Voice For Liberty

Category: Regulation

  • Regulation supports business, not capitalism and free markets

    There are many examples of how the conventional wisdom regarding regulation is wrong: Republicans and conservatives are in bed with government, seeking to unshackle business from the burden of government regulation. Democrats and liberals, on the other hand, are busy crafting regulations to protect the common man from the evils of big business. As it turns out, both Democrats and Republicans love creating regulations, and big business loves these regulations.

    For example, in 2005 Walmart came out in favor of raising the national minimum wage. The company’s CEO said that he was concerned for the plight of working families, and that he thought the minimum wage level of $5.15 per hour was too low. If Walmart — a company the political left loves to hate as much as any other — can be in favor of increased regulation of the workplace, can regulation be a good thing? Had Walmart discovered the joys of big government?

    The answer is yes. Walmart discovered a way of using government regulation as a competitive weapon. This is often the motivation for business support of regulation. In the case of Walmart, it was already paying its employees well over the current minimum wage. At the time, some sources thought that the minimum wage could be raised as much as 50 percent and not cause Walmart any additional cost — its employees already made that much.

    But its competitors didn’t pay wages that high. If the minimum wage rose very much, these competitors to Walmart would be forced to increase their wages. Their costs would rise. Their ability to compete with Walmart would be harmed.

    In short, Walmart supported government regulation as a way to impose higher costs on its competitors. It found a way to compete outside the marketplace. It abandoned principles of free markets and capitalism, and provided a lesson as to the difference between capitalism and business. Many, particularly liberals, make no distinction between business and capitalism. But we need to learn to recognize the difference if we are to have a thriving economy based on free-wheeling, competitive markets that foster innovation, or continue our decline into unproductive crony capitalism.

    In the following excerpt from his book The Big Ripoff: How Big Business and Big Government Steal Your Money, author Timothy P. Carney explains that big business is able to use regulation as a blunt and powerful tool against competitors, and also as a way to improve its image.

    How does regulation help big business?

    Excerpt from The Big Ripoff: How Big Business and Big Government Steal Your Money, by Timothy P. Carney

    If regulation is costly, why would big business favor it? Precisely because it is costly.

    Regulation adds to the basic cost of doing business, thus heightening barriers to entry and reducing the number of competitors. Thinning out the competition allows surviving firms to charge higher prices to customers and demand lower prices from suppliers. Overall regulation adds to overhead and is a net boon to those who can afford it — big business.

    Put another way, regulation can stultify the market. If you’re already at the top, stultification is better than the robust dynamism of the free market. And according to Nobel Laureate economist Milton Friedman:

    The great virtue of free enterprise is that it forces existing businesses to meet the test of the market continuously, to produce products that meet consumer demands at lowest cost, or else be driven from the market. It is a profit-and-loss system. Naturally, existing businesses prefer to keep out competitors in other ways. That is why the business community, despite its rhetoric, has so often been a major enemy of truly free enterprise.

    There is an additional systemic reason why regulation will help big business. Congress passes the laws that order new regulations, and executive branch agencies actually construct the regulations. The politicians and government lawyers who write these rules rarely do so without input. Often the rule makers ask for advice and information from labor unions, consumer groups, environmental groups, and industry itself. Among industry the stakeholders (beltway parlance to describe affected parties) who have the most input are those who can hire the most effective and most connective lobbyists. You can guess this isn’t Mom and Pop.

    As a result, the details of the regulation are often carefully crafted to benefit, or at least not hurt, big business. If something does not hurt you, or hurts you a little while seriously hindering your competition, it is a boon, on balance.

    Another reason big business often cries “regulate me!” is the goodwill factor. If a politician or bureaucrat wants to play a role in some industry, and some executive says, “get lost,” he runs the risk of offending this powerful person. That’s bad diplomacy. Bureaucrats, by their nature, do not like to be told to mind their own business. Supporting the idea of regulation but lobbying for particular details is usually better politics.

  • The promises politicians make

    Recently John Stossel produced a television show titled Politicians’ Top 10 Promises Gone Wrong. The show features segments on government programs and why they’ve gone wrong, with a focus on the unintended consequences of the programs. Particularly illuminating are the attempts by programs’ supporters to justify their worth.

    Now the program is available to view on the free hulu service by clicking on Politicians’ Top 10 Promises Gone Wrong.

    One of the segments on the show explained the harm of Cash for Clunkers, in which serviceable cars were destroyed so that new cars could be sold. The program simply stole sales from the months before and after the program. The mistaken idea that destruction can be a way to create new wealth is held by many who should know better, and Stossel reminds us of the New York Times’ Paul Krugman, who wrote that the terrorist attacks of September 11, 2001 “could even do some economic good” as rebuilding will increase business spending. It’s the seen vs. unseen problem, Stossel and David Boaz of the Cato Institute explain. It’s easy to see people buying new cars. It was reported on television. But it’s more difficult to see all the dispersed economic activity that didn’t take place because of the programs.

    “Living wage” laws, in which people would be paid enough to live on — whatever that means — is next. While increasing wages of low-paid workers is a noble goal, increasing the cost of labor results in an entirely predictable result: less labor is demanded. Fewer people will have jobs. The Grand Canyon National Park, for example, switched to automated ticket machines. Christian Dorsey of the Economic Policy Institute, said that elimination of minimum wage laws would leave employers free to drive down wages as low as possible. But Stossel noted businesses hire employees in a competitive market, and it is that market that sets wages. Only about five percent of workers earn the minimum wage. Why do the others earn more than that? Competitive markets force employers to pay more, not laws.

    A segment on “fancy stadiums” boosting the economy holds a lesson for Wichita and the Intrust Bank Arena in its downtown. The claimed benefits of these venues rarely appear, and the unseen costs are large — “at the local bar there’s one less bartender, there was one less waitress hired at a restaurant, a movie theater that had one less theaterfull. It’s handing money from your right hand to your left and declaring I’m rich.” While Wichita’s arena seems to be doing well, it’s still well within its honeymoon period. Even then, there was a month where no events took place at the arena.

    A segment on the new credit card regulations, intended to protect consumers, shows that the regulations resulted in fewer people being able to get credit cards. Now these people have to go to payday lenders or pawn shops, which are much more expensive than credit cards. Arkansas once capped credit card interest at ten percent. The result was that few people in Arkansas could get a credit card, and the state became known as the pawn shop capital of America.

    Ethanol is the topic of a segment. Promised as a way to solve our energy problem, many politicians of both parties support ethanol. But we’ve come to realize the problems with government support of ethanol: rising price of food, excessive use of fertilizer and fuel to produce corn, and an awareness that ethanol is more harmful to the environment than gasoline. “But it makes us feel good,” Stossel says. In Kansas, Governor Sam Brownback is firmly in favor of government support of ethanol, which Boaz called “pound-for-pound, the dumbest program ever.”

    On the role of government in causing the housing bubble, Howard Husock said “Government exaggerates, rather than minimizes, the age-old impulse to greed. The government made it harder for bankers who wanted to do the right thing.” Stossel explained that bankers who wanted to stay with safe home loans lost out on profits they could earn selling high risk loans to Fannie Mae and Freddie Mac, the government-sponsored agencies.

    At the end, Stossel said: “And that’s the number one promise gone wrong. These guys say they’ll be fiscally responsible. And then we elect them, and they spend more. They’re spending us into bankruptcy. There must be 10,000 harmful programs, and yet they keep creating more. Why can’t we cut them?” Boaz explained: “Every one of those 10,000 programs has a lobbyist in Washington. … They always know when the bill is up before Congress, and they send political contributions, they send people to Washington to lobby. The rest of us don’t do that. … People should be more engaged, people should be better citizens. But the fact is we have lives, and there’s no way that any normal person can know about the 10,000 programs that make up the $3.5 trillion federal budget.”

    And so the programs keep growing, Stossel said, and we must pay their costs and unintended consequences forever — “Unless, there’s a new wind blowing in America. A new attitude, a new expectation that maybe Washington should do less. I hear there is. I sure hope so.”

  • Who benefits, loses from regulation?

    A Powerline post discusses the Upton-Imhofe bill, which would bar the EPA from regulating carbon dioxide emissions. The article quotes Ranking Democrat Henry Waxman of the House Committee on Energy and Commerce as stating this bill benefits “big polluters like Koch Industries.”

    But who really benefits from the regulation of greenhouse gases? First, large companies do. They are better able to absorb the costs of regulation than their smaller competitors. This is why we often see big business promoting increased regulation. It places their smaller competitors at a disadvantage. As Koch Industries is a large company, it is in a position to benefit from the proposed regulations relative to their smaller competitors. But, the company does not support the regulations.

    Who will lose from increased regulation of greenhouse gases? Ultimately consumers will, but business is harmed, too. The cost of regulation causes a loss of income, which leads to less of the product (energy) being produced, and a corresponding rise in price. As energy becomes more expensive, it is low-income people that are hurt the most.

    Aside from these market effects, the Powerline piece explains an entire industry that has developed to benefit from government subsidy of green energy sources and producers:

    But there are, in fact, some companies that would benefit from the imposition of CO2 regulations on power plants, refineries and so on. Those companies are the ones that peddle inefficient forms of energy that cannot compete with fossil fuels absent government subsidies. Those subsidies come in two forms. The government can give money and tax breaks to inefficient energy producers like solar and wind, and it has indeed done that. However, those subsidies are relatively transparent and controversial. The second way in which government can help producers of inefficient energy is, therefore, actually better: it can make energy produced with fossil fuels more expensive by imposing needless regulations. And that is exactly what “green” — i.e., inefficient — energy producers lobby for.

    And who are the green energy subsidy-seekers that benefit from increased regulation? Powerline identifies one: Thomas Steyer, a west coast hedge fund manager with investments in green energy companies. He has a personal financial motive, as Powerline describes: “As an investor who has placed a big bet on non-fossil energy, he has an obvious personal interest in the government imposing regulations that make his competitors — producers of fossil fuel energy — more expensive. In fact, without such government action, the ‘green’ projects in which he has invested are likely worthless.”

    It should not be surprising that Steyer makes large campaign contributions to Democrats and is a board member of Center for American Progress, a left-wing think tank closely associated with the Obama Administration.

    A case study in liberal hypocrisy

    By John H. Hinderaker

    On Monday, the House Committee on Energy and Commerce began its consideration of the Upton-Imhofe bill, which would bar the EPA from regulating carbon dioxide emissions. Upton-Imhofe is critical to any effort to restore our economy, so the Democrats are against it. Ranking Democrat Henry Waxman went on a hysterical rant against the legislation:

    This is dangerous legislation. Climate change is real; it is caused by pollution; and it is a serious threat to our health and welfare. We need to confront these realities, not put our head in the sand like an ostrich.

    We have written about this issue many times. Climate change is “real” only in the sense that the climate is always changing. That has been true for millions of years. Climate change is not caused by pollution; history proves that the level of carbon dioxide in the atmosphere does not control worldwide temperatures. Nor is global warming a serious threat to our health and welfare. Humanity has consistently thrived during warmer periods and suffered during colder ones. The Dark Ages were dark largely because they were cold.

    Waxman continued:

    Yet instead of promoting a clean energy future, we are pursuing this partisan bill that benefits no one except big polluters like Koch Industries.

    I suppose Waxman thought he was punching his liberal ticket by mouthing the Democratic Party talking point du jour. Evidently he didn’t get the memo, and hadn’t heard that the Left has backed off on its daily attacks on Koch because those attacks were so over-the-top and so factually deficient that they made laughingstocks of the lefties who asserted them.

    Continue reading at Powerline.

  • Regulation helps big business, not free enterprise

    Over and over we see how the conventional wisdom is wrong: that Republicans and conservatives are in bed with government, seeking to unshackle business from regulation — but Democrats and liberals are busy crafting effective regulations to protect the common man from the evils of big business. As it turns out, both Democrats and Republicans love creating regulations, and big business loves these regulations.

    How can that be? In the following excerpt from his book The Big Ripoff: How Big Business and Big Government Steal Your Money, author Timothy P. Carney explains that big business is able to use regulation as a blunt tool against competitors, and as a way to improve its image.

    How does regulation help big business?

    Excerpt from The Big Ripoff: How Big Business and Big Government Steal Your Money, by Timothy P. Carney

    If regulation is costly, why would big business favor it? Precisely because it is costly.

    Regulation adds to the basic cost of doing business, thus heightening barriers to entry and reducing the number of competitors. Thinning out the competition allows surviving firms to charge higher prices to customers and demand lower prices from suppliers. Overall regulation adds to overhead and is a net boon to those who can afford it — big business.

    Put another way, regulation can stultify the market. If you’re already at the top, stultification is better than the robust dynamism of the free market. And according to Nobel Laureate economist Milton Friedman:

    The great virtue of free enterprise is that it forces existing businesses to meet the test of the market continuously, to produce products that meet consumer demands at lowest cost, or else be driven from the market. It is a profit-and-loss system. Naturally, existing businesses prefer to keep out competitors in other ways. That is why the business community, despite its rhetoric, has so often been a major enemy of truly free enterprise.

    There is an additional systemic reason why regulation will help big business. Congress passes the laws that order new regulations, and executive branch agencies actually construct the regulations. The politicians and government lawyers who write these rules rarely do so without input. Often the rule makers ask for advice and information from labor unions, consumer groups, environmental groups, and industry itself. Among industry the stakeholders (beltway parlance to describe affected parties) who have the most input are those who can hire the most effective and most connective lobbyists. You can guess this isn’t Mom and Pop.

    As a result, the details of the regulation are often carefully crafted to benefit, or at least not hurt, big business. If something does not hurt you, or hurts you a little while seriously hindering your competition, it is a boon, on balance.

    Another reason big business often cries “regulate me!” is the goodwill factor. If a politician or bureaucrat wants to play a role in some industry, and some executive says, “get lost,” he runs the risk of offending this powerful person. That’s bad diplomacy. Bureaucrats, by their nature, do not like to be told to mind their own business. Supporting the idea of regulation but lobbying for particular details is usually better politics.

    Finally there is the principal-agent problem. In a business, who is doing the actual lobbying for or against a regulation? It is typically the company’s government relations person. His or her job is to work with regulators and help the company find its way through the maze of regulation. To the extent government gets out of his or her company’s hair, the government relations executive becomes less important.

  • Prospects for successful deregulation in Kansas

    In the following short piece from the Wall Street Journal, Paul Rubin tells how difficult it was to battle regulation during the Reagan Administration, and therefore offers little hope that President Obama’s recent initiative to curb regulation will have any success.

    In Kansas, Governor Brownback has created the “Office of the Repealer” and has appointed Secretary of Administration Dennis Taylor to serve as the “Repealer.” Will this initiative be successful in Kansas? Based on Rubin’s experience in the Reagan Administration, I will be pleasantly surprised if any meaningful repeal or reform of regulation is achieved.

    Can Deregulation Work?

    It was hard under Ronald Reagan. It will be impossible under Barack Obama.

    By Paul H. Rubin

    How successful is the president’s recently announced deregulatory initiative likely to be? Based on my experience at two regulatory agencies (the Federal Trade Commission and the Consumer Product Safety Commission) during the Reagan years, I am not optimistic.

    President Reagan was serious about deregulation and appointed agency heads — Jim Miller at the FTC, Terry Scanlon at the CPSC — who were also serious. In turn they appointed determined managers like me, and they backed us up.

    We did some good, but it was not easy. The permanent staffs of the agencies were always interested in more regulation, either because of self-selection or because promotions and power increase in a larger agency. It also helped that we deregulators (generally economists) were not usually interested in permanent government positions, because reducing the power of the agency is a sure way to make enemies.

    Although my mandate was to cut back, I spent more time fighting new proposals than getting rid of old ones. The staffs wanted more, not less. Whenever I met acquaintances from other agencies the invariable comment was “You won’t believe what they want to do now.” (“They” were the permanent staffs.)

    The current regulatory agencies are not going to hire or promote people like me. Without managers with a strong interest in deregulation and with the backing of senior administrators, there will be no serious power to buck the staffs. The current executive order seems to impose cost-benefit analysis, but it has enough loopholes (“equity, human dignity, fairness”) so that agencies will be able to do whatever they want.

    Deregulation was hard even under Reagan. I am afraid it will be impossible under Mr. Obama.

    Mr. Rubin is a professor of economics at Emory University.

  • Unintended consequences of credit card regulation

    While supporters of 2009 Credit CARD (Card Accountability Responsibility and Disclosure) Act promoted it as good for credit card consumers, actual experience has been different, writes Todd Zywicki in The Wall Street Journal. Limits on how credit card issuers can charge their customers has driven people to payday lenders and pawn shops for credit, the very thing lawmakers wanted to curtail.

    Key points of Zywicki’s article include:

    • For many Americans the law has meant higher interest rates, increases in fees, and reduced credit limits.
    • Unintended consequence number one: If companies can’t raise interest rates on risky borrowers, they raise interest rates on all borrowers, even those with spotless records.
    • Unintended consequence number two: If companies can’t price risk efficiently and rationally, they cut off customers, which pushes them to payday lenders, which are really expensive.
    • Unintended consequence number three: If companies can’t price risk efficiently and rationally, they will reduce their lending, which means credit card limits are lowered.
    • Banks also drop customers altogether: “In his letter to shareholders last spring, Jamie Dimon of J.P. Morgan Chase reported that, ‘In the future, we no longer will be offering credit cards to approximately 15% of the customers to whom we currently offer them. This is mostly because we deem them too risky in light of new regulations restricting our ability to make adjustments over time as the client’s risk profile changes.’” … “Meet the new payday loan customers,” wrote Zywicki.
    • “Nontraditional financial products serve an important role in the marketplace for the millions of consumers who count on them. Even pawn shops and loan sharks are more palatable and less expensive than the bounced checks and utility shut-offs that would result in their absence.”

    Some states are stepping up regulation of payday lenders, which is one of the places people go to for loans if they can’t get a credit card. Montana is such a state, having recently passed — by a citizen ballot measure — a 36 percent interest rate cap on loans. As a result, the Great Falls Tribune reports that nearly all such lenders have closed, with some staying open to collect on existing loans without making new loans.

    Comments left to the Wall Street Journal article wonder where the authors of this bill — Former Connecticut Senator Chris Dodd and Representative Barney Frank of Massachusetts — were aware of these entirely predictable consequences. Or, were they just out for a power grab?

    No matter what the answer, this is yet another of endless examples of where government regulation — whether well intended or not — harms the people it is intended to help, and others along the way.

    Dodd-Frank and the Return of the Loan Shark

    In the name of consumer protection, Congress has pushed more Americans outside the traditional banking system.
    By Todd Zywicki

    The least surprising event of 2010 was that, in the wake of new federal limits on how credit-card issuers can price risk and adjust interest rates, more Americans had to go to payday lenders, pawn shops and local loan sharks in order to get credit. It’s simply the latest installment in the old story of regulators thinking they can wish away the unintended consequences of consumer credit regulation.

    Proponents of the 2009 Credit CARD (Card Accountability Responsibility and Disclosure) Act argued that it would protect Americans from exploitative credit-card companies by limiting penalty fees and interest-rate adjustments. For many Americans, though, the law meant higher interest rates, an increase in other fees, and reduced credit limits.

    Continue reading at The Wall Street Journal (subscription required)

  • The Four Loko challenge: not for me

    On Friday Wichita Eagle reporter Dion Lefler issued a challenge to me based on my criticism of FDA regulation of Four Loko, a beverage marketed to young people that contains lots of alcohol, the stimulant caffeine, and other energy-producing ingredients. See Will Voice for Liberty blogger Bob Weeks accept the Four Loko challenge?

    Dear Dion,

    The short answer is thank you for asking, but I won’t be accepting the challenge. After all, the can of Four Loko contains as much alcohol as a bottle of wine. Now I enjoy a cocktail or glass of beer now and then, but I don’t think I’d enjoy consuming that much alcohol quickly in a short time. (I think that’s what “shotgun” means.)

    Underlying this article is a serious public policy issue, described in Lefler’s reporting on the topic in the article Kansas scrutinizes alcoholic energy drink. Because the mix of caffeine and alcohol in this and similar beverages causes some people to consume more alcohol that they might realize, young people have been injured and hospitalized after consuming large quantities. The result is a call for banning the drink. Because I am not in favor of such regulation, I think I’m being accused of advocating the use of Four Loko by young people.

    The challenge faced by all who favor liberty over heavy-handed state regulation is that by not supporting — in this case — a law or regulation against Four Loko, critics accuse us of endorsing its use. Or, since we don’t support laws against these things, critics assume that we don’t care about the unfortunate people who have been, and may still be, harmed by use and abuse of Four Loko.

    I care. I’m sorry that young people have been harmed by this product. I don’t want anyone to be hurt or killed. But often regulation — no matter how well intended, no matter how sensible — doesn’t work. Sometimes regulation causes harmful unintended consequences.

    A recent example is the bans on texting while driving that have been passed in many states, including Kansas. Sounds like sensible regulation, doesn’t it? Who wants to see people harmed on our streets and highways because someone was pecking out a text message while speeding down the street?

    But as we learned a few months ago, the texting bans may not be working. According to the Highway Loss Data Institute: “… such bans are associated with a slight increase in the frequency of insurance claims filed under collision coverage for damage to vehicles in crashes.” Speculation is that the illegality of texting while driving causes people to attempt to disguise their texting, which increases the danger.

    Will banning Four Loko produced the desired result?

    There’s other ways to produce the effect that Four Loko and similar drinks provide, if people want that. One can simply drink coffee or consume caffeine in other forms while drinking alcohol. A popular cocktail in clubs (so I’m told) is Red Bull and vodka. Red Bull is a popular energy drink that contains a lot of caffeine and other ingredients designed to increase one’s energy level. Mixed with vodka, it’s pretty much the same recipe of active ingredients as Four Loko.

    But there’s not been much publicity about the negative effects of this cocktail, to the extent they exist. Perhaps it’s because the Red Bull/vodka drinkers may be an older group, while Four Loko is marketed towards young people.

    Now that the maker of Four Loko has announced a non-caffeinated version, how long will it be until people start mixing in or consuming NoDoz or other caffeine-containing products with this new version? Will this behavior be even more dangerous? The forbidden fruit is very tempting.

    The regulatory state

    In the Central Washington University incident that is often cited regarding Four Loko, the injured college students were “freshmen ranging in age from 17 to 19,” according to news reports. The legal drinking age in Washington is 21, so it was probably illegal for these young people to be possessing and consuming any type of alcoholic beverage.

    As Lefler reports, if Kansas wants to ban these products, it would probably take an act of the legislature. Assuming Kansas lawmakers would pass such a law and the governor would sign it — and it seems likely they would — the soonest it could be done in normal course is January, when the legislature starts its next session.

    This highlights a weakness in the state regulatory machinery. If we believe state regulation is the best way to deal with this product, what if the calendar says it’s May and the legislature has just adjourned, not to meet again until January? Shall the governor call a special session?

    At the federal level, the FDA news release from last week states: “FDA’s action today follows a November 2009 request to manufacturers to provide information on the safety of adding caffeine to their products.” Apparently this issue has had the attention of the FDA for a year, but only now is action being taken.

    But — regulation may work

    Because Four Loko is sold in stores that are already heavily regulated in most states, a ban on Four Loko and similar beverages will be relatively easy to enforce. Few liquor retailers will be willing to come under state sanction and possibly losing their licenses for selling these products. So regulation will likely be successful in getting rid of the product in legal sales outlets. But as mentioned above, the same recipe and effect can be had in a variety of ways, all legal.

    Which brings up a related point: What if there was a new variety of an already-illegal drug, perhaps marijuana, that caused harmful effects on the same level as Four Loko? How would we deal with that? Because sellers of marijuana already operate illegally in most states, they don’t have the same concerns about keeping their licenses as do liquor stores.

  • Mine safety regulations: do they work?

    The mainstream media attack on Charles Koch, David Koch, and Koch Industries has reached the state of West Virginia. This time a newspaper criticizes the Charles G. Koch Foundation for supporting a “conservative Morgantown think tank and several positions at the West Virginia University economics department.” A specific target of criticism is West Virginia University economics professor Russell S. Sobel and a collection of essays he edited.

    Here’s what the Charleston Gazette printed in an article: “One essay questions the value of ‘mandated’ mine safety laws, stating government regulations may increase accident rates.”

    Lobbing a brick like this doesn’t do much to increase understanding of important issues of public policy, including the safety of coal miners.

    Who could be opposed to the safety of coal miners, after all? I think we can all agree that we’d like miners to work in safety. But do laws and government regulation make them safer? The natural reaction of most people is to assume that government regulation will increase safety. But that’s not always the case.

    Here’s a recent example of regulatory failure: Recently research has been presented that shows that bans on texting while driving don’t work and may actually increase the number of crashes. The results of this research are contradictory to what almost everyone in Kansas — and other states — thought this year when the legislature passed, and the governor signed, the texting ban law. It was well-intentioned, but potentially harmful to the safety of drivers — the very people the law is designed to protect.

    Having seen examples of regulatory failure like this, we should ask this question: Have mine safety laws — well intentioned as they are — increased the safety of miners?

    Chapter 4 of the book in question (Unleashing Capitalism: Why Prosperity Stops at the West Virginia Border and How to Fix It) probably holds the material referred to by the Gazette. This chapter was not written by Sobel, but he is the book’s editor. Here’s two points from the book:

    • A focus by regulators on one type of accident led to an increase in other accidents. Overall deaths increased: “In 1910, the U.S. Bureau of Mines was created with a focus on mainly large-scale accidents, defined as gas and dust explosions and other accidents killing more than five men. State mining legislation was also mainly concerned with these types of accidents. This resulted in a decline in large-scale accidents, but an increase in small-scale accidents, which received less publicity but accounted for more deaths overall.”
    • Incentives matter: “With the passage of workers’ compensations laws, accidents actually increased. Under this new system, employers had an incentive to pay workers compensation instead of paying the extra costs of accident prevention.”

    So there is good reason to be skeptical and critical of mine safety laws, even though this is contradictory to a superficial examination of the issue. Yet the mainstream media will automatically demonize those who question the validity of government regulation and those who are bold enough to support their work.

  • Texting bans haven’t worked

    In an attempt to increase highway safety, many states have passed bans on texting while driving. But the bans haven’t worked, and some states have experienced an increase in crashes.

    A news release from the Highway Loss Data Institute summarizes the finding of a new study: “It’s illegal to text while driving in most US states. Yet a new study by researchers at the Highway Loss Data Institute (HLDI) finds no reductions in crashes after laws take effect that ban texting by all drivers. In fact, such bans are associated with a slight increase in the frequency of insurance claims filed under collision coverage for damage to vehicles in crashes. This finding is based on comparisons of claims in 4 states before and after texting ban, compared with patterns of claims in nearby states.”

    The study does not claim that texting while driving is not dangerous. Rather, the realization by drivers that texting is illegal may be altering their behavior in a way that becomes even more dangerous than legal texting. Explains Adrian Lund, president of both HLDI and the Insurance Institute for Highway Safety: “If drivers were disregarding the bans, then the crash patterns should have remained steady. So clearly drivers did respond to the bans somehow, and what they might have been doing was moving their phones down and out of sight when they texted, in recognition that what they were doing was illegal. This could exacerbate the risk of texting by taking drivers’ eyes further from the road and for a longer time.”

    When Kansas passed its texting ban this year, newspapers editors praised the legislature and Governor Mark Parkinson for passing the law. In an editorial, the Wichita Eagle’s Rhonda Holman wrote “But it’s nice to know the state finally has a law against this brainless and dangerous practice.” In his written statement, Parkinson said “I am pleased to sign this legislation that will encourage more aware drivers and save Kansas lives.”

    While Kansas was not included in the HLDI study, there’s no reason to think that Kansas will experience anything different from the states that were studied: Kansas drivers may be under greater risk of being in a crash after the passage of this law. Stricter enforcement of this law and higher fines will simply encourage the dangerous law-evading texting behavior.

    The texting ban was included in my Kansas Economic Freedom Index for 2010 for the Kansas Senate. Senators who voted against the ban increased their scores in favor of freedom.

    While I did not know the results of this study at that time, this is another example where instinctive distrust of government regulation was the correct diagnosis.