Relatively Free Botswana vs. Zimbabwe

See Why Botswana Is Better Off Than Zimbabwe by Daniel J. Mitchell. Excerpt:

"I often present my leftist friends with my two-question challenge. I ask them to name a country, anywhere on the planet and at any point in history, that has either become rich with statist policies or has experienced superior levels of growth with statist policies."

They never have an answer. Or, to be more specific, they never have an accurate answer since Sweden (their reflex response) became rich when government was small and has stumbled ever since a large welfare state was imposed.

And if they are willing to have an extended discussion, my next step is to compare the long-run performance of market-friendly jurisdictions with statist jurisdictions. Whether we’re looking at Chile vs. Venezuela, North Korea vs. South Korea, or Hong Kong vs. Argentina, the results always show that economic liberty is the recipe for growth and prosperity.

When I ask them to show a statist nation with decades of good results, they don’t have an answer. Or, to be more specific, they never have an accurate answer since China (their reflex response) only started to grow once the economy was partially liberalized.

I’m pontificating on this topic because a reader sent me this very stark contrast between market-friendly Botswana and the statist hellhole of Zimbabwe. I can’t vouch for the specific numbers, though it appears some of them are from the Heritage Foundation’s Index of Economic Freedom.

The obvious lesson is that good policy is producing vastly superior results in Botswana.
But I wanted independent confirmation since not everything one sees on the Internet is true (shocking!).

So I checked Human Progress, the invaluable data portal created by Marian Tupy, and downloaded more than 50 years of data for inflation-adjusted ($2010) per-capita GDP in Botswana, Zimbabwe, and South Africa.

The results, to put it mildly, are stunning. Botswana has enjoyed much faster growth than South Africa, and Zimbabwe has suffered horrible stagnation.

South Africa’s anemic performance doesn’t surprise me.

And I guess the gap between Botswana and Zimbabwe shouldn’t surprise me, either. After all, Marian wrote about the difference between Botswana and Zimbabwe back in 2008.

How different, I thought, was Zimbabwe from Botswana, the latter of which is safe and increasingly prosperous. But what accounts for such striking differences between the two neighbors? It turns out that much of the difference stems from the degree of freedom that each populace enjoys.

Here’s some of what he wrote about Botswana.

As Robert Guest of The Economist noted in his 2004 book, The Shackled Continent, “In the last 35 years, Botswana’s economy has grown faster than any other in the world…” According to Scott Beaulier, an economist at Beloit College, “Khama adopted pro-market policies on a wide front. His new government promised low and stable taxes to mining companies, liberalized trade, increased personal freedoms, and kept marginal income tax rates low to deter tax evasion and corruption.” …Economic openness served Botswana well. Between 1966 and 2006, its average annual compound growth rate of GDP per capita was 7.22 percent—higher than China’s 6.99 percent. Its GDP per capita (adjusted for inflation and purchasing power parity) rose from $671 in 1966 to $10,813 in 2005.

And here are some of his observations about Zimbabwe.

…almost all of the country’s 4,000 white-owned farms were invaded by state-organized gangs. Some of the farmers who resisted the land seizures were murdered, while others fled abroad. …The agricultural sector soon collapsed, and with it most of Zimbabwe’s tax revenue and foreign currency reserves. …the government ordered the Reserve Bank of Zimbabwe (RBZ) to print more money, sparking the first hyperinflation of the 21st century. …Mugabe’s answer to the falling economy was to increase state patronage and the intensity of the looting.

Needless to say, nothing has changed in the decade since that article was published. Though hopefully, Mugabe’s recent ouster may lead to better policy in Zimbabwe (it would be difficult to move in the wrong direction, though Venezuela is evidence that further deterioration is possible).

By the way, none of this suggests Botswana is perfect. Indeed, it’s not even close.
According to the Fraser Institute’s Economic Freedom of the World, it is ranked #50, which means it isn’t even in the top quartile. And its latest score of 7.37 (out of 10) is well below top-ranked Hong Kong’s score of 8.97.

But you don’t have to be fast to win a race. You simply need to be quicker than your competitors. And, on the continent of Africa, Botswana has the most economic freedom."

Why Do Taxi Drivers Racially Profile, While Uber And Lyft Drivers Don't? It's Called The Free Market Working

By Ben Shapiro. Excerpt:

"why not? Why aren’t Uber and Lyft drivers discriminating against minority passengers the same way cabbies have done for decades? Are they simply better people?

The answer, of course, is no.

There are two reasons that taxi drivers discriminate against minority passengers and minority areas. The first is what black economist Thomas Sowell has described in his new book as Discrimination I(b) – discrimination against individuals based on available group data. This is not quite the same thing as saying that you’re never going to pick up a black person because black people are inherently violent, which would be racist; it’s more like saying that you’re not going to increase your risk of being victimized by violence, and since the violent crime rate in the black community is higher than the violent crime rate in other communities, knowing nothing else about the passenger than race, you’d rather avoid the statistically greater risk.

Uber and Lyft solve that problem. They solve that problem by allowing drivers to see the ratings for passengers. This individualizes data, making group data irrelevant. Thus, drivers can see if a passenger has a 1-star rating, they probably shouldn’t pick him up, regardless of race. That makes it far more likely that black people are picked up by drivers. This is the same argument as the argument for using criminal background checks in employment: that prevention of that methodology actually leads to fewer minorities being employed, because employers start using group data instead of individual data, thus lumping in law-abiding minorities with those with a criminal background.

But the technology wouldn’t be enough to overcome discrimination. The other issue is that Uber and Lyft aren’t monopolies: they’re competitive businesses. That means there is a competitive advantage in going to higher-risk neighborhoods – the taxis aren’t out there. Competition broadens the rationale for catering to higher-crime areas, for example. You can make money the other guy won’t. That’s not true when a government-sponsored cartel rules everything: the available pool of competition is so small that you wouldn’t drive out to a high-crime area when you could make an artificially-inflated wage driving in a low-crime area.

So, the free market is the reason Uber and Lyft drivers don’t discriminate against minorities. And Leftists should keep that in mind next time they try to crack down on private business in the name of diversity."

A 10% increase in economic freedom is associated with a 5% increase in real per‐capita gross state product GSP

See ECONOMIC FREEDOM AND INCOME LEVELS ACROSS U.S. STATES: A SPATIAL PANEL DATA ANALYSIS. By Joshua C. Hall, Donald J. Lacombe & Timothy M. Shaughnessy in Contemporary Economic Policy.

"Abstract

There is a large literature estimating the effect of economic freedom on economic growth or income levels. Most studies examine the relationship between economic freedom and growth or income levels for countries, while a few examine the relationship for U.S. states. Absent in the state‐level literature is consideration of the presence of spatial spillovers affecting the freedom‐income relationship. Neglecting to account for spatial autocorrelation can bias estimation results and therefore inferences drawn. We find evidence of a spatial pattern in real per‐capita gross state product (GSP) that affects nonspatial estimates of the freedom‐income relationship. Taking into account the direct and indirect effects of economic freedom on real per‐capita GSP, we find a 10% increase in economic freedom is associated with a 5% increase in real per‐capita GSP. (JEL E02, O47, R11)"

The Highly Positive Impacts of Vouchers

By Corey A. DeAngelis of Cato.

"It looks like we have another terrible case of cherry-picking the evidence. But this time it’s shockingly misleading. Instead of simply pretending that the evidence on school choice is “mixed,” the Center for American Progress took it a step further by saying that the voucher evidence is “highly negative.” They are absolutely wrong. Here’s why.

The Four Evaluations

Their review of the research relies on only four voucher studies – Indiana, Ohio, Louisiana, and D.C. Two of these studies – Indiana and Ohio – are non-experimental, meaning that the researchers could not establish definitive causal relationships. But let’s go ahead and entertain them anyway.

The Ohio study used an econometric technique called regression-discontinuity-design, which can only replicate experimental results when a large number of students are used right around a treatment cutoff point. The intuition behind the method is that it is essentially random chance that students fall just around either side of the cut point, and therefore the students are randomly assigned to the voucher treatment or not.

The Ohio program used a cutoff variable - the performance of the child’s public school – to determine program eligibility. However, the researchers used student observations that were not right around the cut point and even removed the observations that were closest to the discontinuity. In other words, the authors could not establish causality, and it is more likely that the children assigned to receive the voucher program were less advantaged than those who were ineligible. After all, students in lower-performing public schools were the ones that were eligible for the choice program.

Even then, the model with the largest sample size actually found that being eligible for the program led to positive test score impacts. But the authors at CAP never mentioned that.

The Indiana study was also non-experimental, as it compared voucher students to those remaining in traditional public schools. But let’s look at it anyway. While the authors did find small negative effects of the program on test scores initially, voucher students caught up to public school students in math and performed better in reading after four years. How in the world can a positive result like this be “highly negative?” Weird.

The Louisiana experiment did find large negative effects on test scores in the first two years. However, voucher students caught up to their public school peers in both math and reading after three years. The CAP authors argue that the main model – although clearly preferred by the Louisiana research team – is less “accurate” because of the “restricted sample size.” That is odd, as using more control variables (and a consistent sample) usually makes econometric models more accurate – not less. Another thing that is odd: the CAP authors chose not to report the positive Ohio results – which came from their larger sample of students – and instead chose to report the negative results – which came from a sample that was less than a tenth of the size. Why the change in criteria?

The CAP review heavily relies on the most recent experimental evaluation of the D.C. voucher program. It just so happens to be one of the only two voucher experiments in the world to find negative effects on student test scores.

The first-year evaluation of the D.C. voucher program found a 7.3 point loss in math scores and no effects on reading scores. However, the CAP authors overstated this loss by saying that the effect was “the same as missing 68 days of school.” But that suggests voucher students lost ground in all subjects, while the D.C. experiment concluded that voucher students did not lose any learning in reading.

What’s more – prior research has found that switching schools – for whatever reason – reduces student math achievement by at least a tenth of a standard deviation. After all, students and schools need to adjust to their new environments. That the average voucher student only lost 7.3 points  from switching schools suggests that the private schools in D.C. may have actually had positive effects on academic outcomes net of the temporary negative effects of a one-time school switch.

Further, the recent D.C. evaluation only looks at students after one year – when they are still adjusting to their new schools. And the meta-analysis of 19 voucher experiments shows that voucher programs’ effects on test scores get better over time. In fact, the positive test score trend was found in both Louisiana and Indiana. In addition, about half of the students in the control group in the D.C. experiment went to schools of choice. In other words, the first-year loss in math scores was relative to a mix of students in both traditional public schools and public charter schools.

And we cannot forget about the unequal playing field in our nation’s capital. D.C. voucher students only receive around $9,600 per year, while children in charter schools receive 46 percent more resources, while students in traditional public schools receive around 3 times the amount of education dollars. It’s amazing that D.C. voucher students are doing as well as they are with such a huge funding disadvantage.

The True State of the Evidence

So what does the evidence actually say?

When synthesizing any body of research, we ought to rely on the most rigorous studies – the experiments. We should also look at all of the studies so we are sure not to fall prey to cherry-picking.

Eleven of the 17 existing voucher experiments in the United States find positive effects on test scores for some or all students, and a recent meta-analysis of 19 voucher experiments around the world finds positive effects overall. Only 2 of the 17 experimental evaluations find any negative effects on student test scores – and those are also the only two evaluations solely looking at effects after the first year.

But what about the students that are left behind in public schools? It turns out that competition benefits those students as well. At least 24 studies exist on this topic. And 23 of the 24 studies find positive effects on student achievement for kids in public schools. None of these studies find negative effects.

But we shouldn’t only look at test scores. After all, families do not care all that much about test scores, especially since test scores are weak predictors of long-term outcomes. It just so happens that private school choice programs have much more positive effects on non-test score outcomes.
I found 11 studies in my review of the most rigorous studies linking private school choice programs to civic outcomes like student tolerance levels and political participation. The majority of the studies found large positive effects. For instance, researchers from Harvard University and the University of Arkansas found that children that won a random lottery to use the D.C. voucher program were about 90 percent more likely to permit individuals from groups they oppose to give a speech in their community. No studies found negative effects. And another review by Patrick J. Wolf similarly found that private school choice largely improves civic outcomes.

Only one experiment – in D.C. – links a voucher program to high school graduation. And it finds that winning the lottery to use a voucher increases the likelihood that a student will graduate high school by 21-percentage points. That is huge.

Another systematic review of the evidence finds that voucher programs lead to racial integration. In fact, 7 of the 8 rigorous studies that exist on the topic find positive effects. None of the studies find negative effects. Unsurprisingly, when vouchers allow disadvantaged children to leave their segregated neighborhood schools, society becomes more integrated.

It’s time we set the record straight. The preponderance of the evidence suggests that private school choice improves test scores, high school graduation rates, tolerance, civic engagement, criminality, racial integration, and public school performance. And, of course, all of these benefits come at a lower cost to the taxpayer.

With the substantial body of scientific evidence suggesting precisely the opposite, claiming that voucher impacts are “highly negative” is almost as absurd as saying that the Earth is flat. Anyone making such a claim needs to seriously reevaluate their position."

State of The Climate Report Reveals 23-Year Temperature Pause in the Stratosphere

By Emeritus Professor Ole Humlum of the University of Oslo.

• Date: 27/03/18
• 
  
• Global Warming Policy Foundation

"London 27 March 2018: A new report from the Global Warming Policy Foundation (GWPF) counters media hype over recent warm global temperatures, showing that almost all of the sudden increase in temperatures in the last couple of years was caused by a record strong natural El Nino phenomenon rather than global warming.

The report’s author, Emeritus Professor Ole Humlum of the University of Oslo, also reveals that the atmosphere is still not behaving the way most climatologists say it should.
According to Professor Humlum, “It is clear that temperatures in the troposphere are continuing to diverge from surface temperatures. In other words, they are warming more slowly than global warming theory says they should. The contrast with theory is even more marked in the stratosphere, where temperatures have barely changed for 23 years. We still have much to learn about the climate.”
The GWPF’s State of the Climate 2017 report is a comprehensive review of the global climate, covering land and ocean temperatures, sea ice, sea levels, snow cover and tropical storms.

Among the key findings of the survey are:

• At the end of 2017 the average global surface temperature was dropping back toward levels before the record 2015-16 El Niño episode. This return to pre-El Niño levels underscores that the recent peak in global temperature was caused mainly by this oceanographic phenomenon in the Pacific.

• Since 2003 the average global temperature estimate based on surface weather stations has steadily diverged in the warm direction from satellite-based estimates without a convincing explanation.

• Data from tide-gauges all over the world suggest an average global sea-level rise of 1-1.5 mm/year, while the satellite-derived estimates suggest a rise of more than twice the rate of about 3.2 mm/year. The noticeable difference between the two data sets still has no broadly accepted explanation."

Illinois Progressive Tax Gambit: Despite a tax hike last year, Democrats and unions are back for more

WSJ editorial. Excerpts:

"This vicious cycle is already playing out in Illinois amid increasing property, income and business taxes. Over the last four years, Illinois GDP has risen a mere 0.9% per year, half the national average and the slowest in the Great Lakes region. Between 2012 and 2016, Illinois lost $18.35 billion in adjusted gross income to other states. Its labor force has been contracting since 2008 while its neighbors grow their pool of human capital. Wisconsin with a 3.2% unemployment rate is recruiting workers in Illinois (4.9%).

As people have left the Prairie State, home values have tumbled. So local governments have jacked up property taxes more. The average property tax bill has risen by half over the last decade while home prices have fallen by 10%, according to the lllinois Policy Institute.

Democrats claim a progressive income tax will spare the middle-class, but sooner or later they’ll be the targets too because there won’t be enough rich to finance the inexorable demands of public unions. This is why Democrats haven’t proposed rates with their constitutional amendments. Vote now—pay later."

The GOP’s Internet Ta

WSJ Editorial. Excerpts:

"The Supreme Court’s 1992 Quill decision forbids state and local governments from requiring businesses without a “physical nexus”—that is, property or employees—to collect sales tax."

"online purchases make up less than 10% of all retail sales, and only a sliver is untaxed. Seventeen of the 18 largest retailers on the web by 2016 had already begun collecting sales taxes on all of their customers’ purchases."

"Big retailers like Amazon and Walmart have the resources to comply with disparate tax rules across thousands of jurisdictions. Small businesses don’t."

"sales tax revenues have been increasing steadily in states with healthy economies. Over the past five years, Florida’s sales tax revenues have grown 27%. South Dakota’s are up by nearly 30% since 2013."

"As for brick-and-mortar stores, most nowadays sell over the web too. Those that are struggling—e.g., Sears and Toys “R” Us—are overleveraged and didn’t adapt fast enough to changes in consumer behavior or tastes. People who shop online generally do so for the convenience rather than incremental tax savings, which can be negated by shipping costs."

"Twenty or so states have adopted “click-through” taxes to hit remote retailers that have contracts with local businesses."

"the Court could divine a new standard from whole cloth that could create confusion. Worse, the Court could enable broader taxation and regulation of out-of-state businesses. This is what many states want to happen. The Justice Department has argued for a “virtual” presence standard that would make a hash out of the Commerce Clause"

How Greece’s archaeological authority slows development

See In Greece, the Authority Investors Fear Most: Its Archaeologists by Nektaria Stamouli of The WSJ. Excerpts:

"Greece’s archaeology authority is among the most feared bureaucracies in a country notorious for red tape, capable of tying up investment plans for years on the mere suspicion that antiquities might lie beneath a proposed development.

As Greece seeks to emerge from years of depression, the need to protect the country’s priceless antique heritage is colliding with its desperate need for investment. Compounding the problem, the archaeology authority is trying to pursue its mission with a budget and staff sharply reduced under austerity, leading to long delays.

In Greece, highways, sewers and other public projects are frequently postponed, redesigned or pushed way over budget by the cost of dealing with buried artifacts. New residential buildings often lack underground garages because developers fear uncovering ancient ruins that can halt the project for years.

The subway in Thessaloniki, Greece’s second-largest city, still isn’t finished after three decades of work, in part because of the discovery of an ancient town that some archaeologists compare to Pompeii in Italy. The excavations brought to light pre-Byzantine buildings, roads and hundreds of thousands of artifacts. As a result, one station had to be redesigned and part of the line remains unfinished."

Hellinikon represents a large piece of a multibillion-euro privatization program Athens has promised its creditors it will complete. The plans call for hotels, museums, theme parks and research facilities, making it one of Europe’s biggest development projects.

The archaeological authority delayed the project’s start for more than a year, even though archaeologists hadn’t expressed reservations before the site was used for sports facilities during the 2004 Olympics. An ancient cemetery and an aqueduct had been found and bracketed out of the 1500-acre area, but the authority delayed construction on the prospect that more findings could be there.

“There is no balance,” said Aristotelis Panteliadis, managing director of a supermarket chain that underwent five years of archaeological reviews over its request to expand a single store in the Peloponnese. “Keeping every ancient object in the spot it was found, even if it’s a small pile of stones from 500 years ago, and blocking investment because of lack of funding for excavations shows an authority with the sole purpose of saying ‘Do not touch anything.’”

Why Is Russian Gas in Boston Harbor? Environmentalists’ war on fossil fuels helps Vladimir Putin

By Drew Johnson of Taxpayers Protection Alliance.

"In 2016 officials in Massachusetts and New Hampshire blocked financing for the $3 billion Access Northeast Pipeline, which would have reliably provided fuel to three New England states. That same year a report from Massachusetts Attorney General Maura Healey’s office claimed the state could “maintain electric reliability” without new infrastructure."

"Greenpeace claims it is time to leave fossil fuels “where they belong: in the ground.” The Sierra Club is pushing the U.S. to abandon all fossil fuels, claiming the country is ready for 100% renewable energy."

"Natural gas and coal are responsible for about 64% of America’s electrical power. Only 15% comes from renewables."

"Since 2006, when the fracking revolution began, natural-gas prices have dropped 27% for residential consumers."

"natural-gas pipelines help the environment. With more pipelines, power plants could switch from coal to natural gas, which emits up to 60% less CO2."

"carbon emissions from power plants have dropped by 25% since 2005, according to the U.S. Energy Information Administration. Emissions of methane, a greenhouse gas that traps 30 times as much heat in the atmosphere as carbon dioxide does, have fallen 16% since 1990."

See also  New England Has a Power Problem: The region is struggling to meet electricity needs and ambitious green power goals by Erin Ailworth and Jon Kamp of The WSJ. Excerpts:

"The six-state region—where electricity costs are 56% above the national average—is heavily dependent on natural gas-fired power after years of losing older, uneconomic coal, oil and nuclear plants to retirement. Gas is also in high demand for heating area homes."

"Yet New England sometimes has difficulty importing enough natural gas to satisfy its needs due to a shortage of pipelines, including conduits to the cheap natural gas being produced less than 400 miles away from Boston, in Pennsylvania, where shale drilling has helped trigger a boom.

“The not-in-my-backyard concept is extraordinarily powerful in New England,” said Chris Lafakis, the head energy economist at Moody’s Analytics."

"ISO New England warned in a February report that without some new infrastructure, “keeping the lights on in New England will become an even more tenuous proposition.”"

"New England states have ambitious mandates to meet future electricity needs with clean energy—populous Massachusetts wants 40% of its power from clean energy sources by 2030."

"But the large-scale energy infrastructure to meet those goals and increase access to fuel supplies in the region has been a nonstarter in recent years.

The developers of Cape Wind, an offshore wind farm once planned off Cape Cod, formally gave up last year after more than a decade of intense local opposition and legal challenges.

Kinder Morgan Inc. in 2016 abandoned a more than $3 billion natural-gas pipeline, Northeast Energy Direct, saying it didn’t have enough buy-in from utilities and faced a tough regulatory environment. The pipeline drew stiff opposition from environmentalists and communities worried about property values, potential safety issues and damage to the landscape."

Oxfam's misleading report on inequality

See Oxfam Thinks $8-Coffee-Drinking Millennials with Student Debt are the World’s Neediest by Chelsea Follett of humanprogress.org.

"Every year, Oxfam releases a report meant to shock the public about the extent of income and wealth inequality. This year’s report claims that the eight richest people on Earth have as much wealth as the bottom half of the world’s population (3.6 out of 7.2 billion people). That’s certainly shocking. It’s also profoundly misleading.

As others have pointed out, Oxfam reached that number with a questionable methodology, which also led them to several other absurd conclusions. According to their own graphs, more poor people live in North America and Europe than China (see the far left of the chart below). How can that be, given that traditional poverty measures show the opposite?



Oxfam isn’t using a traditional poverty measure (such as the number of people with a purchasing-power-adjusted income of less than, say, $2 per day). Instead, they focus on something called “net wealth.” This is the sum of an individual’s wealth minus any debts.

Of course, many people in rich countries carry debt due to university loans or a home mortgage, yet also enjoy high incomes and an enviable standard of living.

Here are some illustrations of just how absurd it is to use net wealth as a measure of poverty.

Consider this. Oxfam claims a penniless, starving man in rural Asia or Sub-Saharan Africa is far richer than an American university graduate with student debt but a high-paying office job, a $2,000 laptop and a penchant for drinking $8 designer coffees.

Let that sink in.

(I must credit Cato’s Adam Bates for that example).

Here is another example, courtesy of Johan Norberg. He points out that his daughter, a child with only about twenty dollars in her piggy bank, is richer than 2 billion people by Oxfam’s logic. If that were true, then the solution would surely not be to take away the humble savings of his daughter and redistribute them among those 2 billion souls, but rather to generate more total wealth, “enlarging the pie” so to speak.

That’s the core problem with obsessing over “inequality.” If the goal is to further human wellbeing, then instead of decreasing inequality through redistribution, we should focus on decreasing poverty by creating ever more wealth. Happily, thanks to the wealth-creating power of market exchange, we’re doing just that. The trend lines all show that poverty (by any reasonable measure) is in retreat."

Barriers To Entry Are Falling So The AT&T-Time Warner Merger Will Probably Not Damage Competition

See Antitrust Case Against Merger of AT&T and Time Warner Feels Stuck in the Past: Trump administration says the entity could be a monopolist, but the internet is eroding barriers to entry in filmed content by Greg Ip of The WSJ. Excerpts:

"For AT&T to exercise monopoly power in the sale of content such as HBO and CNN, alternative suppliers of content must face steep barriers. Those barriers are falling."

Since 2005, University of Minnesota economist Joel Waldfogel has shown, plunging prices for high-end digital cameras slashed the cost of producing high-quality filmed entertainment, leading to an explosion in the volume of new movies with no loss of quality. Meanwhile broadband internet has provided a distribution alternative to movie studios, television networks and cable. Since 2009, the number of original scripted series produced by online houses such as Amazon, Netflix and Hulu has soared from one to 117, now accounting for a quarter of all U.S. studio-produced series."

"In 2009 Netflix, then mostly still a distributor of disks by mail, was worth 8% as much as Time Warner in 2009; it’s now worth 84% more.

The Justice Department argues that a combined AT&T-Time Warner will have both the incentive and the ability to charge rival distributors, both traditional and internet-based, more by threatening to withhold content. AT&T says this is ridiculous: Cutting off other distributors would cost it dearly in lost revenue, and its leverage is minimal, because “an expanding array of content sources” means no content is “genuinely essential for any given distributor.”"

"By delivering its content over AT&T’s wireless network, Time Warner would, as Amazon and Netflix now do, gain valuable insight into subscribers, which it can use to improve its offerings. That isn’t feasible with Time Warner’s existing model, AT&T says.

“AT&T’s overriding economic objective is to encourage consumers to use its networks, no matter whose programs they watch,” the company adds. If owning Time Warner accomplishes that, its network becomes more valuable—and encourages it to expand."

Low-cost natural gas an environmentally friendly fuel

By Mark J. Perry.

"If you want to know the state of America’s environment today, a good place to start is with the dramatic decline in airborne emissions from power plants over the past decade.

As they generate electricity, hundreds of fossil-fuel power plants across the country emit sulfur dioxide, nitrogen oxides and carbon dioxide into the air. The first two substances cause acid rain and contribute to respiratory ailments and are the emissions of most concern to public health. The third is the principal greenhouse gas that accompanies the burning of oil, natural gas and coal because of their carbon content.

According to the Energy Information Administration, there has been a sharp reduction in power-plant emissions over a 10-year period. Since the start of the shale revolution in 2006 and leading up to 2016, annual sulfur-dioxide emissions dropped 81 percent, from 9.5 million metric tons to 1.8 million tons, and nitrogen oxides fell from 3.8 million metric tons to 1.63 million tons, a reduction of 57 percent.

And over the same period, annual carbon-dioxide emissions dropped 22.5 percent, from 2.5 billion metric tons to 1.9 billion tons. Today carbon-dioxide emissions from power production are at late-1980s levels. Think about it: Even as electricity production has risen, carbon emissions fell.

These numbers should bring home a clear message: The fossil fuel revolution in the United States is profoundly changing not only the economics of oil and gas production but also the environment. When it comes to electricity, the economics increasingly favor low-cost, abundant natural gas.

Moreover, natural gas is replacing coal, not only in the United States but also in China and India, two countries with fast-growing economies that are beginning to use imports of liquefied natural gas for electric power production. It’s a powerful demonstration that the significant benefits of the shale revolution are beginning to reach other countries and that the United States has the know-how and resources to play a major role globally in reducing carbon emissions.

Everyone seems to recognize this except U.S. environmental groups and those politicians who are eagerly courting their endorsement by supporting efforts to ban the production and use of fossil fuels.

Environmentalists participating in the keep-it-in-the-ground movement want to replace natural gas with renewable energy sources like solar and wind. That misguided approach, which would unnecessarily send energy costs soaring, is technologically unfeasible and is far from the most efficient way to achieve environmental progress.

Greater use of clean natural gas has already helped us take a significant environmental leap forward. While solar and wind power will continue to become more market competitive, we ought to lean on the resources that are already winning in the marketplace today.

Regrettably, the proposition that reducing the U.S. carbon footprint can be done without natural gas has been gaining ground in political circles. Democrats in both the U.S. Senate and the California Assembly have proposed legislation calling for a full transition to solar and wind.

But relying entirely on renewables is both foolish and unrealistic. Solar and wind are growing as energy sources, and a case can be made for investing in renewables.

But sacrificing natural gas is ill-advised. Given that solar and wind energy are intermittent, it would require a fundamental change in our energy system and impose enormous costs on the nation’s economy.

Those who cling to the belief that natural gas can be replaced forget that the reason you hear so little about acid rain these days is that sulfur-dioxide emissions have declined significantly over the years. Climate change is still a concern to some.

However, the significant reduction in power-plant emissions to the lowest level in almost 30 years proves that we can grow the economy and have a healthy environment, too.

And it’s a demonstration that the technology revolution — and a dose of reason and resolve — can address climate challenges without changing the way we live."

The Welfare Effects of Peer Entry in the Accommodation Market: The Case of Airbnb

By Chiara Farronato and Andrey Fradkin.

"NBER Working Paper No. 24361
Issued in February 2018, Revised in March 2018

NBER Program(s):Industrial Organization, Productivity, Innovation, and Entrepreneurship

We study the effects of enabling peer supply through Airbnb in the accommodation industry. We present a model of competition between flexible and dedicated sellers - peer hosts and hotels - who provide differentiated products. We estimate this model using data from major US cities and quantify the welfare effects of Airbnb on travelers, hosts, and hotels. The welfare gains are concentrated in locations (New York) and times (New Years Eve) when hotels are capacity constrained. This occurs because peer hosts are responsive to market conditions, expand supply as hotels fill up, and keep hotel prices down as a result."

See also Airbnb May Not Be Good for Hotels, but It's Great for Everyone Else: Consumers love the sharing economy by Tori-Anne Barry and Romina Boccia of The Heritage Foundation.

"Cities, counties, and states waging a war against short-term rentals by imposing hefty fines and burdensome regulations on hosts and booking platforms, such as Airbnb and VRBO, should reconsider their heavy-handed approach.

The Airbnb Effect

A new working paper published by the National Bureau of Economic Research finds that the presence of alternative lodging options financially benefits travelers, hosts, and the broader local economy.

The study was conducted by Chiara Farronato of Harvard Business School and Andrey Fradkin of MIT Sloan School of Management to determine the impact of peer-supplied short-term rentals on the economy.

The research shows that the “Airbnb effect” is indeed a real phenomenon. In cities where Airbnb is an option, travelers are able to find more affordable room accommodations through the short-term rental platform. As the supply of rooms goes up, hotels are feeling the effects and reacting with small price decreases to attract travelers.

The research indicates that in 2014, Airbnb renters on average had a consumer surplus of $41 per night in comparison to their hotel-stay counterparts.

The hosts themselves also saw a boost of about $26 in surplus per night. More diverse and affordable lodging options are resulting in longer stays—and more commerce within host cities from travelers purchasing goods and services in the local economy.

The research also found that short-term rentals are more flexible and more responsive to changing market conditions. Hotels have a limited number of rooms dedicated to accommodating guests. During off-seasons, hotels will have some empty rooms, and during peak seasons, demand can at times exceed hotel capacity.

Airbnb hosts respond to the change in market demand. In periods of high demand, hosts will put more lodging options on the platform. During the off-season, the number of active listings falls as hosts may choose to use their spare rooms themselves and to host family and friends, rather than accommodating short-term renters.

Alternative lodging options not only benefit the hosts and renters who use short-term rental platforms, but hotel customers as well. Airbnb has lessened the capacity constraints of hotels.
Short-term rentals directly affect hotel prices as well. With the demand for accommodations dispersed over a larger array of options, hotels are not able to skyrocket their prices during peak periods as much as they used to.

Hotel profits decrease slightly in markets with Airbnb activity. If Airbnb had not been an option for consumers in 2014, hotels in the 10 U.S. cities with the largest peer-hosting markets would have enjoyed a 3.69 percent increase in profits, according to Farronato and Fradkin.

What irks hotels is good news for consumers. The combination of cheaper hotel prices and the increase in room bookings through the Airbnb platform in 2014 resulted in a total of $276 million in consumer surplus in the studied cities.

Additionally, the research determined that roughly half of all Airbnb stays in 2014 would not have resulted in hotel stays had short-term rentals not been an option. Alternative lodging options actually increase tourism and overall travel, with direct benefits for local economies.

Airbnb and other platforms can also offer unique experiences to guests that are vastly different than those of hotels. Hosts are able to personalize stays for their guests, as well as give them a more homelike environment.

Competition Works

These factors make alternative options more appealing to some consumers, while others prefer the reliability and standard hospitality and convenience features offered by hotels. Competition works.
Legislators in several states continue to seek to create obstacles for short-term rentals on behalf of entrenched, legacy interests, such as hotels and hotel employee unions.

Rather than shield big business and big labor from competition, states and localities should consider the broader benefits for their population and businesses when deciding how to treat this new market force.

The market for alternative accommodation options is rapidly expanding. The economic benefits will also continue to grow—if they are given the room to do so."

Failed ACA Reinsurance Program Shows: Government Subsidies Don’t Reduce Premiums

By By Michael F. Cannon of Cato.

"ObamaCare turns eight years old today. Some opponents had hoped to mark the occasion by giving supporters the birthday gift they’ve always wanted: a GOP-sponsored bailout of ObamaCare-participating private insurance companies. Fortunately, a dispute over subsidies for abortion providers killed what could have been the first of many GOP ObamaCare bailouts.

ObamaCare premiums have been skyrocketing. All indications are this will continue in 2019, with insurers announcing premium increases up to 32 percent or more just before this year’s mid-term elections. Some Republicans fear voters will punish them for the effects of a law every Republican opposed and most still want to repeal.

Senate health committee chairman Lamar Alexander (R-TN), Sen. Susan Collins (R-ME), and House Energy & Commerce Committee chairman Greg Walden (R-OR) hope to avert calamity by expanding on a proven failure. For months, they have been pushing legislation that would resurrect ObamaCare’s expired “reinsurance” program with $30 billion of new funding.

ObamaCare’s architects knew the law’s preexisting-conditions provisions would effectively destroy the individual health insurance market. They added the reinsurance program in an attempt to put Humpty Dumpty back together again.

ObamaCare’s preexisting-conditions provisions both increase health-insurance premiums and reduce health-insurance quality. They achieve the former, first, by requiring insurers to cover patients with uninsurable preexisting conditions, and again by unleashing adverse selection. Those factors in turn reduce quality by literally punishing insurers who offer high-quality coverage for the sick.

From 2014 until it expired at the end of 2016, ObamaCare’s reinsurance program gave participating insurers extra taxpayer subsidies to cover the claims of high-cost patients whom its preexisting-conditions provisions require them to cover at a loss. The extra subsidies were supposed to reduce premiums, and prevent a race to the bottom fueled by ObamaCare’s penalties on quality coverage.

If ObamaCare’s reinsurance program was supposed to keep premiums from skyrocketing, it was an utter failure. Premiums increased 18-25 percent per year from 2013 through 2016, well above the trend of 3-4 percent from 2008 to 2013. By 2017, premiums had doubled—a cumulative increase of 99 percent or 105 percent, depending on the source—from pre-ObamaCare levels. ObamaCare’s preexisting-conditions provisions were the driving force behind these premium increases.

Likewise, ObamaCare’s reinsurance program failed to prevent its preexisting-conditions provisions from triggering a race to the bottom on health-insurance quality. Research indicates the penalties those provisions impose on high-quality coverage are indeed making coverage increasingly worse for patients with multiple sclerosis and other high-cost conditions, with no end in sight. All the king’s reinsurance and all the king’s men cannot put Humpty together again.

At this point, ObamaCare supporters might object that premiums would have risen even more without the reinsurance program in place. But this is false. Reinsurance programs do not reduce premiums at all.

To illustrate, take Sen. Collins’ claim that $30 billion in reinsurance subsidies would reduce ObamaCare premiums 40 percent. The claim is complete nonsense. Giving insurance companies $30 billion of taxpayer money would not magically make them 40 percent more efficient. If that were true, a $75 billion bailout would make ObamaCare totally free.

ObamaCare’s reinsurance program did not reduce premiums by a single penny, and neither would a Republican reinsurance program, because government subsidies do not reduce premiums. Giving taxpayer dollars to private insurance companies merely shifts part of the premium from enrollees to taxpayers. If a $30 billion insurance-industry bailout causes the amount ObamaCare enrollees pay for their coverage to fall 40 percent, it is because that 40 percent is being shifted to someone else—i.e., you. (If anything, government subsidies increase premiums through moral hazard.)

Nevertheless, the idea that subsidies reduce premiums is the kind of falsehood Washington will forever exclaim as gospel because it serves the economic interests of insurance companies, and the political interests of politicians who want to be seen as Doing Something, without actually solving anything.

The only thing reinsurance subsidies are guaranteed to do is hand even more taxpayer dollars to private insurance companies. ObamaCare already hands more than $50 billion in explicit government subsidies to participating insurance companies each year. It hands insurers billions more by forcing healthy enrollees to overpay for health insurance. If the first $50 billion didn’t solve the problem, why should we expect another $30 billion would? And if it doesn’t, how much more good money will Congress throw after bad?

Fortunately, a dispute over whether these subsidies could go to insurers that cover abortion prevented the Alexander-Collins-Walden bailout from passing as part of the massive $1.3 trillion spending bill Congress passed to avert a government shutdown today.

Alexander, Collins, and Walden should take the hint and stop trying to bail out ObamaCare, which would just double (or triple, or quadruple) down on a failed system. If Congress is unwilling to repeal and replace ObamaCare yet, opponents should be pushing states to allow individuals and employers to purchase health insurance licensed by U.S. territories, which are exempt from ObamaCare’s costliest regulations, and pushing HHS to reverse its administrative ban on “renewal guarantees” in short term plans. These steps would provide relief for the vast majority of those in the individual market, before the mid-term elections, and disproportionately in areas where the GOP is defending congressional seats. They would also give ObamaCare opponents greater leverage in Congress, and even force supporters to the negotiating table.

If instead Alexander, Collins, and Walden succeed in delivering an ObamaCare bailout, it would mark a stunning reversal for the GOP. Republicans spent seven years promising to repeal ObamaCare and one year trying to replace it, while supporters of the law refused to help—or even to acknowledge ObamaCare’s fundamental flaws. A bailout would hand supporters what they have always wanted but Republicans have heretofore refused to give: more government spending, zero reform, and a bipartisan imprimatur on ObamaCare. One thing is certain: the GOP’s first ObamaCare bailout would not be their last."

Liberate Dishwashers from Federal Efficiency Mandates

By Devin Watkins of CEI.

"Thirty-five years ago, dishwashers cleaned dishes in about an hour. Sadly today, due to federal government regulations, there are no dishwashers that do so. This isn’t progress—it’s the failure of government to allow consumer choice. The Competitive Enterprise Institute this week petitioned the Department of Energy (DOE) to fix the problem.

Federal regulators have been so focused on forcing people to decrease energy usage that they have lost sight of the other features that consumers value. Even the DOE now recognizes that, because of their regulations, manufacturers “typically increase the cycle time.” The DOE is required by law to make sure that such features continue to be options for consumers, but has failed to do so.

Due to the increase in cycle times many consumers have complained. Here are just a few examples:

• “The cycles run FOREVER - Plan on letting it run all afternoon before your dishes are ready so you can use them for dinner!!”
• “It doesn't clean well, but has a very long cycle, well over two hours.”
• One consumer described a cycle time of one and a half hours as “extremely long,” but sadly this is the shortest cycle time on the market.
• “The cycle time is way too long, running for 4 hours and still not cleaning the dishes. I am currently in the process of hand washing a number of dishes that did not clean in last night’s 4-hour cycle.”
• “It spontaneously starts beeping, non-stop, the cycle takes FOREVER. I hate it, I hate it, I hate it.”
• When one consumer called a technician to complain of a 4.5 hour cycle time, she was told that the new machines just take longer than the old ones.

Dishwashers are just one of many consumer appliances harmed by federal regulations. Traditional incandescent light bulbs are banned by federal regulations in favor of compact fluorescent bulbs that contain mercury, have worse color rendering, and cost three to ten times as much. Traditional top-loading clothes washers with a central agitator are banned in favor of front-loading washers that cost twice as much and some of which, according to Consumer Reports, leave clothes “nearly as dirty as they were before washing.”

It is time to stop these irresponsible actions and restore the quality of dishwashers that have been harmed by federal regulations. That is why the Competitive Enterprise Institute has asked the DOE to establish a new category of fast dishwashers. This new category would take no more than an hour to complete cleaning and drying dishes.

The statute allows the DOE to set a new energy standard for a product which has a “performance-related feature” which justifies a lower standard based on the “utility to the consumer of such a feature.” As the consumer complaints above, and an 11,000 person survey demonstrate, a dishwasher’s cycle time is a very important feature with high utility to the consumer.

Our petition would restore choice to the American consumer to allow them to buy the product they choose. Those that like their dishwasher as it is will continue to be able to purchase them. But those that do not like to waste time and still get their dishes clean will have another choice.
It is time to start reversing the damage that federal regulations have done."

Study: Medical Expenses Cause Close to 4% of Personal Bankruptcies—not 60%

By Michael F. Cannon of Cato.

"A new study by economists Carlos Dobkin, Amy Finkelstein, Raymond Kluender, and Matthew J. Notowidigdo – “Myth and Measurement — The Case of Medical Bankruptcies” [subscription required] – challenges the conventional wisdom on the effect of medical bills on the rate of personal bankruptcy. From the study:

Policymakers’ beliefs about the frequency of medical bankruptcies are based primarily on two high-profile articles that claim that medical events cause approximately 60 percent of all bankruptcies in the United States. In these studies, people who had gone bankrupt were asked whether they’d experienced health-related financial stress such as substantial medical bills or income loss due to illness. People were also asked whether they went bankrupt because of medical bills. People who reported any of these events were described as having experienced a medical bankruptcy…
[But] the existing, widely cited evidence on medical bankruptcy is built on the fallacy that when two things occur together there is necessarily a causal relationship between them.

The study’s authors looked instead at people who had a hospitalization to see whether that expensive episode of care increased the probability of filing for bankruptcy. They write, “we estimate that hospitalizations cause only 4 percent of personal bankruptcies among nonelderly U.S. adults.” Even among uninsured adults, “hospitalizations are responsible for only 6 percent of personal bankruptcies.” While medical bills can still drive someone to bankruptcy even if they don’t experience a hospitalization, the authors conclude, “focusing on hospitalized people probably does not lead to vast underestimation of the effect of all illness and injury on bankruptcy rates.”
Takeaways:

1. Always be skeptical of everything you read. (Up to and including this blog!)
2. Keep in mind this study does not show the overall personal bankruptcy rate is lower than believed. It shows only that the share attributable to medical expenses is lower than believed. It therefore follows that, to the extent your support for single-payer springs from a desire to reduce bankruptcies, you should shift your energies toward combating whatever is actually causing the 56 percent of bankruptcies you incorrectly believed to be attributable to medical expenses.
3. Health care reform should be able to get the medical-bankruptcy rate down even more."

Is the American middle class really no better off today than in 1979? Not according to the CBO

By James Pethokoukis of AEI.

Are most Americans really no better off now than they were decades ago? Have living standards gone nowhere? It is a claim some policy activists and policymakers make. But it is hard to square such claims with a new report from the nonpartisan Congressional Budget Office. Lots of cool data in there, but let’s focus on the broad middle class, the 21st to 80th income percentiles. How has it been doing since 1980?

One way is to look at “income before transfers and taxes” — or roughly market incomes plus social insurance benefits such as Social Security and Medicare — which was up 28%. So not zero, but not blazing fast growth. But, again, not zero or even close

Another approach is to look at “income after transfers and taxes” — market income plus social insurance benefits plus means-tested transfers (Medicaid, food stamps) minus federal taxes — which was up considerably more, 42%. Even more not zero! More impressive still: Incomes for the bottom fifth are up nearly 70%.

The “income after transfers and taxes” also does a lot to reduce inequality vs. “income before transfers and taxes” — as the following two charts show (breaking out the top 1%):

Sacrificing Safety Is an Unintended Consequence of the Jones Act

By Thomas Grennes. He is Emeritus Professor of Economics, North Carolina State University. 

"The Jones Act of 1920 requires, among other things, that cargo voyages between two American ports must use American-built ships. As the United States has lost its comparative advantage in ship-building, US ships have become more expensive, and the average age of ships in the Jones Act–eligible fleet has risen relative to the average age of foreign-flag ships. Older ships are less safe, and reforming the Jones Act is the key to increasing safety in US shipping.

Technological Change in Ships and Comparative Advantage

In its first session following the ratification of the US Constitution in 1789, Congress required a vessel to be American built to be eligible for US-flag registry. In the early days of the nation and through the Civil War, the domestic-build requirement had little effect on US shipping costs, since American shipbuilders had a comparative advantage in producing ships that had wooden hulls and were wind driven. US-flag ships carried most of the nation’s foreign trade before the Civil War, and they were highly desirable for use in the international export market.

As part of the Industrial Revolution, Great Britain began producing iron-hulled ships driven by steam that displaced the wooden, wind-driven ships. Ships equipped with the new technology quickly came to dominate most international sea lanes, relegating wooden sailing ships to a subordinate role. American ships became technologically backward. Further, the British repealed the domestic-build requirement of the Navigation Acts, but the US retained its requirement. By 1900 ships wearing a US flag were still 73 percent sail powered, but the British fleet was only 20 percent sail powered. The result was a long-term decline in the share of US trade carried by US-flag ships and a decline in the US-flag share of the world fleet.

The US Merchant Marine has been permanently damaged by the persistence of the American-build requirement. The United States is the only major country that retains a domestic-build requirement. “Although this clearly was not the intention [of the build requirement], the policy further accelerated the virtual elimination of U.S. shipping from all trade routes open to foreign competition.”

US shipbuilders lost their comparative advantage, and American-built ships became increasingly expensive relative to foreign-built ships. According to recent estimates, American-built oceangoing ships cost five times as much as their foreign counterparts. Because of the higher cost of new ships, American shippers have delayed replacing older ships, and the American fleet has gotten older. It is ironic that a law intended to strengthen the US Merchant Marine has contributed to its near disappearance.

Age and Technology

As technology advances, older ships have become more technologically backward. In principle, older ships could be serviced and refitted with the latest technology, but ship owners have avoided bringing older ships up to date because of the additional costs modernization would entail. Services of American shipyards are more expensive than foreign shipyards, and a 50 percent tariff on the use of foreign shipyards that was part of the infamous Smoot-Hawley tariff of 1933 remains in effect. Safety rules with grandfather clauses have made it possible for older ships to operate legitimately without adding modern technology.

For example, El Faro was delivered in 1975 and it was required to follow the safety requirements of 1960 when it sailed in 2015. Safety standards are lower for older ships, and there is evidence that enforcement of standards is also weaker. In the El Faro case, some work was not done before the ship left the port because “parts for older ships were hard to find.” The Coast Guard has been criticized for outsourcing some monitoring to the Alternate Compliance Program, which was judged to be ineffective. Regarding safety standards for older ships, an American ship captain stated recently that “what they have done over the last 20 years is lowering the bar. Their definition of seaworthy gets lower and lower because the ships are getting older and older.”

Are Older Ships Less Safe?

It is undeniable that the Jones Act contributes to the aging of the US-flag fleet. Is there evidence that older ships are also less safe? Marine insurance companies consider older ships to be riskier. Marine insurance is one of the oldest forms of insurance, and insurers have accumulated vast experience evaluating the safety of different types of ships. The importance of age varies with the type of ship, but marine insurers are reluctant to insure ships older than 20 years without extraordinary inspections or higher premiums.

A group at Southampton Solent University conducted a comprehensive study of ship accidents taking place in the last 15 years and concluded, “The evidence confirms the hypothesis that most ship accidents can be linked with older vessels. . . .” The average age of vessels lost was consistently above 20 years, and the average age of lost ships increased steadily over the sample period. National governments inspect foreign ships calling at their ports under the Port State Control (PSC) regime, verifying compliance with the several international conventions of the International Maritime Organization (IMO), a specialized agency of the United Nations. One of the nine regional PSC organizations worldwide, the Paris Memorandum of Understanding, reports the highest detention rates for ships older than 20 years and uses “age over 12 years” as a key risk profile factor.

National ship registries with good safety records, such as the one for the Marshall Islands, will not register ships older than 20 years unless owners provide additional information about the safety of the older ships. The financial community is also suspicious about the safety of older ships. Potential investors were once warned about investing in Horizon Lines, once the largest Jones Act company, because they owned too many older ships.

Jones Act Ships Are Older and Less Safe

US-flag ships are older than those of the world fleet, and the Jones Act contributes to the extraordinary aging of the US fleet. The average age of ships in the US fleet (33 years) is greater than the average age of ships in the foreign-flag fleet (13 years). At the age of 40, El Faro was even older than the average US-flag ship, and it was far older than the average age of international ships (23 years) that were recycled by shipbreakers from 2012 to 2015. In their comprehensive study of the history of US maritime policy, Andrew Gibson of the Naval War College and Arthur Donovan of the US Merchant Marine Academy concluded that the Jones Act contributed to the aging of the US fleet: “The insistence that such ships be U.S. built is the Jones Act’s most constraining feature; no other nation imposes a similar requirement. U.S.-built ships are so expensive that ships in the Jones Act trades are kept in service long past their normal retirement age, the result being that the fleet is very old, indeed much of it is virtually obsolete.”

The Jones Act and Railroad Safety

The Jones Act has contributed to a decline in domestic water transportation. By making US coastal transportation more expensive, the act has also contributed to diminished transportation safety on land. Some oil shipments that could have used coastal tankers have instead been diverted to railroads. A new study of rail safety has demonstrated that additional oil shipments by rail have added to rail congestion and to the frequency and severity of rail accidents.

The El Faro Tragedy and The Age and Safety of Jones Act Ships

The El Faro sinking is a tragic example of the relationship between older ships and safety. El Faro’s owner, TOTE Maritime, operates Jones Act common carrier ocean container shipping services in the Puerto Rico and Alaska trades. TOTE had a different kind of problem earlier on the Puerto Rican route. They were convicted of violating antitrust laws by conspiring to fix freight rates for actions in 2005 and 2008. Before the loss of El Faro, TOTE planned to reposition the ship and continue operating El Faro in their Washington State–Alaska service.

In their investigations of the El Faro sinking that ended in December 2017, the Coast Guard and the National Transportation Safety Board (NTSB) found multiple factors that contributed to the sinking and loss of lives, but both agencies identified factors related to the age of the ship. For example, El Faro was exempt from the current standards for lifeboats. Since it was delivered in 1975, El Faro was permitted to meet the 1960 requirements for ship safety set by the International Convention for the Safety of Life at Sea, rather than the higher standards in place in 2015. NTSB is now recommending closed-top life boats for all ships, rather than the open-top lifeboats used by El Faro. In addition to lower standards for older ships, both agencies cited weaker enforcement of standards for older ships. The Coast Guard was criticized for applying the older safety standards, even though major refitting in 2005–2006 should have caused them to apply the higher standards for newer and remodeled ships. The Coast Guard’s Alternate Compliance Program, which was introduced in the 1990s, allows inspections of US-flag commercial ships required under IMO conventions to be delegated to a ship’s nongovernmental classification society, including—in the instance of El Faro—the American Bureau of Shipping. This practice has been accused of resulting in weaker vessel inspection enforcement than would have been performed by the Coast Guard, and it may have been a contributing factor in El Faro’s loss. Since seamen are the main victims of shipping accidents, it is surprisingly difficult to find public statements from labor union officials expressing concern about possible safety problems with older ships.

Reforming the Jones Act to Improve Safety

Broadly eliminating the most commercially restrictive provisions of the Jones Act—including the US-build, US-ownership, and related requirements—would substantially improve the nation’s economic efficiency and shipboard safety. A narrower but still substantive national reform would be to eliminate only the domestic-build and related requirements, which would completely remove all the incentives to employ older ships. It would revitalize the Jones Act seagoing fleet with modern tonnage. A more moderate reform on a regional basis would be to eliminate the build requirement only for seagoing ships employed in the noncontiguous routes (Alaska, Hawaii, and Puerto Rico). Safety reform could be addressed directly by applying the same standards and enforcement to both old and new ships. A reform that might receive the greatest support would be a permanent exemption from the Jones Act for Puerto Rico, which is suffering from a long-term debt problem, as well as a recent hurricane disaster.

Conclusion

The Jones Act has been justifiably criticized for contributing to higher shipping costs and diverting some transportation from water to land. An unintended consequence of the act is that it contributes to lower ship safety. The US-build requirement of the Jones Act (combined with the high tariff against foreign shipyards and the lower safety standards for older ships) contributes to more dangerous working conditions for American seamen. In spite of the large net cost of the act that is borne by millions of consumers and other end users, the act continues to have strong support from elected officials and union leaders ostensibly representing seamen and shipbuilders. Sponsors of the Jones Act intended to create a stronger merchant marine, but the unintended consequences have been a smaller, older, and more dangerous American fleet that carries very little of US international trade."

“Criminal Aliens” Commit Mostly Victimless Crimes, Few Violent Crimes

By David Bier of Cato.

"During his campaign, President Trump promised to target the “bad hombres” in the United States illegally. But Immigration and Customs Enforcement (ICE) statistics indicate that his administration has cast a much wider net. More than one in four immigrants that ICE arrested last year had no criminal convictions at all, and of the rest, their convictions were mostly victimless crimes—largely traffic infractions, immigration offenses, and drug offenses. Almost 90 percent were for nonviolent crimes. ICE cannot justify its broad crackdown based on these figures.

Figure 1 shows immigrants arrested by ICE by whether they had a criminal conviction (top left) and the distribution of the convictions by type of conviction (bottom right). ICE statistics only provide a list of all convictions that the entire population of criminal aliens committed, meaning that they only show the distribution of convictions, not the distribution of immigrants based on their most serious offense. That said, a majority of all convictions were for crimes with no private victims (i.e. not the government or “society”). Just 11 percent were violent crimes (just one percent were homicide and sexual assault).

Figure 1: Immigrants Arrested by ICE by Criminal Conviction and Distribution of Criminal Convictions

Source: Immigration and Customs Enforcement
 
Figure 2 shows the distribution within each broad category of convictions. Most violent crimes were assaults, which include simple assaults defined by the FBI to include assaults “where no weapon was used or no serious or aggravated injury resulted” and include “stalking, intimidation, coercion, and hazing” where no injuries occurred. The FBI excludes simple assault from its definition of violent crime, but ICE fails to break down this category, so we cannot. The plurality of property crimes were larcenies, which include “thefts of bicycles, motor vehicle parts and accessories, shoplifting, pocket-picking, or the stealing of any property or article that is not taken by force and violence or by fraud.”
Almost two-thirds of the “possible victims” category includes DUIs, which usually don’t have a victim but impose the threat of injury on people. This category also includes some nebulous categories like “privacy,” “threats,” and disturbing the peace, which are undefined in the ICE report. Nonviolent sex crimes include statutory rape as well as lude behaviors in public. Fraud and forgery could have victims or they could be crimes where immigrants allow their family members to use their identities to obtain work in the United States. Family offenses include “nonviolent acts by a family member (or legal guardian) that threaten the physical, mental, or economic well-being or morals of another family member” that aren’t classified elsewhere (e.g. violating a restraining order). Kidnapping convictions generally arise from custody disputes over children, so I included them in this category.

Figure 2: Distribution of Convictions of Criminal Immigrants Arrested by ICE


Source: Immigration and Customs Enforcement
Victimless offenses were traffic infractions that were not DUIs, immigration offenses such as entering the country illegally, or “vice” crimes (drugs, sex work, or alcohol). Immigration “crimes” include illegally entering the country, reentering after a deportation, falsely claiming U.S. citizenship, and smuggling. Obstruction offenses mainly include parole and probation violations or failure to appear in court.

Cato Institute research has previously shown that illegal immigrants are less likely to end up incarcerated in the United States than U.S.-born individuals of the same age. A new paper by my colleague Alex Nowrasteh concludes that illegal immigrants in Texas are significantly less likely to commit a variety of crimes than U.S.-born adults. Illegal immigrants are not generally threats to Americans. Only certain serious criminals who happen to be immigrants are.

ICE provides a public service when it apprehends and removes immigrants from society who are threats to Americans. It fails the public when it deports other people and, by reducing the number of peaceful people in the society, actually increases the proportion of criminals. This strategy will not make Americans safer—indeed, it will make them less safe. Congress should again require ICE to focus on serious criminals.

Table: FY 2017 Total ERO Administrative Arrests Criminal Convictions

Criminal Category	Criminal Convictions
Traffic Offenses - DUI	59,985
Dangerous Drugs	57,438
Immigration	52,128
Traffic Offenses	43,908
Assault	31,919
Larceny	15,918
Obstructing Judiciary, Congress, Legislature, Etc.	11,655
General Crimes	10,702
Burglary	10,262
Obstructing the Police	9,976
Fraudulent Activities	8,922
Weapon Offenses	8,260
Public Peace	7,336
Sex Offenses (Not Assault or Commercialized Sex)	5,033
Invasion of Privacy	4,830
Stolen Vehicle	4,678
Robbery	4,595
Family Offenses	3,934
Forgery	3,768
Sexual Assault	3,705
Stolen Property	3,176
Damage Property	2,681
Flight / Escape	2,319
Liquor	2,313
Health / Safety	1,548
Homicide	1,531
Kidnapping	1,317
Commercialized Sexual Offenses	995
Threat	847

Source: Immigration and Customs Enforcement"