Coyote Blog

Gary Galles at Mises has a good post on why currently proposed "anti-gas-gouging" law is rediculously vague and effectively ex-post-facto law.  I have made this point before as well.

I wanted to comment on something different.  As he begins:

In May, the House of Representatives passed a bill that could lead to
fines as high as $3 million per day for gasoline price gouging, which
it defined as charging a price that "grossly exceeds the average
price"¦offered for sale by that person during the 30 days prior" or
"grossly exceeds the price at which the same or similar gasoline"¦was
readily obtainable in the same area from other competing sellers."

Lets take these two cases in reverse order.  If I am charging a prices that "grossly exceeds the price at which the same or similar gasoline"¦was
readily obtainable in the same area from other competing sellers," then what for God's sakes is the harm?  People will just go to one of the "readily obtainable" other sources.  My business will take a beating, but that's my problem.

The first case is an open invitation for gas lines.  It does not say "grossly exceeds the average
price"¦offered for sale by that person during the 30 days prior unless there is some kind of supply discontinuity or change in wholesale prices."   It sets up a clear if-then:  If you raise your prices by some amount we later rule to be too much, we can fine you $3 million per day.  In the confusion of a supply disruption, gas stations will be afraid to raise their prices despite the new supply-demand reality. They will be afraid of this kind of arbitrary enforcement.  Therefore, the first 100 random people who show up to top off their tanks  or fill their generators to keep their TV running will get the available supply, rather than letting price allocate the gas to the people who value it the most.

I lived through gas lines of the 1970's.  In fact, as the low-driver-on-the-totem-pole, it was my job in the family to cruise around town looking for an open station and then sitting in whatever line I found.  I don't think younger people remember, but in major cities (not in the countryside) in the 1970s, there were weeks when there simply was no gas to be found.  Since that experience, I have pleaded to allow gas gouging in supply emergencies.

Since the mid-1970s, various people have decried the growing amount of money spent on elections.  They have tried numerous approaches to limiting campaign funding, all to no avail.  In part, their lack of success has been due to off-and-on efforts of the courts to protect political speech.  However, a large reason for their failure has been that they are addressing a symptom, rather than the cause of the problem.

The real cause is the growing regulatory state.  Without regulation, there would be only limited incentive for corporations and individuals to make large political contributions.   Regulation (combined with taxation) is the fountain from which most campaign money springs.  Threaten to regulate a sector, and you automatically put politicians in the position of creating winners and losers, both of whom will spend money to try to improve their fates.

Holman Jenkins makes this point in today's WSJ($):

Being a shrewd bunch, the private equity industry
presumably has gotten the message: When vast new fountains of wealth
open up in the economy, Congress must receive its ransom in campaign
donations. Delivering the wagged finger were none other than Max Baucus
and Charles Grassley, chairman and ranking member of the Senate Finance
Committee, who've taken to musing aloud about how the tax code's
treatment of private equity's lately fabulous profits might be revised.

The bipartisan nature of the initiative should
reassure readers that there's no philosophical issue here. It's purely
bidness. You, private equity, have been remiss in your patriotic duty.
Cough up.

Anyone who recalls the junk bond wars of the 1980s
will notice a pattern. Then too, Congress was awash in proposals for
taxing the takeover industry: by eliminating the interest deduction for
junk bond interest, by imposing an excise tax on assets acquired in a
hostile takeover, etc. These ideas came to naught, not least because of
the fright the proposals put into the stock market. But the endless
debate unlimbered a delicious flow of campaign dollars from all
concerned.

It appears that everything will turn out OK for the politicians:

But the message has been received. Private equity has now set up a
Washington trade group and has opened its pockets to politicians, with
Barack Obama being a special heartthrob. Oh, happy day for members of
the House and Senate tax committees, who lived for years off the junk
bond wars and now will live for years off the private equity plutocrats.

I remember stock brokers used to say that they had the best job in the market, because whether the market went up or down, they still got their money.  The same is true of politicians -- whether the regulations help or hurt, whether they end up benefiting the incumbents or the new entrants -- the politicians will still get their money.

Scott Gustafson's Arizona Economics blog points to another example of a local regulatory body, in this case the Structural Pest Commission, bravely protecting incumbent competitors from new competition.  As background, you should know that though we don't have nearly as many pests as most places, the ones we do have (e.g. scorpions) are essentially unkillable with legal chemical technologies.  The best you can hope for is to tighten up your hose to keep them out.  And we have these lovely rodents called roof rats, sort of like squirrels on steroids who are not cute, who like to come in and take up residence in attics and walls.   So a lot of pest control here is about putting up screens over vents and setting traps rather than spraying chemicals.

As retirees go, Rich Hanley seems like a decent enough guy. He's a former cop who came to town a few years ago. He obeys the law. He pays his taxes. In 2004, he started up a little business, repelling roof rats.
 

Specifically, he covers vents with steel mesh so the little fellas can't come calling. 

Once, we would have applauded such enterprise. Now, we issue cease-and-desist orders. 

Yep, it's true. My favorite state bureaucrats over at the Structural Pest Control Commission have decided that Hanley has violated the law... 

"The problem is his advertising," says Lisa Gervase, executive director of the agency... 

The pest-control cops launched a seven-week probe, concluding that Hanley can do the work. He just can't tell people why he's doing the work. Thus, his sales pitch - "Keep birds and rodents from invading your home" - has to go. 

Gervase said the state would have no problem if Hanley says he's covering vents to keep leaves out. "But if he's advertising that he can keep pests from invading your home, that's pest control, and you need a license for pest control."

Its nice, I guess, when you trade group can get the government to use its coercive power to do you work for you.  Much more on licensing as anti-competitive behavior rather than consumer protection.

Regulators can always declare a merger to be monopolistic -- they just have to define the market narrow enough.  For example, if the FCC and FTC are considering calling satellite radio a separate market from terrestrial radio as an excuse to stop the Sirius-XM merger.  The NAB, the trade group fro terrestrial radio, has been going ape trying to block the merger, knowing that the two together will cause its stations to bleed listeners to satellite even faster than in the past.  Hilariously, though, the NAB is having to twist itself into pretzels as it goes to Defcon 1 trying to stop the merger by ... arguing that satellite radio is a separate market from terrestrial radio and thus the merger is monopolistic.  Begging the question, then, why they are working so hard to block it, particularly after the FCC has allowed huge consolidation and merger activity among NAB members.

Now, history is repeating itself yet again, as the FTC threatens to block the Whole Foods - Wild Oats merger because... it claims organic food grocery stores are a separate market from other grocery stores.  Uh, right.  Extra points, as in satellite radio, for claiming consumers will be irreparably harmed by a merger in a "market" that did not even exist 2 decades ago.

Straight from the 1970's, the US's golden era of bumbling government intervention in the economy, come the same proposals that worked oh-so-well the first time around.  Democracts blame big oil for gas prices, and propose channeling solutions from Hugo Chavez:   (via Q&O)

Congressional Democrats are taking aim at big oil companies as U.S. gasoline prices near a record average $3.05 a gallon.

Although
industry experts doubt it will have any effect, half a dozen senators
gathered in front of a Washington service station to push their own
remedies to the situation, the Washington Post said.

The latest average price for a gallon of unleaded regular gas was $3.042, according to the AAA Fuel Gauge report.

Sen.
Charles Schumer, D-N.Y., called on Congress to consider breaking up the
giant companies. Sen. Bernard Sanders, I-Vt., pushed for a windfall
profits bill.

Sen. Maria Cantwell, D-Wash., promoted her
anti-price-gouging bill, which the Senate Commerce Committee adopted
earlier this week.

Gee, since every transaction in a free market requires a willing buyer and a willing seller, wouldn't it be just as correct to blame profligate consumers for the increase?  And why is it I don't remember any of these actors in Congress rushing to clamp down on greedy sellers when home resale prices skyrocketed far more than gas prices have?  Does anyone remember Maria Cantwell imposing windfall profits taxes on home-sellers?  Or, for that matter, on sellers of Internet stocks who financed their campaigns selling stock above $80 that would soon trade only in the single digits?  And by the way, how can any party who elected Maria Cantwell to the Senate seriously call members of the other party "stupid."

Let's do a thought experiment.  Let's assume that through a series of government actions, Congress is able to return oil profits "to the people."  Oil company profits are now reduced to zero.  That should make a huge difference in gas prices, right?  Well, out of a $3.00 gas price, taxes and the retailers margin are probably 75 cents or so (46 cents tax, 10% or 30 cent retail margin).  This leaves $2.25 for the greedy oil companies.  It turns out large oil companies like Exxon make about 6% of revenues in the bad times, and 10% in the good times, like now.  So, this leaves a profit of  14-22 cents per gallon.  The "people" are saved!  Gas prices can come down by a whole 15-20 cents.  Of course, in return for saving a buck or two on fill-ups, we've nuked the whole incentive system for investment and finding new oil and improving efficiency.  Gas prices over time will rise much higher than they are now, and lines will start reappearing at gas stations, but that probably won't show up until after the next election, so why should anyone in Congress care?

This is part 158 or so of a series of posts on how anti-trust law is often portrayed as being pro-consumer, but whose effect in practice is usually just to politically powerful competitors rather than consumers.

I have written a couple of posts on the National Association of Broadcasters hypocritical opposition to the Sirius-XM satellite merger. Radley Balko takes on this same topic:

So when XM and Sirius announced a highly-publicized merger this
year, everything changed for the NAB. Clearly, the two startups it so
feared for so long were floundering. And with no other licensed
satellite providers around, the NAB's position on the merger became
clear: What's bad for satellite is good for the NAB. So the NAB would
oppose an XM-Sirius alliance.

Problem is, the only colorable
argument against the merger is that it would create a monopoly for
satellite radio. XM and Sirius cleverly (and probably accurately)
headed that objection off by noting that satellite radio competes with
a variety of technologies for the listener's ear. This put the NAB in
an awkward position. The lobby would have to argue that despite its
15-year effort to derail satellite radio, satellite radio was not a
competitor. Of course, the harder the NAB fights and the more money the
NAB spends to promote this message, the clearer it becomes that the NAB
fears the competition posed by an XM-Sirius alliance. In effect, the
more the NAB fights the merger, the more it undermines its own argument
against it.

But the NAB has a lot of clout, since it controls most of the media.  Here, for example, is the Boston Globe whoring for the NAB without mentioning that their parent company is a member of the NAB.

Arizona is taking another typical step to protect incumbent businesses against new competitors:

"Arizona regulators have ordered a Seattle-based online home price estimator to stop doing business in the state." Zillow.com
has won wide popularity by applying algorithms to publicly available
data to come with rough estimates of the value of existing homes, which
it makes available for free through its site. The Arizona Board of
Appraisal says that Zillow should not be dispensing such information
without an appraiser's license.

Gee, we'd hate to give people the impression that a whole profession could be replaced by a few computer algorithms and some data base lookups.   I am not sure why, historically, but state governments have an incredible propensity to protect everyone in the real estate field from competition.  For years they have enforced licensing on real estate agents to help support that cartel that the Internet is only just now starting to break up.

By the way, here is another way you could write the headline for this news:  "Arizona Bans Giveaways.  Consumers Must Pay for Everything."  Oh, and my neighbor just sold his house.  The final price he got was within 4% of the Zillow estimate.  I will say that from the houses I am familiar with, they do a pretty good job (though I am sure they make mistakes, for example in neighborhoods with a lot of gentrification and a mix of old and new homes). 

Congrats Pinal County, which border phoenix to the southeast, for pushing government intrusiveness to a new level:

At the conclusion of what Pinal County officials said was the longest
code compliance hearing in the county's history, San Tan Flat owner
Dale Bell was ordered to pay an initial $5,000 fine Tuesday for
customers dancing in the open-air portion of the restaurant. He will
also be fined $5,000 for every day people dance at his restaurant
starting Feb. 17.

Bell, who does not advertise or encourage dancing at San Tan Flat,
acknowledges that people do dance on weekend nights and it's usually
parents with children or senior couples. He has even put up signs
discouraging it.

   "It's impossible to ... ensure no one breaks out in the waltz or two step," Bell said....

County Attorney Seymour Gruber said dancing outside violates a
county code because it's not happening in an enclosed area with walls
and a roof. The county wants Bell to stop the dancing, limit it to
inside only or get a special use permit which requires public input
from neighboring property owners.

We wouldn't want people dancing without wall or a roof, would we?  I mean, there is probably a 0.5% chance they could get rained on or something.  If you are thinking this is some grizzled biker joint or a shack of a place, you are wrong.  Its actually one year old and quite nice - check out the picture.  For those of you in other parts of the country, where the idea of a family honky-tonk may seem odd, this concept is very popular in Arizona.

So why is this government harassment going on?  Well I have gotten better at decoding these things, and my sense is that it started with noise complaints, which many commercial establishments get:

There have been no complaints against San Tan Flat for dancing,
but both the county and Bell have received noise complaints about the
live music. The restaurant has not been cited for noise because the
volume has been within acceptable levels.

So the county got noise complaints, and my guess is that one of the complainers had some strong political pull (or else they would never have pursued it this far).  Particularly since this is not a population-dense area, and there is little housing directly nearby (see Google satellite map, just click on satellite in the upper right to see all the surrounding, uh, dirt).  I mean it's right next to an airport, for god sakes.   Thus, wanting to satisfy what could only be a high-profile complainer, the county moved in and pulled out the rubber glove and gave the restaurant a good probing.  And, since it is impossible to be in compliance with every stupid ordinance on the books (many conflict, so that you can't be in compliance) the city found something they thought they could make stick.  The only issue I can't decode is whether they are trying to use this as a bargaining chip to get operating hour or noise level changes, or if they are using it a s a club to close the place down.  It probably depends mostly on how much juice the key complainer has who is driving this.

The good news is that the IJ is on the case.

PS-  If you really want to get pissed off, read some of the other economic liberty cases being handled right now by the IJ.  Many of them are great examples of a point I have made for years, that state licensing of professions is more about protecting the professions from competition than they are about protecting the consumer.  If you haven't seen it, George Will had a great editorial on the same topic, which includes this gem:

In New Mexico, anyone can work as an interior designer. But it
is a crime, punishable by a fine of up to $1,000 and up to a year in
prison, to list yourself on the Internet or in the Yellow Pages as, or
to otherwise call yourself, an "interior designer" without being
certified as such. Those who favor this censoring of truthful
commercial speech are a private group that controls, using an exam
administered by a private national organization, access to that title.

This is done in the name of "professionalization," but it really
amounts to cartelization. Persons in the business limit access by
others "” competitors "” to full participation in the business.

"¦in Las
Vegas, where almost nothing is illegal, it is illegal "”
unless you are licensed, or employed by someone licensed "” to move, in
the role of an interior designer, any piece of furniture, such as an
armoire, more than 69 inches tall. A Nevada bureaucrat says that
"placement of furniture" is an aspect of "space planning" and therefore
is regulated "” restricted to a "registered interior designer." Placing
furniture without a license? Heaven forfend.

I am a big fan of the Mises blog, but in this post on a Boston Globe editorial they miss something pretty substantial.  S.M. Oliva takes as a starting point this absurd editorial on the pending XM-Sirius merger:

the proposed merger of the two US satellite radio firms is premature at
best. At this point, it should be rejected. In half a decade, the two
firms have gone from barely broadcasting to throwing up their hands in
defeat. But it is hardly clear that the nation's two satellite radio
firms will wither and die unless they unite, or that a merger would
benefit consumers.

Oliva does a good job at debunking this argument, but why bother?  It is patently absurd.  How is can one possible define a market at just satellite radio?  Where have I heard this same ridiculous argument before?  Aha!  Right in the press release from the National Association of Broadcasters, the organization most threatened by satellite radio and who would benefit most if it would just go away.

When
the FCC authorized satellite radio, it specifically found that
the public
would be served best by two competitive nationwide systems. Now,

with  their stock prices at rock bottom and their business model in
disarray
because of profligate spending practices, they seek a government

bail-out to avoid competing in the marketplace.

Of course, even a combined XM-Sirius would have to compete in the marketplace -- in fact with the members of the NAB, whose asses Satellite has been kicking for a few years.

Oh, but here is the good part: the Boston Globe's parent company is a member of the NAB, owning two radio stations and 9 TV stations.  So in fact, the Globe was not editorializing in favor of the consumer, but in fact was shilling for its own trade group, working to weaken a dangerous source of new competition for its own broadcast radio and TV stations.  And nowhere in the editorial does the Globe disclose this massive conflict of interest.  Which makes this closing line a joke:

A Sirius-XM merger would snuff out competition within a potentially
lively market at a time when the technology is still evolving. And by
creating one dominant satellite radio firm, the move would likely keep
new rivals from emerging in the future.

As any economist will tell you, it is ridiculous to define satellite radio as a "market."  At its smallest, the market is reasonably "radio."  The delivery mechanism of radio (satellite vs. terrestrial) is meaningless to the definition of a market (the editorial tries to deal with this logical fallacy by creating a straw man that the market does not include iPods, when of course the main issue is that it does include terrestrial radio stations).   The Globe, along with the NAB whose talking points the Globe is just repeating in this "editorial", are in fact interested in reducing competition for themselves, not enhancing it.

Oh, and by the way, if approving a merger of broadcast or media companies is a "bail-out," then I invite the Boston Globe to calculate how much of a bail-out the Times corporation has been given, as the government has approved the merger of the NY Times, Boston Globe, IHT, 20 other papers, 9 TV stations, 2 radio stations, and 35 commercial web sites.  And by the way, what is the market share of each of their papers in their own local "markets?"

I will leave you with a quote from Milton Friedman vis a vis licensing but entirely appropriate here:

The justification offered is always the same: to protect the consumer. However, the reason
is demonstrated by observing who lobbies at the state legislature for
the imposition or strengthening of licensure. The lobbyists are
invariably representatives of the occupation in question rather than of
the customers. True enough, plumbers presumably know better than anyone
else what their customers need to be protected against. However, it is
hard to regard altruistic concern for their customers as the primary
motive behind their determined efforts to get legal power to decide who
may be a plumber.

A few years ago I coined the term "Intellectual Welfare."  I originally devised he term to describe Social Security, where it was arguable that most people in the program were not receiving a transfer payment, but they were instead receiving for-your-own-good government restriction of individual choice.  In the case of Social Security, government takes over the management of some of our retirement savings (at an appalling cost) because we lunkheads can't be trusted to manage our own savings for ourselves.

I was going to prepare a similar post about cries for regulation in the sub-prime credit market, but Alex Tabarrok did it already:

Roubini and others generating hysteria about defaults in the
mortgage market are credit snobs - they think credit is something that
only the rich can handle.  Just look at the language that Roubini uses
to analogize borrowers - they are "reckless patients" who "spent the last few years on a diet of booze, drugs and artery clogging junk food."  Similarly, the Washington Post tells us that it's the end of the "borrowing binge."

Yeah, we get it.  Credit is ok for us, the "sober" borrowers but poor people can't
handle credit.  Too much credit among the poor generates decay and
social pathology.  Credit must be regulated.  We can't, for example,
have credit stores in poor neighborhoods.  Don't you know that credit is bad for people without self-discipline?   Let the poor buy on installment credit?  That's unconscionable.  Today's furor over sub-prime mortgages is the same old story.

Update: This really ticks me off:

Representative Barney Frank, the Massachusetts Democrat who heads
the House Financial Services Committee, said in an interview on Friday
that he intended to move legislation in the coming weeks. He said the
measure he was preparing would discourage abusive loans by imposing
legal liability "up the chain." It would give borrowers and others the
ability to sue the Wall Street firms that package those mortgages and
then sell them as mortgage-backed securities, as well as the purchasers
of those securities in the secondary market.

"Anybody, including the original borrower, can make a claim, and the
liability would go up the chain," he said. "People say it may
discourage certain kinds of lending. But that's precisely what we want
to do. We will pass a bill that won't allow companies to loan people
more money than they can pay back or loans for more than the value of
the house."

GRRRR.  Does no one remember what it was like to get a mortgage before they were so easily securitized?  The paperwork in the credit application was horrendous, as was the time it took to complete the mortgage.  Today they check two or three numbers, and if these numbers match the requirements of the Wall Street companies that package the loans, the loan is approved.  This legislation, which is aimed at slamming the securitization process, will hurt everyone.  All of our lives will be made worse so a few politicians can demagogue an issue that will be forgotten in 12 months. 

I have always thought the logic of shareholder law suits were crazy to start with, and even crazier given that shareholder suits over loss of stock value tend to result in ... declining stock value.

I have never been able to justify most lawsuits by shareholders
against companies in which they own shares.  Any successful verdict
would effectively come out of the pockets of the company's owners who
are.. the shareholders.  So in effect, shareholders are suing
themselves, and, win or lose, they as a group end up with less than if
the suit had never been started, since a good chunk of the payout goes
to the lawyers.  The only way these suits make financial sense (except
to the lawyers, like Bill Lerach) is if only a small subset of the
shareholders participate, and then these are just vehicles for
transferring money from half the shareholders to the other half, or in
other words from one wronged party that does not engage in litigation
to another wronged party who are aggressively litigious.  Is there
really justice here?

OK, you could argue that many of these shareholders are not suing
themselves, because they are past shareholders that dumped their stock
at a loss.  But given these facts, these suits are even less fair.  If
these suits are often made by past shareholders who held stock at the
time certain wrongs were committed, they are paid by current and future
shareholders, who may well have not even owned the company at the time
of the abuses, and may in fact be participating in cleaning the company
up.  So their argument is that because the company was run unethically
when I owned it, I am going to sue the people who bought it from me and
cleaned it up for my damages?  Though it never happens, the more fair
approach would be for current shareholders to sue past shareholders for
the mess they left.

Tom Kirkendall quotes a related notion from the Economist:

This suggests to The Economist the need for a new Apple rule
to guide prosecutors"”at least in cases, such as backdating, where the
main supposed victim is a company's shareholders. Our rule: if a
criminal prosecution is likely to hurt a company's share price, then
don't prosecute.

Are we serious? Well, we think it's worth a discussion . . .
Cost-benefit analysis is largely absent from America's approach to
regulating business wrongdoing, not only in criminal prosecutions, and
that is probably one of the main reasons why America's capital markets
are indeed losing their competitive edge. At the very least,
encouraging the Department of Justice and the Securities and Exchange
Commission to employ a few less lawyers and a few more economists would
be a step in the right direction.

One of the things I didn't really expect when I started blogging was the near flood of press releases I would get from across the political spectrum.  One I got this morning was called "NEW PROPOSED .XXX WEB DOMAIN LEGITIMIZES SMUT."  I had a couple of thoughts reading this release:

• Um, pornography is legal.  I say that only because the whole press release is written in a tone that implies terrorism or serial killing is being facilitated.  In addition to being legal, it is also a very large business on the web and frankly has been an innovator in many areas of e-commerce.  One may find the business unsavory or distasteful, but it is still a legal enterprise.
• I would think that encouraging a separate domain extension for hard core pornography would be something that pornography's opponents would support, sort of like getting the adult film store out of the suburban mall and into the red light district.   I find that internet filter software (which I have on my kids accounts) works pretty well, but I am pretty sure that filtering out an entire domain extension would be a layup.

Comments closed to avoid the inevitable flood of spam porn links.

Apparently there was another payola bust.  I'm confused.  Why is this illegal?  I guess in the 1950's I might understand it, when there was only one way to listen to music anywhere outside your home.  But today there are about 20 different ways, including several flavors of radio.  If a radio station overplays the same song to the point of insanity, just listen to something else. 

Paying for placement in overcrowded distribution channels is routine in many industries and certainly not the subject of federal law.  If you don't believe me, try taking your new brand of potato chips over to Safeway and try to get on the shelf.   Now, I know folks would argue that this contributes to Safeway's selection being bland.  But that is also why new competitors, like Whole Foods, have emerged to serve folks who don't like Safeway's selection of products.

By the way, does anyone think its funny that record producers are in the news for paying for play at the same time they are in the news for charging for play?

Update:  More on charging for play:

On March 1, 2007 the US Copyright Office stunned the Internet radio
industry by releasing a ruling on performance royalty fees that are
based exclusively on the number of people tuned into an Internet radio
station, rather than on a portion of the station's revenue. They
discarded all evidence presented by webcasters about the potentially
crippling effect on the industry of such a rate structure, and
rubber-stamped the rates requested by the RIAA (Recording Industry
Association of America).

Under this royalty structure, an
Internet radio station with an average listenership of 1000 people
would owe $134,000 in royalties during 2007 -- plus $98,000 in back payments for 2006. In 2008 they would owe $171,000, and $220,000 in 2009.

TJIC has a good example of relying on the government to legislate taste.

More than 30 years after outlawing big flashing signs"¦
Boston wants to bring back some glitz to parts of town deemed too dark
and staid at night.

It's a good thing we've got a single monopolistic authority making aesthetic decisions for everyone.

Saying it wants colorful electronic marquees to create an
atmosphere like Times Square in New York, the Boston Redevelopment
Authority is planning to amend the city's zoning code to permit
electronic signs that make "bold use of graphics" and create a sense of
"animation and motion" and "images that engage the public."

So, basically, the rationale 30 years ago was "some bureaucrat
finds these tacky, so they're forbidden", and now the rationale is
"some bureaucrat likes these, so they're encouraged".

This from the city of Boston, whose government's sense of aesthetics dropped this butt-ugly eyesore of a city hall into the middle of historic downtown Boston:

And, in case you are one who supports government "redevelopment" and mandates on aesthetics but think that it would all work out fine if architectural experts and committees of academics made the decisions, here is the hideous Peabody Terrace at Harvard University, presumably vetted by the finest architectural academic minds in the country:

These buildings, where Harvard stuck me for a full year, were transported right out of East Berlin, right down to the elevators that only stopped on every third floor for efficiency sake (efficiency of the builder, obviously, not the occupant).  The interior walls were bare cast concrete and no amount of heat could warm them in the winter.  It was the most depressing place, bar none, I have every lived.  But the "experts" loved them, and wished that this vision could have been forced by urban planners on all of America:

Leland Cott, an adjunct professor of
urban design at the [Harvard] GSD, calls Peabody Terrace 'a model of design
efficiency, economy, and attention to scale.'

Fortunately, someone gets it:

The magazine Architecture Boston has focused attention on the
controversial aspects of Sert's work by devoting its July/August 2003
issue to an examination of Peabody Terrace, expressing the essential
disagreement about the work in the form of a stark conundrum:
"Architects love Peabody Terrace. The public hates it."

In fact, the public's hostility to the structures may be in
proportion to its degree of proximity, with the most intense feelings
confined to those households on the front lines of the town/gown divide....

Otile McManus, in a companion essay, discusses the reactions of many
Cambridge residents, who have described the complex as "monstrous,"
"cold," "uninviting," "overwhelming," and "hostile," and have compared
it to Soviet housing.

Actually, the most intense feeling were by those who lived there, who really, really hated it  (though I will admit there were several third world students who loved it -- must have been nostalgic for them).  The article goes on to accuse detractors of being anti-modernist.  Which is a laugh, since my house is one of the most starkly modern in the area, so modern I could not sell it several years ago.  I am not anti-modern.  I am anti-bad-design.

Wow!  I am kindof amazed at the hostility I still feel fifteen years after the fact.  I had started out just to link TJIC's post, and here I am in full-blown rant mode.  Sorry.

I have written numerous times about how most anti-trust actions are initiated for the benefit not of consumers but of industry competitors.  The incredible claim that Microsoft's giving away free applications with its OS somehow hurts consumers is just the most famous such example. 

Now we face the specter of anti-trust review of the XM-Sirius satellite radio deal.  All you need to know is that the National Association of Broadcasters, who represent the terrestrial competitors of satellite radio, are lobbying hard for the deal to be rejected.  Nearly every line of the statement is hilarious, but this one caught me:

When
the FCC authorized satellite radio, it specifically found that
the public
would be served best by two competitive nationwide systems. Now,

with  their stock prices at rock bottom and their business model in
disarray
because of profligate spending practices, they seek a government

bail-out to avoid competing in the marketplace.

First, I am sure that the NAB is deeply, deeply concerned about satellite radio serving the public well -- NOT.  Customers gained by satellite radio are customers lost by the NAB**.  In fact, if they really believed the merger would hurt the consumer experience with satellite radio, their statement would instead be "we are thrilled by this merger because it means that customers will be served poorly in the future by the new company and that means customers will defect back to us."

Second, I love the term "government bailout."  What they mean by government bailout is the prospect that the government might not block this merger.  Which, given the white-hot merger activity between NAB members over the past 5 years, means that most NAB members have received the same "bailout."

(HT: Hit and Run)

** In the TV market, terrestrial broadcasters, particularly their local affiliates, got the government to cover their butts by passing a "Must Carry" law, which basically requires that cable companies have to include all the local broadcasters in their feed.  In practice, this and similar laws have forced satellite providers to give you your network feed only through your local affiliate.  This means that instead of DirecTV being able to just give me the NBC national feed, they have to give me the NBC Phoenix affiliate.  As a result, DirecTV has whole satellites that carry forty, fifty, sixty or more identical feeds.  What a screaming waste, and it only gets worse with HDTV.  Anyway, in radio, there is no similar law, so satellite growth is more of a zero-sum loss for terrestrial competitors.  I think the NAB is just huffy they did not get their own must-carry subsidy law passed.

First, Mississippi regulated flood insurance rates down to a level that it was impossible to make money, so State Farm's property coverage on the coast did not cover flood/storm damage.  Then, after Katrina, Dickie Scruggs and company sued State Farm, and others, forcing them to cover storm damage from Katrina that their policies explicitly did not cover and were not priced to cover.  So, facing a state government that, by fiat, forces their fees lower and their coverage higher, State Farm is trying to exit the property insurance business in Mississippi, and the state legislature is considering legislation to prevent them from leaving.

Mississippi Attorney General Jim Hood said Friday he will seek
legislation aimed at blocking State Farm Insurance Cos. from refusing
to write new homeowners and commercial policies in the
hurricane-battered state.

Hood's plan would require any company
that writes automobile insurance in Mississippi and also writes
homeowners policies in other states to offer homeowners and commercial
properties throughout Mississippi....

Hood also said he his urging Gov. Haley Barbour to issue an executive
order that would force the insurer to continue writing new policies
until the Mississippi Legislature can deal with the issue.

Quoting from directive 10-289 (Atlas Shrugged):

Point Two: All industrial, commercial, manufacturing, and business
establishments of any nature whatsoever shall henceforth remain in
operation, and the owners of such establishments shall not quit, nor
leave, nor retire, nor close, sell or transfer their business, under
penalty of the nationalization of their establishment and of any or all
their property.

So I ask you, is the following statement ridiculous  over-the-top regulator-speak from Atlas Shrugged, or was it actually made by a US state AG?

"We're looking at a robber baron in the face that is trying to make an example of Mississippi," Hood said of State Farm.

OK, so lets see:  The state government decides what rates you can charge.  The state government decides what your policy has to cover.  The state government decides if you will be allowed to go out of business.  But State Farm is the robber baron.  LOL.

Hat tip:  Tom Kirkendall

New SEC rules being drafted by the Bush administration are set to declare that Paris Hilton is a fully "accredited investor" with full freedom to invest in any way she likes.  I, who graduated near the top of my class at Harvard Business School, shall likewise be declared not capable of investing and the government will limit my options "for my own good"

The U.S. Securities and Exchange Commission (SEC) has just proposed
that the amount of liquid net worth an individual must have before
investing in hedge funds and other so-called risky investments be
raised to as much as $2.5 million.

The largest program the government has for protecting us from our own investing incompetence is called Social Security, which takes retirement savings from us by force and has the government invest it for us.   As I showed in previous posts, Social Security is returning -0.8% a year on our savings.  Thank god the government is investing this money for us - no way I could have beaten a -0.8% a year return during the greatest 20-year bull market of all time.

Tinfoil Hat Observation:  I use Google search to find old posts on my site.  Usually it is flawless.  For some reason, though, my post titled Social Security Ripoff is not indexed by Google.  A follow-up post on the same day is indexed, as you can see from this search, but not the original.  I have never failed to pull up a post before, even with inexact search words, and have never failed with the exact title in the search.  Weird.   Maybe something in the comments, I will have to check.

Frequent readers will remember that licensing is one of my big pet peaves, so it will not surpise anyone that I enjoyed TJIC's article on the licensing "cycle of suck"

Here's the cycle of suck:

1. a guild of professionals decides to drive up their wages by limiting the supply through accreditation
2. to put teeth in the accreditation, they complain to the politicians
3. politicians see a chance to scratch a back (and get theirs
   scratched in turn) and pass regulations limiting the practice of the
   profession by the non-accredited
4. the price rises and the supply drops
5. marginal consumers can't afford the price
6. politicians see a chance to scratch a back (and get theirs
   scratched in turn) and use taxpayer dollars to increase the supply of a
   service"¦but just to a target consumer group

Hair braiding or delivering cows, its all the same phenomena.  As usual, I can't make a post on licensing without a quote from Milton Friedman:

The justification offered is always the same: to protect the consumer. However, the reason
is demonstrated by observing who lobbies at the state legislature for
the imposition or strengthening of licensure. The lobbyists are
invariably representatives of the occupation in question rather than of
the customers. True enough, plumbers presumably know better than anyone
else what their customers need to be protected against. However, it is
hard to regard altruistic concern for their customers as the primary
motive behind their determined efforts to get legal power to decide who
may be a plumber.

More of my posts on this topic indexed here.

Apparently, the Democratic Congress is trying to "take on" high executive pay with some kind of punitive taxation plan.  This fits well into a class of legislation I would describe as "useless at best, probably counter-productive, but of high symbolic value to our base," something to which both parties are unbelievably susceptible.

I'm confused, by the way, about why exactly I should care how much CEOs are paid, particularly for executives that don't work for companies in which I own stock?  I don't think Paris Hilton, George Clooney, or the CEO of Home Depot are worth what they are paid, but I don't know how it affects me except perhaps for some simmering envy.  Does anyone with above a 5th grade education really believe that they will pay one cent less for gas or a refinery worker will make one dollar more if the CEO of Shell is paid less?

I do understand why the shareholders of Home Depot might be pissed off about what they were paying their CEO, or more accurately, what they paid him to go away.  I am sure the Arizona Cardinals felt the same way about Dennis Green.  Now, if Democrats wanted to suggest that shareholder voting and corporate governance rules needed to be amended to make it easier for shareholders to hold managers accountable for bad decisions and to overrule sweetheart deals between buddies on the board, I am very open to listening.

Every time I write that government funded health care and health nannyism are becoming a Trojan horse for fascism, I get several emails telling me I am being a paranoid flake.  So I will have to just keep posting this kind of thing (from England), via Overlawyered:

SOCIAL workers are placing obese children on the child protection
register alongside victims thought to be at risk of sexual or physical
abuse.

In extreme cases children have been placed in foster care because
their parents have contributed to the health problems of their
offspring by failing to respond to medical advice.

The
intervention of social services in what was previously regarded as a
private matter is likely to raise concerns about the emergence of the
"fat police".

Some doctors even advocate taking legal action against parents for
illtreating their children by feeding them so much that they develop
health problems.

Dr Russell Viner, a consultant paediatrician at Great Ormond Street
and University College London hospitals, said: "In my practice, I can
think of about 10 or 15 cases in which child protection action has been
taken because of obesity. We now constantly get letters from social
workers about child protection due to childhood obesity."

Here is a question for you.  What product is coming under fire from "consumer advocates" for providing more of what consumers are buying the product for?  Answer.

I got a prospectus recently asking for bids to operate a marina facility in Toledo, Ohio.  Typically, when privatizing a recreation facility, the government issues a contract that is essentially a lease -- they lease the facility to a private company who runs it for profit.  Companies compete for the lease by bidding the rent they will pay for the lease, the winning company being a combination of the best qualified and the one offering the highest lease payments.

This prospectus is very similar.  However, in the bid I noticed a collection of requirements called "affirmative action compliance" that were almost as thick as the description of the facility and the sample lease terms.  In the routine course of operating such a lease, from time to time a private company must do maintenance and construction work on the facility.  For example, marina docks are nearly constantly under re-construction, in a process similar to painting the Golden Gate Bridge (more rebuilding work is presumably required in Ohio when the lakes and rivers catch on fire). 

The state of Ohio seems extraordinarily concerned about the racial makeup of any workers who might do construction on the docks in the course of the marina's operation.  In fact, in this prospectus they have quotas on minority hiring -- you need to have at least 9% minorities and 6.9% female work hours in any construction project you perform.  But it is even more detailed than that.  Because these quotas apply as well to EVERY INDIVIDUAL TRADE.  They list the following trades:

Asbestos workers, boilermakers, bricklayers, carpenters, cement masons, electricians, elevator constructors, glaziers, ironworkers, lathers, operating engineers, painters, plasterers, plumbers & pipefitters, roofers, sheet metal workers, other trades

Not only does the job have to have at least 9% minority hours, but each and every category listed has to have 9% minority hours.   So, overall, you could have 50% of your work force be minorities, but if the folks who constructed your elevator were all white, you fail the test.

*CLUNK*  That is the sound of the prospectus hitting the circular file. 

Lawrence Lessig in Wired, via Reason's Hit and Run:

I was one of those reluctant regulators. As the evidence
of Microsoft's practices became clear, I remember well thinking, "Of
course the government needs to do something." And I remember very well
the universal impatience with the notion that the market would solve
the problem. How could it, when any other company was likely to behave
just as Microsoft did?

We pro-regulators were making an
assumption that history has shown to be completely false: That
something as complex as an OS has to be built by a commercial entity.
Only crazies imagined that volunteers outside the control of a
corporation could successfully create a system over which no one had
exclusive command. We knew those crazies. They worked on something
called Linux.

I wanted to believe that Linux would prevail. But
I'm a lawyer, and lawyers aren't programmed to see how profitable
innovation might happen without commercial control. I didn't like the
idea of regulation; I just didn't see any alternative. The suits would
always beat the rebels. Isn't that why they were so rich?

But they never really learn, do they, and Lessig is at it again with net neutrality.  Both cases have in common that the issues have very little to do with consumers, and more to do with protecting other entrenched interests.  (Sun and Netscape in the Microsoft case, Google and Yahoo in the case of AT&T and net neutrality).

One of the issues that is giving Democrats an entre to wack on oil companies is the issue of "subsidies" for deep offshore drilling.  These subsidies appear to take the form (though nothing in the world of oil field royalty payments is very simple or clear) of reduced royalty payments:

With oil prices still above $60 a barrel, do oil companies need
inducements to find and produce more oil? That's the underlying
question of today's NYT front-page article about an Interior Department report questioning the value of royalty rebates and tax breaks for gas and oil production.

The rebates are targeted at expensive and difficult exploration,
usually in deep water or that requires deep drilling. The intention is
to incentivize that exploration, allowing the United States to increase
its domestic reserves using "unconventional oil."

This is the kind of "incentivizing" that always goes wrong for the government, and turns even the best of intentions into massive rent-seeking opportunities.  My solution is similar to Cato's Tom Firey's:  Just make the royalty payment amounts and percentages subject to a bid as part of the offshore leasing process.  The government can include minimum reserve prices and such to protect itself (as they already do for offshore leases).  He suggests rolling all the value into a single up front number.  I would instead suggest a bid upfront number plus a bid royalty that is either a fixed amount per barrel, or more likely, a fixed percentage of oil revenues at some benchmark oil price.

What I am NOT sympathetic to is one party in a lease agreement trying to use its legislative party to void the terms of a previous agreement because it no longer likes the terms:

The article notes that royalties and corporate taxes deliver into
federal coffers about 40 percent of the revenue produced from oil and
gas extracted from federal property. The worldwide average government
take is about 60"“65 percent. A 40 percent federal take may have been
fair at a time when oil prices and profits were lower, the article
suggests, but the government should be getting a much higher cut from
today's prices.

Trying to just void previous deals in order to get better terms is just thuggery, and is the worst possible disincentive for long-term investment.

I have liquor licenses in about six different states, and like sales taxes, the process varies a lot by state.  But one universal impression I have is that the whole liquor licensing process has long ago ceased to serve its original purpose and has instead become either become captive to rent-seekers or has become a bureaucratic jobs program or both.  Al Capone died more than half a century ago.  And while one might argue there is some government interest in making sure minors don't buy the product and similar rules are followed, the liquor licensing process is orders of magnitude more complex and onerous than, say, getting a license to sell cigarettes or to prepare foods on site, both of which have similar features.

The liquor licensing process in most states was crafted in the 1930s, with the end of prohibition.  At that time, the primary concern was to keep out organized crime interests who had run the liquor business during prohibition.  So the process includes FBI background checks, as well as minute disclosure of every single person who has ever loaned you money, so they can be checked out to make sure you are in no way beholden to anyone who is a bad guy in the FBI computers.  The licenses take months to obtain (including a fingerprinting process) and cost thousands of dollars a year, presumably to offset the bureaucracy required to review all the applications.  Here in Arizona, minuscule errors, such as abbreviating "Boulevard" in an address to "Blvd" can cause the application to be rejected and have to be resubmitted.  Believe me, I know.

Worse than the ridiculous jobs-program-and-mindless-bureaucracy-fighting-a-threat-that-no-longer-exists problem is the way liquor licenses are now used in many locales for rent-seeking.  The worst offenders are states that purposefully artificially limit the number of liquor licenses.  This is quite obviously an incumbent protection program, protecting current liquor businesses from new competition.  California is one such state.  Even after I had purchased an existing license for a ridiculous amount of money ($5000 I think), I still had to make my case to the local county planning board who had final approval as to whether they would allow me a license into the county.  I asked them why this was necessary, and they were very up front about it (the following is paraphrased but accurate):

If we issue too many licenses, then it would be hard for you to make money.  We are really just helping you.

Sorry, but I don't need help.  I am willing to take the risk.  And does anyone really think that Shasta County California is looking after me, an out-of-state business just entering the area?  Of course not.  What they are really saying is "let us decide if all our buddies here in the county who we play golf with and who donate to our campaigns are OK with you competing with them."

In fact, this is exactly what happens in Lake Havasu City, AZ.  Though Arizona is not a state that limits liquor licenses, Lake Havasu required some kind of local board meeting to approve our license in that city.  The stated reason was that they wanted to make sure the new liquor business would not bring down the image of the city.  Which is hilarious, for anyone who has been to Lake Havasu City, particularly in spring break.  In fact, I am pretty sure it was an excuse for all the local interests to decide if they could tolerate another competitor or not.

All this comes to mind after I read this article by Radley Balko.  It is a good example of what can happen to you if your business depends on a government license and the local rent-seekers decide that your business needs to go.  A very brief excerpt:

I'll get into the
harassment, entrapment, and defamation Mr. Ruttenberg has endured in a
bit. For the moment, I'd like to focus on possible reasons for the
harassment. Why has this been going on for several years? I think there
are a few minor motivating factors. For one, I think there is,
unfortunately, some antisemitism at play. There's also a strange
rivalry Mr. Ruttenberg had with a Manassas Park police officer over a
girl. And I think part of this may be driven by city officials who for
whatever reason simply began to harbor a grudge against Ruttenberg.
Remember Milton Friedman's old axiom: Hell hath no fury like a bureaucrat scorned.

But I think something else is going on, here. And Black Velvet Bruce
Li has hit it. I believe there is some very strong circumstantial
evidence suggesting that Mr. Ruttenberg's bar was targeted by the city
of Manassas Park because the city had its eye on the property as a
possible site for an off-track betting facility for the Colonial Downs
horse racing track in New Kent County, Virgina.

Update:  I guess this is the day to blog about outdated 1930's liquor legislation.

When the Legislature wrote the first alcohol laws after
Prohibition was repealed in 1933, California defined what a beer is and
what wine is. The definition was simple"”anything added to beer or wine
renders it something else. Sometime thereafter beer and wine producers
started adding things such as preservatives, flavor enhancers and other
things. So narrowly reading the law there is NO such product as either
beer or wine sold in California today. Now common sense and alcohol
regulators know that is not true and so for years have ignored this
narrow interpretation.

Last week [on December 13] a bare
majority of the Board of Equalization voted for the narrow
interpretation of the law, and have begun the process to tax all
alcohols with any additives as distilled spirits. This will increase
the taxes charged on beers, wines, flavored malt beverages, and
flavored beers to the level on hard liquor.

The dated California
law defines beer as having no additives whatsoever. No beer that I know
of"” except perhaps some home brews"”meets this definition.