You are currently browsing the tag archive for the ‘regulation’ tag.

I wasn’t going to post about this when I saw some glibertarian or another make this argument, but now that I see Kevin Drum making it I’ll shoot it down, because why not:

But even as a meddling, big-government-loving, knee-jerk liberal, I’m having a hard time coming up with a good reason for this. If Delta Airlines wants to allow cell phone use even though half their customer base rebels, why shouldn’t they? The safety arguments are pretty specious, and in any case, Shuster doesn’t even try to go there. He just wants to prohibit private companies from allowing behavior that he finds annoying.

I don’t know. Maybe this is one of those things like the Do Not Call List, where I should decide that I just don’t care about first principles. Cell phones on airplanes are so self-evidently infuriating, and banning them is such a trivial infringement on personal liberty, that we should be in favor of it regardless. But I confess that I’d still like to hear a more coherent argument. Why should the federal government be in charge of telling companies where they can and can’t permit their customers to use cell phones?

The answer is externalities and market power. The first half is simple. If I have an obnoxious phone call on an airplane, I am imposing an externality on everyone else.

“So what?” you say. “The same when you’re having a cell phone call in [some other place where you may overhear someone else’s cell phone calls]. Why are airplanes any different?”

Ah. But they are different.

Firstly, you are totally trapped on the plane, likely for hours. If it turns out the dude in the seat in front of me wants to talk for seven straight hours with his significant other from whom he is getting a divorce and boy is that the worst conversation ever, I have absolutely no recourse. If I’m in a restaurant, I can leave. If I’m on the subway, I’m there for maybe a few minutes.

Secondly, airplanes are deeply unpleasant places to be that everybody hates. You’re tens of thousands of feet in the air in a giant metal tube, and you can’t leave. It’s weird, and we can and should acknowledge that people act differently under that circumstance.

Third and most importantly, you can’t change your future behavior to avoid the unpleasantry. If you know that a certain restaurant won’t prohibit cell phone calls, you can go to a restaurant that can. You can get on a different subway car. Etcetera.

But there just isn’t enough meaningful competition in the airline industry to actually have some airlines go cell-free and others go no-cell. Even if they did, the price differentials on certain routes can be extreme on different airlines because of hub-and-spoking and other factors having nothing to do with cell phone calling. Simply put, the economics of the airline industry are such that most consumers have very little market power to take one airline over another for personal travel based on marginal or even substantial non-pecuniary preferences.

And lastly, the entire air travel industry basically exists because of the implicit and explicit subsidy and protection of government. It’s a vital public utility, but not an inherently profitable industry. If the industry doesn’t exist except for government intervention, it’s perfectly fine for government to regulate it in ways that make it more pleasant to the consumer. And unlike “more legroom” or “free checked bags” there aren’t even any implicit costs passed onto consumers, unless you think allowing cell phone calls on planes will somehow make us all wealthier, because I have no idea why that would be, that’s for sure.

There’s just nothing wrong with saying airplanes are different. They are. And if cell phone calls on airplanes are a giant anxiety- and unhappiness-inducing nuisance, we can ban them. Maybe on the short shuttle flights that are mostly business travelers we can allow them and say “no calls on flights over 90 minutes in length.” But there’s plenty of principled ground to have a regulatory intervention on this matter.

Advertisements

The Washington Post busted open the big story about the raisin market, then opined about it, then Planet Money did an excellent story about it. For those without time to click through the genuinely fascinating links, the basics of the story is that raisins, somewhat uniquely, have their supply and demand managed centrally by a government committee, who essentially confiscates a share (sometimes a very large one) of raisin farmers’ output and with varying levels of compensation. This is probably bad public policy, and there’s no reason that this shouldn’t be done away with.

However, there is a sense in all these stories that there is something unusually unjust about the structure of this market. But I’m not sure that’s true. Let’s imagine, instead, that there was simply an additional sales tax on raisins, not unique to raisins at all. In that case, the price would rise, so demand would fall, so supply would contract and the price would rise and eventually we’d settle on an equilibrium where the overall raisin supply is lower and the price is higher and the government collects some revenue. You could even have the tax vary each year to target a price (as opposed to a tax that is a consistent percentage of the otherwise-market-determined price).

In this case, what we have instead is situation where the government targets the supply side rather than the demand side, but to pretty much a similar result, except the government collects its revenue not in money but in-kind.  Now, the fluctuations in the crop portion taken for the reserve and the uncertainty of compensation definitely feels more unfair, but the biggest difference I can see in this scenario is that in the tax scenario you’d probably have fewer raisin farmers, whereas under the status quo there seem to be more raisin farmers than the eventual market price would otherwise produce.

That, to me, is the biggest curiosity – why don’t more farmers do what the one farmer in the Planet Money story does and switch out to a less-regulated crop like almonds? The answer is that if we were in an equilibrium where no raisins were being confiscated then the existing raisin farmers would probably be making substantial profits, thus attracting new entrants into the industry, each one individually having no impact on the market but collectively driving up supply to the point where confiscation would begin. That, along with emotional attachments and the transaction costs of switching crops, probably keeps an equilibrium where you’ll always have more raisin farmers producing more supply than the eventual raisin price would otherwise demand.

In some ways, this solution is more socially optimal – because you still have farmers incentivized to produce as many raisins as possible even as the government is driving up the price, when in the taxation scenario you’d probably have a lower raisin supply. This allows raisins to be donated to school lunch programs, for example, that otherwise wouldn’t exist. In the tax scenario, however, the government could give the money to schools to spend how they see best fit, and that way would probably be better.

Additionally, you could raise the overall sales tax a miniscule amount and deregulate raisins and that would really be socially optimal. Freedom!

Inline image 1

Matt Yglesias writes about experiencing a minor panic when suspecting that his favorite bar may be on a widely-publicized list of DC’s best, then bemoans the inelasticity of overall bar supply. I think he’s confused two things.

If bars as a category are crowded, then more bars will help. And, in general, allowing the market to set the relative quantity of bars in any given neighborhood, city, urban area, etc, is probably a good thing. If people want a new bar more than a new pharmacy, there’s no reason to prohibit the former. Taxes and regulations can and should be used to account for any public health and neighborhood nuisance that a successful bar can engender.

But that’s not going to help at all if your favorite bar gets on that list. That’s because there’s an intangible, unregulateable quality of bars called coolness. It goes in a cycle, something like this:

-New bar opens, preferably in emerging neighborhood or on fringes of emerged neighborhood
-A few savvy people discover said bar and start hanging out there
-Word of mouth spreads and more people start hanging out at the bar [this is when peak cool occurs]
-Someone busts the bar wide open – major newspaper or magazine article for example.
-Bar gets crowded
-The original set of people who made the bar successful stop hanging out there
-Rinse and repeat

Note that this cycle will happen regardless of the overall number of bars in your city and neighborhood. Everyone is chasing the cool. But, by definition, the cool can’t be where everyone already is, otherwise it’s not cool. Cool is inherently positional and zero-sum, and there is a precarious balance to it – if I’m literally the only person in the bar, it’s not cool, and if the bar is packed to the gills with random party people every night, it’s not "cool" – it’s that liminal moment when there is still the thrill of knowing something others don’t, sharing an open secret, being part of something special and unique and distinct with a limited and exception set of others. You can’t force it, recreate it manually, or recover it once it’s lost.

Generally speaking, positionality is a hugely important factor in economic decision-making, one that tends to throw off a lot of models which are based on individuals making decisions in an absolute sense and don’t account for the ways that people act and consume and produce in ways deliberately designed to mimic, anti-mimic, exceed, match, or even sabotage others.

Any bar can serve good booze and have nifty decor. Humans pursue status and rank. That’s what a truly cool bar is about.

I saw this frankly absurd polemic from Jason Brennan at Bleeding Heart Libertarians the other day and laughed it off, but since Andrew Sullivan has seen fit to tee up this particular passage I thought I might as well take a swing at it:

You complain, perhaps rightly, that corporations are just too big. Well, yeah, we told you that would happen. When you create complicated tax codes, complicated regulatory regimes, and complicated licensing rules, these regulations naturally select for larger and larger corporations. We told you that would happen. Of course, these increasingly large corporations then capture these rules, codes, and regulations to disadvantage their competitors and exploit the rest of us. We told you that would happen.

It’s not rocket science. It’s public choice economics.

OK, so let’s assume that the fundamental assertion at the heart of this passage – that “complicated tax codes, complicated regulatory regimes, and complicated licensing rules […] naturally select for larger and larger corporations” is correct. Then I’d imagine that, say, one of the following countries:

Greece, Italy, Portugal, Spain, Australia, Belgium, The Netherlands, Norway, Sweden, France, Denmark, Finland, Germany, The United Kingdom

would be even more dominated by “large corporations” than the American economy, right?

Wrong:

I mean, I’d have to imagine that any libertarian worth their salt would agree that at least some of the countries on the above chart have a more burdensome and complex regulatory regime than the United States, right?

Anyway I think the thing you can say about this chart is that it’s definitely not sorted in order of most-to-least regulated in either direction. There are lots of good reasons the United States has an economy dominated by larger firms, and there are both good and bad things about this, but I don’t think as a rule the size or complexity of a state’s regulatory regime is what determines that.

To wildly over generalize from a data-less assertion I think one thing libertarians don’t do nearly enough of is compare across states and countries.

To speak more generally to Brennan’s polemic I think he blows the whole thing up when he says this:

You balk: Isn’t the problem the regressive pro-market post-Reagan politics? Please, people. Let’s be serious a moment. Reagan used a bunch of pro-market, pro-liberty, anti-big government rhetoric, but the man was no libertarian, and he did little to make the country more libertarian. Reagan spent and spent, and thus ran up the debt. He doubled the number of imports with trade restrictions. He pursued militaristic foreign policy. He increased rather than decreased the size, scope, and power of government. Reagan ramped up the war on Americans civil liberties drugs. He wasn’t even a big deregulator—that was Carter. Look past rhetoric to reality. Reagan was in practice just a more militaristic version of one of you.

[bold mine] So if Reagan is “just a more militaristic version” of the moderate left, then what does that make “big deregulator” Jimmy Carter? The real libertarian? Isn’t he the awful liberal that right-leaning people are so often attempting to hang as a millstone around the necks of the moderate left? And indeed, if you read the blog of lots of moderate lefties these days you see positions advocated like “deregulating land use,” “abolishing the home mortgage interest tax credit,” “replacing the current tax code with some alternative that is more efficient, just and transparent,” etc. Anyway, the point is that Brennan never really identifies who he is referring to here as the “moderate left.” If he’s talking about the conservative wing of the Democratic Party – folks like Evan Bayh, Ben Nelson, the Blue Dog Caucus, the DLC, Harold Ford, etc etc – then he may be right! But most of the left-identifying folks in the blogosphere despise the conservative wing of the Democratic Party, precisely because they tend to vote with the GOP when plutocratic interests are at stake. If this essay is being aimed at them then I think he’d find Markos Moulitsas would like to buy him a beer.

20111205-135558.jpg

Join 3,848 other followers

Not Even Past

Tweetin’

Error: Twitter did not respond. Please wait a few minutes and refresh this page.

RSS Tumblin’

  • An error has occurred; the feed is probably down. Try again later.