse of Venezuela’s totalitarian government as one of my annual hopes and I still think that will happen, hopefully sooner rather than later. That being said, I’m getting a superstitious feeling that I’m jinxing regime change since I’ve listed that hope the past three years and it hasn’t happened.

Now let’s look at the negatives.

Absence of gridlock, leading to big anti-growth tax increases – If Democrats win both Senate seats in Georgia in a few days, that will give them control of the Senate, which will dramatically increase the danger that Biden will push his class-warfare tax policies.

Re-regulation – Trump did not have a perfect track record on red tape (coal subsidies, property rights, Fannie/Freddie, for instance), but there was a net shift in the right direction during his four years. Biden almost certainly will impose more intervention. Indeed, I’m not aware of a single regulatory issue where he’s on the right side. So don’t get your hopes up for better showerheads and dishwashers.

Kamala Harris becomes president – The Vice President-Elect staked out policies far to the left of Biden when she ran for president. And she has a reprehensible track record of trampling rights when she was California’s top cop. That’s an unsavory combination. If she’s even half as bad as her rhetoric, we all should wish Biden good health for the next four years.

P.S. If you want to see hope and fears for previous years, here are my thoughts for 2020, 2019, 2018, and 2017.

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Every so often, I highlight tweets that deserve attention because they say something important, usually in a clever and succinct fashion.

Today, I’m highlighting what I consider to be the year’s best tweet.

The tweet is from Matthew Lesh of the Adam Smith Institute in London and it shows the big difference between private sector results and government incompetence.

Some readers may wonder if he is being unfair? Is the tweet merely libertarian-style grousing?

Well, consider this recent story from the Washington Post, which details how government incompetence at the Centers for Disease Control (CDC) greatly delayed testing capacity.

On Jan. 13, the World Health Organization had made public a recipe for how to configure such a test, and several countries wasted no time getting started: Within hours, scientists in Thailand used the instructions to deploy a new test. The CDC would not roll out one that worked for 46 more days. …The agency squandered weeks as it pursued a test design far more complicated than the WHO version and as its scientists wrestled with failures… The CDC’s response to what became the nation’s deadliest pandemic in a century marked a low point in its 74-year history. …Without tests to identify the early cases, health authorities nationwide were unable to isolate the infected and trace the rapid spread among their close contacts. …120 public health labs were without a government-approved test of their own and, with few exceptions, depended wholly on getting the CDC’s kits. …companies had no incentive to navigate regulatory hurdles and mass-produce kits.

The above story describes how the CDC screwed up at the start of the pandemic.

In her December 27 column for the Washington Post, Megan McArdle highlights a new example of CDC incompetence.

…the now-infamous November meeting of the CDC’s Advisory Committee on Immunization Practices…unanimously agreed that essential workers should get vaccinated ahead of the elderly, even though they’d been told this would mean up to 6 percent more deaths. This decision was supported in part by noting that America’s essential workers are more racially diverse than its senior citizens. …the discussion of whether to prioritize essential workers was anything but robust. …not one of those 14 intelligent and dedicated health professionals suggested adopting the plan that kills the fewest people. …for the past nine months, public health experts have insisted that minimizing deaths should override other concerns, even quite important ones. So how, in this case, did equity conquer death?

Let’s close with some excerpts from Aaron Sibarium’s article on the same issue for the Washington Free Beacon.

The committee openly acknowledged that its initial plan would result in more deaths than “vaccinating older adults first.” But, the panel said, the plan would reduce racial disparities—something they deemed more important than saving lives… The result was an explicitly race-conscious plan that would have prioritized shrinking the case gap between races over saving the most lives. …All of this—the exclusions, the contradictions, the moral redundancies—helped disguise the agenda that it justified, giving unscientific value judgments an air of scientific assuredness.

The really amazing aspect of this story is that there almost surely would be more minority deaths if this this approach was implemented.

But the “woke” bureaucrats though that would have been okay since there would have been an even-greater increase in white deaths.

This is healthcare version of their warped view that it’s okay to support policies that reduce income for poor people so long as the rich incur even greater losses.

Anyhow, I guess we should “congratulate” the CDC for showing it can compete with the WHO in the contest to see which bureaucracy had the worst response to the coronavirus (we already had plenty of evidence that the FDA is incompetent).

We can add this column to my series (here, here, here, and here) on how government blundering magnified the coronavirus pandemic.

P.S. If I had the flair for self-promotion that you often find in D.C., I would have been tempted to claim that my tweet from earlier today deserves some sort of recognition.

But I don’t need attention and affirmation. I simply want people to understand that it’s reprehensible that we have cossetted international bureaucrats (who get lavish, tax-free salaries!) pushing sloppy and ideological nonsense that will make the world less prosperous.

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When I write an everything-you-need-to-know column, I’m inevitably guilty of hyperbole.

All that I’m really doing is highlighting a very compelling example of how politicians make a mess of just about anything they touch.

That’s even true in the rare cases when they’re trying to enact policies I prefer.

The crux of the problem is that politicians like having some level of power and control over various sectors of the economy, for the simple public choice-driven reason that they can then extort bribes, campaign cash, and other goodies.

Which is good news for donors, crooks, and cronies, as P.J. O’Rourke wisely noted.

But it’s bad news for those of us who don’t like sleaze. Yet sleaze is almost inevitable when politicians have power to interfere with private market transactions.

Check out these excerpts from a Politico report.

In the past decade, 15 states have legalized a regulated marijuana market for adults over 21, and another 17 have legalized medical marijuana. But in their rush to limit the numbers of licensed vendors and give local municipalities control of where to locate dispensaries, they created something else: A market for local corruption. Almost all the states that legalized pot either require the approval of local officials – as in Massachusetts — or impose a statewide limit on the number of licenses, chosen by a politically appointed oversight board, or both. These practices effectively put million-dollar decisions in the hands of relatively small-time political figures – the mayors and councilors of small towns and cities, along with the friends and supporters of politicians who appoint them to boards. …They have also created a culture in which would-be cannabis entrepreneurs feel obliged to make large campaign contributions or hire politically connected lobbyists. …It’s not just local officials. Allegations of corruption have reached the state level in numerous marijuana programs, especially ones in which a small group of commissioners are charged with dispensing limited numbers of licenses.

Needless to say, what’s happening in the marijuana industry happens wherever and whenever politicians have power.

“All government contracting and licensing is subject to these kinds of forces,” said Douglas Berman, a law professor at Ohio State University who authors a blog on marijuana policy. …“There’s a lot of deal-making between businesses and localities that creates the environment of everyone working their way towards getting a piece of the action,” Berman said. Whether it’s city or county officials that need to be appeased, local control is “just another opportunity for another set of hands to be outstretched.”

The report concludes by noting that corruption can be avoided very simply. Just make sure politicians and other people in government have no power or authority.

States that have largely avoided corruption controversies either do not have license caps — like Colorado or Oklahoma — or dole out a limited number of licenses through a lottery rather than scoring the applicants by merit — like Arizona. Many entrepreneurs, particularly those who lost out on license applications, believe the government shouldn’t be in the business of picking winners and losers and should just let the free market do its job.

Amen.

I’ll conclude by noting that politicians are doing the right thing in the worst way.

I want to end the War on Drugs because it is a costly failure. It’s not that I think drug use is a good idea. But I recognize that the social harm of prohibition is greater than the social harm of legalization.

And, as a libertarian, I believe people should be free to make their own decisions (consistent with the libertarian non-aggression principle, of course), even if I happen to disapprove.

Sadly, politicians are not legalizing pot for libertarian reasons.

Instead, they see it as a way of having a new product to tax (and they’re botching that). And, as illustrated by today’s story, they see it as a way of lining their own pockets.

I’m almost tempted to say we’d be better off if marijuana was criminalized so it could be sold on the black market instead.

But the real moral of the story is that government power is a recipe corruption.

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Regulatory policy is one of the five ingredients in the recipe for growth and prosperity.

Ideally, there should be a minimal amount of red tape, and it should be governed by sensible cost-benefit analysis (i.e., so it deals with genuine externalities such as pollution).

Unfortunately, politicians rarely favor this light-touch approach, in part because of unseemly “public choice” incentives and in part because they focus only on the benefit side of the cost-benefit equation.

But the cost is very real.

And that means that there are substantial benefits when governments reduce the regulatory burden.

Let’s look at some research published by Italy’s central bank. Sauro Mocetti, Emanuela Ciapanna, and Alessandro Notarpietro investigated the impact of liberalization last decade. Here’s what they looked at.

…the importance of structural reforms, aimed at promoting sustainable and balanced growth, has been at the center of the economic debate, in Italy… Structural reforms are measures designed for modifying the very structure of an economy; they typically act on the supply side,i.e. by removing obstacles to an efficient (and equitable) production of goods and services, and by increasing productivity, so as to improve a country’s capacity to increase its growth potential… The aim of this paper is to assess the macroeconomic impact of three major structural reforms carried out in Italy over the last decade. They include (i)liberalization of services, (ii) incentives to “business innovation” (included in the so-called “Industry 4.0” Plan) and (iii) several measures in the civil justice system aimed at increasing the courts efficiency.

And here are their results.

Our results indicate that the three reforms, introduced in different years and with different timing, starting in 2011 and up to 2017, have already begun to produce their effects on the main macroeconomic variables and on Italy’s potential output. In particular, and taking into account the uncertainty surrounding our micro-econometric estimates, by 2019 GDP was between 3 and 6% higher than it would otherwise have been in the absence of these reforms, with the largest contribution being attributable to the liberalizations in the service sector. A further increase of about 2 percentage points would be reached in the next decade, due to the unfolding of the effects of all the reforms considered here. Therefore, the long-run increase in Italy’s potential output would lie in between 4% and 8%. We also detect non-negligible effects on the labor market: employment would increase in the long term by about 0.4%, while the unemployment rate would be reduced by about 0.3 percentage points.

More output and more jobs. Hard to argue with that outcome.

Here are some charts from the study. Figure 7 shows the impact on some macroeconomic aggregates.

And Figure 8 shows the estimated improvement in the labor market.

These results are good news, but Italy still has a long way to go. It’s only ranked #51 according to Economic Freedom of the World, and it’s score for regulation has only improved by a slight margin over the past decade.

P.S. I shared some research earlier this year about the positive impact of another type of deregulation in Italy.

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Even though I agree with the “nanny state” crowd on a few issues (sugary soda and cigarettes are not healthy, for instance), I oppose their efforts to impose their preferences using government coercion.

Especially when their initiatives lower our quality of life.

Call me crazy, but I don’t like having to flush a toilet more than once.

And I really don’t like modern gas cans that spill gas all over the place as I’m trying to refill a hot lawnmower (immolation doesn’t seem like it would be a pleasant experience).

But what’s really annoying is going to a hotel that has installed low-flow showerheads, or visiting with someone who has that type of showerhead in their home. At the very least, it means you will spend at least twice as much time as normal to get clean.

Well, we have a bit of good news.

The Trump Administration wants consumers to have the option of enjoying better showers. Here are some excerpts from a CNN story by .

The US Department of Energy on Tuesday finalized a pair of new rules rolling back water efficiency standards on showerheads… The new showerhead rule goes after the two-and-a-half-gallon-per-minute maximum flow rate set by Congress in the 1990s. Under current federal law, each showerhead in a fixture counts toward that limit collectively — but the Energy Department’s new rule means each showerhead individually can reach the limit set by Congress. …”Today the Trump Administration affirmed its commitment to reducing regulatory burdens and safeguarding consumer choice,” Secretary of Energy Dan Brouillette said in a statement. “With these rule changes, Americans can choose products that are best suited to meet their individual needs and the needs of their families.” The rollbacks were quickly rebuked by environmental advocates and consumer and appliance standards groups.

If I understand correctly, we’ll still have inadequate showerheads, but we’ll be allowed to have showers that use more than one of them.

Not the ideal outcome, to be sure, but definitely better than the status quo.

But don’t get too excited. It’s very likely that the incoming Biden Administration will propose and then adopt a new regulation to overturn what just happened.

So refurbish your shower now while the opportunity exists.

Or, if you live in a grandfathered home that still has decent amenities, don’t sell.

P.S. I’m normally not in favor of more laws, but I would strongly favor legislation mandating that all politicians and bureaucrats have to retrofit their residences any time some idiotic new regulation is imposed. In other words, no grandfathering for the ruling class. They should live by the rules they want to impose on the rest of us, whether we’re looking at showerheads, taxes, coronavirus, or education.

P.P.S. The Trump Administration also has a new rule that would allow a return to better-quality dishwashers.

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Last year, I shared this video from the Competitive Enterprise Institute to help explain how government bureaucrats are making it harder for Americans to clean their plates, bowls, and silverware.

Washington’s dishwasher mandate is just one example of how red tape diminishes the quality of life.

Bureaucrats have concocted other ways of spreading misery and frustration.

Call me crazy, but I don’t like spending extra time in the shower, flushing more than once, and risking self-immolation when I refill my lawnmower.

But there is a bit of good news. The Trump Administration wants to make it easier for us to clean up after dinner.

The Wall Street Journal’s editorial is a good summary of the issue.

For years American homes have been stuck with dishwashers that take forever and still don’t get the job done. A new Department of Energy rule…will help change that. …Regulations on energy and water usage—tightened in 2013 by the Obama Administration—mean that dishwashers now take at least two hours to complete a full wash cycle. Dishes may still emerge with pieces of last night’s lasagna baked on. …CEI petitioned the Energy Department to allow dishwashers that would reduce the average cycle to one hour from two, while also giving better performance. CEI argued that if the aim of the regulation was to conserve water and energy, it’s unlikely they achieved their purpose. People responded to poor dishwasher performance by pre-rinsing each dish before putting it through their washers, wasting more water… The revised DOE rule is…an example of how common-sense deregulation can deliver real benefits for the public.

And Sam Rutzick of Reason explains this latest development in the battle for clean dishes.

Trump’s Department of Energy finalized a rule establishing a new product class for residential dishwashers that will have a normal cycle time of up to one hour and that can use five gallons of water per cycle. Those rules effectively roll back an Obama-era rule limiting standard dishwashers to use no more than 3.1 gallons of water per cycle. That limit forced dishwasher companies to adjust their products’ cycle lengths. And the supposedly more efficient but less useful dishwashers have been a punchline…the average dishwasher cycle time has jumped from the one-hour cycle that was common a decade ago to more than two hours today. The tighter rules didn’t lead to energy savings for customers. …they actually increased water consumption by 63 billion gallons, as households would have to run their dishwashers multiple cycles, or pre-rinse their dishes by hand, in order to get dishes actually clean.

But Rutzick’s column contains a very important caveat.

Joe Biden may reverse this important bit of deregulation.

Unfortunately, the new rules may not last. While the incoming administration has been vague about which deregulatory efforts they intend to undo, they have spoken in favor of tightening environmental regulations—and the new dishwasher rules could be a casualty. If so, that’ll be bad news for consumers. 

For what it’s worth, while he embraced some very bad policies during the campaign, I don’t think Joe Biden is a Bernie Sanders-style nutjob.

But I fear environmentalism is an area where he will push policy significantly to the left.

So I’m not overly optimistic that we’ll have better dishwashers in the future.

The only good news is that Americans, every time they do the dishes, will have an irritating reminder that government is the problem rather than the solution.

P.S. Yes, I realize better dishwashers are not as important as better tax policy (or as important as worse trade policy), but I don’t think politicians should be undermining our quality of life.

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More than ten years ago, I narrated this video in hopes of convincing politicians and bureaucrats that anti-money laundering laws (and associated regulations) were a costly and intrusive failure.

Sadly, my efforts to bring sanity to so-called AML policy (sometimes known as know-your-customer rules, or KYC) have been just as much of a failure as my efforts to get a flat tax. Or my campaign for a spending cap.

I can’t event get my left-leaning friends to care about this issue, even though poor people are disproportionately harmed when governments impose AML mandates on financial institutions.

Worst of all, not only is AML policy not getting better, there are constant efforts to make it more onerous.

The most-recent example is a proposed regulation, which Andrea O’Sullivan discusses in an article for Reason.

…the Federal Reserve and Treasury Department have proposed expanding what is called the “travel rule” to capture international funds transfers above $250. Currently, financial institutions are required to make certain reports on customers when they send international transactions in excess of $3,000. This has been the threshold since the travel rule was first adopted in the U.S. in 1996… surveilled people are suspected of no crime, nor are they given any opportunity to opt out of this data collection. Still, the government preemptively requires that their transactions be tagged and tracked as if they had done something wrong. …it’s worrying that government agencies don’t even consider personal privacy when proposing new regulations. …By law, federal agencies must issue cost-benefit analyses that weigh the trade-offs of a proposed new rule to industry and society. The travel rule analysis only considers the costs that would be imposed on banks on regulators. The extreme cost to privacy for millions of Americans is not even an afterthought… America’s financial surveillance system…creates compliance and hacking risks for institutions that must store this data. And it doesn’t even work very well. Criminals are routinely able to get the finance they need despite this web of data tracking. Meanwhile, innocent people may have trouble making transactions or get caught in the hassle of some overzealous agent. It’s a big mess.

This is an absurd proposal. The odds of any criminal being caught by added red tape are trivially small. Yet the bureaucrats at the Federal Reserve and Treasury are pushing this new regulation because they don’t care about costs that are borne by others.

Ideally, the entire reporting regime should be scrapped. As an interim measure, the $3,000 figure should be adjusted for the inflation that’s occurred since 1996, which would push the reporting limit to about $5,000.

Since we’re on the topic of inflation and reporting requirements, Prof. Randall Holcombe wrote an article for the Foundation for Economic Education about the anti-privacy reporting rules for other financial transactions.

…the Currency and Foreign Transactions Reporting Act of 1970 requires that financial institutions must keep records of cash transactions summing to more than $10,000 in one day and report suspicious transactions to the federal government. …because the limit is stated as a dollar amount ($10,000), inflation lowers the real value of that limit year after year. Adjusting for inflation, $10,000 in 1970, when the Act was passed, would be $65,000 today. …it appears to me the Act violates the Fourth Amendment, which states in part, “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated…”

Let’s close with a story in the Wall Street Journal that highlights how ordinary people are victimized by AML laws.

Mary Ann Liegey, a retired teacher in Manhasset, N.Y., was shocked in March when she received a letter from her local parish: “Your $20 check payable to St. Mary’s Church…was returned due to Frozen/Blocked Account.” The 75-year-old Ms. Liegey discovered that Citigroup Inc. had blocked her checking and trust accounts after she didn’t respond to a notice asking her for personal information to verify the accounts—part of the bank’s efforts to comply with government-mandated rules referred to as “know your customer,” or KYC. The rules are designed to make it harder for money launderers, terrorists and other criminals to finance illicit activities, hide funds or move dirty money around the globe. …The difficulty and complexity of these reviews are exacerbated by advances in technology that have fundamentally changed the ways people interact with banks. More customers are opening accounts or interacting through mobile apps rather than by walking into a branch and presenting physical identification.

Ms. Liegey isn’t the only victim.

There’s also Mr. Laderer.

Bill Laderer, who owns a landscaping business in Sea Cliff, N.Y., groused that Capital One Financial Corp. suddenly cut off his credit card because he hadn’t provided an employee identification number for his business, which has operated since 1941.

And Ms. Griffit.

Donna Griffit has had a Citigroup account for her California-based business, which helps startups craft pitches, for more than a decade. At the beginning of February, she got a letter saying the bank needed unspecified information from her by month’s end or her account could be closed. When she called the bank a few days later, no one could figure out what was needed, and the bank said it would get back to her, she recalled. She thought it was resolved. But in June, she discovered her account had been frozen.

I’ll close with this excerpt, which shows that all of us are actually victims because banks are spending lots of money to comply with AML/KYC laws.

Needless to say, those costs are passed along to customers.

…the average spending on KYC-related procedures for corporate and asset-manager clients by financial institutions with more than $10 billion in revenue grew to $150 million last year, with each having about 300 employees directly involved, up from just 68 a year prior.

What makes these laws so perverse is that they impose high costs on both individuals and businesses.

Yet they don’t reduce crime.

They don’t reduce terrorism.

They don’t stop drug dealers.

They don’t stop the mafia.

The bottom line is that you don’t help law enforcement by creating haystacks of data and then expect them to find needles.

Nonetheless, politicians support these laws because they can tell their constituents that they’re fighting bad people.

P.S. A recent aspect of AML/KYC laws is that there are proposals to ban cash (including the $100 bill).

P.P.S. In my campaign to be a global money launderer, I have one victory and one defeat.

P.P.P.S. Statists frequently demagogue against so-called tax havens for supposedly being hotbeds of dirty money, but take a look at this map put together by the Institute of Governance and you’ll find only one low-tax jurisdiction among the 28 nations listed.

P.P.P.P.S. You probably didn’t realize you could make a joke involving money laundering, but here’s one starring President Obama.

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The good news is that the election season is almost over. The bad news is that we’ll have a president next year who does not embrace classical liberal principles of free markets and social tolerance.

But that doesn’t mean Trump and Biden are equally bad. Depending on what issues you think are most important, they’re not equally bad in what they say. And, because politicians often make insincere promises, they’re not equally bad in what they’ll actually do.

Regarding Trump, we have a track record. We know he’s pro-market on some issues (taxes and red tape) and we know he’s anti-market on other issues (spending and trade).

Regarding Biden, we have his track record in the United States Senate, where he routinely voted to expand the burden of government.

But we also have his presidential platform. And that’s the topic for today’s column. We’re going to review the major economic analyses that have been conducted on his proposals.

We’ll start with a report from Moody’s Analytics, authored by Mark Zandi and Bernard Yaros, which compares the economic impacts of the Trump and Biden agendas.

The economic outlook is strongest under the scenario in which Biden and the Democrats sweep Congress and fully adopt their economic agenda. In this scenario, the economy is expected to create 18.6 million jobs during Biden’s term as president, and the economy returns to full employment, with unemployment of just over 4%, by the second half of 2022. During Biden’s presidency, the average American household’s real after-tax income increases by approximately $4,800, and the homeownership rate and house prices increase modestly. Stock prices also rise, but the gains are limited. …Near-term economic growth is lifted by Biden’s aggressive government spending plans, which are deficit-financed in significant part. …Greater government spending adds directly to GDP and jobs, while the higher tax burden has an indirect impact through business investment and the spending and saving behavior of high-income households. …The economic outlook is weakest under the scenario in which Trump and the Republicans sweep Congress and fully adopt their economic agenda. …Trump has proposed much less expansive support to the economy from tax and spending policies.

Here’s the most relevant set of graphs from the report.

The Moody’s study is an outlier, however. Most other comprehensive analyses are less favorable to Biden.

For instance, a study for the Hoover Institution by Timothy Fitzgerald, Kevin Hassett, Cody Kallen, and Casey Mulligan, finds that Biden’s plan will weaken overall economic performance.

We estimate possible effects of Joe Biden’s tax and regulatory agenda. We find that transportation and electricity will require more inputs to produce the same outputs due to ambitious plans to further cut the nation’s carbon emissions, resulting in one or two percent less total factor productivity nationally. Second, we find that proposed changes to regulation as well as to the ACA increase labor wedges. Third, Biden’s agenda increases average marginal tax rates on capital income. Assuming that the supply of capital is elastic in the long run to its after-tax return and that the substitution effect of wages on labor supply is nontrivial, we conclude that, in the long run, Biden’s full agenda reduces fulltime equivalent employment per person by about 3 percent, the capital stock per person by about 15 percent, real GDP per capita by more than 8 percent, and real consumption per household by about 7 percent.

Wonkier readers may be interested in these numbers, which show that there’s a modest benefit from unwinding some of Trump’s protectionism, but there’s a lot of damage from the the other changes proposed by the former Vice President.

In a report authored by Garrett Watson, Huaqun Li, and Taylor LaJoie, the Tax Foundation estimated the impact of Biden’s proposed policies. Here are some of the highlights.

According to the Tax Foundation General Equilibrium Model, Biden’s tax plan would reduce the economy’s size by 1.47 percent in the long run. The plan would shrink the capital stock by just over 2.5 percent and reduce the overall wage rate by a little over 1 percent, leading to about 518,000 fewer full-time equivalent jobs. …Biden’s tax plan would raise about $3.05 trillion over the next decade on a conventional basis, and $2.65 trillion after accounting for the reduction in the size of the U.S. economy. While taxpayers in the bottom four quintiles would see an increase in after-tax incomes in 2021 primarily due to the temporary CTC expansion, by 2030 the plan would lead to lower after-tax income for all income levels.

Table 2 from the report is worth sharing because it shows what policies have the biggest economic impact.

The bottom line is that it’s not a good idea to raise the corporate tax burden and it’s not a good idea to worsen the payroll tax burden.

Here are some excerpts by a study authored by Professor Laurence Kotlikoff for the Goodman Institute.

The micro analysis is based on The Fiscal Analyzer (TFA), which uses data from the Federal Reserve’s Survey of Consumer Finance to calculate how much representative American households will pay in taxes net of what they will receive in benefits over the rest of their lives. …The key micro issues…are the degree to which the Vice President’s reforms alter relative remaining lifetime net tax burdens and lifetime spending of the rich and poor within specific age cohorts and the impact of the reforms on incentives to work, i.e., remaining lifetime marginal net tax rates. The macro analysis is based on the Global Gaidar Model (GGM)…a dynamic, 90-period OLG, 17-region general equilibrium model. …The analysis includes three sets of findings. The first is the change in lifetime net taxes defined as the change in lifetime net taxes. The second is the percentage change in lifetime spending, defined as the change in the present value of outlays on all goods and services as well as bequests, averaged across all survivor path. The third is the lifetime marginal net tax rate from earning an extra $1,000. TFA’s lifetime marginal net tax rate measure takes full account of so-called double taxation. …The GGM predicts a close to 6 percent reduction in the U.S. capital stock. The GGM predicts close to a 2 percent permanent reduction in annual U.S. GDP.  The GGM predicts a roughly 2 percentage-point reduction in wages of U.S. workers, with a larger reduction in the wages of high-skilled workers.

In a study for the Committee to Unleash Prosperity, Professor Casey Mulligan estimated the following effects.

This study addresses the impact of these tax rate changes on economic behavior – work, investment, output and growth. This study finds that the Biden tax agenda will reduce production, incomes, and employment per capita by increasing taxation of both labor and business capital. Employment will be about 3 million workers less in the long run (five to ten years). This employment effect is primarily due to the agenda’s expansion of health insurance credits, which raises the average marginal tax rates on labor income by 2.4 percentage points. Biden also plans to increase taxes on businesses and their owners by a combined 6 to 10 percentage points. These taxes will reduce long-run wages, GDP per worker, and business capital per worker in the long run. By decreasing both the number of workers per capita and GDP per worker, respectively, these two key elements of Biden’s agenda reinforce to significantly reduce GDP per capita and average household incomes. I estimate that, as a result of Biden’s tax agenda, real GDP per capita would be 4 to 5 percent less, which is about $8,000 per household per year in the long run. The two parts of the tax agenda combine to reduce real per capita business capital by 7 to 12 percent in the long run.

Here’s a table from the study.

I’ll add two points to the above analyses.

First, the reason that the Moody’s study produces wildly different results is that its model is based on Keynesian principles. As such, a bigger burden of government spending is assumed to stimulate growth.

For what it’s worth, I think borrowing and spending can lead to short-run increases in consumption, but I’m very skeptical that Keynesian policies can generate increases in national income (i.e., what we produce rather than what we consume) over the medium-run or long-run.

All of the other studies rely on models that estimate how government policies impact incentives to engage in productive behavior. They don’t all measure the same things (some of the studies look solely at taxes, some look at overall fiscal policy, and some also include a look at regulatory proposals) but the methodologies are similar.

Second, I’ll re-emphasize the point I made at the beginning about how politicians routinely say things during campaigns that are either insincere or impractical.

For instance, Trump promised to restrain domestic discretionary spending by $750 billion and he actually increased it by $700 billion.

Likewise, I don’t expect Biden (assuming he prevails) to deliver on his campaign promises. In this case, that’s good news since he won’t increase taxes and spending by nearly as much as what he’s embraced during the campaign (in my fantasy world, he turns out be like Bill Clinton and actually delivers a net reduction in the burden of government).

P.S. For those on the losing side of the upcoming election, I’ll remind you that Australia is probably the best option if you want to escape the United States. Though you may want to pick Switzerland if you have a lot of money.

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When I write about regulation, I mostly focus on cost-benefit analysis.

Simply stated, red tape makes it more expensive for people and businesses to do things, much as adding obstacles makes it more difficult for someone to get from Point A to Point B.

So a relevant question is whether proposed regulations generate enough benefits to justify the added expense (I’m generally skeptical, but those are empirical matters).

But there’s another question we should ask, which is why governments create new rules and red tape in the first place?

Those are all plausible explanations.

But one thing that never occurred to me is that we may get more regulation if we live in a state or nation with lots of people.

That’s a topic that James Bailey, James Broughel, and Patrick A. McLaughlin investigated in a new study from the Mercatus Center. Here’s a description of their methodology.

…very few academic studies have advanced scholars’ understanding of the relationship between regulation and population. This article is intended to help fill this gap in the literature. We aim to test whether this population-regulation connection holds using more recent, more refined, and more comprehensive measures of regulation. …This study is the first to use RegData to measure why some polities are more regulated than others, the first to use the full State RegData (released in October 2019) for any econometric analysis, and the first to combine federal and state RegData for the United States with RegData datasets for other countries (Australia and Canada).

Here is some of the key data from the United States, Canada, and Australia.

The United States has about an order of magnitude more people than Canada, along with about an order of magnitude more regulatory restrictions than Canada. Conversely, Australia is less populous than Canada but has nearly twice as many regulatory restrictions. On a per capita basis, Canada, with only 0.0023 restrictions per capita for the entire time period examined, appears somewhat less regulated than the United States (at about 0.0032 restrictions per capita) and significantly less regulated than Australia (whose restrictions per capita rise from about 0.0053 in 2005 to a peak of 0.0095 in 2012, and taper slightly to 0.0092 in 2018). We note, however, that both the Canadian and the Australian regulatory systems are fairly decentralized compared to that of the United States, delegating a considerable amount of autonomy and authority to provincial governments.

The study includes some interesting charts.

First, we see that there are a lot more regulatory restrictions in the United States than in Canada and Australia.

Though if you adjust for population size, Australia has the most red tape.

Kudos to Canada for having the lowest level of red tape, both in absolute terms and in per-capita terms. As I wrote a few years ago, there are many Canadian policies we should emulate.

One common feature of the U.S., Canada, and Australia is that all three nations have some degree of federalism, which means that some government policies are handled at the state/provincial level.

And this means the Mercatus study has another way of measuring the relationship between population and red tape. In the United States, we learn that more people means more regulations.

Figure 3 compares the 2000 population and 2018 regulatory restriction counts of 46 US states and the District of Columbia. We see a strong positive correlation between population and regulatory restrictions. Running a basic linear regression with no controls, we find that, on average, an increase in population of 1,000 people is associated with a statistically significant increase of 9 regulatory restrictions. …we next take the log of both population and regulatory restrictions and run a simple linear regression on these variables…which show that, on average, a 10 percent increase in population is associated with a 3.27 percent increase in regulatory restrictions.

Here’s the relevant chart from the study.

Congratulations to South Dakota for having the lowest level of red tape (the state also scores well on fiscal policy).

Canada and Australia have fewer subnational governments, but the study finds a similar relationship between population size and regulatory restrictions.

While Canada and Australia do not have enough provinces to support proper regression analysis, Figures 4 and 5 plot their subnational populations against their subnational regulatory restrictions. The results are also suggestive of a positive population-regulation correlation.

Here’s the chart for Canada.

And here’s the chart for Australia.

The relationship between red tape and population isn’t a perfect fit, either in the U.S. or in the other two countries. But there certainly seems to be some level of correlation.

But why?

The authors offer some potential answers.

…we show that larger polities consistently have more regulation. This provides support for previous theoretical work that posited a fixed cost associated with regulating. Specifically, the fixed costs of establishing new bureaus, staffing them, and funding them to implement and enforce regulations may fall on a per capita basis with a larger population. In addition to the fixed cost explanation, Mulligan and Shliefer offer other alternative explanations for why regulation may increase with population levels…the scope of activities to regulate becomes larger as population increases.

Sounds like we should turn the 50 states into 500 states (to help ensure good political outcomes, let’s leave California, New York, and Illinois alone and subdivide the libertarian-leaning states).

Not only would we get less red tape, we’d also benefit from additional regulatory diversity and additional regulatory competition.

P.S. Our friends on the left want to go in the opposite direction, favoring global regulation.

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If you’re a curmudgeonly libertarian like me, you don’t like big government because it impinges on individual liberty.

Most people, however, get irked with government for the practical reason that it costs so much and fails to provide decent services.

California is a good example. Or perhaps we should say bad example.

The Tax Foundation recently shared data on the relative cost of living in various metropolitan areas. Looking at the 12-most expensive places to live, 75 percent of them are in California.

So what do people get in exchange for living in such expensive areas?

They get great weather and scenery, but they also get lousy government.

Victor Davis Hanson wrote for National Review about his state’s decline.

Might it also have been smarter not to raise income taxes on top tiers to over 13 percent? After 2017, when high earners could no longer write off their property taxes and state income taxes, the real state-income-tax bite doubled. So still more of the most productive residents left the state. Yet if the state gets its way, raising rates to over 16 percent and inaugurating a wealth tax, there will be a stampede. It is not just that the upper middle class can no longer afford coastal living at $1,000 a square foot and $15,000–$20,000 a year in “low” property taxes. The rub is more about what they get in return: terrible roads, crumbling bridges, human-enhanced droughts, power blackouts, dismal schools that rank near the nation’s bottom, half the nation’s homeless, a third of its welfare recipients, one-fifth of the residents living below the poverty level — and more lectures from the likes of privileged Gavin Newsom on the progressive possibilities of manipulating the chaos. California enshrined the idea that the higher taxes become, the worse state services will be.

Even regular journalists have noticed something is wrong.

In an article in the San Francisco Chronicle, Heather Kelly, Reed Albergotti, Brady Dennis and Scott Wilson discuss the growing dissatisfaction with California life.

California has become a warming, burning, epidemic-challenged and expensive state, with many who live in sophisticated cities, idyllic oceanfront towns and windblown mountain communities thinking hard about the viability of a place many have called home forever. For the first time in a decade, more people left California last year for other states than arrived. …for many of California’s 40 million residents, the California Dream has become the California Compromise, one increasingly challenging to justify, with…a thumb-on-the-scales economy, high taxes… California is increasingly a service economy that pays a far larger share of its income in taxes and on housing and food. …Three years ago, state lawmakers approved the nation’s second-highest gasoline tax, adding more than 47 cents to the price of a gallon. …service workers in particular are…paying far more as a share of their income on fuel just to stay employed. …A poll conducted late last year by the University of California at Berkeley found that more than half of California voters had given “serious” or “some” consideration to leaving the state because of the high cost of housing, heavy taxation or its political culture. …Business is booming for Scott Fuller, who runs a real estate relocation business. Called Leaving the Bay Area and Leaving SoCal, the company helps people ready to move away from the state’s two largest metro areas sell their homes and find others.

Niall Ferguson opines for Bloomberg about the Golden State’s outlook.

As my Hoover Institution colleague Victor Davis Hanson put it last month, California is “the progressive model of the future: a once-innovative, rich state that is now a civilization in near ruins.”… It’s not that California politicians don’t know how to spend money. Back in 2007, total state spending was $146 billion. Last year it was $215 billion. …the tax system is one of the most progressive, with a 13.3% top tax rate on incomes above $1 million — and that’s no longer deductible from the federal tax bill as it used to be. …And there’s worse to come. The latest brilliant ideas in Sacramento are to raise the top income rate up to 16.8% and to levy a wealth tax (0.4% on personal fortunes over $30 million) that you couldn’t even avoid paying if you left the state. (The proposal envisages payment for up to 10 years after departure to a lower-tax state.) It is a strange place that seeks to repel the rich while making itself a magnet for illegal immigrants… And the results of all this progressive policy? A poverty boom. California now has 12% of the nation’s population, but over 30% of its welfare recipients. …according to a new Census Bureau report, which takes housing and other costs into account, the real poverty rate in California is 17.2%, the highest of any state. …But that’s not all. The state’s public schools rank 37th in the country… Health care and pension costs are unsustainable. …people eventually vote with their feet. From 2007 until 2016, about five million people moved to California but six million moved out to other states. For years before that, the newcomers were poorer than the leavers. This net exodus is surging in 2020. …Now we know the true meaning of Calexit. It’s not secession. It’s exodus.

It’s not just high taxes and poor services.

George Will indicts California’s politicians for fomenting racial discord in his Washington Post column.

California…progressives…have placed on November ballots Proposition 16 to repeal the state constitution’s provision…forbidding racial preferences in public education, employment and contracting. Repeal, which would repudiate individual rights in favor of group entitlements, is part of a comprehensive California agenda to make everything about race, ethnicity and gender. …Proposition 16 should be seen primarily as an act of ideological aggression, a bold assertion that racial and gender quotas — identity politics translated into a spoils system — should be forthrightly proclaimed and permanently practiced… California already requires that by the end of 2021 some publicly traded companies based in the state must have at least three women on their boards of directors… And by 2022, boards with nine or more directors must include at least three government-favored minorities. …Gov. Gavin Newsom (D) signed legislation requiring all 430,000 undergraduates in the California State University system to take an “ethnic studies” course, and there may soon be a similar mandate for all high school students. “Ethnic studies” is an anodyne description for what surely will be, in the hands of woke “educators,” grievance studies.

Several years ago, I crunched some numbers to show California’s gradual decline.

But there was probably no need for those calculations. All we really need to understand is that people are “voting with their feet” against the Golden State.

Simply stated, productive people are paying too much of a burden thanks to excessive spending, excessive taxes, and excessive regulation.

So they’re leaving.

P.S. Many Californians are moving to the Lone Star State, and if you want data comparing Texas and California, click here, here, herehere, and here.

P.P.S. Some folks in California started talking about secession after Trump’s election. Now that the state’s politicians are seeking a bailout, I expect that talk has disappeared.

P.P.S. My favorite California-themed jokes can be found here, here, and here.

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When I wrote yesterday that Trump’s overall rating on economic policy was “bad,” a few people wrote to complain.

I did acknowledge in the column that it may be too soon to give the current president a grade, but it’s not looking good. He not only has a bad record on big issues such as spending and trade, but he also is prone to cronyist policies in other areas.

Such as goodies for the coal industry.

Such as goodies for the housing lobby.

And goodies for corn growers, which is the topic of today’s column.

But we’re not going to look at traditional agriculture subsidies (which are awful in their own right). Instead we’re going to focus on government handouts that bribe corn growers and others into turning crops into fuel.

This is a policy that’s bad for taxpayers, bad for consumers, bad for the environment, and probably bad for motherhood and apple pie.

The Competitive Enterprise Institute wrote last year about this boondoggle.

President Trump has again sought changes to the Renewable Fuel Standard (RFS)… The previous reform effort granted ethanol producers and corn growers their request to raise the amount of ethanol allowed year-round in gasoline from 10 to 15 percent (E-15)… But this did not create peace. Pro-RFS forces soon demanded both E-15 and fewer small refinery waivers. Now, the administration has announced that, while it will still grant small refinery exemptions, it will reallocate the waived amounts to non-exempt refineries and thus preserve the 15 billion gallon maximum set out in the law. It will also ease the labelling requirements for gas stations selling E-15. …Lost in the debate between the biofuels industry and the petroleum industry is what the RFS means for consumers. Gasoline prices are relatively low right now, but not because of the RFS. And we are always one bad corn crop away from an ethanol-induced price spike. …The proposed changes can only add to the upward pressure on pump prices.

The year before, the Independent Institute criticized Trump’s approach.

…instead of terminating the Renewable Fuel Standard (RFS) — which mandates a sharp increase in renewable fuel consumption by 2022 — the Trump administration has doubled-down on biofuels. President Trump has said that he supports ramping up ethanol production even further by allowing gasoline containing 15 percent ethanol to be sold year-round. Doing so would expand ethanol use and encourage the EPA to ratchet that percentage up in subsequent years. …a comprehensive meta-analysis in the American Journal of Agricultural Economics found the greenhouse gas benefits of ethanol to be almost zero. For other pollutants like nitrogen oxides (NOx) and ozone, ethanol actually is worse than gasoline. Because 40 percent of the nation’s corn crop is used in the production of biofuels, ethanol production also raises food costs. As a result, consumers pay higher prices for beef, milk, poultry and pork, among other items. …Because the RFS moved corn growing to areas that require more water, more fertilizer, and more acreage, prairies and other wild-lands are disappearing, soil is eroding, groundwater is being depleted, and ocean dead zones are expanding. …If ethanol truly were a good substitute for gasoline, no E10 or E15 mandate would be necessary.

Ironically, Trump’s misguided handouts aren’t necessarily buying him any friends.

As reported by Bloomberg, one of the big recipients says it may diversify away from ethanol unless subsidies are increased.

American ethanol makers have for years been reliant on a government policy that mandates biofuel use. But industry stalwart Green Plains Inc. wants to break away from that dependence… The Omaha, Nebraska-based company has lost faith that the ethanol industry will get the support it needs from parts of the Trump administration, said Chief Executive officer Todd Becker. …“We are going to spend half a billion dollars transforming this company to be not dependent on government policy,” Becker said in an interview. The EPA is “no friend of ethanol. They’ve done everything they can to destroy the market for us. They’ve done everything they can to destroy this industry.” …The U.S. ethanol industry was born out of government support. In the 1970s, President Jimmy Carter asked agribusiness leaders to make biofuels… The industry got another boost in 2007, when the Renewable Fuels Standard expanded the mandate to blend ethanol into gasoline.

This takes chutzpah. Ethanol arguably could be the most subsidized product in the United States, yet beneficiaries say they may exit the industry without ever-increasing handouts.

I’m not sure how to react to this supposed threat.

  • Should I say, “Here’s your hat, what’s your hurry”?
  • Should I channel Clint Eastwood and say, “Go ahead, make my day”?
  • Or should I simply say, “Don’t let the door hit you on the way out”?

The bottom line is that ethanol handout were bad policy when they were first created and they are bad policy today. These handouts are misguided when Democrats are in charge, and they’re misguided when Republicans are in charge.

I’d like Trump to switch his position because of a newfound appreciation for free enterprise, but I’ll be happy if he shifts in the right direction simply because he doesn’t appreciate greedy complaints from the ethanol industry.

P.S. Trump isn’t the only Republican who is bad on this issue. Indeed, the GOPers who support free markets – such as Rand Paul and Ted Cruz – may be in the minority of the Party.

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There are all sorts of regulations, some of which affect the entire economy and some of which target certain sectors. Moreover, regulations vary widely since – depending on the example – they may tell people and business what to do, how to do it, when to do it, and who to do it with.

This is why it’s probably best to think of government red tape as an obstacle course that increases the difficulty of engaging in commerce.

An expensive obstacle course.

Some new research published by Italy’s central bank gives us an opportunity to understand the consequences of red tape.

The study, authored by Lucia Rizzica, Giacomo Roma, and Gabriele Rovigatti, looked at a real-world example of product market regulation (PMR) governing retail hours in Italy.

In this paper we focus on how the regulation of shops opening hours affects the relevant market size and structure. This dimension of PMR has traditionally been a controversial issue in the policy debate, as it involves social, political, economic, and even religious considerations. …we tackle these questions empirically and estimate the effects of full deregulation in shop opening hours on the level and composition of employment and on the number of shops and their size distribution…we focus on Italy and build a novel dataset of Italian municipalities 2007-2016, including their regulatory status, and exploit the variation provided by the staggered implementation at the municipal level of a deregulation reform enacted from1998 onwards.

Here’s a visual from the study, showing the variation over time in the number of municipalities with no regulation, medium regulation, and heavy regulation.

The good news is that Italy actually got rid of rules dictating when stores could be open and this gave the economists an opportunity to measure what happened.

Our estimates show that, in the context of a general contraction of the retail sector and of the economy as a whole, deregulating shops opening hours helped lowering the decrease in both the number of workers and establishments, with an estimated positive impact of about 3% and 2%, respectively. …On top of it, individual-based estimates show that the sector’s labor force structure changed towards a higher prevalence of employees over self-employed, together with a general increase in the number of hours worked and earnings of employees, especially of those with permanent contracts. Our results are robust to a number of checks… In Table 2 we present our baseline results. In columns (1)-(2) we report the estimates of the liberalization effect on the number of workers, and in columns (3)-(4) those on the number of plants in each municipality. …the resulting estimated effect of liberalization in the newly liberalized municipalities is a 3.4% increase in the number of individuals working in the wholesale and retail sector, and a 2.1% increase in the number of shops. …Finally, we show that the reform also had a positive effect on the activity of complementary services, such as restaurants and financial services and, overall, on total employment in affected areas.

For wonky readers, here’s the table mentioned in the above excerpt.

So what’s the bottom line?

…from a policy perspective, our results provide support to the idea that a more flexible regulation of the business environment boosts economic growth… We find no evidence that this leads to a worsening of employment conditions, on the contrary permanent dependent workers enjoyed an increase in their earnings.

It’s great to see that deregulation produced more jobs and higher earnings.

But one thing that we don’t find in the study, unfortunately, is any estimate of how deregulation also benefited consumers thanks to lower prices and greater convenience.

In other words, eliminating or reducing red tape is a win-win situation for just about everybody (with the only exception being the cronyists who gain undeserved advantages because of regulation).

P.S. While I’m glad that Italy got rid of rules limiting retail hours, the country – as measured by the World Bank – still has a lot of needless red tape.

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From the perspective of lifestyle (factors such as climate, scenery, and recreational opportunities), there’s probably no better state in which to live than California.

But if you want to be an entrepreneur, start a business, and create jobs, the Golden State is one of the worst places in America.

I’ve already written about the state’s punitive tax system. The 13.3 percent tax rate is far higher than any other state. That’s an acceptable burden to rich folks in Silicon Valley since they amass their wealth in the form of unrealized (and untaxable) capital gains.

But it’s a crippling burden for regular business owners.

California also has a very unfriendly regulatory regime, ranking a lowly 48 out of 50 according a comprehensive study.

What does that mean, in practical terms?

Let’s look at a few examples to understand the state’s hostile business environment.

We’ll start with the high-profile case of Elon Musk, who is openly rebelling against government red tape by restarting production in his Tesla factory.

Tesla CEO Elon Musk confirmed Monday he’s flouting county rules by reopening a Northern California plant amid concerns over safety during the coronavirus crisis, tweeting: “I will be on the line with everyone else. If anyone is arrested, I ask that it only be me.” …Musk tweeted, “Tesla is restarting production today against Alameda County rules. …all other auto companies in US are approved to resume. Only Tesla has been singled out. This is super messed up!” …The county later responded in a statement: “We have notified Tesla that they can only maintain Minimum Basic Operations until we have an approved plan…and we hope that Tesla will likewise comply without further enforcement measures.” …a frustrated Musk wrote that he was filing a lawsuit to halt the local restrictions and predicted relocating Tesla’s Palo Alto, Calif., headquarters to Texas or Nevada.

To be sure, this is a very unusual example, one where the battle is complicated by the very difficult issue of how to deal with a serious virus.

So let’s zoom out and consider other examples that existed well before the pandemic.

Andy Quinlan of the Center for Freedom and Prosperity explains for Townhall that California has a long history of policies that discourage entrepreneurship and job creation.

To climb out of the massive pit the economy has been thrown into, it will take not just the release of workers from their homes, but also entrepreneurs and innovators capable of adapting to a new economic environment. Unfortunately, innovators are often treated very poorly by all levels of government. And the worst offender is arguably California… Consider last year’s passage of AB 5. It upended California’s gig economy by requiring that contractors be reclassified as employees, even against their will, when certain thresholds were met. The arbitrary caps were set so low that self-employed freelancers have been devastated by a loss of work as many companies suddenly stopped working with California workers. …The state’s regulators are also unfairly attacking an innovative hotel business. OYO Hotels…focuses on the small hotels ignored by the large chains, offering them proprietary technology and marketing assistance to dramatically improve their ability to reach and attract customers, along with capital to ensure their rooms are up to the company’s standards… But California’s regulators have other ideas. They…claim that OYO’s activities make it a franchise, and therefore it was required to seek approval before ever operating in the state.

John Moorlach, a senator in California’s legislature, wrote a column for the Orange County Register about the Golden State’s anti-growth mentality.

If you were a corporate manager looking to build or lease a plant and hire workers, where would you look first? California, with a $13 minimum wage rising to $15 in 2022? …Then there’s the state income tax. During times of plenty, maybe it’s worthwhile to put up with California’s 13.3% top state personal income tax rate… But during tough times? …If you needed that 13.3 percent to re-invest in your company, instead of going to a poorly run state government, where would you go? …Companies that play by the rules, paying all the taxes and observing every labor regulation, will be at a disadvantage… The cost structure will just be too high. So many of these honest firms will go out of business, join the underground economy or move to Texas. …Every state needs a healthy economy in order to survive. …over-burdening its entrepreneurial sector…becomes an abuse.

Now you know why many people are “voting with their feet” and leaving the state.

Let’s close with my home-made visual that illustrates what red tape means for entrepreneurs.

Yes, there are some entrepreneurs who can make it all the way, but many others don’t have the time, money, energy, or expertise the navigate the entire course.

And others can get through eventually, but only at the cost of shrinking their businesses and hiring fewer workers.

Here’s the bottom line: This isn’t a binary no-regulation-vs-all-regulation choice. The states with the best scores for regulation (the top 5 are Kansas, Nebraska, Idaho, Iowa, and Indiana) have red tape, but it’s a question of degree.

Sensible jurisdictions give entrepreneurs more “breathing room” to start businesses and create jobs. Which is why the scholarly evidence shows that less regulation is good for prosperity.

P.S. The good news is that entrepreneurs can escape California’s red tape by moving across the border. The bad news is that this strategy doesn’t solve the problem of federal rules and mandates.

P.P.S. Since I’m always asked about this comparison, you can review data comparing Texas and California by clicking here, herehere, and here.

P.P.P.S. Here’s my favorite California vs Texas joke.

P.P.P.P.S. Libertarian readers will appreciate the argument for private regulation.

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Since I’ve never smoked or vaped, I have no personal interest in the the regulatory battle over vaping and e-cigarettes.

That being said, I started writing about this issue back in 2016 because it involves several important principles.

  1. The libertarian argument that people should be free to do what they want with their own bodies
  2. Whether the “administrative state” should be able to unilaterally grab more regulatory power.
  3. The degree to which “harm reduction” or “zero tolerance” should guide government policies.

From a public health perspective, the third point is most important.

It’s a fight between those who want the Food and Drug Administration to use its self-anointed regulatory authority to ban e-cigarettes (because vaping is worse than not vaping) and those who explain that e-cigarettes are helpful (because vaping is far less risky than smoking).

This fight has a September 9 deadline. The Food and Drug Administration decided several years ago that its power to regulate tobacco somehow meant it also has the power to regulate vaping. The bureaucrats then created a system requiring future approval for marketing and sale of e-cigarettes and related products (originally to be unveiled in 2022 but a federal judge has ordered an earlier deadline).

The FDA has basically given itself the power to prohibit these products, and if you’re interested in that aspect of the battle, here are two short articles (pro and con) about that effort.

I want to focus today on whether it makes sense to impose prohibition, and it’s a simple matter of cost-benefit analysis. Some people want to enjoy nicotine, so is it better for them to vape or to smoke?

Writing for the American Enterprise Institute, Roger Bate points out that smoking is far worse.

…there is an increasing amount of evidence to support it over smoking. As Michael Siegel — a public health Professor at Boston University — says “there is overwhelming evidence that smoking is more hazardous than vaping. One of the most compelling lines of evidence is a series of studies showing that when smokers switch to e-cigarettes, they experience immediate and dramatic improvement in both their respiratory and cardiovascular health, measured both subjectively and objectively.” Cancer rates are at an all-time low partially due to the introduction of vaping and subsequent reduction in smoking.

And if people can’t vape, that leads to more smoking.

Six scholars, in a new study for the National Bureau of Economic Research, found that higher taxes on vaping led to more cigarette consumption.

We explore the effect of e-cigarette taxes enacted in eight states and two large counties on e-cigarette prices, e-cigarette sales, and sales of other tobacco products. …We then calculate an e-cigarette own-price elasticity of -1.5 and a positive cross-price elasticity of demand between e-cigarettes and traditional cigarettes of 0.9, suggesting that e-cigarettes and traditional cigarettes are economic substitutes. We simulate that for every one standard e-cigarette pod (a device that contains liquid nicotine) of 0.7 ml no longer purchased as a result of an e-cigarette tax, the same tax increases traditional cigarettes purchased by 6.4 extra packs.

If you don’t want to read an academic study, a press release from Georgia State University (home to one of the scholars) summarizes the key findings.

Increasing taxes on e-cigarettes in an attempt to cut vaping may cause people to purchase more traditional cigarettes according to a new study funded by the National Institutes of Health. For every 10 percent increase in e-cigarette prices, e-cigarette sales drop 26 percent while traditional cigarette sales jump by 11 percent. …“Vaping-related illnesses are a public health concern. However, cigarettes continue to kill nearly 480,000 Americans each year, and several research reviews support the conclusion that e-cigarettes contain fewer toxicants and are safer for non-pregnant adults,” said co-author Erik Nesson of Ball State University. …Michael F. Pesko from Georgia State University. “We estimate that for every 1 e-cigarette pod no longer purchased as a result of an e-cigarette tax, 6.2 extra packs of cigarettes are purchased instead,” he said. “The public health impact of e-cigarette taxes in this case is likely negative.”

Needless to say, if higher taxes on vaping lead to more smoking, one can only imagine how much additional cigarettes will be consumed if vaping is outlawed.

And that means more cancer, more heart disease, and other illnesses.

The folks who support anti-vaping policies respond by arguing that vaping enables nicotine consumption by some young people and may even be a gateway to smoking.

That’s probably true, but it’s also true that some of those young people would opt for smoking if they didn’t have the option to vape.

From a utilitarian perspective, the bottom line is that vaping saves lives.

The anti-vaping crowd might even admit that’s true, but they presumably would then argue in favor of banning cigarettes.

But why stop there? Obesity also is a major threat to health, so why not ban cakes, pies, pasta, and french fries? And big gulps (oh, wait, that’s already happening)?

And mandate broccoli consumption as well, along with a government-required five-mile jog on days that end in “y”.

At the risk of understatement, the right solution is to let adults make their own decisions. The FDA should quit its harassment campaign against vaping.

P.S. If FDA bureaucrats actually want to save lives, they should focus on their onerous rules and silly regulations that have hampered the private economy’s ability to respond to the coronavirus.

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When the current health crisis heated up, I wrote a column on “Government, Coronavirus, and Libertarianism” and made four simple points.

  1. Libertarians believe government should protect life, liberty, and property
  2. Libertarians correctly warn that a big sprawling federal government means it is less capable of handling the few things it should be doing
  3. Other government-run health systems have not done a good job
  4. The federal government has hindered an effective response to the coronavirus.

Today, I want to elaborate on point #4 by highlighting an avalanche of reports on how bureaucracy and red tape have been endangering our health.

Readers are welcome to click on some or all of the stories and tweets to learn more about how we’re at risk because of clumsy and inefficient government. Though if you’re pressed for time, this first story is the one to read.

And here are many more reports that confirm how government has largely been the source of problems rather than a solution.

For what it’s worth, the stories I shared above are just a small sampling. I could have shared dozens of additional reports.

But rather than beat a dead horse, let’s focus on the key takeaway from this tragedy. David Harsanyi of National Review nicely summarizes the lessons we should be learning.

…the coronavirus crisis has only strengthened my belief in limited-government conservatism — classical liberalism, libertarianism, whatever you want to call it. Years of government spending and expanding regulation have done nothing to make us safer during this emergency; in fact, our profligate spending during years of prosperity has probably constrained our ability to borrow now. …government does far too much of what it shouldn’t, and is far too incompetent at doing what it should. The CDC, an agency specifically created to prevent the spread of dangerous communicable diseases, has failed. Almost everyone would agree that its core mission should be under the bailiwick of government. Yet, for the past 40 years, its mission kept expanding as it spent billions of dollars and tons of manpower worrying about how much salt you put on your steaks and imploring you to do more jumping jacks. …The CDC — and other federal agencies such as the FDA — haven’t just moved too slowly in tapping the expertise of our academic and private sectors to fight COVID-19; they’ve actively impeded such private efforts. …The CDC didn’t merely botch the creation of a COVID-19 test, it failed to turn to private companies that could have created a test faster and better. …I’d simply like government to do much less much better.

David’s final sentence about a government that does less and does it better deserves to be emphasized. Observers ranging from Mark Steyn to Robert Samuelson have pointed out that the federal government is more likely to do a good job if it focuses on core responsibilities. And there’s plenty of academic evidence in support of this position, though this anecdote from Belgium may be even more persuasive.

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Back in 2014, I shared a World Bank study that measured how tax complexity facilitates more corruption by government officials.

Not that anyone should have been surprised. Complex tax codes enable politicians to extort bribes when writing the law (a problem that definitely exists in Washington) and they makes it possible for bureaucrats to extort bribes when administering the system.

Now the World Bank has a new study showing how a larger regulatory burden enables and facilitates corruption.

The two authors, Mohammad Amin and Yew Chong Soh, wanted to use better types of data to get an accurate assessment of the problem.

Business regulations often create opportunities for public officials to collect bribes… If true, this simple insight provides a practical and powerful way for deregulation to combat corruption and its many harmful effects on the economy. …Regulation is often measured by laws on the books rather than the actual regulatory burden on the firms even though it is the latter that is the primary determinant of corruption… The present paper attempts to fill this gap in the literature by using firm-level survey data on the actual corruption and regulatory burden experienced by the firms. …the public choice theory, stresses that regulation is intended to create rents to be distributed between the industry incumbents and the corrupt public officials. In some cases, the main beneficiary of regulation is the industry (regulatory capture view) while in others, it is the politicians and public officials (tollbooth view). …The present paper contributes to the…literature in several ways. …most previous studies have used perceived corruption indices…we depart from the literature by using firms’ experience with corruption instead. … for regulation, we use the actual regulatory burden experienced by the firms rather than rules on the books. This is an important departure from the literature.

For those not familiar with the term, “public choice” refers to research on the self-interested behavior of people in government.

Anyhow, prior research already showed that red tape gave politicians and bureaucrats the ability to extort money from the private economy.

…several studies analyze the possible effects of regulation on corruption. Using macro-level data for a cross-section of 85 countries in 1999, Djankov et al. (2002) look at the relationship between entry regulations and the level of corruption. …Consistent with the tollbooth view, the study finds strong evidence of higher corruption associated with heavier regulation of businesses. Using data from three worldwide firm surveys, Kaufmann and Wei (2000) confirm that when bribe-extracting bureaucrats can endogenously choose regulatory burden and delay, the effective (not just nominal) red tape and bribery can be positively correlated across firms.

The results in the new World Bank study build on the earlier research and confirm (as I noted in a video more than 10 years ago) more power for government means more corruption by government.

Our results show a large positive impact of the regulatory burden on the level of overall corruption as well as petty corruption. For the baseline specification, the overall bribery rate (bribes as percentage of firms’ annual sales) rises by about 0.03 percentage point for each percentage point increase in the regulatory burden. …The results show that irrespective of the set of controls, there is a large positive relationship between Overall Corruption and Time Tax… That is, for each percentage point increase in the regulatory burden, the overall bribe rate increases by 0.028 percentage point. Alternatively, an increase in regulatory burden from its minimum to maximum level leads to 2.8 percentage points increase in the level of overall corruption. This is a large increase given that the mean level of overall corruption equals about 1.1 percent.

By the way, “time tax” is defined as “the average of the percentage of senior management’s time spent in dealing with business regulations”

Here’s a graphic from the study for those of you who like digging into the empirical details.

P.S. The World Bank also released a study last year showing how more regulation reduces business productivity. Needless to say, that ultimately translates into lower wages for workers.

P.P.S. I’ve been asked why the World Bank seems friendlier to good policy than either the International Monetary Fund or Organization for Economic Cooperation and Development. I point out that it’s not uncommon to see quality work from the professional economists at all international bureaucracies, even the IMF and OECD. But the World Bank seems to have a higher percentage of quality research. My guess it that this is a result of its focus on poverty alleviation.

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When I want to explain that excessive government shortens lifespans, I’m going to have a new and powerful argument thanks to the Trump  Administration’s misguided efforts to restrict vaping.

The issue is very simple.

Some people want nicotine. If vaping products are not available, they will opt for cigarettes, which are vastly more dangerous.

The Wall Street Journal recently opined on the issue, echoing the point I made about how the Trump policy will open the door for higher-risk black-market products.

The Food and Drug Administration on Thursday announced a ban on flavored e-cigarettes…don’t think this will…make teens stop vaping. …it’s not clear how much good the FDA ban will do. It is already illegal for teens under age 18 to buy e-cigarettes, but that hasn’t stopped them. …One risk of the FDA’s flavor ban is more teens might buy e-cigarettes on the black market that are less safe. Illegal products are the main culprits in the recent cases of vaping-related lung illness.

Here’s some of what Jacob Sullum wrote on this topic.

In a wake-up call for people who claim to be concerned about smoking-related disease and death, five prominent public health scholars warn that the “tremendous” harm-reducing potential of e-cigarettes could be nullified by panicky political responses to underage consumption and vaping-related lung injuries. …”There is solid scientific evidence that vaping nicotine is much safer than smoking,” the authors note, while “evidence from multiple strong observational studies and randomized trials suggests that vaping nicotine is more appealing and more effective than [nicotine replacement therapy, such as patches and gum,] at displacing smoking.” …that displacement is not limited to adults. Fairchild and her co-authors point out that “population youth smoking rates dropped much faster in the years vaping surged the most (2013–2019) than in prior years, reaching record lows during that same period, which suggests that nicotine vape use may be replacing smoking more than promoting it.” E-cigarette prohibitionists may think they are acting “out of an abundance of caution,” but the policies they advocate look downright reckless when you consider the ongoing death toll from cigarette smoking.

In the interview, I mentioned that the United Kingdom has a far more sensible approach.

Matt Ridley wrote a piece for the Wall Street Journal about his country’s policy.

Nicotine itself is far less harmful to smokers than the other chemicals created during combustion. Heavyweight studies confirm that there are much lower levels of dangerous chemicals in e-cigarette vapor than in smoke and fewer biomarkers of harm in the bodies of vapers than smokers. …In both the U.K. and the U.S. the rapid growth in vaping has coincided with rapid reductions in smoking rates, especially among young people. Yet there is a stark contrast between the two countries in how vaping has been treated by public health authorities… Many British smokers have switched entirely to vaping, encouraged by the government, whose official position is that vaping is 95% safer than smoking, an assertion now backed by early studies of disease incidence. The organizations that have signed a statement saying that vaping is significantly less harmful than smoking include Public Health England, the Association of Directors of Public Health, the Royal College of Physicians and the Royal Society for Public Health. …The argument for harm reduction is not one that comes easily to some public-health advocates, because it means promoting behaviors that may still be harmful, just less so than the alternative. Vaping doesn’t have to prove entirely safe for it to save lives, given that it mostly replaces smoking.

Brad Polumbo adds some details in a column for the Washington Examiner.

America’s war on vaping is in full swing. But when you consider the positive approach taken in the United Kingdom, the foolishness of this new conflict is laid bare. …Vaping is much healthier than smoking traditional cigarettes. E-cigarettes do contain nicotine, but nicotine was never really the problem with traditional cigarettes in the first place — it’s essentially similar to caffeine. Rather, the enormous public health problem posed by cigarettes is due to the cancer-causing chemicals they contain, such as tar, for example. Vaping products do not contain similar chemicals, making them much, much less likely to cause cancer. …If the government is to do anything to address vaping, it should be to promote it as an alternative to smoking. This is what the U.K.’s government has done, to massive success. …A sober analysis reveals that we are doing exactly the opposite of everything we should be doing. We are putting up more barriers and restrictions on vaping, and instead, we should embrace the U.K.’s approach.

Let’s shift from international policy to state policy.

In another column for Reason, Jacob Sullum explains that awful politicians in Massachusetts want to combine two bad policies – vape bans and asset forfeiture.

Massachusetts has “the worst civil forfeiture laws in the country.” It looks like state legislators are about to outdo themselves. The Massachusetts House of Representatives…approved a bill that would ban flavored e-cigarettes, impose a 75 percent excise tax on “electronic nicotine delivery systems” (including e-liquids as well as devices), and authorize forfeiture of cars driven by vapers caught with “untaxed” products. …The bill also says a police officer who “discovers an untaxed electronic nicotine delivery system in the possession of a person who is not a licensed or commissioner-authorized electronic nicotine delivery system distributor” may seize both the product and the “receptacle” in which it is found, “including, but not limited to, a motor vehicle, boat or airplane in which the electronic nicotine delivery systems are contained or transported.” …Massachusetts is poised to deprive vapers of the harm-reducing products they used to quit smoking, then steal their cars if they dare to defy that unjust and irrational edict.

Needless to say, two negatives don’t make a positive.

Let’s close with this chart, which (in a logical world) should put an end to the debate.

Yes, it would be nice if nobody used any sort of dangerous product. But in the real world, where we face tradeoffs, I’d much prefer that people get nicotine from vaping.

P.S. And people should have the freedom to make choices that involve risk. Libertarianism is about treating people like adults.

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In order to protect against “Goldfish Government,” it’s very important to make sure that the powers of government are constrained by national borders.

This is the reason why I’m a passionate defender of tax competition and fiscal sovereignty (even if it means being subjected to slurs, attacks, and imprisonment!).

And it’s why I oppose extraterritorial tax laws such as FATCA.

The fight against extraterritoriality isn’t limited to fiscal issues. It’s also become a big problem in the area of financial regulation.

In a new study for the Center for Freedom and Prosperity, Bruce Zagaris addresses the over-use of sanctions and how they produce undesirable unintended consequences.

The widespread use of economic sanctions constitutes one of the paradoxes of contemporary American foreign policy. Although sanctions are often criticized, even derided, they are simultaneously and quickly becoming the policy mechanism of choice for the United States. The U.S. has economic sanctions against dozens of countries. Even though the success rate of sanctions is unimpressive, sanctions are so popular that they are being introduced by many states and municipalities. …In a global economy, unilateral sanctions tend to impose greater costs on U.S. businesses than on the target, which can usually find substitute sources of supply and financing. …As the U.S. is increasingly resorting to unilateral sanctions, they are inadvertently mobilizing a club of countries and international organizations, including U.S. allies, to develop ways to circumvent U.S. sanctions. …Sanctions are criticized due to their lack of effectiveness, adverse humanitarian effects, and adverse public health effects. Sanctions foment criminalization both during and after the sanctions as a way to circumvent sanctions. Sanctions also result in unintended negative effects on neighbor countries… The excessive use of economic sanctions, especially when U.S. allies oppose them and become targets, produces diplomatic tension, and damages the U.S.’s economy and reputation abroad. The growing number of countries in the club of targets has caused countries to develop innovative means to circumvent the use of the dollar.

I’ve previously written about how the dollar’s role as the world’s reserve currency could be threatened by extraterritoriality, so I fully agree with the concerns in Bruce’s study.

Interestingly, even the U.S. Treasury Secretary acknowledges that there is a problem.

The issue also has been featured on the op-ed page of the Wall Street Journal.

Sahil Mahtani of Investec Asset Management opined that excessive sanctioning by Obama and Trump creates risks for the dollar.

Will the U.S. dollar soon lose its status as the world’s pre-eminent currency? …Developments in foreign-exchange markets during the past 18 months point toward dedollarization. …The increasing use of economic sanctions under Presidents Obama and Trump is the immediate cause of dedollarization. …the change in posture among the trans-Atlantic democracies is noteworthy. …the emergence of a genuinely multipolar world means the coming market cycle is likely to be different. The U.S. dollar may finally be knocked off its pedestal.

Other experts also have warned about how sanctions can backfire on the American economy.

 

The Economist also has highlighted how promiscuous use of sanctions is both wrong and could backfire against America.

The United States…has increasingly punished foreign firms for misconduct that happens outside America. Scores of banks have paid tens of billions of dollars in fines. In the past 12 months several multinationals, including Glencore and ZTE, have been put through the legal wringer. …America has taken it upon itself to become the business world’s policeman, judge and jury. …as the full extent of extraterritorial legal activity has become clearer, so have three glaring problems. …Facing little scrutiny, prosecutors have applied ever more expansive interpretations of what counts as the sort of link to America that makes an alleged crime punishable there; indirect contact with foreign banks with branches in America, or using Gmail, now seems to be enough. …Second, the punishments can be disproportionate. In 2014 BNP Paribas, a French bank, was hit with a sanctions-related fine of $8.9bn, enough to threaten its stability. …Third, America’s legal actions can often become intertwined with its commercial interests. …American banks have picked up business from European rivals left punch-drunk by fines. Sometimes American firms are in the line of fire—Goldman Sachs is being investigated by the DOJ for its role in the 1MDB scandal in Malaysia. But many foreign executives suspect that American firms get special treatment and are wilier about navigating the rules. …escalating use of extraterritorial legal actions will ultimately backfire. It will discourage foreign firms from tapping American capital markets. It will encourage China and Europe to promote their currencies as rivals to the dollar… Far from expressing geopolitical might, America’s legal overreach would then end up diminishing American power.

To be sure, not every issue should be decided solely on the basis of economics. More GDP is good, but not at the cost of sacrificing honor and dignity.

Some nations might be so evil that sanctions are justified.

But policy makers should be fully aware that there are costs when sanctions are imposed.

Those costs include foregone trade, which would be bad for American consumers, workers, and businesses.

Most important, those costs could mean the dollar gets weakened or dethroned as the world’s reserve currency and the U.S. loses its “exorbitant privilege.”

And that could mean less investment in America, which translates into fewer jobs and lower wages.

P.S. The study by Bruce Zagaris is the third in a series on why extraterritoriality is a bad idea. The first study focused on extraterritorial taxation. The second study analyzed extraterritorial financial regulation.

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Four years ago, I wrote about how dishwashers don’t work very well because of foolish red tape from Washington.

The clever folks at the Competitive Enterprise Institute put together a video on the topic.

I especially like the fake commercial at the start of the video.

But I don’t like the way my dishwasher performs.

And Jeffrey Tucker of the American Institute for Economic Research shares my disdain.

American dishwashers used to work. They were wonderful labor-saving devices. They kept our kitchens cleaner. They sanitized the dishes, helping to stop cross-contamination and generally improving health over the iffy process of handwashing. …Then one day they just stopped doing the work. What happened? …Dishwashers used to wash all the dishes in under one hour. Now they take two hours, three hours, and four hours, and still don’t get the dishes clean. …All of this is directly due to government regulations. …Now everything comes out foggy and spotted. This is true no matter which dishwasher you get. …None of this has really hurt the dishwasher industry. Sales have consistently risen for the last ten years. My theory is that people are buying replacements, thinking (rationally) that they just need a newer model. What consumers don’t know, and what manufacturers don’t want to admit, is that they no longer work. The older the model, the more likely it is to be operational.

Here’s the most astounding factoid.

One in five homes have just stopped using their dishwashers altogether.

And here’s the bottom line.

These regulations have caused an infuriating and devastating degradation of the quality of appliances and the quality of life in our homes.

I agree. In my home, I don’t bother putting items in the dishwasher until I’ve thoroughly rinsed them. Otherwise, I’ll find food residue and have to wash them again.

Here’s a chart from the Competitive Enterprise Institute on the average cycle time of dishwashers. As you can see, modern dishwashers take much longer because they do such a poor job.

Since I generally run my dishwasher before heading to bed, I’m not particularly worried about how long it takes.

I just want clean dishes at the end of the process. But that’s now much more difficult because of government.

If you want more examples of the regulatory state’s war on modern life, there are plenty of examples.

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One of the quirkier aspect of Washington policy making is the strategizing that occurs when proposed laws get names such as the “Social Security 2100 Act,” the “PATRIOT Act” or the “Affordable Care Act“.

The obvious goal is to put pressure on other lawmakers, who don’t want to go on record for…gasp…being unpatriotic or for…heaven forbid…supporting expensive care.

I was reminded of this when reading a new study examining the “Corporate Transparency Act” and the “ILLICIT CASH Act” (an acronym for “Improving Laundering Laws and Increasing Comprehensive Information Tracking of Criminal Activity in Shell Holdings Act”).

Who could be for secretive companies, or for criminal activity?

Well, as David Burton explains, these pieces of legislation would be all costs and no benefits.

Both bills…would impose a new, burdensome beneficial owner-ship reporting requirement on the smallest businesses in America, while exempting those most able to abuse the financial system. The Corporate Transparency Act would also burden “exempt” entities, including not-for-profit organizations. Moreover, both reporting regimes would be easily and lawfully avoided by criminal elements with even a rudimentary knowledge of business. Better, more comprehensive information is available from tax forms already provided to government—but jurisdictional turf jealousies in Congress have made it difficult to adopt less burdensome approaches using this tax information.

The report has plenty of details about how these proposals would impose onerous regulatory requirements on small businesses and non-profit organizations – including the fact that there are extremely harsh penalties for inadvertent failure (or inability) to comply with the vague legislative language.

Every small business in America would need to either file the beneficial ownership report or, if the business is in an exempt category, file a certification with FinCEN asserting the exemption. Most would not be exempt. In the case of small firms that have other entities as investors or have any-thing other than entirely conventional corporate governance, the reporting burden may be quite high. …roughly 13 million corporations or LLCs would likely be subject to the new reporting regime and required to either report or seek an exemption. Of those, about 11.2 million are small businesses that are not exempt. If even 9 percent were unaware of this new requirement and fail to file with FinCEN, two years after enactment there would be over 1 million small business owners, religious congregations, and charities in non-compliance, subject to fines and imprisonment. …the likely cost will be over $1 billion annually, and perhaps many billions of dollars each year.

Sadly, congressional supporters presumably don’t care about billions of dollars of costs being imposed on the private sector.

They don’t think beyond the fact that they can issue press releases saying they’re against “dirty money.”

What makes this particular case so disgusting is that the federal government already has all the information that would be collected by the two proposed laws. And it would be relatively simple to make it accessible for financial regulators.

The alternative approach would require the Internal Revenue Service to compile a beneficial ownership database ( based on information already provided to the agency in the ordinary course of tax administration) and to share the information in this database with FinCEN. …This approach would provide more comprehensive information to FinCEN than the proposed reporting regime. Furthermore, the social cost of this approach—creating a database based on information already provided to the IRS—would be a very small fraction of the approach contemplated in the proposed reporting regime. The increase in private compliance costs would be negligible… To implement this approach, Internal Revenue Code § 6103(i)…would need to be amended to allow the IRS to share the information with FinCEN.

So why aren’t politicians choosing this simple, low-cost, and non-intrusive approach?

The answer may cause your jaw to drop.

…this approach involves changes to the tax law (notably Internal Revenue Code § 6103), it falls with the jurisdiction of the House Ways and Means and Senate Finance Committees. …Because the primary congressional proponents of beneficial ownership reporting are on the Financial Services and Banking Committees and are not willing to relinquish control of the issue, the less burdensome, more effective approach has not moved forward.

Not that it would be a good idea to go with the alternative approach.

Yes, it would be a less-misguided way of achieving the goal, but David’s concluding analysis points out that that the entire anti-money laundering regime fails any sort of cost-benefit analysis.

The current U.S. framework is overly complex and burdensome, and its ad hoc nature has likely impeded efforts to combat terrorism, enforce laws, and collect taxes.The proposed beneficial ownership reporting regime would add substantially to the complexity and burden of the existing AML and tax information reporting regime. It would, however, do little to further law enforcement objectives. …there is no actual evidence (as opposed to bare assertions or anecdotes) that the beneficial ownership reporting regimes in other countries have had any material effect on money laundering or terrorism. …The existing AML regime is extraordinary expensive. The AML regime costs an estimated $4.8 billion to $8 billion annually.87 Yet this AML system results in fewer than 700 convictions annually, a substantial proportion (probably most) of which are simply additional counts against persons charged with other predicate crimes. …There is a need to engage in a serious cost-benefit analysis of the AML regime and its constituent parts before adding yet another poorly conceived requirement that burdens the smallest businesses in the country.

Amen.

At the risk of understatement, I’m not a big fan of these laws and regulations.

But Democrats don’t care since they see anti-money laundering laws as a way of destroying financial privacy, which they think is necessary to collect more tax revenue.

And Republicans don’t care because they mindlessly support a tough-on-crime approach, regardless of whether it actually produces positive results.

Gee, isn’t bipartisanship wonderful?

P.S. It’s not relevant to big-picture issues such as regulatory burden and cost-benefit analysis, but I want to share one final passage about the The ILLICIT CASH Act from David’s study.

The bill would raise FinCEN salaries to the level of the Federal Reserve. While it is unsurprising that FinCEN personnel want a raise, this is war-ranted only if it is established that FinCEN is systematically having difficulty attracting qualified, competent personnel. Since only five individuals out of 285 (1.8 percent) quit the agency in fiscal year 2018, it is unlikely that its compensation packages are uncompetitive. In contrast, the annual quit rate in the private sector in 2018 was 30 percent; it was 13 percent in the finance and insurance sector.

In other words, the legislation is also a back-door vehicle to further enrich a portion of the already-overpaid federal bureaucracy.

P.P.S. For what it’s worth, I have a 1-1 record in my inadvertent career as a global money launderer.

P.P.P.S. You may not think AML policy lends itself to humor, but here’s an amusing anecdote involving a former President.

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