Category Archives: Regulation

Free Market Gun Control?

In the wake of the horrific Oregon shooting a few weeks ago each side in the pro-gun/anti-gun debate engaged in a kind of holiday-esque ritual: unbox one’s standard talking points, adorn social media and the press with said arguments for a week or two, and then when the furor has died down quietly pack them back up for the next gun-related incident. The problem with the standard talking points is that although they may resonate with the owner, they do little to sway the opinion of the opposing side. They have become stale and useless.

Government prohibitions of market transactions do nothing to eliminate those transactions. Prohibition raises their costs and consequently the profit potential. This induces more, not fewer, people to ply that trade. Decentralized markets are the most efficient means of delivering to people the goods and services they want. People do not want themselves or anyone else to die a violent death. Let’s see if the market can provide this good. Since it is the left’s position that our government has been ineffective at stopping gun violence and it is the right’s position that the government has no business stopping gun violence, then let’s just pretend for a moment there is no government at all. How could this problem be solved absent any sort of bully running around threatening and intimidating people? Insurance. Yes, that’s right, insurance. Insurance companies are in the business of providing financial protection for unforeseen events. Consequently insurance companies are in the business of mitigating risk. If someone owns (or rents) a home they will, if they are smart, carry a liability policy. This protects the policy owner from financial ruin if they are found guilty of causing some sort of harm to another. In order to minimize such claims involving guns each insurance agency could impose their own (varying) set of regulations on gun ownership for their policyholders. Depending on the level of policy owner regulation some insurers would see more losses related to gun incidents and some fewer. Those that had fewer would find their policies and regulations being copied. The market would soon converge on the most efficient and set of regulations that allow people to own guns while still preventing gun related incidents.

A decentralized system is superior to any one-size-fits-all top down approach because it is self-regulating through an alignment of incentives. In other words it is a “carrot” and not a “stick” approach. Gun owners don’t want to be sued into poverty if despite their best efforts something unexpected happens. Insurers prefer fewer claims over more, so they will make sure their policy owners do indeed make good on those best efforts.

Would this system have prevented Sandy Hook or the Oregon shooting? Maybe, maybe not. Since both shooters got their guns from relatives perhaps those relatives would not have be able to afford the higher premiums (due to other risk factors), or perhaps they would have been compelled to have kept the guns better secured, or perhaps other policy rules would have given them second thoughts about allowing others to access to their guns. We can’t know for certain what might have happened, but the point is that there are at least several possible barriers under this system. Not a single “sensible” new law would have imposed the tiniest of impediment had they been in place prior to those incidents.

So at this point the obvious question might be, “We have insurance today, why don’t insurance companies enact these sort of regulations today?” That is actually such a good question that rather than speculate I called my insurance agent at State Farm and asked him. The reason is simple: gun related incidents not involving an actual criminal (i.e. criminals shooting other criminals) are so few in number they can’t actuarially determine the risk level for them. It’s like trying to calculate the risk of blindness caused by a snowflake injury.

Despite media hype to the contrary, these events, as horrific as they are, are so few and far between that we each have a better chance of being struck by lightning than becoming a shooting victim. Other inanimate objects controlled or used by humans cause far more harm than guns each year (cars, pools, trampolines, etc.)  and yet there is no call to ban those things. Quite odd. Insurance acts as a guide to mitigating risk. Risky things are expensive to insure (be that poor drivers or unguarded pools) and so that tends to minimize those things.

Rather than lamenting violence in this country we should be astounded that in a country with over 300 million guns the murder rate is a mere 4.7 per 100,000 per year.  That is lower than 110 other countries with more stringent gun control or outright bans. We should always strive to do better but since there seems to be no correlation between murder rates and gun control then perhaps the answer is not more gun control but rather to follow the market’s lead and see what works and copy that. Laws shackle us from trying alternative approaches and limit choice. Only the free choice of millions in the market can guide us to the best solution.

* Answers to some obvious objections:

Question: “Well what if someone just chooses to get a policy that doesn’t cover guns or they just don’t get insurance, i.e. they simply take the risk that all will be fine?”

Answer: They are of course free to do so, however, the complete lack of any protection means those they have harmed (or their agents) as a result of their negligence are without any limitation whatsoever permitted to take all that they possess in the world, up to and including their life. In other words there is no limitation of liability if you don’t have insurance or have insufficient coverage. That is a pretty big motivator for 99.9999% of all people to have the peace of mind of being protected by insurance coverage.

Question: “Well what if it is just some homicidal loner who buys a gun and is planning on dying, so they don’t care about insurance or liability?

Answer: Liability laws would need to be eliminated so that one could sue the person that sold them the gun and likewise the person that sold that person the gun, all the way up to the manufacturer of the gun. This would ensure that each person in the chain has an incentive to exercise some level of due diligence to ensure whoever they are selling the gun to represents little risk and is qualified to operate it.

Question: “But wouldn’t that just put gun manufacturers out of business if they got sued every time someone got shot?”

Answer: No, because gun manufacturers would perform whatever actions their insurer said they must do in order to remain protected under their own insurance. As long as they do what the insurer says (i.e. voluntary regulation), they are protected from any such claims. Likewise each person down the chain of sale then has an incentive to be protected by insurance and thus to have their actions regulated by their own insurer. The end result is the final seller then has the greatest incentive to ask for certification of the buyer from some other independent certifying body that has “okayed” the buyer for the seller. That certifying agency takes on the risk and you can be certain they will investigate the heck of the background of each person applying for certification. The certifying agency has their own insurance and their insurer will drive the level of due diligence they must engage in order to approve or deny gun buying permits.

Question: “So gun buyers would be in some sort of database and if they did not possess the purchasing permit they would not be able to buy a gun?”

Answer: Yes and no. Those that want to prove to the world they are low risk and not crazy would voluntarily do so. Once they have their seal of approval they could purchase whatever firearms they wanted and remain protected by insurance. But, being a free system, if someone does not want insurance they can buy guns from others who also don’t want to be part of the system – and this would all be legal. There would be no “black market” per se of people without permits buying guns. There would simply be a small market of some people doing this but the inherent risk of selling to someone like that would be so great it would make the cost of the guns so high this alone would act as a natural barrier to most. Most crazed loners are not financially well off. But given the enormous downsides very few would engage in this sort of activity. Basically the same people that are criminals today and can’t legally buy guns would remain similarly verboten under this system. But the point of gun control has never been to stop criminals from getting guns – everyone knows mere laws won’t stop that. The point has always been to minimize accidental shootings or the mentally unbalanced from obtaining weapons and this approach would accomplish this in an entirely voluntary approach. It would also foster an environment of fewer accidents since today anyone can buy a gun without any training at all. Under this approach one would have to demonstrate competency. We demonstrate competency to drive a car with a license, so why not demonstrate competency to handle a gun with a license? I’d rather have a private system doing this rather than a one size fits all government approach that is immune to improvements from new information.

Zombieland

There is a type of parasite known as “zombie” parasites. They alter the brain chemistry of their host and cause them to engage in behavior that they would normally never undertake. Naturally these behaviors benefit the parasite at the expense of the host. For example the Nematomorph hairworm targets grasshoppers and will compel them to dive directly into bodies of water – an apparent suicide. To someone unaware of the parasitical influence this behavior would be truly baffling. Humankind will also engage in similarly baffling behavior due to the influence of its parasite: the state. Likewise, to those unaware of the state’s infection of society, human behavior can be sometimes baffling. For example, just this week there was much moral outrage over the revelation that a Martin Shkreli (owner of Turing Pharmaceuticals) purchased the rights to manufacturer the drug pyrimethamine (brand name Daraprim) and promptly raised the price from $13.50 to $750 per pill. How can this be?! This is horrible; obviously this is an example of “market failure” that must be remedied by state intervention to ensure such greedy bastards can’t get away with such imprudent behavior. Oh, there is greed in play here, but it is not entirely of Shkreli’s doing, he has a good friend helping him out: the state. Acting like a zombie parasite injecting poison into its victim’s brain, the state distorts natural market incentives to such a degree that we are left with nothing but head-scratching outcomes such as this.

The first clue that the state is involved in this mess was the phrase “bought the rights” peppered throughout every new report on this matter. How does one buy the right to make something? Any reasonably competent organic chemist could look at the structure of that drug and figure out how to make it.* What is preventing someone from doing that and eschewing the need to buy the “rights” to make it? The state. Acting under the auspices of the patent office and the FDA the state creates an artificial monopoly barrier for the production of goods as well as their importation into this country. In essence the state acts as the hired goons of Company A that holds a patent or a licenses to produce Drug B. If anyone else tries to produce or import Drug B, those hired goons will take them down. Don’t believe me? Here are the facts: The FDA bans the importation of this drug (for example, a company in India currently makes it for 10¢ a pill) – so Shkreli is safe from that sort of competition. And because he has bought the “right” to make it in the US, that means no one else can make it unless they go through an onerous and expensive FDA approval process. And he didn’t just buy the rights for a song, no, he spent $55 million to acquire those “rights.” So from a strictly economic standpoint the price increase makes sense. The value of a capital acquisition is driven by the price its products can command on the market. Clearly under a monopoly situation (only made possible by the state) it can command a very high price indeed. Absent such monopoly rights, the recipe for the production of that drug would have had some value but certainly no where near $55 million worth.

When the pundits and critics blame the “free” market for this sort of ridiculous outcome I am left to ponder what an odd definition they must have for the word “free”. Does “free” mean to be influenced and controlled by an implicitly violent cartel of bureaucrats that restricts, regulates, licenses, subsidizes, and outlaws in favor of the few at the expense of the many? If so, then I’d like less freedom please. Like the unfortunate grasshopper most of society is willfully ignorant of the parasitical influence in our midst and so, like the grasshopper, we blindly leap into the abyss.

* please see this page for a discussion of the inevitable “but without IP no one will innovate” objection

Boulders in the Stream

The surety of the law of unintended consequences proceeding from state legislation is as steadfast as the law of gravity. Emblematic of this axiom is the massive drop  off (down 40-60%) in book sales in Israel this past year after the passage of a law intended to bolster book sales, protect small book sellers from “big chains” and of course guarantee a “living wage” to authors.  To those ignorant of basic economics and human behavior the terms of this law might appear reasonable. It guaranteed authors 8% of the sales of the first 6,000 books sold and 10% of all books thereafter while simultaneously criminalizing the discounting of books during their first 18 months of sales. Supposedly this would help the underdogs: small booksellers and new authors. Ironically it does the exact opposite. It is the unknown author that has the greatest incentive to discount heavily in order to entice someone unfamiliar with their work. It is small book sellers that are most likely to haggle or “make a deal” when someone makes a substantial purchase.

Sadly Israel is not alone in this sort of book market meddling. Quite a number of other countries (mainly in Europe) have what are known as “fixed book price agreements” type laws. These are “resale price maintenance agreements”, commonly used in the US on a voluntary basis between vendor and customer, codified into law and backed by the state. In the US if company A wants Vendors B-Z to sell a widget for $1 and Vendor D sells it for less, then the solution is simple: company A just stops selling to vendor D. But in countries where such agreements are enforced by the state, vendor D can be fined or jailed. Let that sink in: jail time for selling goods “too low.” What monsters.

The usual defense of these laws is the same tired protectionist propaganda deployed whenever an entrenched business model is threatened by a new competitor: we need the state to protect us from “unfair” competition. “Unfair” being code for “somehow these people figured out how to sell the product I’m selling for a lot less and I can’t figure out what they are doing or I’m unwilling to change my business model to compete”. For example France has a “Lang Law” which permits book publishers to set the price of the book and then forbid anyone from selling it for less than 95% off the cover price. Fast forward to 2014 and a tweak was added to this law that was targeted at Amazon.com who was both discounting their books 5% and offering free shipping. Apparently selling books into the French market for the exact same price as French bookstores is considered “unfair” if the seller is a ‘foreign’ company.

So what we have here is a real world economics experiment, akin to raising the minimum wage to $50/hour. Israel has, in effect, dialed in the $50 option on book price fixing laws. While many countries have such economic interventionist type protectionism only Israel elevated theirs to stratospherically inane levels. From this we saw quick and clear signs of damage (just as we would if the minimum wage were raised to $50/hour). However, just as with the minimum wage laws, there still exist damaging effects in those countries with more “moderate” protectionist schemes such as France. It is perhaps apropos that a French economist (Bastiat, 19th century) speaks of the “unseen” damage wrought by market interventions.

If the demand for books is inelastic then to the extent book sellers earn more, the sellers of other goods earn less, while on net the public receives fewer goods for money spent. If the demand is elastic then book sellers earn less and other vendors earn more but the public still receives fewer goods. Indeed, the Israeli example demonstrated the elasticity of book demand. After their law went into affect, book sales went down and toy sales went up (as parents passed over high priced books for more affordable toys).

The fatal conceit of the politician is the belief that they can control nature (man) by dictate: people want they want and laws are like boulders in a stream  – it may slow, but it will not stop the flow of water.

FAA Proposes to Murder 100 People Per Year

If you are anything like millions of other Americans you have bought something over the Internet. A world of wares is there for us to browse at just the click of a mouse and tap of a keyboard. And although it is in some respects virtually the same process we (or our parents for the younger among us) engaged in when we browsed print catalogs not that many years ago, it is also a vast improvement over that older, static, process. Information is updated in real time. We can make buying decisions based on the reviews and feedback of other consumers. We can instantly compare prices and options among several vendors. In short, the Internet has not simply repackaged an old process in some techy guise; it has made a material improvement that has added value (that is, time) to all of our lives.

However, one aspect of the ordering process has not changed in over 170 years (Tiffany’s Blue Book, published in 1845 was the first mail-order catalogue in the US) and that is the delivery process. Yes, it has gotten faster (with the advent of air delivery) but the core process is the same: the order changes hands multiple times from human to human as it moves through the delivery pipeline. To be fair, this process is far more enviable than the alternative of picking up the order yourself. In fact one of the rarely noted benefits of bulk delivery is the prevention of accidental death. If every person who has ever ordered something had to go and pick the order up themselves the cost in time and hence productivity is incalculable. But the cost in lives would be calculable to a degree, given the fact that for a certain number of miles driven there will be a certain number of motor vehicle fatalities. All things being equal, without delivery, more people would certainly have died.

Today, after 170 years following one delivery model we are on the cusp of switching to a new delivery model: the drone. Amazon.com has been experimenting with what they call “Prime Air”, that is, direct delivery of your Amazon order, by drone, to your doorstep within hours of placing the order. Amazing! Forget Marty McFly’s 2015 hover board – this is even cooler! But, you knew there was a “but” coming, the FAA will have none of that.  Last week they proposed a new set of regulations for Unmanned Aircraft Systems (UAS) (that only apply to private business naturally; we can’t have these rules standing in the way of government users). Among some of the more onerous rules that would all but quash Amazon’s plans include: “The operator must remain within visual line of sight of the drone” and “They can only operate in the daylight and under 500 feet”. These proposed regulations are driven more by fear of the unknown than by any rational concern over safety. It’s like they never got the point of the old college essay primer: “A ship in harbor is safe, but that is not what ships are made for.” Hint: the point is to let the ship sail so that its potential may be realized.

If these proposed rules are implemented there will be an unseen cost, one that I’m surprised a supposedly “must save lives” utilitarian-mindset entity like the FAA is apparently oblivious to. Were drone delivery of packages permitted it would save roughly 100 lives per year in the United States alone due to the decreased mileage of delivery vehicles (based on my own estimates, see gregmorin.com). And that is only for Amazon deliveries. When other companies begin to deploy the same technology the potential for saving lives only rises further.

Internet commerce, that is, the free market, through its endeavoring to improve our lives has also managed to save many of them. Let’s not forget that lesson as we look toward the future.

The Unseen (Septic)

What does a septic tank have to teach us about economics? This rather mundane bit of technology is at the center of depressingly familiar story figuratively brewing in my backyard. It’s not my septic tank that is the issue, but rather one literally just down the street from me in the small town of Bishop, GA. Bishop residents Blyth and Diana Biggs purchased the “Fambrough House” on the main thoroughfare (Hwy 441) with the intention of residing there and turning it into the first ever restaurant in Bishop. They were on target to open in August 2014 when they hit a snag, well, more of a massive pothole, on the road of entrepreneurship. It seems the Oconee County Health Department is going to require them to rip out their current septic system and install a commercial grade unit to the tune of a mere $75,000. Why? Well, ‘cause regulations say so. And we all know that regulations are infallible because the mantra “one size fits all” has never ever resulted in unintended consequences. Suffice it to say, when I saw their post about this last year on Facebook, all I had to read was “We’ve run into a bit of a problem…” and I instantly knew what the source of their problem was – the state. Nothing will throw cold water faster on the dreams of an entrepreneur than a byzantine labyrinth of irrational regulations.

So, to return to the original question, what does a septic tank teach us about economics? In this case it reminds us of the central lesson of Frédéric Bastiat’s Broken Window Fallacy – unseen effects must also be brought to account when analyzing economic outcomes. In this case, a restaurant that never opens would be an “unseen” effect of a gross misapplication of this particular regulation.

Regulations are an economic good. They provide a benefit, but like all economic goods they have a cost. However, when economic goods are forcibly imposed their cost no longer bears any relationship to the true demand (and hence price) for them. For example, some people like aquariums, but not everyone does. If the government made a law that required all households to have an aquarium, this would naturally shift the demand pattern from partial to universal. From this universal demand we would then witness an elevated price (Econ 101: as demand increases so does price). In the same way an artificially increased demand for regulation drives up the costs for those regulations. The price of these imposed regulations operates in a vacuum, uninfluenced by any other considerations that might compel one to balance their costs with other equally important considerations. For example, if the owners were not compelled by the threat of violence to keep their doors shut they would then be able to freely weigh the costs of opening with a potentially undersized septic vs. the costs of a delayed opening. All things being equal, absent state imposition of these regulations, we would find that demand, and hence price, for septic installation would be lower. This leads to the rather ironic outcome that in the absence of state mandated regulations many places like the Bishop House would actually be more likely to make these such changes owing to their lower costs).

But, if the Bishop House is unable to open due to this artificially imposed barrier, then we will all be the poorer for it, for what is wealth if not the betterment of our lives by the voluntary actions of fellow human beings? Every person barred from adding his own unique contribution to society by artificial barriers (the economic interventionism of regulations, licensing and employment law) erected by the state makes all of society that much poorer.

P.S. If you would like to learn more about The Bishop House or help them please see http://www.gofundme.com/fo1klc

Not Neutrality, Part 2

The moniker “net neutrality” is perhaps one of the most masterful strokes of political propaganda, right up there with “ethnic cleansing” and “quantitative easing” when measured for overall obfuscation. When asked their opinion, many are hesitant to take a stand, as they retreat behind a wall of an honest lack of knowledge on the subject. For the most part this is due to a perceived requirement that one must possess a deep technical understanding of how the internet works in order to have an informed opinion. Unfortunately this plays right into the hands of its proponents; “it’s complicated, trust us, we know what is best”. In fact this complexity tactic comes directly from the pundit’s playbook; witness the recent condescending Jonathan Gruber revelations (“Lack of transparency is a huge political advantage.”) In fact, the essence of net neutrality is not at all complicated; it is just good ol’ fashioned crony capitalism in 21st century garb.

Putatively complicated subjects are often best understood through metaphor. In this case we cast the large content carriers (Netflix, Amazon, Apple, Google) as manufacturers. The manufacturers need to ship their product to distributors. The ISP’s (Comcast, AT&T, Verizon) are the shipping carriers. Currently it is entirely uncontroversial that shipping carriers charge more to ship large things quickly than they do to ship small things slowly. So if we rename “net neutrality” as “shipping neutrality” things come into focus. Under “shipping neutrality” the large manufacturers want the government to force the shipping carriers to charge everyone the exact same amount regardless of size, weight, or speed. In fact, they want the shippers to ship everything at “next day air” speeds but charge first class letter rates. Net neutrality is nothing more than two parties disagreeing over pricing for a service. The cronyism comes in to play when one side demands the government take their side and implement a price ceiling. Of course such naked rent seeking would never fly politically, so it is camouflaged under the guise of protecting freedom, equality and baby kittens. Who could be against baby kittens?

But, as with all types of economic protectionism (tariffs, subsidies and other price controls) it is the consumer that is ultimately harmed. To discern this harm we must extend the metaphor a bit further. If the shipping carriers could not recoup their costs from the shipper then they would have no choice but to collect it from the recipient (postage due surcharge). Nothing is free and someone must pay.

We should be striving to make the internet more, not less, like a package shipping network. For example, if our neighbor receives a large delivery and we receive a small one, we do not subsidize his shipment through a “monthly shipment access fee”. If we receive no shipments in a particular month, we pay nothing. With free competition we would likely see a similar situation with internet access develop: no monthly charges, pay for only the amount and speed you demand as you actually consume it.

Today with internet access we pay the same amount month after month regardless of the extent to which we utilize that service. Although some may pay a bit more for faster service, the fact remains that light users subsidize heavy users. Under net neutrality this subsidization ‘inequality’ would only become more extreme. Heavy Netflix users will cause ISP’s to increase access rates for all consumers because they are legally prohibited from collecting anything extra from Netflix or basing consumer’s charges on their usage patterns; all in the name of ‘fairness’ of course. Would it not be a better outcome if through competition ISP’s charged Netflix more to ensure priority for their content and Netflix in turned passed that cost onto their customers alone? Internet access for everyone else would get cheaper and faster as ISP’s plow that ‘Netflix’ profit into bigger and faster pipes.

An even worse outcome of net neutrality would be if ISP’s were prohibited from raising anyone’s rates. This would result in a fixed price but ever slowing speeds as the network became more congested. At which point the voters would cry out “to do something” and we would then see a new “internet delivery tax” collected by the government and doled out to ISP’s that promised to wag their tails and do their master’s bidding (such as identifying all users on their network, tracking “suspicious” behavior and shutting down websites deemed by the government to be “politically incorrect”.)

So net neutrality supporters, be careful what you wish for, you just might get the world Edward Snowden feared.

Equality for All

“That all men are created equal” is the cornerstone of modern society. This sentiment is however somewhat paradoxical in being both simultaneously true and untrue. The truth flows from the recognition of a necessary commonality of the Natural Rights of all humans. It would be a logical contradiction to assert such rights for oneself whilst simultaneously excluding a grant of that same right on one’s neighbors. Therefore any asserted rights must exist equally for all ipso facto equality of all with respect to their rights.

But upon moving from the philosophical to the physical realm we see that the truth of this statement evaporates. Some people are tall, short, fat, thin, fast, slow, smart, or challenged. We are far from equal. By far the most significant molder of human history has been the strong/weak dichotomy. Throughout history the law of the jungle has ruled virtually all human interactions; the physically strong exploit the physically weak because the gains vastly exceed the costs. The cavemen did it, ancient kings did it, American Indian tribes did it, and the large nation-states of today do it to both those without (via annexation) and within (through taxation). But it is not merely groups that exert violence upon the weak; individual interactions play on this stage all too frequently.

Prior to the existence of guns there were not many options left to the physically weak when confronted with a would-be rapist or mugger. They could run, fight or submit; but being weaker they were destined to lose no matter which route they chose. The invention of the gun changed the balance of power. In short, the gun erases the chasm of physical inequality and puts both the strong and weak on an equal footing. No more must women submit to the designs of the rapist. No more must one choose between being robbed or being nearly beaten to death for resisting.

In a prior article I suggested that a hypothetically ideal world would be one where we could wave a magic wand and all guns would disappear. In retrospect this would be anything but ideal. It would once again permit the physically strong to exploit the physically weak through violence.

Those that argue for total gun prohibitions question the need for anyone to own a weapon. They fail to understand that a violent maniac who kills or wounds an innocent is misusing their weapon no differently then had they used a hammer or knife. No one suggests we outlaw hammers because someone might misuse it because we recognize the utility of the hammer. So what then, if any, is the utility of the gun? Equality. More than any other other invention, the gun makes manifest in the physical world the striven for truth of our highest ideal, that “all men are created equal.”

Life, Liberty and Oligopoly for All!

Life, liberty and the pursuit of happiness: the protection of these rights is the bedrock upon which any legitimate government is founded (if such an oxymoron is possible). However, apparently somewhere along the way “oligopoly” was added to the list of inalienable rights. To wit, the latest example of such protectionist behavior was filed in the Georgia House of Representatives on February 5. A bill (HB907) was introduced that would expand the onerous taxicab and limousine regulations in order that they encompass the activities of internet based ridesharing services such as Uber and Lyft. For those unfamiliar with these services, they use a smartphone app based system to connect people that need transportation with those willing to provide it. Like the Internet it is peer-to-peer interaction with the host company merely maintaining the communication backend. It is a lean and efficient system that translates lower operational overhead into lower consumer costs. All drivers undergo a background check and vehicle inspection before they can sign up. To weed out both undesirable drivers as well as passengers these services employ a self-regulating Ebay-style reputation/feedback system.

These services are faster, often cheaper and can quickly respond to increases in demand, so it should come as no surprise that they’ve been having an impact on the bottom line of the traditional taxi services – many of which still don’t even accept credit cards in the cab. Taxi companies don’t like competition. So what do they do? Do they turn to government and ask “Why don’t you remove all your burdensome regulations so we too can operate more efficiently and at lower costs?” No. Instead they demand that if they must drag a 100-lb boulder everywhere they go, then so too must everyone else. In reality they never would ask for regulations to be repealed. Many had a hand in crafting them. These regulations artificially suppress the supply of service (oligopoly) so as to maintain elevated prices. As an industry, taxis operate nationwide under a byzantine set of rules that permit the local government (and often competitors as well) to determine, in their sole discretion, the precise perfect quantity of taxis needed in their jurisdiction. Once that is determined, taxi owners are allowed to purchase from the government that quintessential symbol of their “public necessity” role – the taxi medallion. The medallion is nothing more than a glorified business license, albeit an artificially limited license. To imagine how limiting the quantity of licenses issued for a service might affect prices paid by the consumer, imagine if, say, another occupation that is also bizarrely licensed by the state – barbers – (really? we really need government to ensure we get a good haircut?) were restricted to just one barber per town. Sure that one barber earns more, but everyone else loses. In the same way, the taxis that already have their medallion stand to benefit by using government to artificially limit who can participate in the taxi market.

When discussing this bill in public the taxi companies are not foolish enough to divulge it’s all about protecting their oligopolistic profits; no, they claim, (as do all politicians looking for an excuse to control our lives), it is about “public safety.” Yes, because clearly when someone is paying you for a lift you lose all ability to competently operate an automobile. Cars function completely differently when a paying passenger is in them as opposed to a non-paying passenger. Yes, how stupid of me to not realize this fact.

It’s a good thing we have government, otherwise how else would we be protected from the evils of innovative businesses attempting to compete with ossified fascist oligopolies.

Energy Independence (Autarky) Makes Us All Poor

If you enjoy the soft warm glow of an incandescent light bulb then you might want to head over to your local hardware store and stock up. As of January 1, the manufacture or importation of 40- and 60- watt light bulbs has been outlawed (100-watt bulbs were banned in 2012 and 75-watt in 2013).  This ban was mandated by the Energy Independence and Security Act of 2007 – a monstrosity of a bill passed with bipartisan and industry support and signed into law by a Republican president (so much for the “Republicans are for small government” myth). It is, like all such bills, predicated on irrational fears and willful ignorance of human nature. The very title betrays adherence to an economically self-destructive goal: market independence. Such independence not only makes us poorer (paying more for less) it actually encourages belligerent behavior. Withdrawing ourselves as a country from the global market (becoming “market isolationists”) by striving for independence or erecting trade barriers makes us more, not less, likely to go to war. Equating energy independence with security is 21st century doublespeak that permits the political class to con the country into following their lead. A country that depends on acquiring its goods through a global network of trade is unlikely to foul that network by killing its participants. But a country that is “independent” has free reign to attack its neighbors if it in fact relies on those neighbors for nothing.

If market independence enhanced one’s security then the state should hold the hermit in highest regard. The hermit produces all for himself and thus relies on no one. But such independence has a cost. It is not money that enhances our standard of living; it is other humans interacting freely with one another. Money is merely a ledger entry, simple bookkeeping to measure the balance of subjective value between such voluntary exchanges if we so choose (e.g. friendship is valuable, but we don’t track that valuable exchange in terms of money). If human interactions add value to our lives, then it follows that limiting those interactions will suppress such value. Government intervention in the market arbitrarily limits these potential interactions by limiting choice. Selecting only from the approved options is no choice at all. So, if government intervention always limits choice, it follows that this will always leaves us all with less value in our lives – even those that appear to benefit from such interventions are harmed, for they too exist in a world with fewer goods because of their legally permitted decreased output.

Now one might have imagined that this “bulb ban” was vociferously objected to by the evil bulb manufacturers (who just wanted to keep foisting cheap bulbs on America in order to preserve their profits at the expense of our “energy independence”). The exact opposite was the case. Industry had been trying for years to entice consumers into switching to the higher margin CFL bulbs with promises of bulb longevity (that never materialized in practice) to offset the exorbitantly higher cost (20-fold in some cases). Once industry realized they could get government to do what the free-market would not (compel consumers to buy their product by leaving them no other choice), they quickly formed a coalition with environmental groups and pushed for crony-capitalist legislation under the cloak of eco-friendliness.

What are the results so far? The consumer has less money, the bulb manufactures have more, and the public, having been sold on the idea of greater bulb efficiency, now leave their bulbs on longer, thus entirely negating one of the primary goals of the bill. That greater efficiency would lead to greater usage should have been easily predicted by anyone who has observed the human penchant to double up on a low calorie meal. Try as they might, Congress cannot legislate away human nature.

Leave my Genes Alone

The aphorism “No good deed goes unpunished” has its counterpart when applied to business, “No good innovation can remain unscathed by the FDA.” To wit: last week the Food and Drug Administration all but ordered the company 23andMe to shut down. Their crime? They have the unmitigated gall to market their Personal Genome Services without having received prior “marketing clearance or approval” from the FDA. Those silly saps at 23andMe forgot they have to kiss the ring of their overlords if they wish to operate a business in this country.

For those unfamiliar, 23andMe sells a $99 genetic testing service wherein a customer submits to them a saliva sample that the company then performs a variety of genetic tests on in order to reveal any potential health concerns (e.g. the presence of genes predisposing one to certain types of cancer or sensitivity to certain drugs, etc.). The tests can also reveal hereditary information to provide one with possible ancestry background as well. All of this is wrapped up in a pretty slick website (that actually works!) that allows the customer to explore his or her results. They’ve basically turned something rather dull and boring (medical testing) into an exciting process of discovery that is actually affordable. With that said, the processes and testing they employ are all well vetted industry standard type testing procedures. They are simply taking existing technology and repackaging it into an easy to understand and affordable package in order to make it available to a much wider cross segment of society.

So what is the FDA’s beef with them? It’s basically semantics. You see, when either the FDA or EPA gets involved with business then all common sense goes out the window. Water becomes an insecticide and aspirin a dangerous drug. A fanciful example will help illustrate: screwdrivers are used to turn screws, and so they can be sold to turn screws, no problem. But if you now decide a screwdriver can also be used to poke holes in things or to act as a tool to pry something open and you wish to market it as a “device for poking holes or prying”, then you are now guilty of selling a “mislabeled and misbranded” product because you have not engaged ABC federal agency to plead for approval of this new application of existing technology. You will need to submit studies and analysis demonstrating that the screwdriver can indeed do these things.

That’s basically the hole 23andMe has fallen into. The FDA is concerned that they are marketing a process in a new and therefore unapproved way and they are also concerned that consumers of this service are incredibly and remarkably stupid. The FDA believes that if someone gets a false positive from one of 23andMe’s PGA tests that naturally that someone will simply take immediate and drastic actions without any kind of follow up testing or consultation with their physician. If a woman finds she has the breast cancer gene, well, she’ll just get a double mastectomy, no questions asked. If someone finds out they are prone to blood clots, they’ll just go out and start eating rat poison (the blood thinning agent warfarin is found in rat poison) in order to self medicate. Yes, as absurd as these concerns are, this is what the FDA is trying to protect us from. Of course never mind that 23andMe has very large and obvious warnings on their site that one should always consult with one’s physician before taking any steps based on test results.

So, at the height of concern in this country about rising medical costs a company steps up to the plate, provides a low cost non-invasive test that affords the customer the ability to proactively manage their health thereby preventing future costs. And how are they rewarded? The FDA valiantly steps in to all but put them out of business by forbidding them from marketing their product. Smart. Really smart. It is through actions such as these that the FDA has caused and will continue to cause far more pain, suffering and death then they have ever prevented.