Wednesday, January 10, 2018

How the Administration Gets the “Three R’s of Deregulation” Exactly Backwards

In a recent short post for the Harvard Business Review,  I proposed that regulatory reformers should be guided by “Three R’s”:
  • Retain regulations that support the basic rules of a market economy. Those include regulations that protect property rights, ensure that contracts are honored, and protect against common law harms like fraud, negligence, and nuisance.
  • Replace regulations that have legitimate aims but also have harmful unintended consequences.
  • Repeal regulations that are motivated primarily by the manipulation of public policy for private gain (rent seeking).
An article by Lisa Friedman in today’s New York Times illustrates how the Trump administration has gotten the three R’s exactly backwards. It details efforts by coal baron Robert E. Murray, a Trump mega-donor, to overturn a broad array of regulations on the coal industry. Be sure to read the full text of Murray’s wish list, which the EPA and the Department of Energy are systematically implementing.

Rather than retaining regulations that support common law property protections against harmful pollution, Murray wants to repeal them outright. His recommendations do not stop at carbon emissions but also include harmful local pollutants like ozone. To compete the picture, he wants to get rid of mine safety regulations.

Some of the regulations that Murray objects to are open to legitimate criticism. For example, he does not like Obama-era support for clean coal technology, about which many environmentalists also express skepticism. He also does not like subsidies for wind and solar energy. My own recommendation, in line with my second “R,” would be to replace the clean coal requirements and renewable energy subsidies with a simpler, more effective carbon tax.

Finally, rather than seeking repeal regulations that are motivated primarily by rent seeking, Murray indulges in open rent seeking of his own. Can it be viewed as anything other than rent seeking when an energy producer seeks to lower his own operating costs by insisting that downwind property owners absorb his output of noxious wastes without compensation?

Reposted from

Tuesday, January 9, 2018

Why We Spend So Much on Healthcare and Get So Little for Our Money?

We often hear that we, in United States, spend more on healthcare than other high-income countries, but get less for our money. A report from the Commonweath Fund, “Mirror, Mirror 2017”, is among many pieces of research to reach that conclusion.  Just why is U.S. healthcare spending so high and performance so low? What are the realistic options for reformers? One of the report’s key charts provides an excellent framework for discussing what it calls “flaws and opportunities for better U.S. healthcare.” 

Why is U.S. healthcare spending so high?

To understand why U.S. healthcare spending is so high, we can begin by asking, , “High relative to what?” After all, as one of the wealthiest countries in the world, we spend more than others on a lot of things. The question is whether U.S. healthcare spending is higher than we would expect it to be even when we take our generally high standard of living into account.

Monday, January 8, 2018

The Three R's of Effective Regulatory Reform

With tax cuts now a done deal, Republicans are turning to regulatory reform to give economic growth a further boost. There, they may find more bipartisan support. Past reforms of airlines, rail, and trucking regulation were, after all, set in motion by Democrats. 

Today, there is significant Democratic support for reform of financial regulation, especially as applied to smaller community banks. Overregulated small businesses can be found in every Congressional district, red or blue.
But while regulatory reform could be a big boost if it is done right, indiscriminate deregulation could do more harm than good.

Blanket deregulation won’t help

Many conservatives and libertarians seem to think the only good regulation is a dead regulation. If that were true, it should be possible to quantify regulation and measure the harm it does. However, attempts to do so have not been particularly successful.

Thursday, January 4, 2018

Some in Congress are Still Trying to Open Banking Service to Canabis Businesses

 As California joins the list of states that have legalized recreational marijuana, limited access to banking services continues to be a problem for producers, retailers, and other businesses in this rapidly growing sector. Because marijuana businesses cannot, in most cases, open bank accounts, accept credit cards, or make electronic payments, the sector remains largely cash based, with all the drawbacks that entails. The problem is felt by businesses that deal in medical as well as recreational cannabis.

Charlie Wilson, whose company Green Bits provides management and compliance services to marijuana-related business, puts it this way in a recent post for The Hill:
There is overwhelming evidence that electronic transactions are more secure, faster and more transparent than dealing only in cash. Yet this highly regulated industry is more difficult to monitor precisely because it is all cash. And oversight will only become more difficult with continued rapid growth and as more states legalize cannabis.
Several attempts have been made to remedy the situation. In April, Rep. Ed Perlmutter (D-CO), along with several co-sponsors, introduced the Secure and Fair Enforcement Banking Act (SAFE Banking Act), a reintroduction of legislation that had been introduced but languished in earlier Congresses. There was some hope that provisions of the act would be folded into the recently passed tax bill, but that did not happen. Not to be discouraged, just before Christmas, Rep. Andy Barr (R-KY) introduced a similar bill, the Industrial Hemp Banking Act, as stand-alone legislation.

All of these bills seek to remove federal barriers to provision of banking services. Among other provisions, they would prevent the FDIC from denying deposit insurance to banks that service cannabis-related businesses, prevent federal banking agencies from penalizing banks that conduct such businesses, and make it easier for banks to accept cannabis-related assets as collateral for loans.
Safe banking for marijuana businesses is a bipartisan cause, as the sponsorship of the above-cited bills makes clear. Now what is required is to translate popular support for legalization into Congressional action. As Marijuana Majority points out, “Bad laws change when good people speak up.”

Reposted from Niskanen Center