Afternoon roundup

• Hadley Updates
  • Megan McArdle also starts updating
  • David Harsanyi celebrates skepticism


• Kiewiet said "The vast regulatory machinery of the federal government has long been and continues to be stuck on stupid."
  
  Further confirmation via Reason, though more applied to the regulations of the several states and local districts: just try operating a simple food vending truck.
  
  Read the Washington Post article and weep.

  The holdup and a temporary patchwork of directives have thwarted Washington vendor Kristin Rider, 28. In July, says Rider, whose father owns the popular Pedro and Vinny's burrito cart at 15th and K streets NW, she bought a vending license and launched her own cart a few blocks away, at 19th and L.
  
  Within weeks, Rider says, an investigator from DCRA told her she was in violation of District rules and needed to obtain a location permit from the District Department of Transportation (DDOT). In the middle of the lunch rush, with customers waiting, she was forced to close. Rider says she called DDOT the next day and was informed that the agency no longer issued location permits and that one was not required.
  
  Rider returned to her cart. But within a week, another agent arrived. First, Rider says, he told her she needed the DDOT permit. She explained that she did not. About a month later, he returned and demanded to see receipts for food purchased. Furious and in tears, "I marched myself up to DCRA and showed them my vending permit. And they said, 'You shouldn't have got that,' " Rider said. "Well, that's not my problem. The fourth floor doesn't know what the fifth floor is doing."

I, for one, welcome the Commerce Commission's protection

Isn't it wonderful that the Commerce Commission, in protecting us from a $20 surcharge for premium VDSL2 offerings that could boost speeds from about 8 MB to about 40MB, has ensured that nobody except Telecom's CEO has VDSL2?

Unfortutunately, there's no current timetable to roll-out VDSL2.

There are no technical hold-ups, but Telecom Wholesale is locking horns with the Commerce Commission over whether it can charge an extra $20 a month for this premium service (Orcon, Vodafone and other interpret regulations as saying DSL is DSL, and there can only be one price. Both also want better terms to put their own ADSL2+ or VDSL2 gear into Telecom's roadside cabinets.)

Unfriendly skies

The American airline industry has such a perfect record of happy customers with no delays or crushed guitars that there's absolutely no need for foreign carriers to be able to fly between American cities. Consequently, cabotage is forbidden. There is no need for competition from foreign carriers and so it must be banned.

Moreover, it is so supremely important that American carriers be protected from foreign competition that the Obama administration has wisely decided that it is better to risk ruining the NHL season than to allow Canadian teams on charter flights to fly between American cities.

In a furious exchange with the Obama administration over the mid-August ruling, Canada has launched its own investigation and will soon close its skies to U.S. sports team charters in retaliation, warns Transport Minister John Baird.

The sticking point is an eight-year-old exemption that had allowed sports and celebrity charters to make several pit stops in American cities. Under existing open skies agreements, regular Canadian airline flights can only visit one U.S. city before returning.

NHL Deputy Commissioner Bill Daly warns the charter ban will create a complicated "patchwork" of travel that could "wreck havoc" with the oncoming hockey schedule, including early league games in Europe, as teams scramble to book flights under the new rules.

This is for the best under this, the best of all possible Administrations with the best of all possible Presidents.

Afternoon roundup

• Kanazawa asks whether the Russian tradition of children taking the father's middle and last name suggests something about Russia:

  The widespread practice of patronyms in Russia suggests that Russian men have historically had greater needs to be convinced of their paternity than men elsewhere (all of whom suffer from a degree of paternity uncertainty to begin with). Why is this? There are at least three (mutually nonexclusive) reasons for Russian men's greater needs to be convinced of their paternity. It could be: 1) Russian men's paternal investment was particularly more valuable, possibly because of Russia's hostile environment (Note that both Iceland and Russia are in very cold climate); 2) Russian men, for some reason, have had inherently lower motivation to provide paternal investment in their putative children; and/or (potentially precipitated by the fact that) 3) Russian women have historically been more likely to cuckold their husbands, by being more likely to have extrapair copulations and pass on their resultant offspring as their husbands'.

  I love that Kanazawa is always willing to go the extra mile in applying rat choice and evolutionary biology.


• Odd forms of collateral in Italy.


• The AIDS Healthcare Foundation sues porn producers in a bid to have condoms mandatory in pornographic films under health and safety legislation. HT: BoingBoing. Never mind that the industry already has effective self-regulation: abstract of Alexandre Padilla's relevant research below.

  This paper analyzes how self-interest and long-term profit expectations provided the necessary incentives for the adult film industry to self-regulate and to find mechanisms to minimize the risks of HIV outbreaks that could result from the asymmetric information and network effects that characterize the industry. With the help of the Adult Industry Medical Healthcare Foundation (AIM), the adult film industry developed a corporate culture to facilitate widespread coordination among members and to make the industry similar to a private club. First, I discuss the predicted effects of asymmetric information and network-effect problems on the industry in terms of HIV outbreaks. Second, I tell the story of AIM and present the policies the industry has adopted since AIM's creation to mitigate those predicted effects. In particular, I discuss how the industry managed the 2004 HIV outbreak without government intervention. Finally, I present statistics comparing HIV infection rates in the industry and general population as well as additional observations to assess the relative effectiveness of the industry in preventing and containing HIV outbreaks.

  Padilla further notes that mandated condom use would eliminate mandatory HIV tests as they then would constitute an unfair and illegal employment condition; much of the industry would be driven abroad or underground. In all those cases, the AIDS situation is worsened by regulation.

Voter preferences and electricity generation

Seamus posted yesterday a political second-best argument in favour of maintaining public ownership of Meridian: while a first best would be private ownership, that's not a politically stable equilibrium because the median voter would demand regulations on a private owner even more inefficient than the initial public ownership.

I wondered in a comment there, and in a comment over at Anti-Dismal, whether the political second-best argument might well not justify a rather wide range of inefficient status quo positions. Paul takes me to task, but I think he's conflating my extension of Seamus's argument with my actual worry about potential use of the political second best argument against change.

I'm certainly not against political second best arguments in particular application. I tend to think, for example, that the New Zealand government has sufficiently proven its utter inability to avoid expropriating Telecom's investments in broadband infrastructure, through mandated sharing with competitors, that there's little chance of substantial private investment in fiber absent government making that investment directly.

Does the political second best argument hold in the power example? First, what do voters think about government ownership or regulation of electricity generation? Well, we have some data on this from the NZES. 40% of respondents want to have full government ownership of generation and distribution; 18% want "mixed" ownership (the current situation); 27% want a private but regulated industry, and 4.5% want a private industry (rest didn't know). So, it looks like voters are strongly against having a private, unregulated industry. That suggests that a private, unregulated industry is not a political equilibrium. Even the current "mixed" ownership situation isn't particularly stable.

Now, some interesting covariates. Probability of supporting full government ownership is significantly affected by:

• Economic thinking (-): a standard deviation increase in economic thinking reduces support for full government ownership by 8%
• Political ignorance (-): a standard deviation increase in political ignorance reduces support by 4%
• Listening to National Radio (+): 3.3%
• Being male (+): increases support 12%

Other covariates didn't matter much. Probability of supporting complete privatization is increasing in economic thinking, political ignorance, being female, not being a superannuitant, and being of asian ethnicity. By and large, the magnitudes of the coefficients is tiny (less than two percent increased probability) except in the case of asian ethnicity which increases the predicted probability by 6%. Economic thinking most strongly predicts support for a private but regulated system.

I'd expect a private but strongly regulated system to be an equilibrium; I can't see a private, unregulated system being a political equilibrium. If I could push a button that would privatize the electricity system while insulating it against stupid regulations, I'd push that button. Unfortunately, such buttons don't exist.

Now, is this a generalized argument in favour of any political status quo? I don't think so. I think there's reasonable evidence consistent with that privatization would result in a highly regulated system, and I can buy that such a system could be worse than what we now have. Paul says this may make me a Marxist, but I'd say rather Coasean.

I do worry that in some cases, building popular support for economically efficient policies requires government to be the first-mover in adopting currently unpopular moves and then building support for the shift by highlighting the successes of the reforms. Economists haven't a theory of the path to equilibrium, and much less a theory of the path from inefficient but politically stable equilibria to efficient stable equilibria that avoid worse-case outcomes. Hard problems.

In any case, if it takes substantial political capital to make any of these kinds of moves, why not start with ones that are more likely to lead to stable and desirable equilibria?

Cross-tasman trade in bread?

One of the things that worries me least is whether or not my bread is fortified with Folic Acid. For some things, I'd go to the barricades. This seems one of the more minor regulatory impositions; however, I can imagine it being very costly for small bakeries.

What I'm puzzled about is the National government's willingness to go carry through with the prior Labour government's policy in this area. They cite cross-Tasman trade agreements with Australia. Now, I can see the case for regulatory harmonization in some areas, weighing appropriately concerns about reduced Tiebout competition, but who trades bread across the ocean?! If efficiencies of scale in bread-making were so large relative to transportation costs, I'd expect there to be one or two big bakeries serving all of New Zealand. Instead, they're everywhere! Coupland's, the big South Island bakery, doesn't seem to ship bread even up to the North Island, never mind to Australia.

Whenever I see things like this, I start thinking about Bootleggers and Baptists. This is all of course just speculation, but folic acid supplementation really seems like the kind of thing that can be done at very low per-unit costs by the very big bakeries but at much higher per-unit costs by the little guys. There are fixed costs in redoing your recipes and testing things out. So it seems a possibility for the kind of regulation designed to raise rivals' costs. So, there's the bootleggers. The Baptists, as often the case, are the public health folks demanding that somebody think about the children.

National's candidate explanation makes no discernible sense, unless there's a massive trans-Tasman trade in bread that nobody's told me about. Bread is about the least likely thing to ship across the ocean though: low value per unit weight so bad for shipping by air, and highly perishable so bad for shipping by sea. So I'd be a bit surprised if the trade regulations were the real story. Purely speculation, but might it be the case that big bakeries have already incurred the fixed costs of rejigging production lines and are keen not to see that investment sunk without it similarly being imposed on the little guys? I see no exemption in the regs for small bakers unless they want to go purely organic.

Or maybe my paranoid goggles are on again now that semester's started and I'm again teaching Public Choice.

Won't someone protect us from the wee fishes?

I think there was a footnote somewhere in Locke about how the point of having government wasn't really to have an impartial arbitrator who could resolve disputes and enforce judgments but rather to make sure that we'd not have fish-based pedicures.

Until Mr. Ho brought his skin-eating fish here from China last year, no salon in the U.S. had been publicly known to employ a live animal in the exfoliation of feet. The novelty factor was such that Mr. Ho became a minor celebrity. On "Good Morning America" in July, Diane Sawyer placed her feet in a tank supplied by Mr. Ho and compared the fish nibbles to "tiny little delicate kisses."

Since then, cosmetology regulators have taken a less flattering view, insisting fish pedicures are unsanitary. At least 14 states, including Texas and Florida, have outlawed them. Virginia doesn't see a problem. Ohio permitted fish pedicures after a review, and other states haven't yet made up their minds. The world of foot care, meanwhile, has been plunged into a piscine uproar. Salon owners who bought fish and tanks before the bans were imposed in their states are fuming.

The issue: cosmetology regulations generally mandate that tools need to be discarded or sanitized after each use. But epidermis-eating fish are too expensive to throw away. "And there's no way to sanitize them unless you bake them for 20 minutes at 350 degrees," says Lynda Elliott, an official with the New Hampshire Board of Barbering, Cosmetology and Esthetics. The board outlawed fish pedicures in November.

The New Hampshire Board of Barbering, Cosmetology and Esthetics?! The fish ban is currently front-page news on their website. The State Motto is curiously missing. Wonder why.

Sometimes, moral panics explain ridiculous regulations. Sometimes, collusion between a cartel of regulated firms and the regulatory agency explains ridiculous regulations. And sometimes we just have Vogons running things. On no account should you allow a member of the New Hampshire Board of Barbering, Cosmetology and Esthetics to read poetry to you.

HT: Book of Joe.

Food inspection: Quality floors and ceilings?

Don Boudreaux's post on food inspections reminds me of an interesting American case. During the "mad cow" scare a few years ago, which hammered Canadian beef exports to the US and American beef exports to Asia, Creekstone Farms decided to give the customer what he wanted: beef fully tested for BSE. They built a testing lab, trained up the staff, and were ready to start testing 100% of their animals at slaughter.

Now, if the point of USDA food inspection is to ensure that all food consumed is of at least a certain quality - helping to help prevent food-borne illness - you'd expect them to have supported Creekstone's move. Or at least been indifferent to it. Of course, you'd be wrong. The USDA banned Creekstone from implementing its testing regime.

The USDA's line is that random testing is sufficient to ensure food security; moreover, as the tests aren't as reliable on younger animals, testing of all animals could not guarantee BSE-free product. False positives could cause alarm.

This has been working its way through the courts since 2006. Last September, the DC Circuit sent it back to the District Court; Creekstone hasn't yet announced whether it will continue with the case.

I can imagine a public interest story consistent with the USDA's position. I just don't believe it. The public interest story would be built around that Creekstone's move looks like an off-diagonal in a prisoner's dilemma game where the social optimum is testing of downer cows and older beasts and little testing of younger ones but where the Nash equilibrium is the (costly) 100% testing of all animals driven by irrational consumer fears. I don't find the story too plausible: guaranteed "GE-Free" or organic products haven't taken over the food market. Folks weigh quality, safety and "solidarity in consumption" against price. Another public interest variant would be that false positives in the 100% testing regime could lead to foreign demands for 100% testing of all beef and further restrictions on US exports. Again, I don't buy it. Surely Creekstone's first move on seeing a positive result would be to double-check with another $20 test kit. And perhaps even a third test to arbitrate if the results of the first two were in conflict. I can believe restrictions following a confirmed positive case, but false positives would be sorted out prior to that stage. I'm having a hard time seeing a reasonable public interest case; it looks more like the stifling of competition through quality ceilings.

The case has had plenty of coverage in the usual outlets. Boudreaux's post just brought it back to mind.