In most cases, excessive regulation doesn’t surprise me all that much. It usually focuses on familiar industries, such as automobiles. So, for example, when the National Highway Traffic Safety Administration came up with a rule mandating that all cars and light trucks sold in the United States have rearview cameras, it wasn’t a great shock.
But every now and then, regulators do something that catches me off guard. This is from the Economist:
Vancouver’s ban on doorknobs in all new buildings, which went into effect last month, … has provoked a strong reaction from the door-opening public and set off a chain reaction across the country as other jurisdictions ponder whether to follow Vancouver’s lead.
Wait, what?? They are banning doorknobs? I confess that this threw me when I first read it. Were they going to require some sort of Star Trek-like eyeball scanning device, along with an automatic door?
Turns out it wasn’t anything quite so techonoligcally advanced. They just want “levered doorhandles” instead. Here’s their rationale:
The war on doorknobs is part of a broader campaign to make buildings more accessible to the elderly and disabled, many of whom find levered doorhandles easier to operate than fiddly knobs. Vancouver’s code adds private homes to rules already in place in most of Canada for large buildings, stipulating wider entry doors, lower thresholds and lever-operated taps in bathrooms and kitchens.
I would have thought doorknobs were pretty easy to deal with, but OK, maybe levers are easier. But I’m not sure how you go from “some people find levers easier” to “everyone must use levers!”
Furthermore, perhaps levers are too easy:
True, elderly and disabled people find it easier to operate doors with handles. But so do bears. In British Columbia, bears have been known to scavenge for food inside cars—whose doors have handles, knob advocates point out. Pitkin County, Colorado, in the United States, has banned door levers on buildings for this very reason. One newspaper columnist in the pro-knob camp has noted that the velociraptors in “Jurassic Park” were able to open doors by their handles.
Obviously, bears don’t vote (nor do velociraptors), so we probably can’t attribute these developments to regulatory capture by the bear lobby, which wants easier access to people food (are campers getting more careful with their “pic-a-nic” baskets these days?). Nevertheless, something seems a little off in the regulatory process in Vancouver.
Paul C. "Chip" Knappenberger and Patrick J. Michaels
Global Science Report is a feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”
Last fall, the press pounced on the results of a new study that found that global climate change was leading to an increasing frequency of heat waves and thus resulting in greater heat-related mortality. Finally a scientific study showing that global warming is killing us after all! See all you climate change optimists have been wrong all along, human-caused global warming is a threat to our health and welfare.
Not so fast.
Upon closer inspection, it turns out that the authors of that study—which examined heat-related mortality in Stockholm, Sweden—failed to include the impacts of adaptation in their analysis as well as the possibility that some of the temperature rise which has taken place in Stockholm is not from “global” climate change but rather local and regional processes not at all related to human greenhouse gas emissions.
What the researchers Daniel Oustin Åström and his colleagues left out of their original analysis, we (Chip Knappenberger, Pat Michaels, and Anthony Watts) factored in. And when we did so, we arrived at the distinct possibility that global warming actually led to a reduction in the rate of heat-related mortality in Stockholm.
Our findings have just been published in the scientific journal Nature Climate Change as a Comment on the original Oustin Åström paper (which was published in the same journal).
We were immediately skeptical because the original Oustin Åström results run contrary to a solid body of scientific evidence (including our own) that shows that heat-related mortality and the population’s sensitivity to heat waves was been declining in major cities across America and Europe as people take adaptive measures to protect themselves from the rising heat.
Contrarily, Oudin Åström reported that as a result of an increase in the number of heat waves occurring in Stockholm, more people died from extreme heat during the latter portion of the 20th century than would have had the climate of Stockholm been similar to what it was in the early part of the 20th century—a time during which fewer heat waves were recorded. The implication was that global warming from increasing human greenhouse gas emissions was killing people from increased heat.
But the variability in the climate of Stockholm is a product of much more than human greenhouse gas emissions. Variations in the natural patterns of regional-scale atmospheric circulation, such as the Atlantic Multidecadal Oscillation (AMO), as well as local impacts associated with urbanization and environmental changes in the direct vicinity of the thermometer are reflected in the city’s temperature history, and the original Oudin Åström et al. publication did not take this into account. This effect is potentially significant as Stockholm is one of Europe’s fastest growing cities.
But regardless of the cause, rising temperatures spur adaptation. Expanded use of air conditioning, biophysical changes, behavior modification, and community awareness programs are all examples of actions which take place to make us better protected from the dangers associated with heat waves. Additionally, better medical practices, building practices, etc. have further reduced heat-related stress and mortality over the years.
The net result is that as result of the combination of all the adaptive measures that have taken place over the course of the 20th century in Stockholm, on average people currently die in heat waves at a rate four times less than they did during the beginning of the 20th century. The effect of adaptation overwhelms the effect of an increase in the number of heat waves.
In fact, it is not a stretch to say that much of the adaptation has likely occurred because of an increased frequency of heat waves. As heat waves become more common, the better adapted to them the population becomes.
Our analysis highlights one of the often overlooked intricacies of the human response to climate change—the fact that the response to climate change can actually improve public health and welfare.
Which, by the way, is a completely different view than the one taken by the current Administration.
Knappenberger, P., Michaels, P., and A. Watts, 2014. Adaptation to extreme heat in Stockholm County, Sweden. Nature Climate Change, 4, 302-303.
Oudin Åström, D., Forsberg, B., Ebi, K. L. & Rocklöv, J., 2013. Attributing mortality from extreme temperatures to climate change in Stockholm, Sweden. Nature Climate Change, 3, 1050–1054.
Former Drug Czar Bill Bennett has co-authored an article in the Weekly Standard, “The Legalization Juggernaut.” Bennett is upset about voter approval for the marijuana legalization initiatives in Colorado and Washington and recent polls showing “for the first time that a clear majority of Americans (58 percent) support marijuana legalization.” Bennett can hardly believe that we have reached this “dangerous and absurd moment.” It is absurd because, to Bennett, the policy question boils down to this: “Do we need a dumber country?” If the debate can be framed that way, Bennett and his co-author, Christopher Beach, are convinced that “this headlong rush into disaster can be stopped.” If.
Some readers of Cato@Liberty might need reminding that when Bennett was a high-ranking government official, he once said executing drug dealers was morally justifiable. Given that stance, it must bewilder him to see marijuana stores opening in Denver, Seattle, and other cities. For the moment, all Bennett wants are a few political leaders to “speak out on marijuana.” Hmm. That’s another telling indication of the changing political climate with respect to drug policy.
With the expiration of the current federal highway bill in a few months, the infrastructure issue is heating up. Newspapers are ginning up interest with stories about deficient and falling down bridges (e.g. here and here).
Diane Rehm kindly invited me to her NPR show this morning to discuss how we should move ahead with financing infrastructure. I pointed to the advantages of devolving funding to state governments and the private sector. America should embrace the global movement towards privatization and public-private partnerships for highways, bridges, airports, and other facilities.
Even Japan—previously known for its pork-barrel infrastructure spending—is beginning to embrace privatization, notes this piece at NextCity.org (h/t Nick Zaiac):
Over a 15-year period starting in 1987, the Japanese government undertook one of the most ambitious privatizations in history, moving its most heavily traveled railways from public ownership into private hands. The privatization of Japanese National Railways – whose assets on Honshu (Japan’s main island) were split into three separate companies (JR East, Central and West, each centered around one of Japan’s three major metropolitan areas) – was a roaring business success. JR East, which runs commuter, intercity and Shinkansen lines in Tokyo and the surrounding region, doubled its revenue over the 15-year period, cut its payroll by a third, upped its per-capita passenger-miles by two-thirds, all while cutting the number of accidents by nearly 60 percent and keeping fares more or less flat.
Now Osaka, Japan is looking to repeat the magic, but this time on its city subway network – which, if successful, would be the first government subway system in the country to be sold off.
… The move follows on the heels of the sale of another one of the prefecture’s railways, the … Semboku Rapid Railway.
… Not to be outdone, the Tokyo Metropolitan Government is considering selling its 46.6 percent stake in Tokyo Metro.
Robert A. Levy
Here are a few thoughts on high frequency trading [HFT] – not a thorough analysis of the problems and solutions, but rather a brief outline to encourage further discussion.
What is HFT?
The modern version of HFT, as described by Malkiel and Leavitt in an April 11 Wall Street Journal op-ed, “involves the placement of high-speed computers in close proximity to stock-market servers to give some participants the ability to buy and sell stocks faster than the blink of an eye.” The favored participant purchases early access to information from either a public exchange or a so-called dark pool, which is essentially a private exchange established by investment banks. With privileged access, the HF trader can learn of a pending order before it is executed, and then earn a small profit by buying or selling ahead of the order. For example, a sell order exists at $100.00; an HF trader learns of a pending buy order at $100.02, which allows the HF trader to earn $.02 by first buying at $100.00 then selling at $100.02.
What are the pluses and minuses of HFT?
Benefits of HFT can include market efficiency, increased liquidity, and lower transactions costs. To illustrate: Assume orders have been placed to sell 5,000 shares of XYZ at $15.02 and 5,000 shares at $14.94. Assume further, a pending buy order for a minimum of 10,000 shares at $15.00. The HF trader, acting as market-maker, might buy 10,000 shares from the two sellers at an average price of $14.98 and re-sell the shares to the buyer for $15.00. The result would be a narrowed bid-asked spread, reduced trading costs, increased volume, and enhanced liquidity.
On the other hand, as Malkiel and Leavitt point out, HFT is a form of insider trading known as front-running whereby “optimally positioned traders can see trade orders from other investors before they are executed. They can execute a purchase just ahead of those orders and run the price up just a bit, pocketing the difference.” In addition, HFT has been blamed for increased market volatility.
Has HFT caused increased volatility and “flash crashes”?
Early information is new information; and new information, by its very nature, can trigger market volatility. Every major announcement is potentially destabilizing, and the persons who first acquire the information have an advantage – usually to the detriment of retail investors. Yet government intervention to suppress new information is rarely beneficial. Increased volatility, taken alone, does not justify regulation. At a minimum, there should be a showing that HFT either generates large economic losses or involves fraud, breach of contract, or breach of fiduciary duty.
Because price often responds to increased volume, one way to dampen volatility would be to slow down trading. For instance, HF traders might be charged a transaction fee or required to hold a security for a specified period of time. Such regulations would also mitigate front-running, but they could diminish market efficiency and raise trading costs to the detriment of all investors. Drawing again from Malkiel and Leavitt: “In Europe, when trading taxes were implemented, trading volume and liquidity fell, and bid-asked spreads increased. Similarly, in Canada, when fees were increased on high-speed traders, spreads increased and liquidity decreased.”
With respect to flash crashes, an SEC-CFTC joint report determined that HFT actually improves conditions by absorbing some of the sell pressure. Moreover, the Dow’s 600-point decline in a few minutes during May 2010 – which was reversed within a half-hour – was attributed to a single $4+ billion futures sale by a large money manager. In fact, flash crashes were common long before HFT. The exchanges have already implemented “circuit breakers” to minimize their impact.
Does HFT entail front-running?
Ordinarily, front-running allegations are based on breach of fiduciary duty. The front-runner is under a legal obligation not to profit from inside knowledge of his client’s pending order. By contrast, the HF trader is transacting for his own account; he has no client, and so could not have breached a fiduciary duty. His trades are based on information that he has purchased from an exchange.
If, however, the exchange did not have the right to sell the information, then the HF trader’s early access might have been acquired illegally. Typically, investors have written agreements with their brokers, but not with exchanges; so the sale of access by the exchange is not a direct contractual breach. Nonetheless, that sale might still be impermissible if contracts are deemed to contain an implicit term that provides for ownership of the information by the investor who initially placed the order. In that case, it’s the exchange, not the HF trader, that has acted unlawfully by selling information it doesn’t own.
What framework should control the regulatory environment?
Accordingly, ownership of the underlying property rights is one criterion for government regulation of HFT. If the investor owns the information on his pending orders, his rights have been violated by the exchange; and any sale of the information must be subject to his consent. Effectively, that might shut down HFT because the investor is the party whose trades are being front-run. But if the exchange owns the information, then its sale does not violate anyone’s rights and traders should be allowed to compete for faster access.
Under those circumstances, the only other basis for government regulation would be significant welfare losses – e.g., if the costs of front-running and higher volatility outweigh possible improvements in market liquidity, pricing efficiency, and trading costs – in which case investors unable or unwilling to compete against HF traders might have to be protected.
Who has property rights to information on pending orders?
The Coasean answer to the property rights question is that the initial assignment of ownership doesn’t matter: If transactions costs are low, bargaining by the various parties will direct resources toward their highest valued use. But here, transactions costs among affected investors, brokers, exchanges, and HF traders are likely to be prohibitive. Moreover, libertarians are concerned with distributive shares – i.e., who benefits and who bears the costs – not just aggregate resource allocation.
A Lockean rule would assign ownership to the originator of the information. The economically efficient rule is that ownership should vest in the party least able to avoid harm if the right were to vest elsewhere. And the libertarian rule is that the victim of any harm has the right to claim compensation. Application of those rules is unclear in this instance, and perhaps even conflicting. When that happens – i.e., when rights theory doesn’t provide clear guidance – a utilitarian analysis can inform the initial assignment of a property right. In other words, an economic cost-benefit assessment and a rights-based assessment will merge. (That also happens when we evaluate, say, speed limits or any other safety regulations.)
In brief: Preventing exchanges from selling access to early information is equivalent to establishing a property right in the originating investor. Perhaps that’s desirable, but it requires careful scrutiny of costs and benefits that, so far, hasn’t been evident in the literature.
It is increasingly clear that the congressional GOP will be using school choice – especially charter schools – as an election-year weapon [$]. And certainly Republicans, Democrats, Independents, Greens – whatever – should support school choice because educationally, socially, and financially it is the right thing to do. But that doesn’t mean Republicans should ignore that the Constitution gives Washington no authority to meddle in education outside of controlling the District of Columbia, federal installations, and ensuring that states and districts don’t discriminate when they provide schooling.
Congressional Republicans’ primary vehicle for showing how much they care about choice is a bill – the Success and Opportunity through Quality Charter Schools Act (H.R. 10) – that would use $300,000,000 annually to expand charter schooling. Charters, recall, are schools authorized to function by public entities such as school districts or states, but that are run by ostensibly private entities.
The biggest threat that typically comes from federal funding, of course, is that regulation will follow. That said, as public schools, charters already have to follow federal laws such as No Child Left Behind, so regulation isn’t the primary threat from charter aid. No, it’s another major threat: unintended consequences. And the most dangerous – and real – of those consequences is the damage charter schooling does to private schooling, by far the truest form of school choice.
As a 2012 Cato analysis revealed, between 8 and 11 percent of all charter students, depending on the level of schooling, came from private schools. In urban areas the numbers are much more stark, with nearly a third of elementary charter students having been likely private schoolers. As a new Friedman Foundation report describes, the problem for private schools is a clear one: It is very hard to compete when parents think they are getting a private education at public school prices: $0.
It’s great if congressional Republicans, or anyone else, wants to talk up school choice. But the Constitution exists for a reason: to keep federal politicians from inflicting harm, even when they think they’re doing good.
Michael D. Tanner
According to reports, lawmakers in Hawaii agreed to a four-step increase in the minimum wage from its current level of $7.25, rising to $10.10 by 2018. This increase would make them just the third state to impose a double digit minimum wage, along with Connecticut and Maryland. Proponents of the increase point to the high cost of living on the island, and say that, without this increase, low-wage workers will be consigned to living in poverty. They also point to the low unemployment rate in the state as a sign that the labor markets could absorb the increased minimum wage without significant job loss. These arguments fail to look at who the proposed increases would actually affect and do not properly account for the adverse effects this legislation could have on some segments of the population.
Despite claims to the contrary, relatively few Hawaiians would benefit from the increase. For one, the median wage for many sectors that are targeted by minimum wage legislation is already above the $10.10 goal: the median wage for bellhops in 2012 was $10.12, for cashiers it was $10.41 and for amusement and recreation attendants it was $11.87. Older, more experienced workers more likely to support a family are more likely to earn above the median wage, and thus be unaffected by the minimum wage hike. According to testimony before the state legislature, only around 14,000 people worked at the current minimum wage or less in 2012, but even this might overstate how many people would benefit from the increase; many of these workers were teenagers or secondary earners, after accounting for this, the number of full-time workers who are also the head of household falls to 3,700. Depending on which poverty measure you look at, there are between 173,000 and 231,000 people in poverty in Hawaii, so the tiny proportion of families that could benefit from the increase is little more than a drop in the bucket when looking at their broader poverty problems. The plight of these people is not trivial, but introducing broad ineffective policy that introduces distortions into the entire labor market is not the answer.
While it is true that topline unemployment rate (4.7 percent over the past four quarters) is significantly lower than the national average (7.1 percent), as is often the case, looking solely at a headline statistic leaves out many of the nuances needed to understand the context. When people not attached to the labor force or involuntary working part time for economic reasons are accounted for, their unemployment rate rises to 11.3 percent, closer to the national average, so claims that the labor market is strong enough to absorb the distortions of the minimum wage increase are not true.
The arguments so far have ignored the active harm this legislation could do, as some workers will be priced out of the labor market altogether or will see their hours decreased, reducing their take home pay. Due to the high cost of living, 6.2 percent of workers in Hawaii work multiple jobs, often supplementing their full time job with other work in the service or hospitality industry. When this legislation increases the minimum wage they can be paid, many businesses will decide to cut hours or reduce the number of workers they add in busy months, instead hoping to increase productivity of the workers they do retain. While those retained workers will see an increase in pay, more will find their hours cut or be locked out of the job market altogether. Teenagers would also be likely to be priced out of their entry level jobs under this legislation, as employers will be unable to justify the increased cost of keeping them on for their low level of productivity; this would lead to lower human capital development, and more young Hawaiians could end up leaving for the mainland where there are more opportunities.
The cost of living is certainly higher in Hawaii than other states. A recent report from Vox found that Honolulu was the most expensive metropolitan area in the country, and my own research showed that the high cost of living in Hawaii was one of the reasons they had the most generous welfare package in the Work Versus Welfare study. This higher cost of living contributes to the broader problem of poverty in the state, which is without question a concern, but this minimum wage increase will do little to lift people out of poverty, and will actively harm others. It is not the answer the Aloha State needs.
For more on the problems with minimum wage laws, see here.
Defenders of the Common Core national curriculum standards have long employed ridiculing Core opponents as a primary tactic to keep their effort from crumbling. Unlike, say, a circus, the pro-Core assault hasn’t been very entertaining or funny, but it’s been there. Now, though, the humor tide may be turning, with actual funny people – professional comedians – taking on the Common Core.
A first big laugh attack was launched a few weeks ago, when David-Letterman-in-waiting Stephen Colbert ripped into bizarre math questions stemming from the Common Core:
Yesterday, another comedian went after the Core. Louis C.K., of the show Louie, tweeted what actually sounded like a kinda serious distress call about his children:
My kids used to love math. Now it makes them cry. Thanks standardized testing and common core!
— Louis C.K. (@louisck) April 28, 2014
Now, nobody should make policy based on the jibes of comedians, professional or otherwise. But that pop culture is starting to mock the Core is yet another bad sign for the national standards effort, an effort proponents once thought in the bag when, under federal pressure, 45 states quietly signed on to the Core.
Funny thing is, Core stalwarts don’t seem to be laughing anymore.
The New York Times reported at the top of page one yesterday on the $4.1 million in payments that a single physical therapist in Brooklyn got from Medicare in 2012. It’s a shocking sum, and Medicare fraud is common in both physical therapy and the Brooklyn area. The therapist who received the money says that the billings are for his large, multi-office practice.
The point is broader: Reporters, medical trade association figures, investigators and researchers are poring over newly released data about Medicare spending. They’re strengthening public oversight and the public’s capacity to question this government program. It’s data that the American Medical Association and other industry groups fought against releasing. There is risk that the numbers will lead some to unfair conclusions, perhaps even in the case of this Brooklyn physical therapist, but the public oversight it brings to the Medicare program and the circumspection it brings to fraudsters and others will be more than worth it. Data is a powerful oversight tool.
That’s why I think it’s good news that the House of Representatives passed the DATA Act yesterday. The Digital Accountability and Transparency Act, introduced by Mark Warner (D-VA) in the Senate and Darrell Issa (R-CA) in the House, requires the federal government to adopt data standards for all federal spending and publish all of it online. This will permit the public to gather insights like the ones in that New York Times story across the vastness of the federal spending enterprise. It will make the diffuse cost of government a little more acute in the minds of many, positioning Americans to say specifically which spending should stop.
Change will not come instantly, and the legislation is not self-executing, but groups like the Data Transparency Coalition, a prime mover behind the legislation, appear poised to insist on full execution of the law. Implementation should not have the cost that the Congressional Budget Office estimated for it, and if it does, the billions saved thanks to availability of information to the public should justify the costs. If another “cost” of transparency is improvement of federal programs that should be eliminated, I think that beats the today’s status quo of having them on the books and failing.
The DATA Act is not a direct response to a 2008 Cato event asking the Obama administration to “Just Give Us the Data.” Indeed, the administration has been conspicuously unsupportive of transparency in this area, though transparency was a key campaign theme in President Obama’s first election. Cato studies in this area since then include “Publication Practices for Transparent Government” and “Grading the Government’s Data Publication Practices.” We’ll be repeating the grading study during the summer, though it’s doubtful the administration’s grades will improve by that time. We will use the data structures that the DATA Act requires in our Deepbills project, which shines light on Congress’s proposals, including its plans for spending.
Paul C. "Chip" Knappenberger and Patrick J. Michaels
Global Science Report is a feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”
There is a new study out that purports to make a “conservative” estimate of the social cost of carbon and in doing so arrives at a figure nearly four times larger than the central estimate currently used by the U.S. government—the latter a figure which we and others have voluminously argued is itself several times too high. Perhaps the authors of the new report ought to look up the definition of the word “conservative.”
Recall that the social cost of carbon is supposed to represent the total value of future damages from climate change resulting from the current emission of a ton of carbon dioxide. As you may imagine, coming up with the SCC involves more imagination than actual science.
The primary “tools” used for determining the SCC are “integrated assessment models,” or IAMs, which incorporate a very simple climate model into an economics model. Writing in the journal Nature Climate Change, Jeroen van den Bergh and Wouter Botzen review elements (economic and climatic) that are poorly incorporated or missing entirely from the IAMs.
A prominent characteristic of the IAMs is that they are notoriously malleable and able produce virtually any value for the SCC that the modeler or end-user desires.
Judging from the introductory sentence of their paper
Climate change has been called “the biggest market failure the world has seen” and “the mother of all externalities.”
you can pretty much guess what kind of SCC value van den Bergh and Botzen prefer.
To support their apparent preference for a high SCC, they spend the bulk of their paper imagining bad climate outcomes—with high monetary damages—and are generally dismissive of positive climate impacts. For example:
Nevertheless, our summary of the main effects provides a clear insight, namely that unquantified negative effects of climate change tend to dominate unquantified positive effects. The negative effects comprise large biodiversity losses, political instability, violent conflicts, large-scale migration, extreme weather events, natural disasters and the effect on long-term economic growth. Accounting for the latter is likely to increase the SCC because large impacts of climate change are expected to reduce the rate of GDP growth, partly because of negative effects on labour and capital productivity.
Unsurprisingly, when you include a lot of negative impacts along with a low discount rate, the IAMs produce very high estimates of the SCC.
In fact, van den Bergh and Botzen arrive at a “conservative” SCC value of $125. For comparison, value used by the Obama Administration for cost/benefit analyses of new regulations is $36.
Interestingly, in their “conservative” analysis, they never once mention the growing body of new and prominent scientific literature that produce updated estimates of the earth’s climate sensitivity—a measure of how much climate change we expect from carbon dioxide emissions—that are much lower and much more tightly constrained than the ones used in all of the studies reviewed by van den Bergh and Botzen.
The lower climate sensitivity estimates not only reduce the overall impacts from expected climate changes, but they do so primarily by reducing the chances of unexpected and catastrophic changes—the biggest drivers of the high SCC values in the IAMs. It has been repeatedly shown (see here, here, and here for example) that incorporating the new, lower climate sensitivity estimates reduce the IAMs’ SCC determinations by some 40 percent.
And there are lots of other things, which, if better incorporated in the IAM’s, would lead to lower SCC values.
If the positive benefits from carbon dioxide emissions on the planet’s crop production were better included in the IAM’s, the SCC value drops further. And if arguments for the use of a higher discount rate, rather than the very low one espoused by van den Bergh and Botzen win the day, the SCC drops further still.
Add to the mix a more reasoned view of future climate extremes, and before you know it, it is an easy argument to make that the SCC value should fall significantly below the Administration’s $36 rather than some three to four times higher.
It is bad enough that van den Bergh and Botzen present a rather one-sided view of the science of climate change/climate extremes and the economics concerning the choice of discount rate, but for them to term their analysis “conservative” is really taking things too far. “Alarmist” would be a more apt description.
Our hope would have been that the reviewers for Nature Climate Change would have caught the glaring oversight of the current climate sensitivity literature (with one of the most persuasive articles appearing in the sister journal Nature Geosciences), but that didn’t happen. We’ll withhold speculation as to why that was the case.
Van den Bergh, J.C.J.M., and W.J.W. Botzen, 2014. A lower bound to the social cost of CO2 emissions. Nature Climate Change, 4, 253-258, doi:10.1038/NCLIMATE2135.
Last week President Barack Obama embarked on his great reassurance tour of Asia. America’s allies need not fear. No matter how wealthy, influential, or powerful, they can count on Washington’s continuing protection.
So it is with the Republic of Korea (ROK). Behind America’s shield the South prospered, developing an economy now around 40 times the size of North Korea’s. The ROK also has twice the population, an overwhelming technological advantage, access to global markets, and numerous important international friends.
Yet when President Obama arrived in Seoul he announced: “The commitment that the United States of America has made to the security of the Republic of Korea only grows stronger.” The U.S. is rather busy in the world. Why must Washington promise even greater support for a country well able to defend itself?
In one sense the ROK’s dramatic growth demonstrates the success of American policy. For years, without U.S. backing the South could have been overwhelmed by Pyongyang in a second Korean War.
But the correlation of forces began to change in the 1960s. By the new millennium the Korean race was over. Seoul had won decisively.
Only in terms of military power did Pyongyang remain ahead, and even there its advantage waned. The DPRK held that advantage only because South Korea chose not to invest more of its growing wealth in its military. Which Seoul could do because America was still protecting the South.
If there was no cost of defending much of the known world, there’d be no problem with this policy. However, while everyone assumes America’s promise to intervene will deter war, human history is littered with cases when deterrence failed.
Thus, the more Washington wants to do in the world, the more of Americans’ money Washington must spend. Moreover, as I point out in my latest Forbes online article: “receiving a security commitment from a major power usually makes nations more confrontational, even reckless: after all, if you have a big brother willing to do the fighting, why not take advantage of the opportunity?”
Finally, Washington’s treaty commitments and force deployments discourage allied nations from doing more on their own behalf.
The worst danger for America from its commitment to the ROK is involvement in an unnecessary war among nuclear powers. After years of attempting to dissuade Pyongyang from building nuclear weapons the U.S. government appears to have concluded that the DPRK is unpersuadable.
This realization has left Washington officials searching for new approaches. But the only reason the U.S. needs be so concerned is America’s military tie to the South.
Absent Washington’s promise to war on the Seoul’s behalf, the DPRK would have little interest in America. Moreover, Pyongyang only has an ability to harm the U.S. because Washington has generously stationed 28,000 men and women, plus additional dependents, within range of its artillery and tanks as well as missiles.
Of course, Washington promotes a general policy of nonproliferation. But that does not justify permanent defense treaties and garrisons.
Worse, it isn’t clear that nonproliferation works any longer in Northeast Asia. Russia, China, and North Korea possess the doomsday weapon. America’s democratic allies, Japan, South Korea, and Taiwan, have no deterrent and instead rely upon the U.S.
The risks of this policy increase as Beijing grows more aggressive. It might be time for Washington to indicate that if Pyongyang continues to follow its present course and China allows the North to do so, the U.S. government would withdraw its objection to its democratic allies following the same path.
Dissolving the military alliance wouldn’t mean ending other cooperation. Even security cooperation would be possible, indeed, desirable, without America promising to defend its wealthy friend.
The U.S.-South Korea military alliance once made sense. No longer. American policy will not have really succeeded until the ROK ends its embarrassing security dependence on Washington.
Frequent stories in the Washington Post describe failures in federal management and programs (e.g. here and here). There are also frequent stories about efforts to further centralize power in Washington. The ambitions are endless, even though the failures keep piling up.
From a Saturday story on education:
The Obama administration is making a second attempt to regulate the way the country prepares its classroom teachers, saying training programs should be held accountable to improve the quality of K-12 teachers.
Education Secretary Arne Duncan said that his department will propose regulations for teacher training programs this summer and seek public input in a process that should result in final rules in a year.
Some professions have standardized systems and national exams to ensure consistency … But teacher preparation programs vary from school to school, and each state sets its own licensing requirements. Most programs are run by universities, but some are run by nonprofit groups or school districts. They each have their own standards of admission and completion requirements.
In a nod to democracy, Secretary Duncan says that he will seek “public input” for his new national rules. But ultimately his department intends to bludgeon the education system into conformity with the threat of denying federal funds.
This story is a microcosm of the continual expansion in the federal aid system, which I’ve argued is a main cause of the erosion in American freedoms over the past century. The growth in the aid-to-state system—which has more than 1,100 programs—has undermined efficient, responsive, and frugal government in the United States.
With a track record of failures, wasteful paperwork, and stifling regulations, it is hard to believe that policymakers would want to expand the aid system further. But there is a continually barrage of proposals for increased federal aid spending and top-down regulations coming from Democrats.
Liberal Republicans such as George W. Bush have also been culpable in expanding central power through aid programs. And it was John Boehner who helped Bush foist No Child Left Behind on us. Nonetheless, there is at least an ongoing debate within the Republican Party about the wisdom of centralization.
As for the Democrats, they gush about “diversity,” “community,” and “democracy,” but their penchant for national top-down public policy is helping to destroy those very features of our free society.
A common argument against returning to the immigration policy of 1790-1875, where virtually anybody in the world could immigrate to the United States, is that such a policy would diminish America’s national sovereignty. By not exercising “control” over borders through actively blocking immigrants, as the argument goes, the United States government would surrender a supposedly vital component of its national sovereignty. But that argument is mistaken as there is no inherent conflict between free immigration and national sovereignty.
The standard Weberian definition of a government is an institution that has a monopoly (or near monopoly) on the legitimate use of violence within a certain geographical area. The way it achieves this monopoly is by keeping out other competing sovereigns (aka nations) that would be that monopoly of legitimate coercion. The two main ways our government does that is by keeping the militaries of other nations out of the United States and by stopping insurgents or potential insurgents from seizing power through violence and supplanting the U.S. government.
U.S. immigration laws are not primarily designed or intended to keep out foreign armies, spies, or insurgents. The main effect of our immigration laws is to keep out willing foreign workers from selling their labor to willing American purchasers. Such economic controls do not aid in the maintenance of national sovereignty and relaxing or removing them would not infringe upon the government’s national sovereignty any more than a policy of unilateral free trade would. If the United States would return to its 1790-1875 immigration policy, foreign militaries crossing U.S. borders would be countered by the U.S. military. Allowing the free flow of non-violent and healthy foreign nationals does nothing to diminish the U.S. government’s legitimate monopoly of force.
Many of those who complain that free immigration would reduce U.S. national sovereignty really mean that the U.S. government will have less power. That is absolutely correct. If free immigration was the law of the land then the government would not be able to arbitrarily stop immigrants for any virtually any reason, the power of American bureaucrats to capriciously exclude immigrants and punish American businesses who want to hire them would be diminished, the outcomes of attempting to immigrate would be ex ante more predictable for the immigrant, and the U.S. government’s power in relation to immigration would be brought in line with our common law traditions. Those benefits to free immigration are, by the way, also the benefits of limited constitutional government in every other sphere of human activity.
Complaining that free immigration would limit government power and therefore limit national sovereignty is akin to complaining that the Constitution limits government power and therefore limits government sovereignty. Such a limitation of government power is the point of such restrictions. Only by limiting the power of our government over our lives can we maintain some degree of individual liberty. In so far as the Constitution or free immigration would limit government power then they are checks on government action. But those checks on government actions do not diminish the national sovereignty of the U.S. government and do not allow foreign sovereigns or governments to gain power over us at the expense of our government’s abandonment of it.
There is a contradiction between constitutionally limited government and near limitless immigration controls but there is no such contradiction between U.S. national sovereignty and free immigration. The exceptions to this is the movement of people into the United States that would seek to destroy U.S. national sovereignty like foreign military forces (who are rightly called “invaders”), insurgents, spies, terrorists, or other limited and identifiable non-immigrants. Blocking the vast majority of all such people from entering is actually made easier by freer immigration for two reasons. First, the government could more easily identify and exclude them through limited and targeted border controls that are currently difficult because most border controls target economic immigrants rather than legitimate security concerns. Second, if any peaceful and healthy person could come to the United States lawfully then anybody attempting to enter unlawfully would raise red flags – allowing the government to focus scarce law enforcement resources on people most likely to be security threats. In that way, our current restrictionist border controls likely impede the government’s power to exclude threats to its sovereignty.
There is a historical argument that free immigration and U.S. national sovereignty are not in conflict. From 1790-1875 the federal government placed almost no restrictions on immigration. At the time, states imposed restrictions on the immigration of free blacks and likely indigents through outright bars, taxes, passenger regulations, and bonds. Many of those restrictions weren’t enforced by state governments and were lifted in the 1840s after Supreme Court decisions limited the power of state governments to regulate international commerce. During that time, the United States fought two wars against foreign powers – the War of 1812 and the Mexican American War – and the Civil War, which was the largest war in our history. The U.S. government’s monopoly on the legitimate use of force during that time was certainly challenged from within and without but the U.S. government maintained its national sovereignty even with near open borders. The U.S. government was also clearly sovereign during that period of history. Those who claim the U.S. government would lose its national sovereignty under a regime of free immigration have yet to reconcile that with America’s past and the arguments above. We do not have to choose between free immigration and continued U.S. national sovereignty - we can have both just as our ancestors did.
Next time you notice some politician demanding a higher minimum wage and denouncing private employers for underpaying labor, chances are good the message reached you with the help of an unpaid student intern. Last week a Washington Post opinion contributor unsurprisingly revealed that the Obama White House is itself taking on about 150 such interns this summer, even as it keeps dreaming up new ways to extend and toughen the coverage of the Fair Labor Standards Act of 1938 for everyone else. New York State Sen. Daniel Squadron, sponsor of a bill to raise the minimum wage at many employers to $15/hour, turns out to offer his own unpaid internships (minimum commitment: 3 days a week), while Del. Heather Mizeur, the left-most Democratic candidate for Maryland governor, has advised would-be Campaign Fellows that “All positions are unpaid and you must provide your own phone and laptop.” All this following two years of agitation by labor activists and class-action lawyers about the iniquity of unpaid internships.
More about politicians’ double standards in a moment: should, in fact, the government ban such internships for private employers? I answer “no” in a new U.S. News “Debate Club” also featuring an entry by Dan Rothschild of R Street Institute as well as contributions by three advocates of a ban. Excerpt from mine:
With eyes wide open, students with many options have long sought out voluntary unpaid internships because they’re an arrangement that can rationally benefit both sides.
In an Auburn University working paper last month (via), four economists reported on a study that found internship experience was associated with a 14 percent increase in the rate at which prospective employers request interviews of job seekers. As a predictor of the rate of callbacks, an internship on the resume actually worked much better than a business degree itself.
Yet class-action lawyers and labor activists now attack internships as — in the trendy, elastic new term — “wage theft.” These same lawyers and activists go to court demanding millions of dollars retrospectively over arrangements both sides understood perfectly well at the time to be unpaid — and think shakedowns like these should *not* be called “theft.” …
In modern America, it’s never more than a short jump from “this set-up isn’t for everyone” to “let’s ban it.”
I go on to discuss the sclerosis of the European job market, especially when it comes to youth employment, and observe that the “campaign against internships is part of a wider campaign against low-pay work options in general — call it a campaign to get rid of any stepping stones in the stream that aren’t sturdy enough to support a whole family.” And I note the curious contrast with higher education pointed out by my colleague Andrew Coulson: “Paying to Learn Nothing = Legal. Paying Nothing to Learn = Illegal.”
But back to the politicos. My reaction to the stories above is not to try to shame President Obama or Sen. Squadron. To begin with, we know exactly what fix they are likely to propose once we “win” that debate: mulct taxpayers in Terre Haute and Ticonderoga to provide stipends for highly credentialed White House or Albany interns who are already probably headed for the top 10 percent of the income distribution no matter what. Another victory for salving our consciences about inequality!
Instead, I hope stories like the above lead some supporters of Obama, Squadron and Mizeur to rethink their notions of exploitation and unpaid labor. Why wouldn’t a 22-year-old with a laptop and a few free months take a flyer to work for a dynamic political operation, or (mutatis mutandis) hang out in a foreign correspondent’s office, or be the coffee-bringer while getting to see how a Hollywood studio makes a film? Why shouldn’t consenting parties be free to make a choice like these for themselves, rather than our presuming to make it for them? [adapted and expanded from Overlawyered]
“Within limits, the system of progressive taxation is defensible and effective. Beyond a certain point, however, it dulls incentives, and may destroy the principal source of funds for new enterprises involving exceptional risks.”
–Harold G. Moulton (founder of the Brookings Instituion), Controlling Factors in Economic Development, The Brookings Institution, 1949, p. 292.
Oh dear, yet another scare story about falling-down bridges. A Washington Post headline today in the hardcopy is “63,000 Bridges Structurally Deficient, U.S. Says.”
The Federal Highway Administration (FHWA) has released its annual data on bridge conditions, and indeed the data show that 63,522 bridges were “structurally deficient” in 2013. That sounds like a lot, but it is out of 607,751 total U.S. bridges.
Here’s what nearly all media stories on this topic gloss over: the share of U.S. bridges that are structurally deficient has been falling steadily for more than two decades. The chart below (based on FHWA data) shows that the share of U.S. bridges that are structurally deficient fell from 22 percent in 1992 to just 10 percent in 2013.
The chart clearly shows good news on the bridge front, but many reporters focus on the bad news angle favored by construction lobby groups.
The WaPo story reflects lobbyist pleas that the states need the federal government to fix their bridges. But why? If Pennsylvania has “the nation’s worst problem,” then the Pennsylvania legislature should find a solution—either reprioritize the state budget, start privatizing bridges, charge bridge tolls, or find other funding sources. No need to look to Washington. Uncle Sam is not Santa Claus.
K. William Watson
The 2009 Family Smoking Prevention and Tobacco Control Act banned the sale of all flavored cigarettes, except menthols, in the United States. Indonesia successfully challenged that part of the law at the World Trade Organization as disguised protectionism—the banned products were clove cigarettes from Indonesia and the exempted menthols are made in the United States. The U.S. government tried to claim that the distinction was justified because kids like smoking cloves more than menthols. They failed to convince the trade court, because that’s ridiculous.
The time given the United States to bring its measure into compliance with WTO law has now elapsed. Instead of changing the law to allow cloves or to ban menthols, however, the United States has claimed that issuing a report and thinking about what to do about menthol cigarettes is enough to bring it into compliance. Indonesia understandably disagrees and is seeking permission to retaliate against U.S. imports.
To stave off retaliation, the U.S. government has now decided to defend the clove cigarette ban by arguing that it was completely ineffective. As reported by Inside U.S. Trade ($)(emphasis added):
The U.S. is … claiming that, even if it is found not to have complied with the ruling, Indonesia is not entitled to retaliation because the country’s exports have not been nullified or impaired by the U.S. ban on clove cigarettes….
Specifically, the U.S. points out that the Indonesian industry has repackaged clove cigarettes into clove cigars, which unlike their counterparts are not banned. Therefore, the U.S. maintains, Indonesia’s clove exports have not suffered as a result of the ban.
International trade rules probably won’t slow the steady creeping of progressive lifestyle paternalism, but I truly enjoy these kinds of embarrassing revelations. The pesky thing about people is that they keep trying to do things they want to do even when governments tell them not to—coercive “nudges” notwithstanding.
Last year, Sallie James and I wrote a paper warning against the increasing prevalence of regulatory protectionism in the United States. We noted that, unlike most product regulations, tobacco control doesn’t lend itself to market solutions:
For some regulations that have nonprotectionist goals, there is no free market answer, because the “legitimate” goal is an illiberal imposition on consumer choice. Again, the clove cigarette ban provides an excellent example. For tobacco control advocates, the goal is not to have better quality products or to prevent negative environmental impact—the goal of a cigarette ban is to control people for their own purported good.
Any cigarette ban, like other forms of prohibition, is incompatible with the ideals of a free society. The dangers of smoking are well-known, and its popularity has waned considerably in recent decades, but smoking tobacco tastes and feels as good as it always has, and many find the risks acceptable.
While the global tobacco control movement is fiercely opposed to the proliferation of global trade rules, the anti-tobacco forces are probably wasting their energy. Even if tobacco measures are exempted from all trade rules, the paternalists are going to lose because their agenda is ultimately hopeless. They’re fighting a losing battle against the indelible human spirit that pursues happiness without permission.
As the fall-out continues from the Supreme Court’s affirmative action decision earlier this week—see, in order, Ilya’s, my, and Wally’s Cato@Liberty comments—I was invited late yesterday to expand, very briefly, on my earlier reflections at a site called “2paragraphs”—in particular, to discuss, in two paragraphs, how public higher education transfers wealth from the lower to the upper classes of society, and how affirmative action actually harms those it’s meant to help. You’ll find that brief discussion here.
The Springdale (Ark.) Police Department put together a recruitment video for new officers. The video is getting some attention—for its militarism. Take a look:Springdale Police Recruiting Video
The video shows armored vehicles, flash bang grenades, and (at the 2:30 min. mark) officers dressed in ghillie suits.
Whenever the government magnanimously “offers” its assistance, all Americans should be skeptical. Recent confirmation of this fact has come from Harrington, Maine, where the federal government’s helpful assistance—via the employment verification system, E-Verify—has cost one small business thousands in fines.
Worcester Wreath Co. hires around 500 seasonal employees annually to help fill orders for handcrafted holiday wreaths and centerpieces. The majority of the wreaths are sold, while others go to the company’s Wreaths Across America program, which places free wreaths on headstones at Arlington National Cemetery. In short, this is an American company that supplies holiday goods and helps to honor deceased American veterans at no cost to the taxpayer.
Worcester Wreath, however, made the mistake of voluntarily using the Fed’s E-Verify system. E-Verify is an electronic employment eligibility verification system run by the federal government that is intended to weed unauthorized immigrants out of the labor force by allowing employers to check their eligibility against a government database. The employer enters the job applicant’s Social Security number and information into E-Verify which then checks it against a government database.
Any potential issues are flagged with a tentative non-confirmation (TNC). Employers and employees have an opportunity to appeal the TNC, but a failed appeal (or failure to appeal) will result in a final non-confirmation (FNC) and the applicant being ruled as not work-authorized for legal employment in the United States.
Some 101 of Worcester Wreath’s seasonal employees were found by E-Verify to have employment-authorization issues. Six were retained by the company despite the issues and another six were fired and then rehired at a later date.
For the sin of employing 12 willing workers with statuses marked as questionable (not clear from the article whether a TNC or an FNC was issued) by the voluntarily used, notoriously unreliable, and largely ineffective E-Verify, the company was fined $25,000 ($2,083.33 per worker).
Worchester Wreath’s participation in E-Verify was voluntary but the fines were heavy. Fines like these on businesses of all sizes who employ seasonal workers will only get worse if E-Verify becomes mandatory. Instead of punishing businesses who supply free holiday decorations to the world’s most famous veterans’ cemetery, the Feds should attack the root problem and fix our legal immigration system.
Scott Platton assisted in the writing of this piece.