Jean Tirole On Regulation And Unintended Consequences

See Jean Tirole could have succumbed to Nobel-prize-induced grandeur. Instead he humbly defends his discipline. Book review from The Economist.

Economics for the Common Good. By Jean Tirole. Translated by Steven Rendall. Princeton University Press; 576 pages; $29.95 and £24.95.

Excerpts:

"In some cases, though, critics of economists ask too much of them. Although economists did underestimate the importance of financial regulation in the run-up to the crisis, and oversold the benefits of whizzy new instruments, blaming them for failing to spot something that even financial supervisors had only partial knowledge of seems unfair. Crises often come when an unforeseen but otherwise survivable investor panic becomes self-fulfilling. Knowing when the world will flit between states is impossible.

Mr Tirole spends much of his book reminding readers of what economics is for. It is supposed to serve society, and to offer rigour where gut instincts go wrong. Debates on whether to weaken protection for permanent employees, for example, pit managers against workers who want security. The economist is there to point out the victim hidden by this dichotomy: the person who has no job, or only a short-term contract, because companies are afraid to hire hard-to-fire staff on full contracts.

Economics is perfectly capable of incorporating questions of morality, says Mr Tirole. It simply imposes structure on debate where otherwise indignation would rule. It might make sense to ban some markets, like dwarf-tossing, he says: its existence diminishes the dignity of an entire group. But a market in organs or blood, for example, should not be rejected on the basis of instinctive moral repugnance alone. Policymakers should consider whether payment would raise the supply of donated blood or kidneys, improving or even saving lives. (It might not, if the motivation of money makes generous people afraid of looking greedy.) Whatever the answer, policymakers should make decisions from “behind the veil of ignorance”: without knowing whether any one person, including the policymakers themselves, would be a winner or loser from a particular policy, which society would they choose?

Mr Tirole applies this type of reasoning to topics ranging from carbon taxes to industrial policy, from competition to the digital economy. He presents economists as detectives, sniffing out abuse of market power and identifying trade-offs where populists make empty promises. His analysis is laden with French examples of ill-advised attempts to defy the constraints that those in his discipline delight in pointing out. When in 1996 the French government blocked new large stores in an effort to restrain the power of supermarket chains, share prices of existing ones rose. The new laws inadvertently worsened the problem by restricting competition."

Douglas Irwin debunks trade-policy myths.

See A historian on the myths of American trade Douglas Irwin agrees that trade policy is important. But all manner of powers are wrongly laid at its door. Book review from The Economist. 

Clashing over Commerce: A History of US Trade Policy. By Douglas Irwin. University of Chicago Press; 832 pages; $35.
Excerpts:

"As Mr Irwin spins this grand narrative, he also debunks trade-policy myths. During recessions, tariffs have often been assigned more of a role than they really had, low ones for inflicting American producers with excessive competition (as in 1818) and high ones for stimulating domestic production (as in 1893). But tariff changes were often too small or too late to have these purported results; monetary policy and other factors are more often to blame.

Political dynamics would lead people to see a link between tariffs and the economic cycle that was not there. A boom would generate enough revenue for tariffs to fall, and when the bust came pressure would build to raise them again. By the time that happened, the economy would be recovering, giving the impression that tariff cuts caused the crash and the reverse generated the recovery.

Mr Irwin also methodically debunks the idea that protectionism made America a great industrial power, a notion believed by some to offer lessons for developing countries today. As its share of global manufacturing powered from 23% in 1870 to 36% in 1913, the admittedly high tariffs of the time came with a cost, estimated at around 0.5% of GDP in the mid-1870s. In some industries, they might have sped up development by a few years. But American growth during its protectionist period was more to do with its abundant resources and openness to people and ideas.

Even the Smoot-Hawley tariff bears less responsibility for worsening the Depression than people often think. The Depression was well under way before it came into force. The tariff changes themselves played less of a role than deflation; because the tariffs were set in dollar terms, they loomed larger as prices and wages fell. And the collapse of global trade had more to do with widespread capital controls than a tit-for-tat tariff race."

"But Mr Irwin does think that trade policies have consequences, just not the ones usually trumpeted. Such policies transfer wealth, sometimes by sizeable amounts. In 1885 an average tariff of 30% reshuffled around 9% of America’s GDP from foreign exporters and domestic importers to domestic producers and the government. Trade policies also generate costs. In 1984, economists found that consumers were forking out more than $100,000 in the form of higher prices for each job protected in the clothing industry, where the average wage was around $12,000 per year."

"In 1824, Henry Clay, one of America’s great senators, proposed an “American system” of tariffs, a national bank and “internal improvements” like roads and canals to strengthen the economy of the young country. He saw tariffs as a no-lose deal: raising money from foreigners, promoting American industry and creating a balanced, self-sufficient economy. The tariffs passed, but Clay failed to deliver on infrastructure, or on a plan for American industry. It is hard to see his rather less illustrious successors pulling off this tempting but difficult trick.

Of all the clashes Mr Irwin describes, the most important today is not between political parties, or between friends and foes of trade. It is between policymakers and the forces such as technology reshaping the global economy, in the process destroying many manufacturing jobs. At most, protectionism could shelter some of those jobs temporarily. But those jobs already lost are unlikely to come back."

Fraser Forum Senator Sanders—and much of the media—incorrectly sell single-payer as only path to universal health care

From Bacchus Barua of the Fraser Institute.

"“There is so much to be learned and we will take back what we learned here and what we learned about the Canadian health-care system to the United States Congress and to the American people,” said U.S. Senator Bernie Sanders (pictured above) during his recent speech at the University of Toronto.

Of course, many Canadians were quick to congratulate themselves for the high praise received. Unfortunately, not only is Senator Sanders taking lessons from a universal health-care system that receives only mediocre value for the amount it spends, but his increased advocacy for a single-payer system suggest that he’s learning the wrong lessons.

Let’s start with some basics. The pursuit of universal health insurance coverage in no way necessitates a single-payer government monopoly. And yet, Senator Sanders, his tour guides, and much of the media continue to use the terms interchangeably—selling their single-payer vision as the only path to universal health care.

Sure, of the 29 members of the OECD—a group of economically developed countries—considered having achieved universal or near universal health-care insurance coverage for core services in 2015, some (such as Canada) use a single-payer approach. However, others (such as Switzerland and the Netherlands) rely on regulated, but competitive, private health-care insurance markets. In fact, many countries use a blend of public and private insurers and providers because they understand that the focus should be on the goal of universal access regardless of ability to pay, not on requiring a government monopoly over health-care financing and services.

While this is certainly the most egregious conflation of terms that continues to plague health-care debates in Canada and the United States, the senator is guilty of other misunderstandings.
For example, he is often quoted marvelling that Canada’s government is able to ensure universal insurance coverage for its population at 50 per cent of what the U.S. spends on health care (presumably on a per capita basis, adjusted for purchasing power parity or ppp). While this is true, it does not inform us about the relative efficacy of a single-payer system such as Canada’s compared to more blended multi-payer universal health-care systems, for at least three reasons.

First, the U.S. simply spends more on health care (per capita, and as a percentage of its economy) than every developed country in the world, period. So while it’s true that at US$4,753 per capita (ppp), Canada spent about half of what the U.S. did ($9,892) on health care in 2016, so did Australia ($4,708), Germany ($5,551) and the Netherlands ($5,385)—all of which allow for private-sector involvement to a far greater extent than Canada. In fact, the Netherlands largely relies on a mandatory and competitive private insurance system with a public safety-net—similar in a number of ways to what the U.S. has presently after the introduction of the Affordable Care Act (although distinctly different in a variety of ways as well).
Second, while the figures above include public and private spending, even if we examined just the amount of money the U.S. already spends on public health care (Medicare, Medicaid, Veterans Administration, etc.), at a cost of $4,860 it’s already more than what Canada spends on public and private health care combined ($4,753). So the notion that expanding government control over the rest of its health-care system would allow the U.S. to bring total health-care costs down to Canada’s level is illogical.

Finally, the non-monetary costs of Canada’s single-payer system (as a result of rationed care) are often ignored. These costs are manifested most clearly in the form of the long wait times Canadians endure for medically necessary care.

In 2016, Canadians could expect to wait 20 weeks between referral to treatment, averaged across 12 major specialities. In some provinces, patients could expect to wait for more than a year to receive treatment from an orthopaedic or neurosurgeon. While defenders of the status-quo acknowledge the presence of such waits, they often brush them aside as little more than minor inconveniences. However, physicians repeatedly indicate that their patients wait longer than what they consider clinically reasonable.

There are also other unseen consequences in the form of patients being in pain, unable to work or experiencing increasing difficulty as their conditions deteriorate while they wait for treatment. In fact, a recent study pegged the personal economic cost of lost wages and time at approximately $1,759 per patient in Canada (and up to $5,360, if you include time lost outside the work week).

By contrast, patients in Australia, Germany and the Netherlands report much shorter wait times for treatment across the board. As mentioned previously, they too spend about half of what the U.S. does on health care, but—unlike Canada—ensure universal access to care through a blended system involving public and private insurers and hospitals.

While it’s always encouraging to see U.S. senators such as Bernie Sanders striving to improve access to health care in the U.S., he would be better served by visiting universal health-care countries that get better value for their health-care dollars than Canada.

Importantly, rather than suggest that “[t]he only long-term solution to America's health-care crisis is a single-payer national health-care program,” he should set his sights on creating the best health-care system possible for Americans, irrespective of whether it is achieved through government or private means."

The Impact of Regulations and Institutional Quality on Entrepreneurship

By Dustin Chambers & Jonathan Munemo of Mercatus. 

"New business creation is a prominent feature of the entrepreneurial process. Many studies have demonstrated the positive effects of new business creation on economic growth and development. Newly established businesses tend to be more efficient than older businesses, and the competitive pressure that they exert on other businesses enhances overall productivity and economic growth. New businesses also play much more of a role in job creation than older, more established businesses. Therefore, regulations that inhibit the creation of new businesses can be harmful.

Dustin Chambers and Jonathan Munemo look at the effect of business entry regulations and the quality of a nation’s governmental institutions on entrepreneurship. They find that new business creation is significantly lower in countries with excessive barriers to entry, a lack of high-quality governmental institutions, or both. If a nation wants to promote entrepreneurship, it should prioritize reducing the red tape required to start a new business and improving regulatory quality.

Study Design

This study examines the impact of start-up regulations and institutional quality on the level of new business activity in 119 countries between 2001 and 2012. Entrepreneurship is measured using a World Bank standard called new business entry density, which is the number of new limited liability companies registered per 1,000 working-age people. The study uses indices for six dimensions of institutional quality from the World Bank’s Worldwide Governance Indicators database: voice and accountability, political stability, government effectiveness, regulatory quality, rule of law, and control of corruption. Each dimension is measured on a five-point scale from −2.5 to 2.5, with higher values corresponding to better outcomes. The results are estimated in terms of the effect of a one-standard-deviation change in institutional quality. The standard deviation measures how widely data are dispersed from the average, or mean, of the data. Data that are clustered closer to the mean will have a smaller standard deviation; a larger standard deviation signifies more widely dispersed data.

Key Findings

A nation’s regulatory and institutional environment plays a crucial role in determining the level of entrepreneurship.

• Increasing start-up procedures by one step is associated with an approximate 9.7 percent decline in new business density.
• Increasing the quality of regulations by one standard deviation is associated with a 52 percent increase in new business density.
• Increasing voice and accountability by one standard deviation is associated with a 45 percent increase in new business density.
• Increasing political stability by one standard deviation is associated with a 30 percent increase in new business density.

Conclusion

Removal of entry-related regulations is generally associated with superior economic outcomes such as higher per capita income, reduction in the size of the unofficial economy, less corruption, and improved productivity. If a nation wishes to promote higher levels of domestic entrepreneurship in both the short and long term, top policy priority should be given to reducing barriers to entry for new firms and improving overall institutional quality."

Trump’s Dubious Trust-Busting

The assault on AT&T-Time Warner seems to be more about politics than antitrust law.

WSJ editorial. 

"Justice last sued to block a vertical merger under Section 7 of the Clayton Act in 1977 in United States v. Hammermill Paper Co. It lost. Unlike horizontal mergers of businesses that directly compete, the government in vertical deals must marshal evidence to prove that vertically integrated companies would reduce competition and harm consumers.

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In many of the two dozen or so vertical mergers since 1977 in which the government has raised antitrust concerns, Justice negotiated a settlement imposing behavioral remedies to blunt speculative anti-competitive effects. That includes its 2011 approval of NBCU’s merger with Comcast in which it barred the cable giant from withholding its content from competitors. Justice hasn’t said that the Comcast restrictions were insufficient to curb antitrust abuses, but it won’t entertain such limits for AT&T and Time Warner."

"Supposedly AT&T would threaten to withhold Time Warner content from its diverse competitors to force them to pay more."

"Time Warner accounts for less than 10% of broadcast and cable viewership while DirectTV makes up just 20% of the national multi-channel video programming market. CNN and HBO hardly provide invaluable or indispensable programming, and in any case Time Warner would be giving up hundreds of millions of dollars in revenue if it withheld its content from other distributors. As for raising prices, Time Warner can do that now if it can get away with it. Merging with AT&T hardly gives it more ability to do so.

Justice’s even stranger claim is that the merger would “impede disruptive competition” from “emerging online competition.” Emerging? That adjective will surprise Netflix , with its 110 million subscribers and more than two dozen original shows; or Amazon, with its original TV series and movies and its 90 million Prime members."

"The reality is that competition in media content and distribution has intensified, and traditional pay-for-TV distributors including cable companies and DirectTV are losing customers. AT&T has 25 million video subscribers, down half a million this year. The largest cable companies boast fewer than 50 million customers. Acceleration in cord-cutting is harming content producers like Time Warner that charge cable companies per subscription and sell ads based on viewership.

Increased competition is forcing innovation and consolidation in business models."

"AT&T like Comcast wants to purchase content and use its ability to mine user data to better target ads at viewers. This could help the combined company better compete with Google and Facebook , which already draw 60% of digital ad revenues in the U.S."

Keystone XL on the Cusp

The record shows that pipelines are the safest way to transport oil.

WSJ editorial.

"More than 99.99% of oil moved by pipeline arrives at its destination safely. Compared to rail, pipelines are 2.5 times less likely to have an accident that results in an oil spill, the Fraser Institute concluded after assessing Canadian government data between 2004 and 2015. A Manhattan Institute report looked at the U.S. Department of Transportation’s annual accident data between 2007-2016. Per billion ton-miles, oil pipelines charted the lowest rate at 0.66. Railways came in at 2.20, and roads at 7.11.

South Dakota’s Keystone pipeline, where last week’s spill occurred, has safely delivered more than 1.5 billion barrels of oil since opening in June 2010. TransCanada had isolated the affected portion of pipeline within 15 minutes. South Dakota’s Department of Environment and Natural Resources said emergency precautions “seemed to work very well,” and the spill didn’t spoil surface or drinking water.

Federal and state governments have deemed these to be acceptable risks, especially given the enormous economic benefits. Keystone XL amounts to a shovel-ready, $8 billion investment in American infrastructure—without taxpayer money. Unfounded pipeline alarmism has stymied this project for years, and it would be a pity if such dishonest tactics succeeded again."

What Went Wrong With the CFPB

I was an aide to Barney Frank. I’ve learned it’s a mistake to create an unaccountable agency.

By Dennis Shaul. He is CEO of the Community Financial Services Association of America.

"Under the law, the CFPB—unlike the Securities and Exchange Commission, the Federal Communications Commission, the Federal Trade Commission and other independent agencies—is funded by the Federal Reserve, a move specifically designed to avoid congressional oversight."

"the Dodd-Frank Act of 2010 . . . The authors wanted the bureau to be a fair arbiter of protecting consumers, instead of what it has become—a politically biased regulatory dictator and a political steppingstone for its sole director, who is now expected to run for governor of Ohio."

"To show how partisan the CFPB became under Mr. Cordray’s leadership, not one of the agency’s employees made a contribution to Donald Trump’s campaign, while a multitude contributed to Hillary Clinton. The new director will have a partisan staff."

"The bureau took full credit for punishing Wells Fargo for opening false customer accounts. But the Los Angeles Times, not the CFPB, uncovered the malfeasance."

"large banks, including Wells Fargo, were fined tens of billions of dollars for toxic mortgages in the financial crisis. A threshold question is whether one person, in this case the director, should have the power to levy such fines."

"Even though the Dodd-Frank Act expressly prohibits the CFPB from regulating automotive finance, the agency jumped into the field, alleging discrimination in auto lending. Because federal law prohibits auto lenders from gathering information on race, the agency had to guess at its claim of discrimination based solely on names and ZIP Codes"

"The agency then went ahead with guidance that raised the costs of an average auto loan by an estimated $600."

"Many of its examination procedures are duplicative of other financial regulators, and no thought was given to how that could have been avoided."

"The CFPB, like other agencies, collects fines and fees. Astonishingly, Congress does not require them to be transferred to the federal Treasury. Mr. Cordray has boasted of collecting billions of dollars on behalf of consumers, but portions of that money ultimately go to favored consumer groups—a continuing problem of ideological preference."

"In its recent rule-making on short-term, small-dollar lending, the agency used flawed data and ignored the comments of more than a million customers who use the service. It also failed to draw any distinction between legitimate, state-regulated lenders and illegal lenders, primarily online."

Can Marijuana Alleviate the Opioid Crisis?

The federal government should stop blocking research into the drug’s medical potential

By Richard Boxer. He is a clinical professor at UCLA’s David Geffen School of Medicine.

"Not only is marijuana a potentially effective pain treatment, it may also help alleviate the opioid crisis. States that have legalized medical marijuana enjoy significantly lower levels of opioid consumption and overdose deaths than states that continue to penalize possession and use, according to the Journal of the American Medical Association: “States with medical cannabis laws had a 24.8% lower mean annual opioid overdose mortality rate . . . compared with states without medical cannabis laws.”

Researchers from the University of California, San Diego found that hospitalization rates of people suffering from painkiller abuse and addiction dropped 23% and overdoses requiring hospitalization fell 13% in places where medical marijuana was made legal. And a recent study found that Colorado, which legalized the drug for recreational use in 2014, experienced a 6.5% reduction in opioid-related deaths.

Last year alone, more than 64,000 Americans died from drug overdoses. Recognizing the link between decriminalizing marijuana and reducing opioid overdoses could save thousands of lives. With 650,000 prescriptions for opioids filled each day (3,900 for new patients) the epidemic seems likely to continue. Although scientific proof is no guarantee of an end to partisan squabbling, evidence-based medical data may offer hope for a consensus about the effectiveness of cannabis in the alleviation of human suffering."

Cutting SALT (state and local tax deduction) Is Good For America's Health

By Adam Millsap of Mercatus.

"Americans consume a lot of sodium, and many doctors believe it would do us good to cut back on the salt. The recent debate over federal tax reform has highlighted a different kind of salt that we should also cut: the state and local tax (SALT) deduction.

Many politicians from both sides of the aisle are against cutting SALT, but its elimination will make the tax code more progressive, simpler, and help fund cuts in tax rates , which in turn will help economic growth.

Under current law, taxpayers who itemize their deductions can deduct their state and local income or sales taxes—but not both—and their property taxes from their federal taxable income. The Senate bill would eliminate this SALT deduction altogether, while the House bill would save the property tax portion but cap it at $10,000.


Supporters of SALT argue that taxpayers shouldn’t pay federal taxes on the money used to pay state and local taxes. This isn’t a bad argument, but most people don’t use SALT for that purpose. Instead, they rely on the standard deduction to lower their federal taxable income. In 2014, only 28% of all federal income tax filers itemized and claimed the SALT deduction. The other 72% used the standard deduction.

So despite what SALT supporters say, eliminating it won’t mean that most people will begin paying federal taxes on money used to pay state and local taxes. This is especially true if the standard deduction is doubled, as is the case with the current House bill.

Politicians and voters making the largest uproar about the elimination of SALT tend to be from high-income, high-tax states such as Connecticut, New York, New Jersey, and California. And understandably so; according to the Tax Policy Center, the average deduction in each of those states was over $17,000 in 2014, more than double the roughly $7,000 average in Florida and other southern and western states. Without the SALT deduction, taxes may rise considerably for many people in high-tax states.

But if we want the tax code to be more progressive, this isn’t a bad thing. In general the SALT deduction favors the high-income people of these high-tax states. In 2014, only about 10% of tax filers making less than $50,000 claimed the SALT deduction, while about 81% of filers making over $100,000 claimed it.

Additionally, an analysis from the Tax Policy Center found that 90% of the tax increase from eliminating SALT would be concentrated among earners making over $100,000 per year, and 40% of the increase would be paid by earners making over $500,000. Since many high-income workers live in large, expensive cities on the coasts, it’s not surprising to see a large amount of pushback from coastal states.

In addition to directly benefiting high-income individuals, the SALT deduction subsidizes state and local governments, especially those with high tax burdens. Residents of those areas can offset some of their state and local tax burden by itemizing and claiming the SALT deduction. This makes them more willing to support higher state and local taxes, since federal taxpayers throughout the country are essentially sharing part of the bill.

If taxpayers can no longer claim the SALT deduction, they will be less willing to pay these higher taxes, which will impact state and local finances. Instead of relying on higher taxes to fund larger governments, state and local governments with high tax burdens may have to reevaluate spending priorities and shift to more user-fees.

This highlights another issue created by the SALT deduction. Because state and local taxes can be deducted but user-fees and payments to private providers can’t, state and local governments have an incentive to fund services via higher taxes and to do things in-house.


For example, researchers have noted that the SALT deduction incentivizes voters and officials to fund services such as garbage collection with taxes that can be deducted from federal taxable income rather than privatize them or fund them with user-fees that can’t be deducted. Tax policies like SALT that favor one method of provision over another generate an inefficient mix of publicly and privately provided goods and services.

The United States needs tax reform. Our system is too complex and holds back economic growth. At the same time, we should try to offset rate cuts—in addition to making real spending cuts—so as not to blow an even larger hole in the federal budget. Eliminating the SALT deduction simplifies the tax code and helps offset rate cuts that will spur more growth , while also making the tax code more progressive. It’s not a silver bullet, but it’s a step in the right direction."

Why Net Neutrality Was Mistaken From the Beginning (AOL Edition)

It turns out that Tom Wheeler, the FCC head who imposed the rules, doesn't know what he's talking about.

By Nick Gillespie of Reason.

"Current Federal Communications Commission (FCC) Chairman Ajit Pai memorably told Reason that "net neutrality" rules were "a solution that won't work to a problem that doesn't exist."

Yet in 2015, despite a blessed lack of throttling of specific traffic streams, blocking of websites, and other feared behavior by internet service providers (ISPs) and mobile carriers, the FCC issued net neutrality rules that gave the federal government the right to punish business practices under Title II regulations designed for the old state-enabled Bell telephone monopoly.

Now that Pai, who became chairman earlier this year, has announced an FCC vote to repeal the Obama-era regulations, he is being pilloried by progressives, liberals, Democrats, and web giants ranging from Google to Netflix to Amazon to Facebook, often in the name of protecting an "open internet" that would let little companies and startups flourish like in the good old days before Google, Netflix, Amazon, and Facebook dominated everything. Even the Electronic Frontier Foundation (EFF), which back in 2009 called FCC attempts to claim jurisdiction over the internet a "Trojan Horse" for government control, is squarely against the repeal.

Yet the panic over the repeal of net neutrality is misguided for any number of reasons.
First and foremost, the repeal simply returns the internet back to pre-2015 rules where there were absolutely no systematic issues related to throttling and blocking of sites (and no, ISPs weren't to blame for Netflix quality issues in 2013). As Pai stressed in an exclusive interview with Reason last week, one major impact of net neutrality regs was a historic decline in investment in internet infrastructure, which would ultimately make things worse for all users. Why bother building out more capacity if there's a strong likelihood that the government will effectively nationalize your pipes?

Despite fears, the fact is that in the run-up to government regulation, both the average speed and number of internet connections (especially mobile) continued to climb and the percentage of Americans without "advanced telecommunications capability" dropped from 20 percent to 10 percent between 2012 and 2014, according to the FCC (see table 7 in full report). Nobody likes paying for the internet or for cell service, but the fact is that services have been getting better and options have been growing for most people.

Second, as Reason contributor Thomas W. Hazlett, a former chief economist for the FCC, writes in The New York Daily News, even FCC bureaucrats don't know what they're talking about.
Hazlett notes that in a recent debate former FCC Chairman Tom Wheeler, who implemented the 2015 net neutrality rules after explicit lobbying by President Obama, said the rise of AOL to dominance during the late 1990s proved the need for the sort of government regulation he imposed. But "AOL's foray only became possible when regulators in the 1980s peeled back 'Title II' mandates, the very regulations that Wheeler's FCC imposed on broadband providers in 2015," writes Hazlett. "AOL's experiment started small and grew huge, discovering progressively better ways to serve consumers. Wheeler's chosen example of innovation demonstrates how dangerous it is to impose one particular platform, freezing business models in place."

Deep confusion reigns on this point. In an explainer video posted earlier this year by the Wall Street Journal, net neutrality is analogized to package delivery. The overnight shipper, FedEx, delivers boxes to Amazon's customers, treating them all the same. This, says the video, is exactly what net neutrality rules applied to ISPs do.
Wrong. FedEx is unregulated. The firm chooses to offer terms and conditions that apply generically. Its rival, UPS, not so much: "UPS is not a common carrier," says the company's website, "and reserves the right in its absolute discretion to refuse carriage to any shipment tendered to it for transportation."
The firms are free to blaze different trails, with markets deciding the outcome.

Read the whole thing here.

And watch/read an interview with Hazlett from earlier this year where he discusses his epic history of the FCC, The Political Spectrum, and argues that deregulation gave us cable, HBO, and the iPhone.
Indeed, even more worrying than the decline in investment following the implementation of net neutrality is the attempt by its supporters to assume that the current moment is how internet access will forever be delivered. Last year, for instance, mobile traffic surpassed fixed (or desktop) traffic for the first time, so the territory is changing fast. Pai told Reason about a variety of moves that will allow for new ways to deliver the internet, especially to rural areas that are currently lagging behind. He also noted to Reason that many of the legal actions lobbed at mobile carriers by net neutrality proponents have been to challenge "zero-rating" plans that allow customers to stream unlimited amounts of music, video, and other services without counting against a monthly data cap. Exactly how such services are bad is unclear, especially since they don't block or throttle anything. In most contexts, giving customers something extra and unlimited is usually considered a good thing.

For Pai, repealing net neutrality isn't being done to bolster the bottom line of ISPs. Rather, it's to enable the very sort of innovation and experimentation that has worked so well from the early days of the commercialized internet. As Hazlett suggests, giving the government the ability to regulate business models is rarely a good idea, especially in fast-changing tech fields; there will be many competing models and many will die while some flourish. Pai's FCC would still insist on transparency from ISPs and the Federal Trade Commission (FTC) would be able to investigate anti-competitive practices by ISPs (Pai says that the FTC is actually better suited to this sort of role than the FCC, which is open to question). And in his interview with Reason, Pai also laid out some benchmarks by which to judge whether the repeal of net neutrality is successful or not.

Listen below, read a full transcript here, or go to iTunes and subscribe to the Reason Podcast and never miss our thrice-weekly conversations about politics, culture, and ideas from a libertarian perspective."

No, Obamacare Enrollment Is Not Strong, Not By A Longshot

By Chris Conover. Excerpts:

"The reason it is not is buried at the tail-end of the story where the reporter notes "the enrollment period ends Dec. 15, which is about half as much time as people had to sign up last year."

Yipes! If enrollees have only half the time to sign up, then by pure arithmetic, the daily enrollment pace needs to be double last year's in order for total enrollment at the end of the enrollment period to match the level reach at the end of last year's enrollment period: 12,216,003.

But if current enrollment is 128% of last year's when it needs to be 200%, a more accurate way to frame this year's performance would be to say that Obamacare is on track to sign up 36% fewer enrollees than last year (i.e., 128/200=64% which would meaning signing up 36% fewer). That's a pretty bad news story rather far removed from the rosy picture painted by The Hill's headline."

"Clearly, it's possible that there will be a massive surge in enrollments prior to December 15 that will allow this looming shortfall to be averted. But how probable is that prospect?  This year's total enrollment period (Nov. 1-Dec. 15) is only 45 days long [1].  If 2.3 million signed up in the first 18 days, that means that 9.9 million must sign up in the final 27 days to reach last year's enrollment total. That implies the daily rate of sign-ups has to be 2.9 times as fast as the rate we've observed to date (and remember the rate we've observed to date already is 28% higher than last year's pace!).

Even the guru of ACA enrollment figures--Charles Gaba, who runs ACASignups.net [2]--concedes that total Exchange enrollments this year likely will top out at only 10 million. Yet even this prediction (made just before the open enrollment began) now already seems optimistic. To hit that target, the pace of enrollments for the balance of the open enrollment period would have to be 2.2 times as high as we've observed in the first 19 days! Not impossible, to be sure, but neither is this highly probable.

As an example, last year the pace of enrollments was 42% higher during the final 71 days of open enrollment compared to the first 21 days. This same thing could happen this year, but remember that we only have 24 days of open enrollment left. So even if average daily enrollments climb from their current level of 128,000 daily to 182,000, that will add only 4.9 million more enrollees by December 15. If this happened, total enrollment for 2017 would end up at 7.2 million (which would be lower than the 8 million who signed up in Obamacare's first year)."

"Actual vs. Projected Enrollment. The first is to compare actual enrollment against projections made by the Congressional Budget Office (CBO) in July 2012. I use these projections because they take into account the Supreme Court ruling on Obamacare that was handed down in June of that year. That ruling--by making Medicaid expansion discretionary rather than mandatory across all states--meant that CBO analysts expected additional individuals to end up purchasing coverage through the Exchanges rather than being forced onto Medicaid.

Produced by Christopher J. Conover, Duke University, based on CBO projections from July 2012, CMS data on ACA enrollments, and ACASignups data on paid (effectuated) enrollments and projected enrollment at end of 2017-18 open enrollment period.

Fig. 1

CBO made its projections based on paid enrollments, which are lower than the gross enrollment figures I've cited earlier. From the standpoint of accurately measuring gains in coverage, it is paid enrollments that matter since those who fail to pay their premiums can be legally tossed off their policy, thereby becoming uninsured.

According to figures from Charles Gaba, average monthly paid enrollments in 2014 (the first year Obamacare Exchanges were fully operational) were 5.46 million, i.e., 32% lower than the gross enrollment figure of 8.0 million mentioned earlier.  Things improved in year 2 insofar as Mr. Gaba's estimate of average monthly paid enrollment (9.35 million) was only 20% lower than the gross enrollment figure of 11.7 million.

Mr. Gaba has never produced similar figures for subsequent years, so for purposes of analysis, I have generously assumed that paid enrollments equal 80% of gross enrollments rather than only 68%. Yet even using figures stacked in favor of Obamacare, Fig. 1 shows that estimated actual average paid monthly enrollments have fallen far short of CBO projections every single year; moreover, this shortfall generally increased with each passing year.

In year 1, Exchange enrollments fell 39% below CBO projections, improving slightly to a shortfall of 33% in year 2. But in every subsequent year, the shortfall has grown steadily, from 56% in Year 3, and 61% in year 4. We do not yet know the actual result for year 5, but if Mr. Gaba is correct that total enrollments will reach 10 million, that translates into average monthly paid enrollments  of only 8 million, or 69% below where CBO once thought we would be in 2018. If instead 2018 final enrollment numbers follow the pattern of last year's open enrollment period, the shortfall would reach 78%."

"Year-Over-Year Changes in Enrollment. An even clearer picture of just how persistently and swiftly the air has gone out of Obamacare's tires in shown in Fig. 2.

Produced by Christopher J. Conover, Duke University, based on CBO projections from July 2012, CMS data on ACA enrollments, and ACASignups data on paid (effectuated) enrollments and projected enrollment at end of 2017-18 open enrollment period.

Fig. 2

Each year, the gains in enrollments in the Obamacare Exchanges have gotten smaller and smaller, actually turning negative by year 4. So this year's expected decline in coverage will simply continue that pattern except that the absolute loss in enrollments will be anywhere from 4.5 times last year's loss (if Mr. Gaba is correct) to 10 times as large (if last year's enrollment pattern is repeated this year).

This bleak trend was not foreordained. The CBO did expect the year 2 gains in enrollment to be somewhat smaller than those in year 1. However, in year 3, the gain in enrollment was expected to match those in year 1 and in no year did CBO expect Exchange enrollment to decline (and certainly not be 4 million people in a single year)."

A new study shows how state licensing rules block upward mobility

See Licenses to Kill Opportunity. WSJ editorial.

"More than ever, the government requires Americans to get permission to earn a living. In the 1950s one in 20 workers needed a license to work; now about one in four do. The rules hurt the working poor in particular, but everyone suffers in states with the most licensing requirements, as a new and comprehensive report by the Institute for Justice (IJ) illustrates.

IJ examined 102 lower-income professions across the United States. That list ranges from truck drivers to taxidermists, from school bus drivers to bartenders. The study assessed the difficulty of obtaining a license and the number of occupations subject to licensing requirements in each state.

Hawaii’s prerequisites are the most grueling while Louisiana and Washington regulate the most professions, with both states requiring a license for 77 lower-income fields. The nearby table shows the 10 states with the highest occupational-licensing burden.

California has the most dysfunctional regime. Across professions, it has established “a nearly impenetrable thicket of bureaucracy” where “no one could” provide a “list of all the licensed occupations,” as one state oversight agency admitted last year. California’s door repairmen, carpenters and landscapers must first rack up 1,460 days of supervised on-the-job experience, then pay more than $500 for the license, before they can work as a contractor.

The cost and time to obtain a license is no accident, as professional guild members sit on state licensing boards and reinforce the racket. They want to limit competition to keep prices high.

Until recently, the New Hampshire Board of Barbering, Cosmetology & Esthetics could levy fines on salons that have a barber’s pole—or even a pole painted red, white and blue that resembles one—but no licensed barber. In February an Arizona board targeted a cosmetology student who dared to give free haircuts to the homeless. He risked being barred from the profession until Gov. Doug Ducey interceded.

Licensing proponents claim they’re merely protecting public health. But the Institute for Justice found that on average tree trimmers undergo 16 times more training than an emergency medical technician, and cosmetologists more than 11 times. That makes safety sense only if Edward Scissorhands styles your hair and trims your lawn.

The report also highlights how state licensing demands are inconsistent and often irrational. Only three states and the District of Columbia require a license for interior designers. But in all four, aspirants must clock six years of education or experience, pass an exam, and pay between $1,120 and $1,485 for the license. That’s far more training than is required for a dental assistant (Washington, D.C.), optician (Florida), midwife (Louisiana) or pharmacy technician (Nevada).

Stiff licensing requirements are often prohibitive for America’s working poor, keeping them trapped in low-wage, low-skill jobs. Many states also bar people with a criminal record from working in a licensed profession. Society pays the price. Researchers at Arizona State University’s Center for the Study of Economic Liberty found that in states with burdensome licensing requirements, recidivism rates increased by more than 9% over a 10-year span. In states where it was easier to get a license, the rates went down.

Nationwide, licensing drives up prices by as much as $203 billion annually. The requirements also hurt consumers by restricting access to goods and services. Louisiana has around 400,000 more black residents than neighboring Mississippi. But in 2012 Mississippi had 1,200 licensed African-style hair braiders. Louisiana, which requires 500 hours of training, had just 32, according to IJ.

The study found that heavy-handed licensing doesn’t follow party lines, which means the rules are rooted in political muscle more than ideology. Staunchly Republican Wyoming requires a sign-off for 26 lower-income professions, the lowest number of any state. But liberal Vermont is the runner-up, requiring a license for 31 occupations and beating out Montana and South Dakota.

That signals political potential for reform. Giving the poor a pathway to a dignified, self-supporting life should be a bipartisan priority."