November 20, 2015

FTC Retaliated Against, and Destroyed, Innocent Firm that Stood Up for Rule of Law

(p. A17) Sometimes winning is still losing. That is certainly true for companies that find themselves caught in the cross hairs of the federal government. Since 2013, my organization has defended one such company, the cancer-screening LabMD, against meritless allegations from the Federal Trade Commission. Last Friday, [November 13, 2015] the FTC's chief administrative-law judge dismissed the agency's complaint. But it was too late. The reputational damage and expense of a six-year federal investigation forced LabMD to close last year.

. . .

Unlike many other companies in similar situations, . . . , LabMD refused to cave and in 2012 went public with the ordeal. In what appeared to be retaliation, the FTC sued LabMD in 2013, alleging that the company engaged in "unreasonable" data-security practices that amounted to an "unfair" trade practice by not taking reasonable steps to protect patient information. FTC officials publicly attacked LabMD and imposed arduous demands on the doctors who used the company's diagnostic services. In just one example, the FTC subpoenaed a Florida oncology lab to produce documents and appear for depositions before government lawyers--all at the doctors' expense.

Yet after years of investigation and enforcement action, the FTC never produced a single patient or doctor who suffered or who alleged identity theft or harm because of LabMD's data-security practices. The FTC never claimed that LabMD violated HIPAA regulations, and until 2014--four years after its investigation began--never offered any data-security standards with which LabMD failed to comply.

. . .

. . . , the FTC is likely to simply disregard the 92-page decision--which weighed witness credibility and the law--and side with commission staff. That's the still greater injustice: The FTC is not bound by administrative-law judge rulings. In fact, the agency has disregarded every adverse ruling over the past two decades, according to a February analysis by former FTC Commissioner Joshua Wright. Defendants' only recourse is appealing in federal court, a fresh burden in legal fees.

That's what happens when a federal agency serves as its own detective, prosecutor, judge, jury and executioner. As Mr. Wright observed, the FTC's record is "a strong sign of an unhealthy and biased institutional process." And he puts it perhaps most powerfully: "Even bank robbery prosecutions have less predictable outcomes than administrative adjudication at the FTC." Winning against the federal government should never require losing so much.

For the full commentary, see:

DAN EPSTEIN. "Hounded Out of Business by Regulators; The company LabMD finally won its six-year battle with the FTC, but vindication came too late." The Wall Street Journal (Fri., Nov. 20, 2015): A17.

(Note: ellipses, and bracketed date, added.)

(Note: the online version of the commentary was updated on Nov. 19, 2015.)

November 8, 2015

Recycling Is Costly "Religious Ritual"

John Tierney penned another eye-opening commentary, this one as a cover-story for the SundayReview Section of The New York Times. A few of the best passages are quoted below.

(p. 1) In 1996, I wrote a long article for The New York Times Magazine arguing that the recycling process as we carried it out was wasteful.

. . .

So, what's happened since then? While it's true that the recycling message has reached more people than ever, when it comes to the bottom line, both economically and environmentally, not much has changed at all.

Despite decades of exhortations and man-(p. 4)dates, it's still typically more expensive for municipalities to recycle household waste than to send it to a landfill. Prices for recyclable materials have plummeted because of lower oil prices and reduced demand for them overseas. The slump has forced some recycling companies to shut plants and cancel plans for new technologies.

. . .

One of the original goals of the recycling movement was to avert a supposed crisis because there was no room left in the nation's landfills. But that media-inspired fear was never realistic in a country with so much open space. In reporting the 1996 article I found that all the trash generated by Americans for the next 1,000 years would fit on one-tenth of 1 percent of the land available for grazing. And that tiny amount of land wouldn't be lost forever, because landfills are typically covered with grass and converted to parkland, like the Freshkills Park being created on Staten Island.

. . .

Last week the National Institutes of Health announced that it had prematurely ended a large national study of how best to treat people with high blood pressure because of its exceptional results.

In this trial of more than 9,000 people age 50 and older with high blood pressure, an aggressive treatment strategy to keep systolic blood pressure below 120 was compared with a conventional one aimed at keeping it below 140. The subjects all had a high risk of heart attacks, stroke and heart failure. The N.I.H. concluded, six years into a planned eight-year study, that for these patients, pushing blood pressure down far below currently recommended levels was very beneficial.

. . .

As a business, recycling is on the wrong side of two long-term global economic trends. For centuries, the real cost of labor has been increasing while the real cost of raw materials has been declining. That's why we can afford to buy so much more stuff than our ancestors could. As a labor-intensive activity, recycling is an increasingly expensive way to produce materials that are less and less valuable.

Recyclers have tried to improve the economics by automating the sorting process, but they've been frustrated by politicians eager to increase recycling rates by adding new materials of little value. The more types of trash that are recycled, the more difficult it becomes to sort the valuable from the worthless.

In New York City, the net cost of recycling a ton of trash is now $300 more than it would cost to bury the trash instead. That adds up to millions of extra dollars per year -- about half the budget of the parks department -- that New Yorkers are spending for the privilege of recycling. That money could buy far more valuable benefits, including more significant reductions in greenhouse emissions.

So what is a socially conscious, sensible person to do?

It would be much simpler and more effective to impose the equivalent of a carbon tax on garbage, as Thomas C. Kinnaman has proposed after conducting what is probably the most thorough comparison of the social costs of recycling, landfilling and incineration. Dr. Kinnaman, an economist at Bucknell University, considered everything from environmental damage to the pleasure that some people take in recycling (the "warm glow" that makes them willing to pay extra to do it).

He concludes that the social good would be optimized by subsidizing the recycling of some metals, and by imposing a $15 tax on each ton of trash that goes to the landfill. That tax would offset the environmental costs, chiefly the greenhouse impact, and allow each municipality to make a guilt-free choice based on local economics and its citizens' wishes. The result, Dr. Kinnaman predicts, would be a lot less recycling than there is today.

Then why do so many public officials keep vowing to do more of it? Special-interest politics is one reason -- pressure from green groups -- but it's also because recycling intuitively appeals to many voters: It makes people feel virtuous, especially affluent people who feel guilty about their enormous environmental footprint. It is less an ethical activity than a religious ritual, like the ones performed by Catholics to obtain indulgences for their sins.

Religious rituals don't need any practical justification for the believers who perform them voluntarily. But many recyclers want more than just the freedom to practice their religion. They want to make these rituals mandatory for everyone else, too, with stiff fines for sinners who don't sort properly. Seattle has become so aggressive that the city is being sued by residents who maintain that the inspectors rooting through their trash are violating their constitutional right to privacy.

For the full commentary, see:

JOHN TIERNEY. "The Reign of Recycling." The New York Times, SundayReview Section (Sun., OCT. 4, 2015): 1 & 4.

(Note: ellipses added.)

(Note: the online version of the commentary has the date OCT. 3, 2015.)

The Kinnaman paper mentioned above, is:

Kinnaman, Thomas C., Takayoshi Shinkuma, and Masashi Yamamoto. "The Socially Optimal Recycling Rate: Evidence from Japan." Journal of Environmental Economics & Management 68, no. 1 (July 2014): 54-70.

October 23, 2015

"Strong-Willed Scientists Overstated the Significance of Their Studies"

The New York Times seems open to the idea that strong-willed scientists might overstate their results in science food studies. I wonder if The New York Times would be open to the same possibility in science climate studies?

(p. A19) For two generations, Americans ate fewer eggs and other animal products because policy makers told them that fat and cholesterol were bad for their health. Now both dogmas have been debunked in quick succession.

. . .

Epidemiological data can be used to suggest hypotheses but not to prove them.

Instead of accepting that this evidence was inadequate to give sound advice, strong-willed scientists overstated the significance of their studies.

Much of the epidemiological data underpinning the government's dietary advice comes from studies run by Harvard's school of public health. In 2011, directors of the National Institute of Statistical Sciences analyzed many of Harvard's most important findings and found that they could not be reproduced in clinical trials.

It's no surprise that longstanding nutritional guidelines are now being challenged.

In 2013, government advice to reduce salt intake (which remains in the current report) was contradicted by an authoritative Institute of Medicine study. And several recent meta-analyses have cast serious doubt on whether saturated fats are linked to heart disease, as the dietary guidelines continue to assert.

Uncertain science should no longer guide our nutrition policy. Indeed, cutting fat and cholesterol, as Americans have conscientiously done, may have even worsened our health.

For the full commentary, see:

NINA TEICHOLZ. "The Government's Bad Diet Advice." The New York Times (Sat., FEB. 21, 2015): A19.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date FEB. 20, 2015.)

October 19, 2015

FCC Gains Arbitrary Power Over Internet Innovation

(p. A11) Imagine if Steve Jobs, Larry Page or Mark Zuckerberg had been obliged to ask bureaucrats in Washington if it was OK to launch the iPhone, Gmail, or Facebook's forthcoming Oculus virtual-reality service. Ridiculous, right? Not anymore.

A few days before the Independence Day holiday weekend, the Federal Communications Commission announced what amounts to a system of permission slips for the Internet.

. . .

As the FCC begins to issue guidance and enforcement actions, it's becoming clearer that critics who feared there would be significant legal uncertainty were right. Under its new "transparency" rule, for example, the agency on June 17 conjured out of thin air an astonishing $100 million fine against AT&T, even though the firm explained its mobile-data plans on its websites and in numerous emails and texts to customers.

The FCC's new "Internet Conduct Standard," meanwhile, is no standard at all. It is an undefined catchall for any future behavior the agency doesn't like.

. . .

From the beginning, Internet pioneers operated in an environment of "permissionless innovation." FCC Chairman Tom Wheeler now insists that "it makes sense to have somebody watching over their shoulder and ready to jump in if necessary." But the agency is jumping in to demand that innovators get permission before they offer new services to consumers. The result will be less innovation.

For the full commentary, see:

BRET SWANSON. "Permission Slips for Internet Innovation; The FCC's new Web rules are already as onerous as feared and favor some business models over others." The Wall Street Journal (Sat., Aug. 15, 2015): A11.

(Note: ellipses added.)

(Note: the online version of the commentary has the date Aug. 14, 2015.)

October 11, 2015

Feds Constrain Startups

(p. A15) Virtually every state has suffered a drop in startups, which suggests that this is a national, and not a regional or state, problem.

. . .

If history is any indication, many of today's economic heavyweights will ultimately decline as new businesses take their place. Research by the Kaufman Foundation shows that only about half of the 1995 Fortune 500 firms remained on the list in 2010.

Startups also have declined in high technology. John Haltiwanger of the University of Maryland reports that there are fewer startups in high technology and information-processing since 2000, as well as fewer high-growth startups--annual employment growth of more than 25%--across all sectors. Even more troubling is that the smaller number of high-growth startups is not growing as quickly as in the past.

. . .

Surveys by John Dearie and Courtney Gerduldig, authors of "Where the Jobs Are: Entrepreneurship and the Soul of the American Economy" (2013), show that entrepreneurs report being hamstrung by difficulties in finding skilled workers, by a complex tax code that penalizes small business, by regulations that raise the costs of doing business, and by difficulties in obtaining financing that have worsened since 2008.

For the full story, see:

EDWARD C. PRESCOTT and LEE E. OHANIAN. "Behind the Productivity Plunge: Fewer Startups; New businesses were created at a 30% lower rate in 2012 than the annual average rate in the 1980s." The Wall Street Journal (Thurs., June 26, 2014): A15.

(Note: ellipses added.)

(Note: the online version of the story has the date June 25, 2014.)

October 5, 2015

Belgian Government Mandates Mayo to Be No Less than 80% Fat

(p. A1) BRUSSELS--Mayonnaise here is a sauce celebre, so important that a 60-year-old royal decree governs what goes in it.

. . .

Belgian mayonnaise must contain at least 80% fat and 7.5% egg yolk. European rivals are permitted to sell mayo with a mere 70% fat and 5% egg yolk.

For the full story, see:

TOM FAIRLESS. "No Yolk, Belgian Food Producers Fed Up with Mayonnaise Rules; But effort to relax royal recipe doesn't go down well with chefs; yellow peas." The Wall Street Journal (Mon., Sept. 20, 2015): A1 & A10.

(Note: ellipsis added.)

(Note: the online version of the story has the date Sept. 20, 2015 and the title "In Belgium, Mayonnaise Makers Want a New Recipe; But effort to relax royal recipe doesn't go down well with chefs; yell;ow peas.")

September 19, 2015

Increasing Recalls of Organic Food Due to Bacterial Contamination

(p. B3) New data collected by Stericycle, a company that handles recalls for businesses, shows a sharp jump in the number of recalls of organic food products.

Organic food products accounted for 7 percent of all food units recalled so far this year, compared with 2 percent of those recalled last year, according to data from the Food and Drug Administration and the Department of Agriculture that Stericycle uses to compile its quarterly report on recalls.

In 2012 and 2013, only 1 percent of total units of food recalled were organic.

Kevin Pollack, a vice president at Stericycle, said the growing consumer and corporate demand for organic ingredients was at least partly responsible for the increase.

"What's striking is that since 2012, all organic recalls have been driven by bacterial contamination, like salmonella, listeria and hepatitis A, rather than a problem with a label," Mr. Pollack said. "This is a fairly serious and really important issue because a lot of consumers just aren't aware of it."

For the full story, see:

STEPHANIE STROM. "Private Analysis Shows a Sharp Increase in the Number of Organic Food Recalls." The New York Times (Fri., Aug. 21, 2015): B3.

(Note: the online version of the story has the date AUG. 20, 2015, and has the title "Recalls of Organic Food on the Rise, Report Says." The last paragraph quoted above differs in the print and online versions; the version quoted is the print version. The online version of the paragraph is: "According to Stericycle, 87 percent of organic recalls since 2012 were for bacterial contamination, like salmonella and listeria, rather than a problem with a label. "This is a fairly serious and really important issue because a lot of consumers just aren't aware of it," Mr. Pollack said.")

August 17, 2015

Average Length of 10-K Reports Rises to 41,911 Words

WordLength10KannualReportGraph2015-07-05.jpgSource of graph: online version of the WSJ article quoted and cited below.

(p. B1) General Electric Co.'s chief financial officer was taken aback by the industrial conglomerate's 246-page annual report.

The 10-K and supporting documents his finance team and others at the company produced was meant to give investors a comprehensive picture of GE's businesses and financial performance over the previous 12 months. It did everything but.

Packed with text on the company's internal controls, auditor statements and regulator-mandated boilerplate on "inflation, recession and currency volatility," the 2013 annual report was 109,894 words long. "Not a retail investor on planet Earth could get through" it, let alone understand it, said GE finance chief Jeffrey Bornstein.

Companies are spending an increasing amount of time and energy beefing up their regulatory filings to meet disclosure requirements. The average 10K is getting longer--about 42,000 words in 2013, up from roughly 30,000 words in 2000. By comparison, the text of the Sarbanes-Oxley Act of 2002 has 32,000 words.

For the full story, see:

VIPAL MONGA and EMILY CHASAN. "The 109,894-Word Annual Report." The Wall Street Journal (Tues., June 2, 2015): B1 & B10.

August 5, 2015

Plant Breeders Use Old Sloppy "Natural" Process to Avoid Regulatory Stasis

(p. A11) What's in a name?

A lot, if the name is genetically modified organism, or G.M.O., which many people are dead set against. But what if scientists used the precise techniques of today's molecular biology to give back to plants genes that had long ago been bred out of them? And what if that process were called "rewilding?"

That is the idea being floated by a group at the University of Copenhagen, which is proposing the name for the process that would result if scientists took a gene or two from an ancient plant variety and melded it with more modern species to promote greater resistant to drought, for example.

"I consider this something worth discussing," said Michael B. Palmgren, a plant biologist at the Danish university who headed a group, including scientists, ethicists and lawyers, that is funded by the university and the Danish National Research Foundation.

They pondered the problem of fragile plants in organic farming, came up with the rewilding idea, and published their proposal Thursday in the journal Trends in Plant Science.

. . .

The idea of restoring long-lost genes to plants is not new, said Julian I. Schroeder, a plant researcher at the University of California, Davis. But, wary of the taint of genetic engineering, scientists have used traditional breeding methods to cross modern plants with ancient ones until they have the gene they want in a crop plant that needs it. The tedious process inevitably drags other genes along with the one that is targeted. But the older process is "natural," Dr. Schroeder said.

. . .

Researchers have previously crossbred wheat plants with traits found in ancient varieties, noted Maarten Van Ginkel, who headed such a program in Mexico at the International Maize and Wheat Improvement Center.

"We selected for disease resistance, drought tolerance," he said. "This method works but it has drawbacks. You prefer to move only the genes you want."

When Dr. Van Ginkel crossbred for traits, he did not look for the specific genes conferring those traits. But with the flood-resistant rice plants, researchers knew exactly which gene they wanted. Nonetheless, they crossbred and did not use precision breeding to alter the plants.

Asked why not, Dr. Schroeder had a simple answer -- a complex maze of regulations governing genetically engineered crops. With crossbreeding, he said, "the first varieties hit the fields in a couple of years."

And if the researchers had used precision breeding to get the gene into the rice?

"They would still be stuck in the regulatory process," Dr. Schroeder said.

For the full story, see:

GINA KOLATA. "A Proposal to Modify Plants Gives G.M.O. Debate New Life." The Wall Street Journal (Fri., MAY 29, 2015): A11.

(Note: ellipses added.)

(Note: the online version of the story has the date MAY 28, 2015.)

July 30, 2015

Institutional Improvements Can Sometimes Be Designed, Rather than Only Spontaneous

A distinguished school of libertarian and neo-Austrian economic thought argues, following F.A. Hayek, that institutional improvements only arise from spontaneous order, and never from conscious design. There is something to their argument, but the designs of Alvin Roth provide counter-examples.

(p. A13) Mr. Roth's work has been to discover the most efficient and equitable methods of matching and implement them in the world. He writes with verve and style, describing many market malfunctions--from aboriginal tribes in Australia arranging marriages for children not yet born to judges bending every rule in the book to hire law clerks years before they have graduated from law school--and how we ought to think about them.

Mr. Roth's approach contrasts with standard debates over free markets versus government regulation. We want markets to be thick, quick, timely and trustworthy, but without careful design markets can become thin, slow, ill-timed and dangerous for the honest. The solution to these problems is unlikely to be regulation legislated from on high. Instead what Mr. Roth practices is nuanced market design created mostly by market participants. Mr. Roth found, for example, that even though the problems in the market for gastroenterologists and law clerks looked the same (hiring started years before schooling ended), the solutions had to be subtly different because of differences in culture, history and norms.

For the full review, see:

ALEX TABARROK. "BOOKSHELF; The Designer of Markets; In some markets, price isn't the determining factor. You can choose to go to Harvard, but Harvard has to choose to accept you first." The Wall Street Journal (Tues., JUNE 16, 2015): A13.

(Note: ellipses added.)

(Note: the online version of the review has the date JUNE 15, 2015, and has the title "BOOKSHELF; Matchmaker, Make Me a Market; In some markets, price isn't the determining factor. You can choose to go to Harvard, but Harvard has to choose to accept you first.")

The book under review is:

Roth, Alvin E. Who Gets What -- and Why: The New Economics of Matchmaking and Market Design. New York: Houghton Mifflin Harcourt Publishing Co., 2015.

July 20, 2015

Drinking Water Not Harmed by Fracking

(p. A13) Fracking isn't causing widespread damage to the nation's drinking water, the Obama administration said in a long-awaited report released Thursday.

The U.S. Environmental Protection Agency--after a four-year study that is the U.S. government's most comprehensive examination of the issue to date--concluded that hydraulic fracturing, as being carried out by industry and regulated by states, isn't having "widespread, systemic impacts on drinking water."

For the full story, see:

RUSSELL GOLD And AMY HARDER. "Fracking's Harm to Water Not Widespread, EPA Says." The Wall Street Journal (Fri., June 5, 2015): A5.

(Note: the date of the online version of the story is June 4, 2015, and has the title "Fracking Has Had No 'Widespread' Impact on Drinking Water, EPA Finds.")

July 13, 2015

Banks Used "Regulatory Arbitrage" to Rent Seek at Taxpayers' Expense

(p. 21) Between 2009 and 2011, a group of economists at New York University's Stern School of Business published an influential series of reports and books that sought to explain what, exactly, happened during the financial crisis. The depth of the inquiry was notable because the school is generally thought of as a Wall Street-friendly training ground for future bankers. One of the most striking findings was that between 1980 and 2000, the large banks in America had significantly moved away from productivity ­enhancement and toward rent-­seeking.

For the reports' principal authors, Matthew Richardson and Viral Acharya, the evidence of this shift came from careful study of the various ways that banks have legally evaded regulation of their capital requirements. A fundamental tenet of bank regulation is that banks shouldn't borrow too much, because being overleveraged makes them vulnerable to collapse. But banks can most easily make huge profits if they borrow huge amounts, and they tend to pursue unsafe levels of borrowing. Then, the authors observed, they use their power as essential tools in an economy to negotiate bailouts from the government, forcing taxpayers to guarantee their losses. Richardson and Acharya showed that it was precisely because our banking regulations were so extensive and complex that banks were able to seek rents. They called this "regulatory arbitrage," a term that means banks have harnessed regulation and turned it into a powerful business tool.

For the full commentary, see:

ADAM DAVIDSON. "Wall Street Is Using the Power of Dodd-Frank Against Itself." The New York Times Magazine (Sun., May 31, 2015): 18 & 20-21.

(Note: ellipsis added.)

(Note: the date of the online version of the commentary is MAY 27, 2015, and has the title "Wall Street Is Using the Power of Dodd-Frank Against Itself.")

One of the relevant papers by Acharya and Richardson is:

Acharya, Viral V., and Matthew Richardson. "Causes of the Financial Crisis." Critical Review 21, no. 2-3 (2009): 195-210.

July 8, 2015

Not Clear If Net Neutrality Is Good for Consumers

(p. B2) Of course, government antitrust and communications policy is supposed to benefit consumers, not any individual company or group of companies. "It's fair to say Netflix has gotten something of a free pass," said Scott Hemphill, visiting professor of antitrust and intellectual property at New York University School of Law. "This open Internet principle that's in ascendance is certainly good for Netflix. It's harder to say it's good for consumers."

. . .

Despite Netflix's arguments that it shouldn't have to pay fees to a broadband provider, that proposition is hardly self-evident. The fees Netflix so fiercely opposes are analogous to those found in many industries, such as credit cards, where both consumers and merchants pay the credit card companies. "It's hard to say if these fees are good or bad for consumers," Professor Hemphill said.

For the full story, see:

JAMES B. STEWART. "Common Sense; Netflix's Invisible Hand In Policy and Mergers." The New York Times (Fri., MAY 29, 2015): B2-B3.

(Note: ellipsis added.)

(Note: the date of the online version of the story is MAY 28, 2015, and has the title "Her Majesty's Jihadists" which was also the title used on the cover, but not at the start of the actual article on p. 42, which has the title "Common Sense; How Netflix Keeps Finding Itself on the Same Side as Regulators.")

July 1, 2015

"Secure in the Knowledge that She Has Other Opportunities"

(p. A11) . . . , Professor Higgins notes that it is Eliza's "curbstone English that will keep her in the gutter to the end of her days." He boasts that with a few months under his instruction, she could get a job "as a lady's maid or a shop's assistant."

The next morning, Eliza appears at Professor Higgins's doorstep to hire him to teach her English because she wants to be "a lady in a flow'r shop, 'stead of sellin' at the corner of Tottenham Court Road." He accepts.

Note the assumptions. Eliza didn't place her hope in new regulations for street-side flower mongering. For Eliza, upward mobility was about acquiring the skills she needed to get ahead, in this case proper English and the manners that went with it.

. . .

In the end, the only real leverage a worker has over a boss is her ability to tell him where to get off--secure in the knowledge that she has other opportunities. Which is exactly what Eliza Doolittle does at the end, when she's acquired the English and manners that mean she no longer has to put up with the bullying of Professor Henry Higgins.

For the full commentary, see:

WILLIAM MCGURN. "MAIN STREET; Audrey Hepburn Teaches Economics; Progressives rushing to help New York nail-salon workers should rent a copy of 'My Fair Lady'." The Wall Street Journal (Tues., May 26, 2015): A11.

(Note: ellipses added.)

(Note: the online version of the commentary has the date May 25, 2015.)

June 23, 2015

"Brazen Federal Overreach" Blocks Wine Process Innovation

(p. A13) On May 27, our Napa Valley winery will pull eight cases of Cabernet Sauvignon out of Charleston Harbor in South Carolina. We placed them there six months ago, protected from the elements, following similar experiments in the past two years. The cold water and the tides seem to expedite the aging process, and we believe that our ocean-aged fine wine--which we've trademarked as Aquaoir--could revolutionize how vintners around the world think about winemaking. The only obstacle: the federal government.

For more than a year, our winery has been targeted by the Treasury Department, specifically, the Alcohol and Tobacco Tax and Trade Bureau. The agency believes our product is unfit for human consumption, despite an utter lack of evidence, and it has threatened to revoke our winemaking license. Washington doesn't recognize this wine for what it is: the product of entrepreneurship and experimentation.

. . .

We don't envision expanding into vast underwater wine-storage development. We simply want to try to understand the ocean-aging effects so that we can try to simulate them on dry land. It would be lamentable if brazen federal overreach blocked the potential for innovation in an industry that could be on the cusp of a true sea change. Only in Washington could you raise a glass to that.

For the full commentary, see:

JIM DYKE JR. "The Wine-Dark Sea of Regulation; We aged wine at the bottom of the ocean--then the feds threatened our license." The Wall Street Journal (Thurs., May 21, 2015): A13.

(Note: ellipsis added.)

(Note: the date of the online version of the commentary is MAY 20, 2015.)

June 6, 2015

Science Fiction Creates "False Sense of Conflict between Humans and Machines"

(p. R4) "I think the development of full artificial intelligence could spell the end of the human race," astrophysicist Stephen Hawking told the BBC. Tesla founder Elon Musk called AI "our biggest existential threat." Former Microsoft Chief Executive Bill Gates has voiced his agreement.

. . .

Taking part in the discussion [is] . . .; Guruduth S. Banavar, vice president of cognitive computing at IBM's Thomas J. Watson Research Center; . . .

. . .

WSJ: Does AI pose a threat to humanity?

MR. BANAVAR: Fueled by science-fiction novels and movies, popular treatment of this topic far too often has created a false sense of conflict between humans and machines. "Intelligent machines" tend to be great at tasks that humans are not so good at, such as sifting through vast data. Conversely, machines are pretty bad at things that humans are excellent at, such as common-sense reasoning, asking brilliant questions and thinking out of the box. The combination of human and machine, which we consider the foundation of cognitive computing, is truly revolutionizing how we solve complex problems in every field.

. . .

(p. R5) WSJ: Some experts believe that AI is already taking jobs away from people. Do you agree?

. . .

MR. BANAVAR: From time immemorial, we have built tools to help us do things we can't do. Each generation of tools has made us rethink the nature and types of jobs. Productivity goes up, professions are redefined, new professions are created and some professions become obsolete. Cognitive systems, which can enhance and scale the capabilities of our minds, have the potential to be even more transformative.

The key question will be how to build institutions to quickly train professionals to exploit cognitive systems as their assistants. Once learned, these skills will make every individual a better professional, and this will set a new bar for the nature of expertise.

For the full interview, see:

TED GREENWALD, interviewer. "Does Artificial Intelligence Pose a Threat?" The Wall Street Journal (Mon., May 11, 2015): R4-R5.

(Note: ellipses, and bracketed word, added; bold in original online version.)

(Note: the online version of the interview has the date May 10, 2015.)

May 25, 2015

To FDA Aging Is Not a Disease, So FDA Will Not Approve Drugs that Extend Life

(p. D1) Some of the top researchers on aging in the country are trying to get an unusual clinical trial up and running.

. . .

The trial aims to test the drug metformin, a common medication often used to treat Type 2 diabetes, and see if it can delay or prevent other chronic diseases. (The project is being called Targeting/Taming Aging With Metformin, or TAME.) Metformin isn't necessarily more promising than other drugs that have shown signs of extending life and reducing age-related chronic diseases. But metformin has been widely and safely used for more than 60 years, has very few side effects and is inexpensive.

The scientists say that if TAME is a well-designed, large-scale study, the Food and Drug Administration might be persuaded to consider aging as an indication, or preventable condition, a move that could spur drug makers to target factors that contribute to aging.

. . .

(p. D4) Fighting each major disease of old age separately isn't winnable, said S. Jay Olshansky, another TAME project planner and a professor at the school of public health at the University of Illinois at Chicago. "We lower the risk of heart disease, somebody lives long enough to get cancer. If we reduce the risk of cancer, somebody lives long enough to get Alzheimer's disease."

"We are suggesting that the time has arrived to attack them all by going after the biological process of aging," Dr. Olshansky said.

Sandy Walsh, an FDA spokeswoman, said the agency's perspective has long been that "aging" isn't a disease. "We clearly have approved drugs that treat consequences of aging," she said. Although the FDA currently is inclined to treat diseases prevalent in older people as separate medical conditions, "if someone in the drug-development industry found something that treated all of these, we might revisit our thinking."

For the full story, see:

SUMATHI REDDY. "To Grow Old Without Disease." The Wall Street Journal (Tues., March 17, 2015): D1 & D4.

(Note: ellipses added.)

(Note: the online version of the story has the date March 16, 2015, and has the title "Scientists' New Goal: Growing Old Without Disease.")

May 9, 2015

Incandescents Better than LEDs at Allowing a Good Night's Sleep

(p. D6) Studies have shown that such light, especially from the blue part of the spectrum, inhibits the body's production of melatonin, a hormone that helps people fall asleep.

. . .

Devices such as smartphones and tablets are often illuminated by light-emitting diodes, or LEDs, that tend to emit more blue light than incandescent products.

For the full story, see:

KATE GALBRAITH. "WIRED WELL; Can Orange Glasses Help You Sleep Better?" The New York Times (Tues., APRIL 7, 2015): D6.

(Note: ellipsis added.)

(Note: the online version of the story has the title "WIRED WELL; Can Orange Glasses Help You Sleep Better?")

April 28, 2015

Creativity Was Permissionless on the Internet Before Obama Made It a Regulated Utility

(p. A15) Critics of President Obama's "net neutrality" plan call it ObamaCare for the Internet.

That's unfair to ObamaCare.

Both ObamaCare and "Obamanet" submit huge industries to complex regulations. Their supporters say the new rules had to be passed before anyone could read them. But at least ObamaCare claimed it would solve long-standing problems. Obamanet promises to fix an Internet that isn't broken.

. . .

Utility regulation was designed to maintain the status quo, and it succeeds. This is why the railroads, Ma Bell and the local water monopoly were never known for innovation. The Internet was different because its technologies, business models and creativity were permissionless.

This week Mr. Obama's bureaucrats will give him the regulated Internet he demands. Unless Congress or the courts block Obamanet, it will be the end of the Internet as we know it.

For the full commentary, see:

L. GORDON CROVITZ. "INFORMATION AGE; From Internet to Obamanet; BlackBerry and AT&T are already making moves that could exploit new 'utility' regulations." The Wall Street Journal (Mon., Feb. 23, 2015): A15.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date Feb. 22, 2015,)

April 24, 2015

Remaining Airline Regulations Increase Fares and Reduce Services

(p. 256) Kenneth Button makes the case for "Really Opening Up the American Skies." "The deregulation of the 1970s, by removing entry quantitative controls, led to a considerable increase in services. It also increased the capability of individuals to access a wider range of destinations from their homes via the hub-and-spoke system of routings that emerged. This pattern has been reversed since 2007. The largest 29 airports in the United States lost 8.8 percent of their scheduled flights between 2007 and 2012, but medium-sized airports lost 26 percent and small airports lost 21.3 percent. . . . In sum, the 1978 Airline Deregulation Act only partially liberalized the U.S. domestic airline market. One important restriction that remains is the lack of domestic competition from foreign carriers. The U.S. air traveler benefited from the country being the first mover in deregulation, and this provided lower fares and consumer-driven service attributes some 15-20 years before they were enjoyed in other markets; the analogous reforms in Europe only fully materialized after 1997. But the world has changed, and so have the demands of consumers and the business models adopted by the airlines. . . . But remaining regulations still limit the amount of competition in the market and, with this, the ability of travelers to enjoy even lower fares and a wider range of services." Regulation, Spring 2014, pp. 40-45


Taylor, Timothy. "Recommendations for Further Reading." Journal of Economic Perspectives 28, no. 3 (Summer 2014): 249-56.

(Note: ellipses in original.)

The article quoted by Taylor is:

Button, Kenneth. "Really Opening up the American Skies." Regulation 37, no. 1 (Spring 2014): 40-45.

April 17, 2015

Disclosure Regulations Often Have Unintended Consequences

(p. B5) . . . , some disclosure works. Professor Levitin cites two examples. The first is an olfactory disclosure. Methane doesn't have any scent, but a foul smell is added to alert people to a gas leak. The second is A.T.M. fees. A study in Australia showed that once fees were disclosed, people avoided the high-fee machines and took out more when they had to go to them.

But to Omri Ben-Shahar, co-author of a recent book, "More Than You Wanted To Know: The Failure of Mandated Disclosure," these are cherry-picked examples in a world awash in useless disclosures. Of course, information is valuable. But disclosure as a regulatory mechanism doesn't work nearly well enough, he argues.

First, it really works only when things are simple. As soon as transactions become complex, disclosure starts to stumble. Buying a car, for instance, turns out to be several transactions: the purchase itself, the financing, maybe the trade-in of old car and various insurance and warranty decisions. These are all subject to various disclosure rules, but making the choices clear and useful has proved nigh impossible.

In complex transactions, we then must rely on intermediaries to give us advice. Because they are often conflicted, they, too, become subject to disclosure obligations. Ah, even more boilerplate to puzzle over!

And then there's the harm. Over the years, banks that sold complex securities often stuck impossible-to-understand clauses deep in prospectuses that "disclosed" what was really going on. When the securities blew up, as they often did, banks then fended off lawsuits by arguing they had done everything the law required and were therefore not liable.

"That's the harm of disclosure," Professor Ben-Shahar said. "It provides a safe harbor for practices that smell bad. It sanitizes every bad practice."

For the full review, see:

JESSE EISINGER. "In an Era of Disclosure, an Excess of Sunshine but a Paucity of Rules." The New York Times (Thurs., FEBRUARY 12, 2015): B5.

(Note: ellipsis added.)

(Note: the online version of the review has the date FEBRUARY 11, 2015.)

The book under review is:

Ben-Shahar, Omri, and Carl E. Schneider. More Than You Wanted to Know: The Failure of Mandated Disclosure. Princeton, NJ: Princeton University Press, 2014.

April 16, 2015

Occupational Licensing Creates Cartels

(p. 251) Aaron Edlin and Rebecca Haw discuss "Cartels by Another Name: Should Licensed Occupations Face Antitrust Scrutiny?" "Once limited to a few learned professions, licensing is now required for over 800 occupations. And once limited to minimum educational requirements and entry exams, licensing board restrictions are now a vast, complex web of anticompetitive rules and regulations. . . . State-level occupational licensing is on the rise. In fact, it has eclipsed unionization as the dominant organizing force of the U.S. labor market. While unions once claimed 30% of the country's working population, that figure has since shrunk to below 15%. Over the same period of time, the number of workers subject to state-level licensing requirements has doubled; today, 29% of the U.S. workforce is licensed and 6% is certified by the government. The trend has important ramifications. Conservative estimates suggest that licensing raises consumer prices by 15%. There is also evidence that professional licensing increases the wealth gap; it tends to raise the wages of those already in high-income occupations while harming low-income consumers who cannot afford the inflated prices." "We contend that the state action doctrine should not prevent antitrust suits against state licensing boards that are comprised of private competitors deputized to regulate and to outright exclude their own competition, often with the threat of criminal sanction." University of Pennsylvania Law Review, April 2014, pp. 1093-1164.


Taylor, Timothy. "Recommendations for Further Reading." Journal of Economic Perspectives 28, no. 3 (Summer 2014): 249-56.

(Note: ellipsis in original.)

April 13, 2015

Italian Traditional Family Stunts Individual Enterprise

(p. 15) Hooper's book, both sweeping in scope and generous with detail, makes persuasive arguments for how geography, history and tradition have shaped Italy and its citizens, for better and sometimes for worse. Roman Catholicism, for example, has indelibly conditioned Italian society, even as the Vatican's restrictions are widely ignored. Catholicism's great allowance for human frailty has translated into a great propensity for forgiveness, as evinced in the Italian justice system, but also resistance to the notion of accountability. It's a word, Hooper adds, that has no counterpart in the Italian language.

. . .

There's . . . mammismo, the propensity of young Italians to remain too closely tied to the maternal apron strings. But while "the traditional family has been at the root of much of what Italy has achieved," Hooper writes, dependence on the family can infantilize, and lack of individual enterprise has held the country back. Indeed, various sections of Hooper's book return to Italy's economic decline and its underlying causes.

He notes that the paperwork and formalities of Italy's cumbersome bureaucracy rob the average Italian of 20 days a year. And he wonders what other country could ever have had a Minister for Simplification to deal with its plethora of often conflicting laws and regulations.

Circumventing some of that bureaucracy partly answers another common question: Why is Italy so prone to corruption? After all, Italians are masters at sidestepping regulations, or, as the saying goes, "Fatta la legge, trovato l'inganno" ("Make the law, then find a way around it"). It's no wonder foreign investment in Italy is so low.

For the full review, see:

LISABETTA POVOLEDO. "Under the Italian Sun." The New York Times Book Review (Sun., March 1, 2015): 15.

(Note: ellipses added; italics in original.)

(Note: the online version of the review has the date FEB. 27, 2015, and has the title "'The Italians,' by John Hooper.")

The book under review is:

Hooper, John. The Italians. New York: Viking, 2015.

April 7, 2015

"Red Tape Is Good for the Government but Not for Us Chinese People"

(p. A8) China's seven million public servants have long been a target of scorn by citizens who accuse them of endemic laziness and corruption. Last year, a municipal water official in Hebei Province with a history of turning off the taps of customers who refused to pay kickbacks -- including an entire village -- was detained after investigators found $20 million hidden in his home.

In the southwestern province of Yunnan, officials at a local land reclamation bureau often leave for lunch around 10:30 a.m., returning after 3 p.m. "It simply gets too hot to do any work," Pan Yuwen, an agricultural adviser, said one rainy day last month when the temperature was a less-than-sultry 60 degrees Fahrenheit.

But more than lackadaisical bureaucrats, it is the head-spinning tangle of regulations that infuriates many ordinary Chinese. At the heart of their ire is the hukou, or family registration, an onerous system akin to an internal passport that often tethers services like public education, subsidized health care and pensions to a Chinese citizen's parents' birthplace -- even if he or she never lived there.

. . .

One recent afternoon, Li Ying, 39, sat in a fluorescent-lit Beijing government office, waiting for her number to be called so she could apply for a temporary residence permit that would allow her 6-year-old son to enroll in school.

Although Ms. Li moved to Beijing with her parents as a child in 1981, her hukou is registered in a distant town, meaning her son will be shut out of the city's public schools without the permit.

Among the 14 required documents, Ms. Li must provide her hukou certificate, proof of residence, a diploma, a job contract, a marriage license, her husband's identity card, his hukou, a certificate proving that she has only one child and a company document detailing her work performance and tax payments.

"What a headache," she said, a pile of paperwork balanced on her lap. "Red tape is good for the government but not for us Chinese people."

For the full story, see:

DAN LEVIN. "China's Middle Class Chafes Against Maze of Red Tape." The New York Times (Sat., MARCH 14, 2015): A4 & A8.

(Note: ellipsis added.)

(Note: the online version of the story has the date MARCH 13, 2015.)

April 5, 2015

Railroad Regulation Helped Kill Passenger Service

(p. 1179) By 1970, passenger service was a not only losing money, but had deteriorated to such an extent that it was no more the elegant transportation mode as it once was. No more were the Hollywood stars long distance rail passengers. No more movies like "North by Northwest," which featured the New York Central's Twentieth Century Limited service from New York to Chicago. The book highlights the factors causing the decline of private rail passenger service and the creation of AMTRAK. The authors cite ICC regulation, the growth in alternative modes, which were heavily subsidized, the mix of freight and passenger service on the same lines, and public policy, which favored the airline industry.

. . .

One public policy that government got right is deregulation. This started with the 3R Act, then the 4R Act and then the Staggers Rail Act of 1980, which had a massive impact on the industry. Deregulation culminated in the ICC Elimination Act, in which the ICC was replaced by the Surface Transportation Board--or STB--with substantially diminished regulatory power. Gallamore worked in government when much of this legislation was passed and gives a firsthand account of the debates that took place in Congressional (p. 1180) hearings and the discussions in and out of government on the merits of deregulation.

In the concluding chapter of the over 500-page book, entitled "Decline and Renaissance of American Railroads in the Twentieth Century" the authors provide a summary of the history of the railroads and the lessons for public policy in the future. This chapter is such a great summary, that the reader may be best off starting with it, before reading the book. But don't forget the afterword, which provides the authors' recommendations for future U.S. policies for the railroads. It is a very insightful chapter.

. . .

American Railroads should be on the reading list of economists interested in transportation and logistics, economic historians, government officials, and rail fans who would like to know more about the history of the railroads in the twentieth century, and are interested in understanding the economics of the industry and the problems of government regulation. Gallamore and Meyer, at the end of the book, sum up why it should be read:

This book's authors love railroads because they have a great history, fascinating operations, intriguing technology and untold opportunity for the future, but we also love them because no other enterprises illustrate elegant economic principles quite so well (p. 435).

For the full review, see:

Pagano, Anthony M. "American Railroads: Decline and Renaissance in the Twentieth Century." Journal of Economic Literature 52, no. 4 (Dec. 2014): 1178-80.

(Note: ellipses added.)

The book under review is:

Gallamore, Robert E., and John R. Meyer. American Railroads: Decline and Renaissance in the Twentieth Century. Cambridge, MA: Harvard University Press, 2014.

April 3, 2015

Chinese Communists Crush Innovative Entrepreneurs by Banning Open Internet

(p. A1) BEIJING -- Jing Yuechen, the founder of an Internet start-up here in the Chinese capital, has no interest in overthrowing the Communist Party. But these days she finds herself cursing the nation's smothering cyberpolice as she tries -- and fails -- to browse photo-sharing websites like Flickr and struggles to stay in touch with the Facebook friends she has made during trips to France, India and Singapore.

Gmail has become almost impossible to use here, and in recent weeks the authorities have gummed up Astrill, the software Ms. Jing and countless others depended on to circumvent the Internet restrictions that Western security analysts refer to as the Great Firewall.

By interfering with Astrill and several other popular virtual private networks, or V.P.N.s, the government has complicated the lives of Chinese astronomers seeking the latest scientific data from abroad, graphic designers shopping for clip art on Shutterstock and students submitting online applications to American universities.

If it was legal to protest and throw rotten eggs on the street, I'd definitely be up for that," Ms. Jing, 25, said.

China has long had some of the world's most onerous Internet restrictions. But until now, the authorities had effectively tolerated the proliferation of V.P.N.s as a lifeline for millions of people, from archaeologists to foreign investors, who rely heavily on less-fettered access to the Internet.

But earlier this week, after a number of V.P.N. companies, including StrongVPN and Golden Frog, complained that the Chi-(p. A6)nese government had disrupted their services with unprecedented sophistication, a senior official for the first time acknowledged its hand in the attacks and implicitly promised more of the same.

The move to disable some of the most widely used V.P.N.s has provoked a torrent of outrage among video artists, entrepreneurs and professors who complain that in its quest for so-called cybersovereignty -- Beijing's euphemism for online filtering -- the Communist Party is stifling the innovation and productivity needed to revive the Chinese economy at a time of slowing growth.

"I need to stay tuned into the rest of the world," said Henry Yang, 25, the international news editor of a state-owned media company who uses Facebook to follow American broadcasters. "I feel like we're like frogs being slowly boiled in a pot."

. . .

The vast majority of Chinese Internet users, especially those not fluent in English and other foreign languages, have little interest in vaulting the digital firewall. But those who require access to an unfiltered Internet are the very people Beijing has been counting on to transform the nation's low-end manufacturing economy into one fueled by entrepreneurial innovation.

. . .

Avery Goldstein, a professor of contemporary Chinese studies at the University of Pennsylvania, said the growing online constraints would not only dissuade expatriates from relocating here, but could also compel ambitious young Chinese studying abroad to look elsewhere for jobs.

"If they aren't able to get the information to do their jobs, the best of the best might simply decide not to go home," he said.

For those who have already returned to China and who crave membership in an increasingly globalized world, the prospect of making do with a circumscribed Internet is dispiriting. Coupled with the unrelenting air pollution and the crackdown on political dissent, a number of Chinese said the blocking of V.P.N.s could push them over the edge.

"It's as if we're shutting down half our brains," said Chin-Chin Wu, an artist who spent almost a decade in Paris and who promotes her work online. "I think that the day that information from the outside world becomes completely inaccessible in China, a lot of people will choose to leave."

For the full story, see:

ANDREW JACOBS. "China Further Tightens Grip on the Internet." The New York Times (Fri., JAN. 30, 2015): A1 & A12.

(Note: ellipses added.)

(Note: the online version of the story has the date JAN. 29, 2015.)

March 31, 2015

Brin: Regulatory Burden Discourages Health Entrepreneurs

(p. A13) Earlier this month, at a private conference for the CEOs of his portfolio companies, venture capitalist Vinod Khosla interviewed Google co-founders Sergey Brin and Larry Page, asking them if the company might jump into health care. "It's just a painful business to be in," Mr. Brin replied, later noting that "the regulatory burden in the U.S. is so high that I think it would dissuade a lot of entrepreneurs."

Mr. Brin is right. As a neurosurgeon-scientist and entrepreneur who co-founded a bioelectronic medicine company that deploys implantable technology to supplant drugs, I wish he were wrong.

. . .

. . . entrepreneurs should be allowed to carve out their own turf and let patients choose their own level of risk.

Consider the case of Goran Ostovich, a burly, 47-year-old truck driver from Mostar, Bosnia. Mr. Ostovich has suffered from long-standing rheumatoid arthritis and needed near-permanent bed rest. With his hands and wrists swollen and aching, he could no longer hold on to a wheel or even play with his small children. He tried a variety of medications. None worked.

When I met Goran at his doctor's office in 2012, however, he didn't seem at all afflicted with the disease. That's because, one year earlier, he had been offered the opportunity to be the first participant in a clinical trial of a new therapy based on my invention. He received a bioelectronic implant and rapidly improved.

. . .

Since news of this clinical trial's success became public, people from all over the U.S. stricken with rheumatoid arthritis have emailed, called and sent letters pressing for their shot at potentially effective--but not yet FDA-approved--treatments.

. . .

Some patients are very willing to take a calculated risk, . . .

For the full commentary, see:

KEVIN J. TRACEY. "Let Patients Decide How Much Risk They'll Take; Take a tip from Sergey Brin: The health-care regulatory burden stops entrepreneurs from getting into the game." The Wall Street Journal (Mon., July 28, 2014): A13.

(Note: ellipses added.)

(Note: the online version of the commentary has the date July 27, 2014, and has the title "Let Patients Decide How Much Risk They'll Take; Take a tip from Sergey Brin: The health-care regulatory burden stops entrepreneurs from getting into the game.")

March 28, 2015

Most of Benefits of Minimum Wage Increases Do Not Go to the Poor

(p. A11) A higher minimum wage raises wages of low-wage workers, and even though most evidence points to job losses from higher minimum wages, the evidence doesn't point to widespread employment declines. Thus, consistent with a recent Congressional Budget Office report, many more low-wage workers will get a raise than will lose their jobs. But that argument is about low-wage workers, not low-income families. Minimum wages are ineffective at helping poor families because such a small share of the benefits flow to them.

One might think that low-wage workers and low-income families are the same. But data from the U.S. Census Bureau show that there is only a weak relationship between being a low-wage worker and being poor, for three reasons.

First, many low-wage workers are in higher-income families--workers who are not the primary breadwinners and often contribute a small share of their family's income. Second, some workers in poor families earn higher wages but don't work enough hours. And third, about half of poor families have no workers, in which case a higher minimum wage does no good. This is simple descriptive evidence and is not disputed by economists.

A historical perspective is instructive. Assembling Census Bureau data over nearly seven decades, Richard Burkhauser and Joseph Sabia have shown that in 1939, just after the federal minimum wage was established, 85% of low-wage workers (those earning less than one-half the private-sector wage) were in poor families. Such a high percentage implies that, in that year, the new minimum wage targeted poor families well. However, as the public safety net expanded, family structure changed and more people in families began working, this percentage fell sharply over time--to around 17% by the early 2000s.

In contrast, as of the early 2000s 34% of low-wage workers were in families that were far from poor, with incomes more than three times the poverty line. In other words, for every poor minimum-wage worker who might directly benefit from the minimum wage, two workers in families with incomes more than three times the poverty line would benefit.

For the full commentary, see:

DAVID NEUMARK. "Who Really Gets the Minimum Wage; Obama's $10.10 target would steer only 18% of the benefits to poor families; 29% would go to families with incomes three times the poverty level." The New York Times (Mon., July 7, 2014): A11.

(Note: the online version of the commentary has the date July 6, 2014.)

For more of Neumark on minimum wages, see:

Neumark, David, and William L. Wascher. Minimum Wages. Cambridge, MA: The MIT Press, 2008.

March 19, 2015

Over-Regulation Could Stifle Drones' Potential to Revolutionize Our Lives

(p. A15) In the early days of the automobile, Vermont enacted a law requiring someone to walk one-eighth of a mile in front of every car and wave a red flag to warn pedestrians. Iowa directed all motorists to call ahead to warn each town on their route that they were coming. Some jurisdictions set speed limits so low that drivers who obeyed them risked having their engines stall.

Those laws seem humorously quaint, but if they had been widely adopted and enforced, the automobile revolution might have been shut down and its manifold benefits denied to millions. Today over-regulation could stifle the development of drones, which have the potential to revolutionize many parts of the economy and our everyday lives.

To cite a few examples: Amazon hopes to launch Prime Air, which would use drones to deliver packages in less than 30 minutes after an order is placed. Texas Equusearch, which organizes missing-person recovery efforts, can replace the labor of 100 volunteers with one drone. Clayco Inc., a construction firm, intends to use drones for aerial imaging of construction projects--replacing either helicopters, which burn fossil fuels and can be dangerous to those below, or construction workers, who risk serious injury through falls when they must climb to reach high, hard-to-reach places to take photos.

For the full commentary, see:

JOSEPH R. PALMORE and CHRISTOPHER J. CARR. "Overregulated Drones Struggle for Take-Off; The FAA has been slow and stuck in the past--precisely what the technology is not." The Wall Street Journal (Mon., Feb. 23, 2015): A15.

(Note: the online version of the commentary has the date Feb. 22, 2015,)

March 15, 2015

Regulations Reduce Biotech Innovation

(p. A15) Modern genetic engineering, also called genetic modification or GM, has been around since the 1970s. Yet with the notable exception of biopharmaceuticals--beginning with the marketing of human insulin in 1982 and now accounting for more than 20% of U.S. drug expenditures--genetic engineering has failed to realize anything approaching its potential for vertical progress.

The reason is plain: In the non-pharmaceutical sectors, federal regulators for years seemingly have done everything they can to prevent U.S. researchers and companies from employing genetic engineering to create the "next big thing."

. . .

Regulatory disincentives are potent. It costs about $136 million to bring a genetically engineered crop plant to market. This is the primary reason more than 99% of such crop plants are those that are grown at huge scale: . . .

. . .

"Biopharming"--the once-promising biotechnology area that uses genetic engineering techniques to induce crops such as corn, tomatoes and tobacco to produce high concentrations of high-value pharmaceuticals (one of which is the Ebola drug, ZMapp)--is moribund because of the Agriculture Department's extraordinary regulatory burdens. Thanks to EPA's policies, which discriminate against organisms modified with the most precise and predictable techniques, the high hopes for genetically engineered "biorational" microbial pesticides and microorganisms to clean up toxic wastes have evaporated.

For the full commentary, see:

HENRY I. MILLER. "Regulators Put the Brakes On Biotech; Thanks to EPA, hopes have evaporated for genetically engineered microorganisms to clean up toxic wastes." The Wall Street Journal (Weds., Jan. 14, 2015): A15.

(Note: ellipses added.)

(Note: the online version of the commentary has the date Jan. 13, 2015.)

March 11, 2015

Occupational Licensing Raises Costs for Consumers and Reduces Jobs

(p. B1) What lesson should we draw from the success of Uber?

Customers have flocked to its service. In the final three months of last year, its so-called driver-partners made $656.8 million, according to an analysis of Uber data released last week by the Princeton economist Alan B. Krueger, who served as President Obama's chief economic adviser during his first term, and Uber's Jonathan V. Hall.

Drivers like it, too. By the end of last year, the service had grown to over 160,000 active drivers offering at least four drives a month, from near zero in mid-2012. And the analysis by Mr. Krueger and Mr. Hall suggests they make at least as much as regular taxi drivers and chauffeurs, on flexible hours. Often, they make more.

This kind of exponential growth confirms what every New Yorker and cab riders in many other cities have long suspected: Taxi service is woefully inefficient. It also raises a question of broader relevance: Why stop here?

. . .

(p. B5) . . . like taxi medallions, state licenses required to practice all sorts of jobs often serve merely to cordon off occupations for the benefit of licensed workers and their lobbying groups, protecting them from legitimate competition.

This comes at a substantial social cost. "Lower-income people suffer from licensing," Professor Krueger told me. "It raises the costs of many services and prevents low-income people from getting into some professions."

In a study commissioned by the Brookings Institution's Hamilton Project, Morris Kleiner of the University of Minnesota found that almost three out of 10 workers in the United States need a license from state governments to do their jobs, up from one in 20 in the 1950s. By cordoning off so many occupations, he estimates, professional licensing by state governments ultimately reduces employment by up to 2.8 million jobs.

For the full commentary, see:

Eduardo Porter. "Job Licenses in Spotlight as Uber Rises." The New York Times (Weds., JAN. 28, 2015): B1 & B5.

(Note: ellipses added.)

(Note: the online version of the commentary has the date JAN. 27, 2015.)

The working paper co-authored by Krueger, is:

Hall, Jonathan V., and Alan B. Krueger. "An Analysis of the Labor Market for Uber's Driver-Partners in the United States." Working paper. January 22, 2015.

Kleiner's working paper at Brookings, is:

Kleiner, Morris M. "Reforming Occupational Licensing Policies." In The Hamilton Project, Brookings, Discussion Paper 2015-01, January 2015.

March 10, 2015

Over-Taxed and Over-Regulated Castles for Sale in Italy

(p. A3) While castles and historic mansions in Italy have long been family inheritances, today dozens of them are for sale, even in one of the most conservative real estate markets in Europe.

. . .

On historic buildings, where owners used to pay little as compensation for the elevated costs of maintaining centuries-old structures, the taxes increased by 20 or 30 times, depending on the property's location.

On some buildings, taxes spiked from 3,000 euros (about $3,400) in 2011 to 75,000 euros (about $84,000) by 2013. That might be a small figure for castle dwellers in the United Kingdom, but it is a burden for Italian pockets, especially in regions where the property's market value or tourism interest is low.

The trends, to many here, are indicative of Italy's place as a country caught between its past glory and its modern difficulty in producing an innovative climate capable of ensuring its future.

. . .

. . . buyer beware: Living a nobleman's life in Italy comes at a cost, even for many tycoons. New owners face the same onerous bureaucracy as Italians to make even minimal changes to many older properties.

Under Italian law, the owner of a historic building is its custodian, bound to maintain it and grant its security and, in some cases, its use to the public. Many buyers give up on properties of great historic value, but in bad condition, for this reason, brokers said.

"This is a problem for possible investors, who want to have modern comforts like a spa, air-conditioning or a lift," said Mr. Pallavicini, of the Italian Historic Houses Association.

"We no longer live like in 1800," he added. "But 99 percent of those changes are either impossible or extremely bureaucratic and complicated in an Italian historic building."

For the full story, see:

GAIA PIANIGIANI. "PONTASSIEVE JOURNAL; Life of Italian Nobility for Sale, Complete With Regulations and Taxes." The New York Times (Weds., JAN. 28, 2015): A11.

(Note: ellipses are added.)

(Note: the online version of the story has the date JAN. 27, 2015.)

March 2, 2015

"It's My Life, and I Want the Chance to Save It"

(p. 18) LYONS, Colo. -- Since May [2014], a string of states have passed laws that give critically ill patients the right to try medications that have not been approved by the Food and Drug Administration.

Deemed "Right to Try" laws, they have passed quickly and often unanimously in Colorado, Michigan, Missouri, Louisiana and Arizona, bringing hope to patients like Larry Kutt, who lives in this small town at the edge of the Rocky Mountains. Mr. Kutt, 65, has an advanced blood cancer and says his state's law could help him gain access to a therapy that several pharmaceutical companies are testing. "It's my life," he said, "and I want the chance to save it."

The laws do not seem to have helped anyone obtain experimental medicine, as the drug companies are not interested in supplying unapproved medications outside the supervision of the F.D.A. But that seems almost beside the point to the Goldwater Institute, the libertarian group behind legislative efforts to pass Right to Try laws. "The goal is for terminally ill patients to have choice when it comes to end-stage disease," said Craig Handzlik, state policy coordinator for the Goldwater Institute, based in Arizona. "Right to Try is something that will help terminally ill people all over the country."

For the full story, see:

JULIE TURKEWITZ. "Patients Seek 'Right to Try' New Drugs." The New York Times, First Section (Sun., JAN. 11, 2015): 18.

(Note: the bracketed year is added.)

(Note: the online version of the story has the date JAN. 10, 2015.)

February 22, 2015

Free Market Tour Guide Challenges Savannah's Attack on Free Speech

(p. A25) SAVANNAH, Ga. -- Especially when she sips French onion soup at a restaurant that was featured in the Julia Roberts movie "Something to Talk About," Michelle Freenor is an irrepressible tour guide.

She rattles off the history of Methodism in this city, as well as tidbits about William T. Sherman's March to the Sea. She discusses the canopy of Spanish moss that hangs above Savannah's streets, whether "Jingle Bells" was actually composed here, and just how haunted one of the country's largest historic landmark districts might be.

But Ms. Freenor has also emerged in recent weeks in a new role: plaintiff in a federal lawsuit that could reshape Savannah's lucrative and potent tourism industry. Backed by a nonprofit law firm with libertarian leanings, Ms. Freenor and three others, including her husband, are challenging the Savannah ordinance that requires tour guides to hold licenses and pass regular academic and medical examinations.

"It's the free market that made us successful, not the City of Savannah," said Ms. Freenor, 43. "You shouldn't have to pass a test to be able to tell people where the best ice cream in Savannah is."

. . .

"What tour guides do is talk for a living," said Robert Johnson, one of Ms. Freenor's lawyers. "They're just like stand-up comedians, journalists or novelists. And in this country, you don't need a license from the government to be able to talk."

For the full story, see:

ALAN BLINDER. "Lawsuit May Reshape Tourist Industry in History-Rich Savannah." The New York Times, First Section (Sun., DEC. 21, 2014): A25 & A31.

(Note: ellipsis added.)

(Note: the online version of the story has the date DEC. 20, 2014. The online version says that the New York paper version of the article started on p. 28. It does not say on what page of that edition, the article continued. My page numbers are from the National Edition, which I usually receive.)

February 10, 2015

Yucca Mountain Has Multiple Barriers to Isolate Nuclear Materials

(p. A20) The Nuclear Regulatory Commission on Thursday [Oct. 16, 2014] released a long-delayed report on the suitability of Yucca Mountain as a disposal spot for nuclear waste, finding that the design met the commission's requirements, laying the groundwork to restart the project . . .

. . .

. . . the report released Thursday, mostly done in 2010 but frozen until a recent court decision, concluded that the design had the required multiple barriers, to assure long-term isolation of radioactive materials.

For the full story, see:

MATTHEW L. WALD "Calls to Use a Proposed Nuclear Site, Now Deemed Safe." The New York Times (Fri., OCT. 17, 2014): A20.

(Note: ellipses, and bracketed date, added.)

(Note: the online version of the story has the date OCT. 16, 2014., and has the title "Calls to Use Yucca Mountain as a Nuclear Waste Site, Now Deemed Safe.")

January 22, 2015

As with Airplanes, Lives Must Be Risked to Achieve Routine Safety in Spaceships

(p. A21) SEATTLE -- ONE clear winter day in 1909, in Hampshire, England, a young man named Geoffrey de Havilland took off in a twin-propeller motorized flying machine of his own design, built of wood, piano wire and stiff linen hand-stitched by his wife. The launch was flawless, and soon he had an exhilarating sensation of climbing almost straight upward toward the brilliant blue sky. But he soon realized he was in terrible trouble.

The angle of ascent was unsustainable, and moments later de Havilland's experimental plane crashed, breaking apart into a tangled mass of shards, splinters and torn fabric, lethal detritus that could easily have killed him even if the impact of smashing into the ground did not. Somehow, he survived and Sir Geoffrey -- he was ultimately knighted as one of the world's great aviation pioneers -- went on to build an astonishing array of military and civilian aircraft, including the world's first jet airliner, the de Havilland Comet.

I thought immediately of de Havilland on Friday when I heard that Virgin Galactic's SpaceShipTwo, a rocket-powered vehicle designed to take well-heeled tourists to the edge of space, had crashed on a flight over the Mojave Desert, killing one test pilot and seriously injuring the other.

. . .

Certainly the Wright brothers and others like de Havilland were involved in what we now view as an epic quest, but many experts of the day were certain that flight, however interesting, was destined to be not much more than a rich man's hobby with no practical value.

"The public has greatly over-estimated the possibilities of the aeroplane, imagining that in another generation they will be able to fly over to London in a day," said a Harvard expert in 1908. "This is manifestly impossible." Two other professors patiently explained that while laymen might think that "because a machine will carry two people another may be constructed that will carry a dozen," in fact "those who make this contention do not understand the theory of weight sustentation in the air."

. . .

There will be tragedies like the crash of SpaceShipTwo and nonlethal setbacks such as the fiery explosion, also last week, of a remote-controlled rocket intended for a resupply mission to the International Space Station. There will be debates about how to improve regulation without stifling innovation. Some will say private industry can't do the job -- though it's not as if the NASA-sponsored Apollo or space shuttle missions went off without a hitch (far from it, sadly).

But at the heart of the enterprise there will always be obsessives like Sir Geoffrey, who forged ahead with his life's work of building airplanes despite his own crash and, incredibly, the deaths of two of his three sons while piloting de Havilland aircraft, one in an attempt to break the sound barrier. Getting to routine safety aloft claimed many lives along the way, and a hundred years from now people will agree that in that regard, at least, spaceships are no different from airplanes.

For the full commentary, see:

SAM HOWE VERHOVEK. "Not a Flight of Fancy." The New York Times (Tues., NOV. 4, 2014): A21.

(Note: ellipses added.)

(Note: the online version of the commentary has the date NOV. 3, 2014.)

January 1, 2015

FAA Requires Drones to Carry Onboard Manuals

(p. B1) BERLIN--In four years, GmbH has emerged as a promising player here in the rapidly expanding commercial-drone industry. The 20-employee startup has sold more than 400 unmanned aircraft to private-sector companies and now is pitching its fourth-generation device.

Over the same period, Seattle-based Applewhite Aero has struggled to get permission from the Federal Aviation Administration just to fly its drones, which are designed for crop monitoring. The company, founded the same year as Service-drone, has test-flown only one of its four aircraft, and is now moving some operations to Canada, where getting flight clearance is easier.

"We had to petition the FAA to not carry the aircraft manual onboard," said Applewhite founder Paul Applewhite. "I mean, who's supposed to read it?" Mr. Applewhite, like many of his U.S. peers, fears the drone industry "is moving past the U.S., and we're just getting left behind."

For the full story, see:

JACK NICAS. "U.S. Rules Clips Drone Makers' Wings." The Wall Street Journal (Mon., Oct. 6, 2014): B1 & B4.

(Note: the online version of the story has the date Oct. 5, 2014, and has the title "Regulation Clips Wings of U.S. Drone Makers.")

December 5, 2014

Simplot's Company Keeps Innovating with Potatoes

(p. B1) A potato genetically engineered to reduce the amounts of a potentially harmful ingredient in French fries and potato chips has been approved for commercial planting, the Department of Agriculture announced on Friday [November 7, 2014].

The potato's DNA has been altered so that less of a chemical called acrylamide, which is suspected of causing cancer in people, is produced when the potato is fried.

The new potato also resists bruising, a characteristic long sought by potato growers and processors for financial reasons. Potatoes bruised during harvesting, shipping or storage can lose value or become unusable.

The biotech tubers were developed by the J. R. Simplot Company, a privately held company based in Boise, Idaho, which was the initial supplier of frozen French fries to McDonald's in the 1960s and is still a major supplier. The company's founder, Mr. Simplot, who died in 2008, became a billionaire.

The potato is one of a new wave of genetically modified crops that aim to provide benefits to consumers, not just to farmers as the widely grown biotech crops like herbicide-tolerant soybeans and corn do. The nonbruising aspect of the potato is similar to that of genetically engineered nonbrowning apples, developed by Okanagan Specialty Fruits, which are awaiting regulatory approval.

. . .

The question now is whether the potatoes -- which come in the Russet Burbank, Ranger Russet and Atlantic varieties -- will be adopted by food companies and restaurant chains. At least one group opposed to such crops has already pressed McDonald's to reject them.

For the full story, see:

ANDREW POLLACK. "New Potato, Hot Potato: U.S. Approves Modified Crop. Next Up: French-Fry Fans." The New York Times (Sat., NOV. 8, 2014): B1-B2.

(Note: ellipsis, and bracketed date, added.)

(Note: the online version of the story has the date NOV. 7, 2014, and has the title "U.S.D.A. Approves Modified Potato. Next Up: French Fry Fans.")

December 4, 2014

Consumers Cannot Count on Regulators for Safety

(p. A1) WASHINGTON -- The nation's top auto regulator faced withering criticism across Capitol Hill on Tuesday over its failure to identify a deadly defect in General Motors cars -- even as its top official tried again and again to shift the blame back to the automaker.

Hours after a House committee released a scathing report about the agency's yearslong failure to spot the ignition-stalling defect that has now been linked to 19 deaths, a Senate subcommittee hearing turned angry and tense. Lawmakers from both parties accused the agency, the National Highway Traffic Safety Administration, of overlooking evidence that could have saved lives and of deferring to the auto industry rather than standing up to it.

The agency was "more interested in singing 'Kumbaya' with the manufacturers than being a cop on the beat," said Senator Claire McCaskill, the subcommittee's chairwoman, in sharp questioning reminiscent of her interrogation of G.M.'s chief executive, Mary T. Barra, in a hearing before the same panel in the spring.

. . .

(p. B2) "You want to obfuscate responsibility, rather than take responsibility," Ms. McCaskill, a Missouri Democrat, said, her voice rising. "We've all said shame on G.M." She added, "You've got to take some responsibility that this isn't being handled correctly."

. . .

Watching from a seat just behind Mr. Friedman [deputy administrator of the N.H.T.S.A.] was Laura Christian, the birth mother of Amber Rose, a teenager who was killed in 2005 when her Cobalt ran off the road, into a tree, and the air bags did not deploy.

As Mr. Friedman continued to speak, Ms. Christian said she could feel herself getting flushed and increasingly upset over the agency's lack of remorse.

"It was extremely frustrating to hear David Friedman go on about how his agency was this wonderful thing," she said. "All along they missed the glaringly obviously defects."

For the full story, see:

HILARY STOUT and AARON M. KESSLER. "Congress Castigates Auto Regulator Over a Deadly G.M. Defect." The New York Times (Weds., SEPT. 17, 2014): A1 & B2.

(Note: ellipses, and bracketed words, added.)

(Note: the online version of the story has the date SEPT. 16, 2014, and has the title "Senators Take Auto Agency to Task Over G.M. Recall." In the Midwest edition that I receive, this article started on p. A1; according to the indexes, and the online edition, in the New York edition, the article started on p. B1.)

November 30, 2014

Esther Dyson Sees a Lot of Silicon Valley as Just Motivated to Make Money

(p. C11) The U.S. Commerce Department recently said that it plans to relinquish its oversight of Icann, handing that task to an international body of some kind. The details are still being worked out, but Ms. Dyson hopes that governments won't be the new regulators. . . .

For now, she thinks there are many Silicon Valley Internet companies with inflated market values. "There is the desire to make money that motivates a lot of that in Silicon Valley, and yes, I think it's totally a bubble," she says. "It's not like the last bubble in that there are a lot of real companies there [now], but there are a lot of unreal companies and...many of them will disappear." She thinks too many people are starting similar companies. "You have people being CEOs of teeny little things who would be much better as marketing managers of someone else's company," she says.

And though her work often takes her to California, she's happy to stay in New York. These days, she finds Silicon Valley "very fashionable," she says, "and I don't really like fashion."

For the full interview, see:

ALEXANDRA WOLFE, interviewer. "WEEKEND CONFIDENTIAL; Esther Dyson's Healthy Investments; The investor is hoping to produce better health through technology with a new nonprofit." The Wall Street Journal (Sat., May 3, 2014): C11.

(Note: first ellipsis added; second ellipsis in original.)

(Note: the online version of the interview has the date May 2, 2014, and has the title "WEEKEND CONFIDENTIAL; Esther Dyson's Healthy Investments; The investor is hoping to produce better health through technology with a new nonprofit.")

November 27, 2014

Catering to Auto Dealers, State Governments Restrict Consumers Right to Buy Direct from Tesla

(p. 7B) Backed by dealership trade groups, several states, including Arizona, New Jersey, Maryland, Texas and Virginia, have banned or restricted Tesla from selling to the public.

The Iowa Department of Transportation asked Tesla to stop its West Des Moines test drives after being alerted to the event by the Iowa Automobile Dealers Association, said Paul Steier, director of the DOT's Bureau of Investigation and Identity Protection.

. . .

State law requires auto dealers to be licensed, and by offering test drives, Tesla was acting as a dealer, Steier said. "You can't just set up in a hotel parking lot and sell cars," said Bruce Anderson, president of the Iowa Automobile Dealers Association. "This is a regulated industry."

For the full story, see:

Joel Aschbrenner, The Des Moines Register. "With Farm Robotics, the Cows Decide When It's Milking Time." USA Today (Weds., September 26, 2014): 7B.

(Note: ellipsis added.)

(Note: the online version of the story has the date September 25, 2014, and differs in some respects from the print version. In the quotes above, I have followed the print version.)

November 23, 2014

Cat Stevens Protests New York Government Ban on Paperless Tickets

(p. C3) Yusuf, the singer until recently called Yusuf Islam, but better known as Cat Stevens for his 1970s hits like "Peace Train," has canceled a concert at the Beacon Theater in frustration over New York state laws on ticket scalping.

. . .

"I have been a longtime supporter of paperless tickets to my shows worldwide and avoiding scalpers," Yusuf wrote. "Unfortunately NY has a state law that requires all tickets sold for shows in NYC to be paper, enabling them to be bought and sold at inflated prices."

After heavy lobbying by the ticketing industry, New York passed a law in 2010, which has since been renewed, requiring promoters to offer customers the option of transferrable tickets.

For the full story, see:

BEN SISARIO. "Cat Stevens Cancels Show and Cites Ticket Law." The New York Times (Thurs., SEPTEMBER 25, 2014): C3.

(Note: ellipsis added.)

(Note: the online version of the story has the date SEPTEMBER 24, 2014, and has the title "Yusuf, the Former Cat Stevens, Cancels New York Concert.")

November 12, 2014

FDR Ruthlessly Manipulated Political Process

(p. D8) Michael C. Janeway, a former editor of The Boston Globe and executive editor of The Atlantic Monthly who wrote two books chronicling what he saw as the intertwined decline of democracy and journalism in the United States, died on Thursday [April 17, 2014] at his home in Lakeville, Conn.

. . .

The second book, "The Fall of the House of Roosevelt: Brokers of Ideas and Power From FDR to LBJ," published in 2004, measured some of the ideas in his first book against the history of the New Deal. It focused on President Franklin D. Roosevelt's inner circle of advisers, a group of political operatives and thinkers often called Roosevelt's "brain trust," who helped conceive ideas like the minimum wage, Social Security and federal bank deposit insurance.

Mr. Janeway's father, Eliot Janeway, an economist, Democratic hand and columnist for Time magazine (a portfolio not unheard-of in those days), was a prominent member of that group.

Michael Janeway suggested that in undertaking the radical changes necessary to yank the "shattered American capitalist system into regulation and reform," Roosevelt and his team manipulated the political process with a level of ruthlessness that may have been justified by the perils of the times. But in the years that followed, he wrote, the habit of guile and highhandedness devolved into the kind of arrogance that defined -- and doomed -- the presidency of Lyndon B. Johnson, Roosevelt's last political heir.

For the full obituary, see:

PAUL VITELLO. "Michael Janeway, 73, Former Editor of The Boston Globe." The New York Times (Sat., APRIL 19, 2014): D8.

(Note: ellipsis, and bracketed date, added.)

(Note: the online version of the obituary has title "Michael Janeway, Former Editor of The Boston Globe, Dies at 73.")

The book mentioned in the passage quoted above is:

Janeway, Michael. The Fall of the House of Roosevelt: Brokers of Ideas and Power from FDR to LBJ, Columbia Studies in Contemporary American History. New York: Columbia University Press, 2004.

November 7, 2014

Wal-Mart Nimbly Evades Bank Industry Efforts to Restrict Competition

(p. B3) Here comes Wal-Bank.

After years of thwarted efforts to break into banking, Walmart is making its biggest foray yet into everyday financial services.

Walmart, the nation's largest retailer, is teaming up with Green Dot, known for its prepaid payment cards, to supply checking accounts to almost anyone over 18 who passes an ID check.

. . .

. . . the new Walmart initiative will be the first full-blown, off-the-shelf checking account. To help attract customers, Walmart and Green Dot will forgo a screening system many banks use to vet potential customers and rely instead on a proprietary system. The model is expected to allow almost any consumer who passes an identification check to open an account in minutes, according to Green Dot.

In the past, Walmart has tried to secure a federal bank charter to become a deposit-taking bank, but abandoned that effort in 2007 in the face of opposition from the banking industry. Since then, the retailer has assembled an array of services that could be offered without a charter, as well as partnerships with financial service companies like Green Dot.

For the full story, see:

HIROKO TABUCHI and JESSICA SILVER-GREENBERG. "Finding a Door Into Banking, Walmart Prepares to Offer Checking Accounts." The New York Times (Weds., SEPT. 24, 2014): B3.

(Note: ellipses added.)

(Note: the online version of the story has the date SEPT. 23, 2014, and has the title "Walmart Prepares to Offer Low-Cost Checking Accounts.")

October 22, 2014

Nevada Government Lets Tesla Sell Directly to Consumers

(p. A13) . . . in addition to rubber-stamping the agreement that waived Tesla's property, sales and business taxes for a decade or more--while throwing in discount power rates--the Nevada legislature also approved a bill last week that would exempt the auto maker from franchising regulations outlawing the company's retail approach. The state's auto dealers, who only weeks ago threatened to sue over the matter, shifted gears and endorsed the legislation.

"My car dealers want to assist in any way they can," John Sande of the Nevada Franchise Auto Dealers Association told the Reno Gazette Journal. "Nevada law does not allow Tesla to come in and sell directly to the consumer, so we are going to have to come in and change it so they can sell directly to the consumer."

No doubt the dealers balanced the pros and cons of agitating for their own self-interest against overwhelming political support for the deal and the spending potential of thousands of new, well-paid workers who may prefer a Ford or Chevy pickup over a $70,000 Tesla Model S. But the fact that Nevada legislators so quickly jettisoned a key provision of the state's dealership-franchise provisions speaks volumes about how essential these statutes really are to the well-being of their constituents.

There is no rational reason Tesla--or any other automobile manufacturer--should be restricted from selling new cars directly to those who seek to buy them.

For the full commentary, see:

JOHN KERR. "OPINION; Tesla Breaks the Auto Dealer Cartel; Nevada lets the electric car maker sell directly to consumers. Too bad everyone else still can't." The Wall Street Journal (Weds., Sept. 17, 2014): A13.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date Sept. 16, 2014.)

October 17, 2014

French Socialist Wants to Encourage Entrepreneurs by Reducing Regulations

MacronFrenchSocialist2014-10-07.jpg "Emmanuel Macron, France's new economy minister, has been a major force behind a recent shift by President François Hollande toward a more centrist economic policy." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B3) . . . , what is important, Mr. Macron said, as a late train from the nearby Gare de Lyon rumbled beneath his window, is that France continue to streamline and modernize the welfare state.

"For me being a Socialist today is about defending the unemployed, but also defending businessmen who want to create a company, and those who need jobs," he said. "We have to shift the social model from a lot of formal protections toward loosening bottlenecks in the economy."

For the full story, see:

LIZ ALDERMAN. "France's 36-Year-Old Economy minister Is Face of the New Socialism." The New York Times (Tues., OCT. 7, 2014): B3.

(Note: ellipsis added.)

(Note: the online version of the story has the date OCT. 6, 2014, and has the title "Emmanuel Macron, Face of France's New Socialism.")

October 9, 2014

Feds Allow Hollywood to Use Drones

(p. B1) LOS ANGELES -- The commercial use of drones in American skies took a leap forward on Thursday [Sept. 25, 2014] with the help of Hollywood.

The Federal Aviation Administration, responding to applications from seven filmmaking companies and pressure from the Motion Picture Association of America, said six of those companies could use camera-equipped drones on certain movie and television sets. Until now, the F.A.A. has not permitted commercial drone use except for extremely limited circumstances in wilderness areas of Alaska.

Put bluntly, this is the first time that companies in the United States will be able to legally use drones to fly over people.

The decision has implications for a broad range of industries including agriculture, energy, real estate, the news media and online retailing. "While the approval for Hollywood is very limited in scope, it's a message to everyone that this ball is rolling," said Greg Cirillo, chairman of the aviation practice at Wiley Rein, a law firm in Washington.

Michael P. Huerta, the administrator of the F.A.A., said at least 40 similar applications were pending from companies beyond Hollywood. One is Amazon, which wants permission to move forward with a drone-delivery service. Google has acknowledged "self-flying vehicle" tests in the Australian outback.

"Today's announcement is a significant milestone in broadening commercial use," Anthony R. Foxx, secretary of transportation, told reporters in a conference call.

For the full story, see:

BROOKS BARNES. "Drone Exemptions for Hollywood Pave the Way for Widespread Use." The New York Times (Fri., SEPT. 26, 2014): B1 & B7.

(Note: bracketed date added.)

(Note: the online version of the story has the date SEPT. 25, 2014.)

October 5, 2014

Feds Protect Us from Baby Photos

(p. 1) Pictures of smiling babies crowd a bulletin board in a doctor's office in Midtown Manhattan, in a collage familiar to anyone who has given birth. But the women coming in to have babies of their own cannot see them. They have been moved to a private part of the office, replaced in the corridors with abstract art.

"I've had patients ask me, 'Where's your baby board?' " said Dr. Mark V. Sauer, the director of the office, which is affiliated with Columbia University Medical Center. "We just tell them the truth, which is that we no longer post them because of concerns over privacy."

For generations, obstetricians and midwives across America have proudly posted photographs of the babies they have delivered on their office walls. But this pre-digital form of social media is gradually going the way of cigars in the waiting room, because of the federal patient privacy law known as Hipaa.

Under the law, the Health Insurance Portability and Accountability Act, baby photos are a type of protected health information, no less than a medical chart, birth date or Social Security number, according to the Department of Health and Human Services. Even if a parent sends in the photo, it is considered private unless the parent also sends written authorization for its posting, which almost no one does.

For the full story, see:

ANEMONA HARTOCOLLIS. "Baby Pictures at the Doctor's? Cute, Sure, but Illegal." The New York Times, First Section (Sun., AUG. 10, 2014): 1 & 19.

(Note: the online version of the story has the date AUG. 9, 2014.)

October 2, 2014

Regulations Deter Start-Ups, Creating a "Senile Economy"

(p. 5B) We may have a "senile economy," says economist Robert Litan of the Brookings Institution. That's senile as in old, rigid and undynamic.

. . .

Litan is not just blowing smoke. In a new study, he and Ian Hathaway measured the age of American businesses. They were astonished by what they found: From 1992 to 2011, the share of U.S. firms that were 16 and older jumped from 23 percent to 34 percent.

. . .

What happened to all the entrepreneurs? Good question.

"We do not have an explanation," write the University of Maryland and the Census Bureau economists. Neither does Litan. "One theory is that the cumulative effect of regulations," he says, discriminates against new businesses and favors "established firms that have the experience and resources to deal with it." What allegedly deters and hampers startups is not any one regulation but the cost and time of complying with a blizzard of them.

For the full commentary, see:

ROBERT J. SAMUELSON. "Fewer entrepreneurs spells trouble." Omaha World-Herald (Mon., August 11, 2014): 5B.

(Note: ellipses added.)

The article mentioned above by Hathaway and Litan is:

Hathaway, Ian, and Robert E. Litan. "The Other Aging of America: The Increasing Dominance of Older Firms." In Economic Studies at Brookings, The Brookings Institution (July 2014): 1-17.

September 29, 2014

For Health Entrepreneurs "the Regulatory Burden in the U.S. Is So High"

(p. A11) Yo is a smartphone app. MelaFind is a medical device. Yo sends one meaningless message: "Yo!" MelaFind tells you: "biopsy this and don't biopsy that." MelaFind saves lives. Yo does not. Guess which firm found it easier to put their product in consumers hands?

. . .

In January 2010, Jeffrey Shuren, a veteran FDA official, was appointed director of the FDA's Center for Devices and Radiological Health, the division responsible for evaluating MelaFind. Dr. Shuren, Dr. Gulfo writes, had "a reputation for being somewhat anti-industry" and "an aggressive agenda to completely revamp the device approval process." Thus in March MELA Sciences was issued something called a "Not Approvable letter" raising various questions about MelaFind.

. . .

The letter sent the author into survival mode. He battled the FDA, calmed investors, and defended against the lawsuit all while trying to keep the company afloat. Under stress, Dr. Gulfo's health began to decline: He lost 29 pounds, his hair began to fall out, and the pain in his gut became so intense he needed an endoscopy.

. . .

The climax to this medical thriller comes when, in "the greatest 15 minutes of [his] life," Dr. Gulfo delivers an impassioned speech, à la "Twelve Angry Men," to the FDA's advisory committee. The committee voted for approval, 8 to 7, and, perhaps with the congressional hearing in mind, the FDA approved MelaFind in September 2011.

It was a major triumph for the company, but Dr. Gulfo was beat. He retired from the company in June 2013-- . . .

. . .

Google's Sergey Brin recently said that he didn't want to be a health entrepreneur because "It's just a painful business to be in . . . the regulatory burden in the U.S. is so high that I think it would dissuade a lot of entrepreneurs." Mr. Brin won't find anything in Dr. Gulfo's book to persuade him otherwise. Until we get our regulatory system in order, expect a lot more Yo's and not enough life-saving innovations.

For the full review, see:

ALEX TABARROK. "BOOKSHELF; It's Broke. Fix It. MelaFind's breakthrough optical technology promised earlier, more accurate detection of melanoma. Then the FDA got involved." The Wall Street Journal (Tues., Aug. 12, 2014): A11.

(Note: ellipses added, except for the one internal to the final paragraph, which is in the original.)

(Note: the online version of the review has the date Aug. 11, 2014, and has the title "BOOKSHELF; Book Review: 'Innovation Breakdown' by Joseph V. Gulfo; MelaFind's breakthrough optical technology promised earlier, more accurate detection of melanoma. Then the FDA got involved.")

The book under review is:

Gulfo, Joseph V. Innovation Breakdown: How the FDA and Wall Street Cripple Medical Advances. Franklin, TN: Post Hill Press, 2014.

August 30, 2014

Rollin King Found Legal Way to Avoid Fed's Regulations

(p. 25) Rollin W. King, a co-founder of Southwest Airlines, the low-cost carrier that helped to change the way Americans travel, died Thursday [June 26, 2014] in Dallas. He was 83.

. . .

The concept for Southwest came to Mr. King when he noticed that businessmen in Texas were willing to charter planes instead of paying the high fares of the domestic airlines.

At the time that Mr. King first proposed the idea to Mr. Kelleher over drinks, the federal government regulated the fares, schedules and routes of interstate airlines, and the mandated prices were high.

Competitors like Texas International Airlines, Braniff International Airways and Continental Airlines waged a protracted legal battle before Southwest could make its first flight. By not flying across state borders, Southwest was able to get around prices set by the Civil Aeronautics Board.

For the full obituary, see:

MICHAEL CORKERY. "Rollin King, 83, Pilot Who Helped Start Southwest Airlines." The New York Times, First Section (Sun., June 29, 2014): 25.

(Note: ellipsis, and bracketed date, added.)

(Note: the online version of the obituary has the date June 28, 2014, and has the title "Rollin King, Texas Pilot Who Helped Start Southwest, Dies at 83.")

August 24, 2014

U.S. Constitution Reflects Lockean Natural Rights

(p. A13) Over the past three decades, Richard A. Epstein has repeatedly argued--with analytical rigor and astonishing erudition--that governments govern best when they limit their actions to protecting liberty and property. He is perhaps best known for "Takings," his 1995 book on the losses that regulations impose on property owners. Of late, he has exposed the flaws of a government-administered health system.

In "The Classical Liberal Constitution," Mr. Epstein takes up the political logic of our fundamental law. The Constitution, he says, reflects above all John Locke's insistence on protecting natural rights--rights that we possess simply by virtue of our humanity. Their protection takes concrete form in the Constitution by restricting the federal government to specific, freedom-advancing and property-protecting tasks, such as establishing a procedurally fair justice system, minting money as a stable repository of value, preserving a national trade zone among the states, and, not least, guarding the rights listed in the Bill of Rights.

For the full review, see:

JOHN O. MCGINNIS. "BOOKSHELF; Book Review: 'The Classical Liberal Constitution,' by Richard A. Epstein; Our understanding of the Constitution lost its way when we embraced the idea that rights are created by a benevolent state." The Wall Street Journal (Mon., March 23, 2014): A13.

(Note: the online version of the review has the date March 23, 2014, and has the title "BOOKSHELF; Book Review: 'The Classical Liberal Constitution,' by Richard A. Epstein; Our understanding of the Constitution lost its way when we embraced the idea that rights are created by a benevolent state.")

The book under review is:

Epstein, Richard A. The Classical Liberal Constitution: The Uncertain Quest for Limited Government. Cambridge, MA: Harvard University Press, 2013.

August 23, 2014

The Vagueness and Regulatory Discretion of Dodd-Frank Is "a Recipe for Cronyism"

(p. 218) Aaron Steelman has an "Interview" with John Cochrane. On Dodd-Frank: "I think Dodd-Frank repeats the same things we've been trying over and over again that have failed, in bigger and bigger ways. . . . The deeper problem is the idea that we just need more regulation--as if regulation is something you pour into a glass like water--not smarter and better designed regulation. Dodd-Frank is pretty bad in that department. It is a long and vague law that spawns a mountain of vague rules, which give regulators huge discretion to tell banks what to do. It's a recipe for cronyism and for banks to game the system to limit competition." On how to stop bailing out large financial institutions: "You have to set up the system ahead of time so that you either can't or won't need to conduct bailouts. Ideally, both. . . . The worst possible system is one in which everyone thinks bailouts are coming, but the government in fact does not have the legal authority to bail out." . . . Econ Focus, Federal Reserve Bank of Richmond, Third Quarter 2013, pp. 34-38. https://www.richmondfed


Taylor, Timothy. "Recommendations for Further Reading." Journal of Economic Perspectives 28, no. 1 (Winter 2014): 235-42.

(Note: italics, and first two ellipses, are in original; the last ellipsis is added.)

August 16, 2014

Process Innovations, Allowed by Deregulation, Creatively Destroyed Railroads

(p. A11) In "American Railroads: Decline and Renaissance in the Twentieth Century," transportation economists Robert E. Gallamore and John R. Meyer provide a comprehensive account of both the decline and the revival.   . . .    They point to excessive government regulation of railroad rates and services as the catalyst for the industry's decay.

. . .

. . . deregulation, Mr. Gallamore and Meyer demonstrate, was a process of creative destruction. Conrail was created by the government in 1976 in a risky, last-ditch attempt to rescue Penn Central and other bankrupt Eastern railroads. It was quickly losing $1 million a day, and its plight helped make the case for the major revamp of railroad regulation that came in 1980. A wave of mergers followed, and the new companies slashed routes and employees on the way to profitability. The shrinking of the national rail system helped, too, as freight companies consolidated traffic on a smaller (and therefore cheaper) network. Freight-train crews were cut to two or three people from four or five. Cabooses were replaced by electronic gear at the end of freight trains.

For the full review, see:

DANIEL MACHALABA. "BOOKSHELF; Long Train Runnin'; Track conditions got so bad in the 1970s that stationary freight cars were falling off the rails thanks to rotting crossties." The Wall Street Journal (Weds., July 9, 2014): A11.

(Note: ellipses added.)

(Note: the online version of the review has the date July 8, 2014, and has the title "BOOKSHELF; Book Review: 'American Railroads' by Robert E. Gallamore and John R. Meyer; Track conditions got so bad in the 1970s that stationary freight cars were falling off the rails thanks to rotting crossties.")

The book under review is:

Gallamore, Robert E., and John R. Meyer. American Railroads: Decline and Renaissance in the Twentieth Century. Cambridge, MA: Harvard University Press, 2014.

August 15, 2014

Flexibility of System of Industrial Relations Makes German Economy Strong

(p. 183) We have argued that the remarkable transformation of the German economy from the "sick man of Europe" to a lean and highly competitive economy within little more than a decade is rooted in the inherent flexibility of the German system of industrial relations. This system allowed German industry to react appropriately and flexibly over time to the demands of German unification, and the global challenges of a new world economy.


Dustmann, Christian, Bernd Fitzenberger, Uta Schoenberg, and Alexandra Spitz-Oener. "From Sick Man of Europe to Economic Superstar: Germany's Resurgent Economy." Journal of Economic Perspectives 28, no. 1 (Winter 2014): 167-88.

August 11, 2014

Lynas Apologizes for Organizing Anti-GM (Genetic Modification) Movement

(p. 115) More than a decade and a half since the commercialization of first-generation agricultural biotechnology, concerns about transgenic crop impacts on human and environmental health remain, even though the experience across a cumulative 1.25 billion hectares suggests the relative safety of first-generation genetically engineered seed. The risks posed by agricultural biotechnology warrant continued attention, and new transgenic crops may pose different and bigger risks. Weighing against uncertain risks are benefits from increased food production, reduced insecticide use, and avoided health risks to food consumers and farm workers. At the same time, adoption is shown to increase herbicide use while reducing herbicide toxicity, save land by boosting yields while also making previously unfarmed lands profitable. Adoption benefits food consumers and farmers but also enriches seed companies that enjoy property right protections over new seed varieties. The (p. 116) balance of scientific knowledge weighs in favor of continued adoption of genetically engineered seed, which may explain why some longtime critics have reversed course. For example, Lord Melchett, who was the head of Greenpeace, has been advising biotechnology companies on overcoming constraints to the technology (St. Clair and Frank forthcoming). Mark Lynas, a journalist and organizer of the anti-GM (genetic modification) movement, publicly apologized for helping start the movement in his "Lecture to Oxford Farming Conference" (2013).

Agricultural biotechnology remains regulated by regimes developed at the introduction of the technology. Whereas precaution may have been appropriate before the relative magnitudes of risks and benefits could be empirically observed, accumulated knowledge suggests overregulation is inhibiting the introduction of new transgenic varieties. Regulation also discourages developing-country applications, where benefits are likely greatest. In the future, new genetic traits may promise greater benefits while also posing novel risks of greater magnitudes than existing traits. Efficient innovation and technology adoption will require different and, perhaps, more stringent regulation in the future, as well as continued insights from researchers, including economists, in order to assess evolving costs and benefits.


Barrows, Geoffrey, Steven Sexton, and David Zilberman. "Agricultural Biotechnology: The Promise and Prospects of Genetically Modified Crops." Journal of Economic Perspectives 28, no. 1 (Winter 2014): 99-120.

July 29, 2014

HR Regulations and Fear of Lawsuits Keep Managers from Firing Workers Who Do Not Work

(p. 1B) The biggest problem in your workplace has a name. His name is Jeff. . . .

Jeff sits two cubicles down from us, or three, or four. His real name may be John, Juan or Joan. He gets to the widget factory late, he leaves early and always mucks up his part of any group project. He complains, loudly, about the smallest things, and when you bring doughnuts for your birthday he probably takes three and then talks with his mouth full, too.

. . .

(p. 2B) . . . , morale suffers greatly when most of a company's employees perceive that their supervisor is failing to deal with their low-performing co-worker, month after month, year after year.

For this, Hoogeveen blames a corporate culture that is so concerned about HR regulations, and the often-imagined threat of litigation, that bosses often fail to take into account how the trouble employee affects the larger climate.

. . .

. . . if Jeff doesn't improve, he needs to be fired. This is perhaps the worst part of a boss's job, Hoogeveen thinks. His eyes mist as he recalls firing an employee whom he liked, but who was simply a bad fit at QLI.

It's human nature to avoid this conflict, to maintain the status quo and let Jeff be, he says. That's what can and does happen at most Omaha companies.

But it's bad for the employees, and it's bad for business.

"A lot of this stuff is incredibly easy to understand," says Omaha's workplace mechanic [Kim Hoogeveen]. "It's incredibly difficult to live."

For the full story, see:

Hansen, Matthew. "Workplace Guru: Don't Let Problem Worker Slide." Omaha World-Herald (Mon., July 21, 2014): 1B-2B.

(Note: ellipses, and bracketed name, added.)

(Note: the online version of the article had the title "Hansen: Don't let Jeff -- the problem worker -- slide, workplace guru says.")

July 26, 2014

Countries that Protect Jobs Stifle Economic Growth

(p. 240) In an "Interview" conducted by Jessie Romero, John Haltiwanger discusses changing patterns of job creation and destruction: "But now we're seeing a decline in the entry rate and a pretty stark decline in the share of young businesses. . . . But it's also important to recognize that the decline in the share of young firms has occurred because the impact of entry is not just at the point of entry, it's also over the next five or 10 years. A wave of entrants come in, and some of them grow very rapidly, and some of them fail. That dynamic has slowed down. . . . If you look at young small businesses, or just young businesses period, the 90th percentile growth rate is incredibly high. Young businesses not only are volatile, but their growth rates also are tremendously skewed. It's rare to have a young business take off, but those that do add lots of jobs and contribute a lot to productivity growth. We have found that startups together with high-growth firms, which are disproportionately young, account for roughly 70 percent of overall job creation in the United States. . . . "I think the evidence is overwhelming that countries have tried to stifle the [job] destruction process and this has caused problems. I'm hardly a fan of job destruction per se, but making it difficult for firms to contract, through restricting shutdowns, bankruptcies, layoffs, etc., can have adverse consequences. The reason is that there's so much heterogeneity in productivity across businesses. So if you stifle that destruction margin, you're going to keep lots of low-productivity businesses in existence, and that could lead to a sluggish economy. I just don't think we have any choice in a modern market economy but to allow for that reallocation to go on. Of course, what you want is an environment where not only is there a lot of job destruction, but also a lot of job creation, so that when workers lose their jobs they either immediately transit to another job or their unemployment duration is low." Econ Focus, Federal Reserve Bank of Richmond, Second Quarter 2013, pp. 30-34.


Taylor, Timothy. "Recommendations for Further Reading." Journal of Economic Perspectives 28, no. 1 (Winter 2014): 235-42.

(Note: italics, ellipses, and bracketed word, in original.)

July 2, 2014

The Opportunity Cost of Surgeons Dictating and Documenting Health Records

(p. A13) Across the country, doctors waste precious time filling in unnecessary electronic-record fields just to satisfy a regulatory measure. I personally spend two hours a day dictating and documenting electronic health records just so I can be paid and not face a government audit. Is that the best use of time for a highly trained surgical specialist?

For the full commentary, see:

DANIEL F. CRAVIOTTO JR. "A Doctor's Declaration of Independence; It's time to defy health-care mandates issued by bureaucrats not in the healing profession." The Wall Street Journal (Tues., April 29, 2014): A13.

(Note: the online version of the commentary has the date April 28, 2014.)

June 27, 2014

Instead of 50 Silicon Valleys, Andreessen Sees 50 Kinds of Silicon Valley

AndreessenMarcCofounderNetscape2014-05-31.jpg "Marc Andreessen, co-founder of the first major web browser, Netscape, has a record for knowing what's coming next with technology." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B8) Mr. Andreessen said new valleys will eventually emerge. But they won't be Silicon Valley copycats.

Over the past couple of years, venture firms have invested in start-ups in Los Angeles, New York, Chicago and all over China. Los Angeles, for example, is home to Snapchat, Tinder, Whisper, Oculus VR and Beats, some of the big tech stories of the year. Mr. Andreessen said another hot place is Atlanta, the home of Georgia Tech.

But he offers a caveat.

"My personal view is that Silicon Valley will continue to take a disproportionate share of the No. 1 positions in great new markets, and I think that's just a reflection that the fact that the valley works as well as it does," Mr. Andreessen said.

There is a caveat to his caveat.

In Mr. Andreessen's view, there shouldn't be 50 Silicon Valleys. Instead, there should be 50 different kinds of Silicon Valley. For example, there could be Biotech Valley, a Stem Cell Valley, a 3-D Printing Valley or a Drone Valley. As he noted, there are huge regulatory hurdles in many of these fields. If a city wanted to spur innovation around drones, for instance, it might have to remove any local legal barriers to flying unmanned aircraft.

For the full interview, see:

NICK BILTON. "DISRUPTIONS; Forecasting the Next Big Moves in Tech." The New York Times (Mon., MAY 19, 2014): B8.

(Note: the online version of the interview has the date MAY 18, 2014, and has the title "DISRUPTIONS; Marc Andreessen on the Future of Silicon Valley(s), and the Next Big Technology." )

June 25, 2014

Occupational Licensing Hurts Poor and Restricts Innovation and Worker Mobility


Source of book image:

(p. A31) In the 1970s, about 10 percent of individuals who worked had to have licenses, but by 2008, almost 30 percent of the work force needed them.

With this explosion of licensing laws has come a national patchwork of stealth regulation that has, among other things, restricted labor markets, innovation and worker mobility.

. . .

Occupational licensing, moreover, does nothing to close the inequality gap in the United States. For consumers, there is likely to be a redistribution effect in the "wrong" direction, as higher income consumers have more choice among higher quality purveyors of a service and lower income individuals are left with fewer affordable service options.

. . . , government-issued licenses largely protect occupations from competition. Conservatives often see members of the regulated occupation supporting licensing laws under claims of "public health and safety." However, these laws do much more to stop competition and less to enhance the quality of the service.

Also, all consumers do not demand the same level of quality. If licensure "improves quality" by restricting entry into the profession, then some consumers will be forced to pay for more "quality" than they want or need. Not everyone wants a board-licensed hairdresser.

For the full commentary, see:

MORRIS M. KLEINER. "Why License a Florist?" The New York Times (Thurs., MAY 29, 2014): A31.

(Note: the online version of the commentary has the date MAY 28, 2014.)

Kleiner's most recent book on occupational licensing is:

Kleiner, Morris M. Stages of Occupational Regulation: Analysis of Case Studies. Kalamazoo, Michigan: W.E. Upjohn Institute, 2013.

June 20, 2014

How Medicaid Rewards Doctors Who Mistreat Patients

(p. A13) I recently operated on a child with strabismus (crossed eyes). This child was covered by Medicaid. I was required to obtain surgical pre-authorization using a Current Procedural Terminology, or CPT, code for medical identification and billing purposes. The CPT code identified the particular procedure to be performed. Medicaid approved my surgical plan, and the surgery was scheduled.

During the surgery, I discovered the need to change my plan to accommodate findings resulting from a previous surgery by another physician. Armed with new information, I chose to operate on different muscles from the ones noted on the pre-approved plan. The revised surgery was successful, and the patient obtained straight eyes.

However, because I filed for payment using the different CPT code for the surgery I actually performed, Medicaid was not willing to adjust its protocol. The government denied all payment. Ironically, the code-listed payment for the procedure I ultimately performed was an amount 40% less than the amount approved for the initially authorized surgery. For over a year, I challenged Medicaid about its decision to deny payment. I wrote numerous letters and spoke to many Medicaid employees explaining the predicament. Eventually I gave up fighting what had obviously become a losing battle.

For the full commentary, see:

ZANE F. POLLARD. "The Bureaucrat Sitting on Your Doctor's Shoulder; When I'm operating on a child, I shouldn't have to wonder if Medicaid will OK a change in the surgical plan.." The Wall Street Journal (Thurs., May 22, 2014): A13.

(Note: the online version of the commentary has the date May 21, 2014.)

June 11, 2014

"A Backhanded Slap to Overweening European Union Rule Makers"

LemonsSoldByUglyFruit2014-05-31.jpg "Lemons sold by Ugly Fruit." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 6) At a time of lingering economic hardship for many in the European Union, whose penchant for regulation has extended even to the shape, size and color of the foods its citizens eat, Ms. Soares has bet that there is a market for fruits and vegetables deemed too ugly by government bureaucrats, supermarkets and other retailers to sell to their customers.

Six months ago, she and a handful of volunteers started a cooperative called Fruta Feia, or Ugly Fruit, which in its short life is already verging on a kind of countercultural movement. It has taken off with hard-pressed consumers, won applause from advocates outraged by Europe's skyrocketing food waste, and provided a backhanded slap to overweening European Union rule makers. In its own way, it has even quietly subverted fixed notions of what is beautiful, or at least edible.

"The E.U. norms are based on the mistaken idea that quality is about appearance," said Ms. Soares, 31, who formerly worked in Barcelona as a renewable energy consultant. "It's of course easier to measure the exterior aspect rather than interior features like sugar levels, but that is the wrong way to determine quality."

She said her goal was "to break the dictatorship of aesthetics, because it has really helped increase food wastage."

Europe wastes 89 million tons of food a year, according to a study presented in May by the Dutch and Swedish governments, which called on the European Union "to reduce the amount of food waste caused by the labeling system."

For her part, Ms. Soares estimates that a third of Portugal's farming produce goes to waste because of the quality standards set by supermarkets and their consumers. She says the waste is also a striking example of misplaced regulatory intervention by the European Union, which has tried to unify food standards across the 28-nation bloc.

For the full story, see:

RAPHAEL MINDER. "Tempting Europe With Ugly Fruit." The New YorkTimes, First Section (Sun., MAY 25, 2014): 6 & 8.

(Note: the online version of the story has the date MAY 24, 2014.)

June 9, 2014

Government Regulations Favor Health Care Incumbents


Source of book image: online version of the WSJ review quoted and cited below.

(p. A11) The rise in U.S. health-care costs, to nearly 18% of GDP today from around 6% of GDP in 1965, has alarmed journalists, inspired policy wonks and left patients struggling to find empathy in a system that tends to view them as "a vessel for billing codes," as the technologist Dave Chase has put it.

Enter Jonathan Bush, dyslexic entrepreneur, . . .

. . .

. . . , Mr. Bush touts technology as a driver of change. It has revolutionized the way we shop for books and select hotels, but health-care delivery has been stubbornly resistant. Mr. Bush notes that the number of people supporting each doctor has climbed to 16 today from 10 in 1990--half of whom, currently, are administrators handling the mounting paperwork. Astonishingly, as Mr. Bush observes, the government had to pay doctors billions of dollars, via the 2009 HITECH Act, to incentivize them to upgrade from paper to computers. Meanwhile, fast-food chains discovered computers on their own, because the market demanded it.

. . .

Let entrepreneurs loose on these challenges, Mr. Bush believes, and they will come up with solutions.

Mr. Bush identifies three major obstacles to the kinds of change he has in mind. First, large hospital systems leverage their market position to charge hefty premiums for basic services, then use the proceeds to buy more regional hospitals and local practices. "As big ones take over the small," Mr. Bush laments, "prices shoot up. Choices vanish." Second, government regulations, especially state laws, favor powerful incumbents, shielding "imaging centers and hospitals from competition." Third, heath care suffers from a risk-avoidant culture. The maxim "do no harm," Mr. Bush says, should not be an excuse for clinging to a flawed status quo.

For the full review, see:

David A. Shaywitz. "BOOKSHELF; A System Still in Need of Repair; Routine medical services can be done for less cost--one of many obvious realities that current health-care practices studiously ignore." The Wall Street Journal (Mon., May 19, 2014): A11.

(Note: ellipses added.)

(Note: the online version of the review has the date May 18, 2014, and has the title "BOOKSHELF; Book Review: 'Where Does It Hurt?' by Jonathan Bush; Routine medical services can be done for less cost--one of many obvious realities that current health-care practices studiously ignore.")

The book under review is:

Bush, Jonathan, and Stephen Baker. Where Does It Hurt?: An Entrepreneur's Guide to Fixing Health Care. New York: Portfolio, 2014.

May 22, 2014

In France "'Liberté, Égalité, Fraternité' Means that What's Yours Should Be Mine"

SantacruzGuillaumeFrenchEntrepreneurInLondon2014-04-27.jpgGuillaume Santacruz is among many French entrepreneurs now using London as their base. He said of his native France, "The economy is not going well, and if you want to get ahead or run your own business, the environment is not good." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 1) Guillaume Santacruz, an aspiring French entrepreneur, brushed the rain from his black sweater and skinny jeans and headed down to a cavernous basement inside Campus London, a seven-story hive run by Google in the city's East End.

. . .

A year earlier, Mr. Santacruz, who has two degrees in finance, was living in Paris near the Place de la Madeleine, working in a boutique finance firm. He had taken that job after his attempt to start a business in Marseille foundered under a pile of government regulations and a seemingly endless parade of taxes. The episode left him wary of starting any new projects in France. Yet he still hungered to be his own boss.

He decided that he would try again. Just not in his own country.

"A lot of people are like, 'Why would you ever leave France?' " Mr. Santacruz said. "I'll tell you. France has a lot of problems. There's a feeling of gloom that seems to be growing deeper. The economy is not going well, and if you want to get ahead or run your own business, the environment is not good."

. . .

(p. 5) "Making it" is almost never easy, but Mr. Santacruz found the French bureaucracy to be an unbridgeable moat around his ambitions. Having received his master's in finance at the University of Nottingham in England, he returned to France to work with a friend's father to open dental clinics in Marseille. "But the French administration turned it into a herculean effort," he said.

A one-month wait for a license turned into three months, then six. They tried simplifying the corporate structure but were stymied by regulatory hurdles. Hiring was delayed, partly because of social taxes that companies pay on salaries. In France, the share of nonwage costs for employers to fund unemployment benefits, education, health care and pensions is more than 33 percent. In Britain, it is around 20 percent.

"Every week, more tax letters would come," Mr. Santacruz recalled.

. . .

Diane Segalen, an executive recruiter for many of France's biggest companies who recently moved most of her practice, Segalen & Associés, to London from Paris, says the competitiveness gap is easy to see just by reading the newspapers. "In Britain, you read about all the deals going on here," Ms. Segalen said. "In the French papers, you read about taxes, more taxes, economic problems and the state's involvement in everything."

. . .

"It is a French cultural characteristic that goes back to almost the revolution and Robespierre, where there's a deep-rooted feeling that you don't show that you make money," Ms. Segalen, the recruiter, said. "There is this sense that 'liberté, égalité, fraternité' means that what's yours should be mine. It's more like, if someone has something I can't have, I'd rather deprive this person from having it than trying to work hard to get it myself. That's a very French state of mind. But it's a race to the bottom."

For the full story, see:

LIZ ALDERMAN. "Au Revoir, Entrepreneurs." The New York Times, SundayBusiness Section (Sun., MARCH 23, 2014): 1 & 5.

(Note: ellipses added.)

(Note: the online version of the story has the date MARCH 22, 2014.)

SegalenDianeFrenchEntrepreneurInLondon2014-04-27.jpg 'Diane Segalen moved most of her executive recruiting practice to London from Paris. In France, she says, "there is this sense that 'liberté, égalité, fraternité' means that what's yours should be mine."" Source of caption and photo: online version of the NYT article quoted and cited above.

May 14, 2014

Delta Overcomes Obstacles that Ground Other Airlines

DeltaOvercomesObstaclesToKeepFlyingGraphic.jpgSource of graphic: online version of the WSJ article quoted and cited below.

Cancellations due to mechanical failures, piliot illness and government regulations are often announced as though they were acts of God, outside the possible control of airlines, for which the airline is blameless. But airlines can take actions, and improve processes, to reduce the frequency and consequences of such cancellations. In airlines, and in other firms, there is not a sharp line between what can and what cannot be under the firm's control.

(p. D3) Atlanta

The crew of Delta Air Lines Flight 55 last Thursday couldn't legally fly from Lagos, Nigeria, to Atlanta unless they waited a day due to new limits on how much pilots can fly in a rolling 28-day period. The trip would have to be canceled.

Instead, Delta headquarters told the captain to fly to San Juan, Puerto Rico, which they could reach within their duty limits. There, two new pilots would be waiting to take the Boeing 767 on to Atlanta. The plane arrived in San Juan at 2:44 a.m., quickly took on fuel and pilots, and landed in Atlanta only 40 minutes late.

The episode, unorthodox in the airline industry, illustrates the fanaticism Delta now has for avoiding cancellations. Last year, Delta canceled just 0.3% of its flights, according to flight-tracking service That was twice as good as the next-best airlines, Southwest and Alaska, and five times better than the industry average of 1.7%.

. . .

Managers in Delta operations centers move planes, crews and parts around hourly trying to avoid canceling flights. How well an airline maintains its fleet and how smartly it stashes spare parts and planes at airports affect whether your flight goes or not.

Delta thinks it has come up with new analytical software and instruments that can help monitor the health of airplanes and predict which parts will soon fail. Empty planes are ferried to replace crippled jets rather than waiting for overnight repairs.

Mechanics developed a vibration monitor to install on cooling fans for cockpit instruments. A plane can't be sent out on a new trip with a broken fan.

Now when vibration starts to increase, indicating that a bearing may be wearing down and getting close to failing, a new fan is swapped in. The wobbly fan goes to the shop for new bearings. That has reduced canceled flights.

So has spending $2 million to have spare starters for Boeing 767 engines at all 767 stations abroad. Starters last about five years. While each plane has two and both engines can be started with one, you can't send a plane out on a long trip over oceans with only one working.

For the full story, see:

SCOTT MCCARTNEY. "THE MIDDLE SEAT; A World Where Flights Aren't Canceled; How Smartly an Airline Stashes Spare Parts and Planes at Airports Affects Whether or Not Your Flight Takes Off." The Wall Street Journal (Thurs., April 3, 2014): D3.

(Note: ellipsis added.)

(Note: the online version of the story was updated April 2, 2014, and has the title "THE MIDDLE SEAT; A World Where Flights Aren't Canceled; Inside Delta's new strategies to avoid stranding fliers.")

May 8, 2014

Government Pushed Kiewit to Ignore Worker Safety


Source of book image:

(p. C9) Boston Harbor's filth is legendary. It was mock-celebrated in the 1966 song "Dirty Water." The city's water-treatment plants were hopelessly inadequate, and barely treated sewage had been pouring into the harbor for decades.

. . .

The Deer Island Sewage Treatment Plant was supposed to solve these problems. Begun in 1990, the $3.8 billion facility would process human and industrial waste on a small island in Boston Harbor and then send it through a 9.5-mile tunnel into the deep waters of the Atlantic. Fifty-five vertical pipes called risers spurred off the tunnel's final section to further diffuse waste before releasing it into the sea. Temporary safety plugs, likened to giant salad bowls, had been placed near the bottom of each riser to keep water from seeping in before construction was complete.

These plugs were a source of conflict between the tunnel's owner, the Massachusetts Water Resources Authority (MWRA), and the company they hired to build it, Kiewit, "the Omaha-based construction giant" that, Mr. Swidey notes, "had built more miles of the U.S. highway system than any other contractor." The director of MWRA, Doug MacDonald, had left a job as a partner in a Boston law firm to take over the authority, a behemoth of 1,700 employees and, at the peak of harbor cleanup, an additional 3,000 construction workers. Mr. MacDonald's job included mollifying various parties who disagreed about how the Deer Island project would reach completion: Kiewit; the tunnel's designers, mostly out of the picture by 1998; ICF Kaiser Engineers, hired by MWRA to protect its interests and act as Mr. MacDonald's eyes and ears; the union "sandhogs" who bored out 2.4 million tons of rock to create the tunnel; the Occupational Safety and Health Administration, ostensibly looking out for worker safety but seeming more interested in handing out fines; and, though federal funds for harbor cleanup had long since dried up, "a bow-tied federal judge who served as the cleanup project's robed referee, threatening stiff fines or worse if the deadlines he imposed were not met."

. . .

The problem weighed most heavily on Kiewit. The firm was contractually obligated to deliver on time, subject to late-fee penalties of $30,000 a day, and to cover cost overruns. More, Kiewit had fronted the construction costs and would only be paid by selling the tunnel, piece by piece, to MWRA. The contract further obligated Kiewit to provide "lighting and ventilation (or breathing apparatus) for the personnel" that pulled the plugs but, in what seemed a senseless conflict, mandated that the plugs "could be removed only after the tunnel was completed," writes Mr. Swidey, "meaning after the sandhogs had cleared out, taking their extensive ventilation, transportation, and electrical systems with them."

Kiewit protested that clearing the tunnel of its life-sustaining infrastructure would make "the risk of catastrophe [to the workers pulling the plugs] . . . exponentially higher !" They offered several sound alternatives. In response, ICF Kaiser accused them of just wanting their payday. After a "year-long memo war," Kiewit capitulated, cleared the tunnel and hired a commercial dive team to go into a pitch-black airless tube.

For the full review, see:

NANCY ROMMELMANN. "BOOKS; One Mile Down, Ten Miles Out; Their oxygen was starting to get thin. On the verge of passing out, Hoss radioed back to the Humvees. The reply was an expletive, and the line went dead." The Wall Street Journal (Sat.,March 15, 2014): C9.

(Note: ellipses between paragraphs, added; ellipsis inside last paragraph, in original.)

(Note: the online version of the review has the date March 14, 2014, and has the title "BOOKSHELF; Book Review: 'Trapped Under the Sea' by Neil Swidey; In 1999, five deep-sea welders had to traverse a tunnel beneath Boston Harbor with no breathable air, no light and no chance for rescue should things go horribly wrong." )

The book under review is:

Swidey, Neil. Trapped under the Sea: One Engineering Marvel, Five Men, and a Disaster Ten Miles into the Darkness. New York: Crown Publishers, 2014.

April 27, 2014

Government Wire Inspectors Only Showed Up to Get Their Pay

(p. 121) Edison had originally planned to offer service to the entirety of south Manhattan, south of Canal Street and north of Wall Street, but engineering considerations forced him to carve out a smaller district, bounded by Wall, Nassau, Spruce, and Ferry Streets. Still, his company had to place underground some eighty thousand linear feet of electrical wire. This had never been attempted before, so it should not have been a surprise when H. O. Thompson, the city's commissioner of public works, summoned Edison to his office to explain that the city would have to be assured that the lines were installed safely. Thompson was assigning five inspectors to oversee the work, whose cost would be covered by an assessment of $5 per day, per inspector, payable (p. 122) each week. When Edison left Thompson's office, he was crestfallen, anticipating the harassment and delays ahead that would be caused by the inspectors' interference. On the day that work began, however, the inspectors failed to appear. Their first appearance was on Saturday afternoon, to draw their pay. This set the pattern that the inspectors followed as the work proceeded through 1881 and into 1882.


Stross, Randall E. The Wizard of Menlo Park: How Thomas Alva Edison Invented the Modern World. New York: Crown Publishers, 2007.

April 21, 2014

Where Ideas Go to Launch Versus Where Ideas Go to Die

(p. 1) PALO ALTO, Calif. -- THE most striking thing about visiting Silicon Valley these days is how many creative ideas you can hear in just 48 hours.

. . .

Curt Carlson, the chief executive of SRI International, which invented Siri for your iPhone, recalls how one leading innovator (p. 11) just told him that something would never happen and "then I pick up the paper and it just did."

What they all have in common is they wake up every day and ask: "What are the biggest trends in the world, and how do I best invent/reinvent my business to thrive from them?" They're fixated on creating abundance, not redividing scarcity, and they respect no limits on imagination. No idea here is "off the table."

. . .

What a contrast. Silicon Valley: where ideas come to launch. Washington, D.C., where ideas go to die. Silicon Valley: where there are no limits on your imagination and failure in the service of experimentation is a virtue. Washington: where the "imagination" to try something new is now a treatable mental illness covered by Obamacare and failure in the service of experimentation is a crime. Silicon Valley: smart as we can be. Washington: dumb as we wanna be.

For the full commentary, see:

Thomas L. Friedman. "Start-Up America: Our Best Hope." The New York Times, SundayReview Section (Sun., FEB. 16, 2014): 1 & 11.

(Note: ellipses added.)

(Note: the online version of the commentary has the date FEB. 15, 2014.)

April 18, 2014

In the Gilded Age Moguls Cleaned Up Their Own Mess and the Economy Was Not Hurt


Source of book image: online version of the WSJ review quoted and cited below.

(p. A13) Takeover wars seem to have lost their sizzle. What happened to the battles of corporate goliaths? Where have they gone, those swaggering deal makers? "Harriman vs. Hill" is a corporate dust-up that takes us back to the beginning of the 20th century, when tycoons who traveled by private rail merrily raided each other's empires while the world around them cringed.

. . .

Mr. Haeg conveys a vivid picture of the Gilded Age in splendor and in turmoil. Champagne still flowed in Peacock Alley in the Waldorf-Astoria, but fistfights erupted on the floor of the exchange, and a young trader named Bernard Baruch skirted disaster with the help of an inside tip, then perfectly legal. There were scant rules governing stock trading, the author reminds us--no taxes, either. "If you won in the market, you kept it all."

In that era, moguls were left to clean up their own mess.   . . .

. . .

Though hardly a cheerleader, Mr. Haeg is admiring of his cast, nostalgic for the laissez-faire world they inhabited. Observing that the economy wasn't upset by the stock market's mayhem, he concludes that, "in a perverse way, the market had worked."

For the full review, see:

ROGER LOWENSTEIN. "BOOKSHELF; When Titans Tie the Knot; Businessmen of a century ago didn't place 'competition' on a revered pedestal. Merger and monopoly were considered preferable." The Wall Street Journal (Fri., Feb. 14, 2014): A13.

(Note: ellipses added.)

(Note: the online version of the review has the date Feb. 13, 2014, and has the title "BOOKSHELF; Book Review: 'Harriman vs. Hill,' by Larry Haeg; Businessmen of a century ago didn't place 'competition' on a revered pedestal. Merger and monopoly were considered preferable.")

The book under review is:

Haeg, Larry. Harriman Vs. Hill: Wall Street's Great Railroad War. Minneapolis, MN: University of Minnesota Press, 2013.

April 14, 2014

Detailed Government Rules Impede Progress


Source of book image: online version of the WSJ review quoted and cited below.

(p. A13) The rulebooks should be "radically simplified," Mr. Howard says, on matters ranging from enforcing school discipline to protecting nursing-home residents, from operating safe soup kitchens to building the nation's infrastructure: Projects now often require multi-year, 5,000-page environmental impact statements before anything can begin to be constructed. Unduly detailed rules should be replaced by general principles, he says, that take their meaning from society's norms and values and embrace the need for official discretion and responsibility.

Mr. Howard serves up a rich menu of anecdotes, including both the small-scale activities of a neighborhood and the vast administrative structures that govern national life. After a tree fell into a stream and caused flooding during a winter storm, Franklin Township, N.J., was barred from pulling the tree out until it had spent 12 days and $12,000 for the permits and engineering work that a state environmental rule required for altering any natural condition in a "C-1 stream." The "Volcker Rule," designed to prevent banks from using federally insured deposits to speculate in securities, was shaped by five federal agencies and countless banking lobbyists into 963 "almost unintelligible" pages. In New York City, "disciplining a student potentially requires 66 separate steps, including several levels of potential appeals"; meanwhile, civil-service rules make it virtually impossible to terminate thousands of incompetent employees. Children's lemonade stands in several states have been closed down for lack of a vendor's license.

For the full review, see:

STUART TAYLOR JR. "BOOKSHELF; Stop Telling Us What to Do; When a tree fell into a stream in Franklin Township, N.J., it took 12 days and $12,000 for the necessary permits to remove it." The Wall Street Journal (Tues., April 8, 2014): A13.

(Note: the online version of the review has the date April 7, 2014, and has the title "BOOKSHELF; Book Review: 'The Rule of Nobody' by Philip K. Howard; When a tree fell into a stream in Franklin Township, N.J., it took 12 days and $12,000 for the necessary permits to remove it.")

The book under review is:

Howard, Philip K. The Rule of Nobody: Saving America from Dead Laws and Broken Government. New York: W. W. Norton & Co., 2014.

April 8, 2014

Government Regulations Slow U.S. Use of Drones

DronesThreeSophisticatedCommerical2014-04-03.jpgThree sophisticated drones. From top to bottom, the Insitu ScanEagle, the Yamaha RMAX, and the Trimble UX5. Source and photo: online version of the WSJ article quoted and cited below.

(p. B1) After Greek land surveyor George Papastamos bought his first drones a year ago, he let go most of his workers. Now, instead of a team of 12, he shows up to work sites with just a drone and an assistant.

"I could see this was the future," said Mr. Papastamos, a second-generation surveyor from Athens. The drones have improved his maps and lowered his costs, enabling him to win more business. "It is much, much more profitable," he said.

As U.S. regulators and courts grapple with when and how to allow the use of drones for commercial purposes, flying robots already are starting to change the way companies do business in countries from Australia to Japan to the U.K. They are showing the potential to provide cheaper and more effective alternatives to manned aircraft--and human workers--in industries like mining, construction and filmmaking.

The U.S. is "the world leader in producing drones," but "the reality is the rest of the world has moved further ahead of us in terms of commercial applications," said drone researcher Missy Cummings, director of the Humans and Autonomy Lab at Duke University.

For the full story, see:

JACK NICAS. "From Farms to Films, Drones Find Commercial Uses." The Wall Street Journal (Tues., March 11, 2014): B1 & B6.

(Note: the online version of the story has the date March 10, 2014, and has the title "Drones Find Fans Among Farmers, Filmmakers; FAA Still Debating Rules but Drones are Spraying 40% of Japan's Rice Fields.")

March 31, 2014

Better Policies Explain Why Poland Prospers More than Ukraine

RushchyshynYaroslavUkraineEntrepreneur2014-03-30.jpg "Yaroslav Rushchyshyn, a garment manufacturer, wants to end penalties when his company reports a financial loss." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B1) LVIV, Ukraine -- Every kind of business in this restless pro-European stronghold near the border with Poland has an idea about how to make Ukraine like its more prosperous neighbor.

For Yaroslav Rushchyshyn, founder of a garment manufacturer, it is abolishing bizarre regulations that have had inspectors threatening fines for his handling of fabric remnants and for reporting financial losses.

For Andrew Pavliv, who runs a technology company, it is modernizing a rigid education system to help nurture entrepreneurs.

For Natalia Smutok, an executive at a company that makes color charts for paint and cosmetics, it meant starting an antibribery campaign, even though she is 36 weeks pregnant.

. . .

(p. B10) Victor Halchynsky, a former journalist who is now a spokesman for the Ukrainian unit of a Polish bank, said the divergence of the two countries was a source of frustration.

"It's painful because we know it's only happened because of policy," he said, adding that while both countries had started the reform process, Poland "finished it."

Ukraine has been held back by a number of policies. Steep energy subsidies have kept consumption high and left the country dependent on Russian gas, draining state coffers. Mr. Pavliv said the state university system, which he called "pure, pure Soviet," was too inflexible to set up a training program for project managers, or to allow executives without specific certifications to teach courses. An agriculture industry once a Soviet breadbasket has been hurt by antiquated rules, including restrictions on land sales. Aggressive tax police have been used to shake down businesses.

For the full story, see:

DANNY HAKIM. "A Blueprint for Ukraine." The New York Times (Fri., MARCH 14, 2014): B1 & B10.

(Note: ellipsis added.)

(Note: the online version of the story has the date MARCH 13, 2014.)

PavlivAndrewTechEntrepreneur2014-03-30.jpg "Andrew Pavliv, who runs a technology company, wants to help turn Lviv into a little Ukrainian Silicon Valley." Source of caption and photo: online version of the NYT article quoted and cited above.

March 4, 2014

Better Wheat Is "Mired in Excessive, Expensive and Unscientific Regulation"

(p. A19) Monsanto recently said that it had made significant progress in the development of herbicide-tolerant wheat. It will enable farmers to use more environmentally benign herbicides and could be ready for commercial use in the next few years. But the federal government must first approve it, a process that has become mired in excessive, expensive and unscientific regulation that discriminates against this kind of genetic engineering.

The scientific consensus is that existing genetically engineered crops are as safe as the non-genetically engineered hybrid plants that are a mainstay of our diet.

. . .

Much of the nation's wheat crop comes from a section of the central plains that sits atop the Ogallala Aquifer, which is rapidly being depleted.

. . .

New crop varieties that grow under conditions of low moisture or temporary drought could increase yields and lengthen the time farmland is productive. Varieties that grow with lower-quality water have also been developed.

. . .

Given the importance of wheat and the confluence of tightening water supplies, drought, a growing world population and competition from other crops, we need to regain the lost momentum. To do that, we need to acquire more technological ingenuity and to end unscientific, excessive and discriminatory government regulation.

For the full commentary, see:

JAYSON LUSK and HENRY I. MILLER. "We Need G.M.O. Wheat." The New York Times (Mon., Feb. 3, 2014): A19.

(Note: ellipses added.)

(Note: the online version of the commentary has the date Feb. 2, 2014.)

February 28, 2014

Growth Slow Due to Policies Impeding Start-Ups

(p. A11) The most recent period of rapid productivity growth in the U.S.--and rapid economic growth--was in the 1980s and '90s and reflected the remarkable success of new businesses in information and communications technologies, including Microsoft, Apple, Amazon, Intel and Google. These new companies not only created millions of jobs but transformed modern society, changing how much of the world produces, distributes and markets goods and services.

Rising living standards in the future will depend on the continued success of these businesses but also on the next generation of success stories. Getting the U.S. economy back on track will require a much higher annual rate of new business startups. Sadly, the annual rate of new business creation is about 28% lower today than it was in the 1980s, according to our analysis of the U.S. Census Bureau's Business Dynamics Statistics annual data series.

Why is the startup rate so low? The answer lies in Washington and the policies implemented in the wake of the 2008 financial crisis that were, ironically, intended to grow and stabilize the economy.    . . .

This explosion in federal regulation, intervention and subsidies has retarded productivity growth by protecting incumbents at the expense of more efficient producers, including startups. The number of pages in the Federal Code of Regulations peaked at nearly 175,000 in 2012, an increase of more than 7% in President Obama's first three years.

For the full commentary, see:

EDWARD C. PRESCOTT and LEE E. OHANIAN. "U.S. Productivity Growth Has Taken a Dive; It has averaged about 1.1% since 2011, less than half the historical rate since 1948. Here's how to increase it." The Wall Street Journal (Tues., Feb. 4, 2014): A11.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date Feb. 3, 2014.)

February 21, 2014

Hero Rebels Against the Bureau of Technology Control


Source of book image: online version of the WSJ review quoted and cited below.

(p. D8) In "Influx," . . . , a sinister Bureau of Technology Control kidnaps scientists that have developed breakthrough technologies (the cure to cancer, immortality, true artificial intelligence), and is withholding their discoveries from humanity, out of concern over the massive social disruption they would cause. "We don't have a perfect record--Steve Jobs was a tricky one--but we've managed to catch most of the big disrupters before they've brought about uncontrolled social change," says the head of the bureau, the book's villain. The hero has developed a "gravity mirror" but refuses to cooperate, despite the best efforts of Alexa, who has been genetically engineered by the Bureau to be both impossibly sexy and brilliant.

In the publishing world, there is a growing sense that "Influx," Mr. Suarez's fourth novel, may be his breakout book and propel him into the void left by the deaths of Tom Clancy and Michael Crichton. "Influx' has Mr. Suarez's largest initial print run, 50,000 copies, and Twentieth Century Fox bought the movie rights last month.

An English major at the University of Delaware with a knack for computers, Mr. Suarez started a consulting firm in 1997, working with companies like Nestlé on complex production and logistics-planning issues. "You only want to move 100 million pounds of sugar once," says Mr. Suarez, 49 years old.

He began writing in his free-time. Rejected by 48 literary agents--(a database expert, he kept careful track)--he began self-publishing in 2006 under the name Leinad Zeraus, his named spelled backward. His sophisticated tech knowledge quickly attracted a cult following in Silicon Valley, Redmond, Wash., and Cambridge, Mass. The MIT bookstore was the first bookstore to stock his self-published books in 2007.

For the full review, see:

EBEN SHAPIRO. "Daniel Suarez Sees Into the Future." The Wall Street Journal (Fri., Feb. 7, 2014): D8.

(Note: ellipsis added.)

(Note: the online version of the review has the date Feb. 5, 2014, and the title "Daniel Suarez Sees Into the Future.")

The book under review, is:

Suarez, Daniel. Influx. New York: Dutton, 2014.


Author of Influx, Daniel Suarez. Source of photo: online version of the WSJ article quoted and cited above.

February 16, 2014


(p. A11) When I am asked if I want a Compact Fluorescent Light, the only thought I have is that I don't want my light to be compact, nor do I wish it to be florescent. I want a light that will incandesce across my room, filling it with a familiar yellow surf, and remind me that it was not with wax or kerosene, but with incandescent bulbs that man conquered the night.

. . .

I imagine what will happen when the filaments in my final incandescent bulbs grow weak, and I can hardly read my notes before me. Will I no longer be able to write at night? Or worse, will living with CFLs and LEDs make every day feel like I have just spent nine hours plastered before a computer screen? One day, soon, I will turn on my light and hear for the last time the signature, explosive death rattle of an incandescent bulb, and I'll hold a vigil for the light that shaped and witnessed more than a century of human history. Tender is the light, Keats might say.

In my lightless room, I'll sit for a moment and wonder how many more times in my life I'll watch a bulb go out again. As I look to my dead bulb, I'll think of the poet again and whisper: Darkling, you were not a piece of technology born for death.

For the full commentary, see:

ALEXANDER ACIMAN. "Tender Is the Light of My Incandescents; Bracing myself for life once the filaments in my beloved bulbs grow weak." The Wall Street Journal (Fri., Jan. 31, 2014): A11.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date Jan. 30, 2014.)

February 15, 2014

Big Island of Hawaii Bans G.M.O.s Despite Papaya Saved from Disease

IlaganGreggorDefenderOfGMOs2014-01-19.jpg "Greggor Ilagan initially thought a ban on genetically modified organisms was a good idea." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 1) KONA, Hawaii -- From the moment the bill to ban genetically engineered crops on the island of Hawaii was introduced in May 2013, it garnered more vocal support than any the County Council here had ever considered, even the perennially popular bids to decriminalize marijuana.

Public hearings were dominated by recitations of the ills often attributed to genetically modified organisms, or G.M.O.s: cancer in rats, a rise in childhood allergies, out-of-control superweeds, genetic contamination, overuse of pesticides, the disappearance of butterflies and bees.

Like some others on the nine-member Council, Greggor Ilagan was not even sure at the outset of the debate exactly what genetically modified organisms were: living things whose DNA has been altered, often with the addition of a gene from a distant species, to produce a desired trait. But he could see why almost all of his colleagues had been persuaded of the virtue of turning the island into what the bill's proponents called a "G.M.O.-free oasis."

"You just type 'G.M.O.' and everything you see is negative," he told his staff. Opposing the ban also seemed likely to ruin anyone's re-election prospects.

Yet doubts nagged at the councilman, who was serving his first two-year term. The island's papaya farmers said that an engineered variety had saved their fruit from a devastating disease. A study reporting that a diet of G.M.O. corn caused tumors in rats, mentioned often by the ban's supporters, turned out to have been thoroughly debunked.

And University of Hawaii biologists urged the Council to consider the global scientific consensus, which holds that existing genetically engineered crops are no riskier than others, and have provided some tangible benefits.

"Are we going to just ignore them?" Mr. Ilagan wondered.

Urged on by Margaret Wille, the ban's sponsor, who spoke passionately of the need to "act before it's too late," the Council declined to form a task force to look into such questions before its November vote. But Mr. Ilagan, 27, sought answers on his own. In the process, he found himself, like so many public and business leaders worldwide, wrestling with a subject in which popular beliefs often do not reflect scientific evidence.

. . .

(p. 19) Ms. Wille urged a vote for the ban. "To do otherwise," she said, "would be to ignore the cries from round the world and on the mainland."

"Mr. Ilagan?" the Council member leading the meeting asked when it came time for the final vote.

"No," he replied.

The ban was approved, 6 to 3.

The mayor signed the bill on Dec. 5.

For the full story, see:

Amy Harmon. "On Hawaii, a Lonely Quest for Fact." The New York Times, First Section (Sun., Jan. 5, 2014): 1 & 18-19.

(Note: ellipsis added.)

(Note: the online version of the story has the date JAN. 4, 2014, and has the title "A Lonely Quest for Facts on Genetically Modified Crops.")


"Papaya genetically modified to resist a virus became one part of a controversy." Source of caption and photo: online version of the NYT article quoted and cited above.

January 22, 2014

Regulators Forbid Doctor from Curing Dentist's Pelvic Pain

DavidsonDaneilPelvicPain2014-01-16.jpg "Dr. Daniel Davidson, an Idaho dentist, has pelvic pain so severe that he cannot sit, and can stand for only limited periods." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A18) After visiting dozens of doctors and suffering for nearly five years from pelvic pain so severe that he could not work, Daniel Davidson, 57, a dentist in Dalton Gardens, Idaho, finally found a specialist in Phoenix who had an outstanding reputation for treating men like him.

Dr. Davidson, whose pain followed an injury, waited five months for an appointment and even rented an apartment in Phoenix, assuming he would need surgery and time to recover.

Six days before the appointment, it was canceled. The doctor, Michael Hibner, an obstetrician-gynecologist at St. Joseph's Hospital and Medical Center, had learned that members of his specialty were not allowed to treat men and that if he did so, he could lose his board certification -- something that doctors need in order to work.

The rule had come from the American Board of Obstetrics and Gynecology. On Sept. 12, it posted on its website a newly stringent and explicit statement of what its members could and could not do. Except for a few conditions, gynecologists were prohibited from treating men. Pelvic pain was not among the exceptions.

Dr. Davidson went home, close to despair. His condition has left him largely bedridden. The pain makes it unbearable for him to sit, and he can stand for only limited periods before he needs to lie down.

"These characters at the board jerked the rug out from underneath me," he said.

For the full story, see:

DENISE GRADY. "Men With Pelvic Pain Find a Path to Treatment Blocked by a Gynecology Board." The New York Times (Weds., December 11, 2013): A18.

(Note: the online version of the story has the date December 10, 2013.)

January 20, 2014

AquaBounty Has Waited More than 17 Years for FDA Approval


"The Enviropig Scientists at the University of Guelph, in Canada, developed these pigs to produce more environmentally friendly waste than conventional pigs. But the pigs were killed because the scientists could not get approval to sell them as food." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 4) If patience is a virtue, then AquaBounty, a Massachusetts biotech company, might be the most virtuous entity on the planet.

In 1993, the company approached the Food and Drug Administration about selling a genetically modified salmon that grew faster than normal fish. In 1995, AquaBounty formally applied for approval. Last month, more than 17 years later, the public comment period, one of the last steps in the approval process, was finally supposed to conclude. But the F.D.A. has extended the deadline -- members of the public now have until late April to submit their thoughts on the AquAdvantage salmon. It's just one more delay in a process that's dragged on far too long.

The AquAdvantage fish is an Atlantic salmon that carries two foreign bits of DNA: a growth hormone gene from the Chinook salmon that is under the control of a genetic "switch" from the ocean pout, an eel-like fish that lives in the chilly deep. Normally, Atlantic salmon produce growth hormone only in the warm summer months, but these genetic adjustments let the fish churn it out year round. As a result, the AquAdvantage salmon typically reach their adult size in a year and a half, rather than three years.

. . .

We should all be rooting for the agency to do the right thing and approve the AquAdvantage salmon. It's a healthy and relatively cheap food source that, as global demand for fish increases, can take some pressure off our wild fish stocks. But most important, a rejection will have a chilling effect on biotechnological innovation in this country.

. . .

Then there's the Enviropig, a swine that has been genetically modified to excrete less phosphorus. Phosphorus in animal waste is a major cause of water pollution, and as the world's appetite for meat increases, it's becoming a more urgent problem. The first Enviropig, created by scientists at the University of Guelph, in Canada, was born in 1999, and researchers applied to both the F.D.A. and Health Canada for permission to sell the pigs as food.

But last spring, while the applications were still pending, the scientists lost their funding from Ontario Pork, an association of Canadian hog farmers, and couldn't find another industry partner. (It's hard to blame investors for their reluctance, given the public sentiment in Canada and the United States, as well as the uncertain regulatory landscape.) The pigs were euthanized in May.

The F.D.A. must make sure that other promising genetically modified animals don't come to the same end. Of course every application needs to be painstakingly evaluated, and not every modified animal should be approved. But in cases like AquaBounty's, where all the available evidence indicates that the animals are safe, we shouldn't let political calculations or unfounded fears keep these products off the market. If we do that, we'll be closing the door on innovations that could help us face the public health and environmental threats of the future, saving countless animals -- and perhaps ourselves.

For the full commentary, see:

EMILY ANTHES. "Don't Be Afraid of Genetic Modification." The New York Times, SundayReview Section (Sun., March 10, 2013): 4.

(Note: ellipses added.)

(Note: the online version of the commentary has the date March 9, 2013.)

Emily Anths, who is quoted above, has written a related book:

Anthes, Emily. Frankenstein's Cat: Cuddling up to Biotech's Brave New Beasts. New York: Scientific American / Farrar, Straus and Giroux, 2013.

January 15, 2014

The Law-Breaking Entrepreneur as "Savior"

(p. A11) This is a simple lesson in free-market economics, provided courtesy of the harsh winter weather of recent days in the eastern half of the U.S. Coincidentally, the annual meetings of the American Economic Association were scheduled to take place in Philadelphia, from Jan. 3-6. My friend and colleague, Haizheng Li, flew in to Philadelphia late in the evening of Thursday, Jan. 2, landing around 10:45. As he later told me, by then it was snowing heavily. Because of backed-up air traffic, the pilot was not able to park at their arrival gate for 40 minutes. After de-planing, Haizheng waited for another 40 minutes to retrieve his luggage.

. . .

Haizheng and a number of other passengers were facing the grim prospect of an uncomfortable night at the airport. The food vendors were all closed. Haizheng was tired and hungry--and he was scheduled to make a presentation at 8 the next morning.

Unexpectedly, out of the night came a savior. A man walked through baggage claim asking whether any of the recently arrived passengers needed transportation to one of the downtown hotels. Haizheng didn't ask what the ride might cost, he just said yes. As it turned out, the man took six stranded passengers, plus luggage, to their hotels for $25 each.

No doubt in doing so he broke at least one, probably several, laws regarding passenger transport that are designed to prop up the local taxi cartel. Yet this man's action dramatically improved the lives of six individuals, each of whom undoubtedly would have been willing to pay much more than $25 to get from the airport to their respective hotels. Haizheng told me he would have paid a lot more.

For the full commentary, see:

DAVID N. LABAND. "An Economics Lesson at the Baggage Carousel; Government-regulated taxis weren't around in a snowstorm. Then came a man with a car and price." The Wall Street Journal (Fri., Jan. 10, 2014): A11.

(Note: ellipsis added; italics in original.)

(Note: the online version of the article has the date Jan. 9, 2014.)

January 4, 2014

Ending U.S. Sugar Import Quotas Would Create 20,000 U.S. Jobs in Food Manufacturing

CalvoBacciOwnerCandyShop2013-12-j07.jpg "Erin Calvo-Bacci, the owner of a candy shop, the Chocolate Truffle, in Reading, Mass., lamented the cost of American sugar." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A14) READING, Mass. -- Inside the Chocolate Truffle candy shop in this Boston suburb are chocolate pizzas, chocolate buffalo wings, even a chocolate wingtip shoe. The owner, Erin Calvo-Bacci, would like to expand her business close to home, but is instead thinking of moving her operations to Canada, where the sugar essential for her products costs far less.

"We are committed to offering locally made affordable products, but the cost of sugar is driving manufacturers out of the country," Ms. Calvo-Bacci said, echoing other American candy producers, like the maker of Dum Dum lollipops, that are moving jobs to Mexico to take advantage of the lower sugar prices there.

Candy makers say the culprit is the federal sugar program, a combination of import restrictions, production quotas and loan programs dating to the 1930s, all designed to keep the price of American sugar well above that of the world market. Now the program is at the center of an intensifying battle as the House and Senate open formal negotiations this week on a long-delayed farm bill.

The price for one type of sugar, wholesale refined beet sugar, averaged 43.4 cents per pound at Midwest markets last year, the Agriculture Department reported, compared with 26.5 cents per pound for the world refined sugar price.

. . .

. . . sugar producers, bolstered by lawmakers from sugar-beet-producing states like Minnesota and sugarcane states like Florida, have spent an estimated $20 million since 2011 to block efforts to change the program. . . . Small candy makers, bakers and others who have lobbied Congress for lower prices say that taking on the sugar lobby is like taking on Goliath.

"We were no match for the sugar people," said Judy Hilliard McCarthy, an owner of Hilliard's House of Candy, a candy maker just outside Boston. Ms. McCarthy said she had made several trips to Washington to lobby on behalf of the industry.

Government and academic studies support claims by candy makers that the sugar program has had an impact on the industry. A widely cited 2006 study by the Commerce Department and a 2011 Iowa State University study found that the price supports had led to job losses among candy makers.

In particular, the Commerce Department study found that three candy-making jobs were lost for each job growing or processing sugar that was saved by higher prices. The Iowa State study found that eliminating price supports and quotas for sugar would create about 20,000 jobs for American food processors, bakeries and candy makers.

For the full story, see:

RON NIXON. "Candy Makers, Pinched by Inflated Sugar Prices in the U.S., Look Abroad." The New York Times (Thurs., October 31, 2013): A14.

(Note: ellipses added.)

(Note: the online version of the article has the date October 30, 2013, and has the title "American Candy Makers, Pinched by Inflated Sugar Prices, Look Abroad.")

The latest version of the John Beghin Iowa State report, mentioned above, is:

Beghin, John C., and Amani Elobeid. "The Impact of the U.S. Sugar Program Redux." Working Paper No. 13010. Iowa State University, Department of Economics, Staff General Research Papers, May 2013.

SugarPouredForConfection2013-12-07.jpg "Sugar was poured to make a confection for Hilliard's House of Candy, just outside Boston, whose owner has lobbied officials." Source of caption and photo: online version of the NYT article quoted and cited above.

December 23, 2013

Over-Regulated Tech Entrepreneurs Seek Their Own Country

The embed above is provided by YouTube where the video clip is posted under the title "Balaji Srinivasan at Startup School 2013."

(p. B4) At a startup conference in the San Francisco Bay area last month, a brash and brilliant young entrepreneur named Balaji Srinivasan took the stage to lay out a case for Silicon Valley's independence.

According to Mr. Srinivasan, who co-founded a successful genetics startup and is now a popular lecturer at Stanford University, the tech industry is under siege from Wall Street, Washington and Hollywood, which he says he believes are harboring resentment toward Silicon Valley's efforts to usurp their cultural and economic power.

On its surface, Mr. Srinivasan's talk,—called "Silicon Valley's Ultimate Exit,"—sounded like a battle cry of the libertarian, anti-regulatory sensibility long espoused by some of the tech industry's leading thinkers. After arguing that the rest of the country wants to put a stop to the Valley's rise, Mr. Srinivasan floated a plan for techies to build an "opt-in society, outside the U.S., run by technology."

His idea seemed a more expansive version of Google Chief Executive Larry Page's call for setting aside "a piece of the world" to try out controversial new technologies, and investor Peter Thiel's "Seastead" movement, which aims to launch tech-utopian island nations.

For the full commentary, see:

FARHAD MANJOO. "HIGH DEFINITION; The Valley's Ugly Complex." The Wall Street Journal (Mon., Nov. 4, 2013): B4.

(Note: the online version of the commentary has the date Nov. 3, 2013, and has the title "HIGH DEFINITION; Silicon Valley Has an Arrogance Problem.")

December 19, 2013

Regulators Harass Saucy and Irreverent Buckyball Entrepreneur


"Craig Zucker, former head of Maxfield & Oberton, which made Buckyballs, sells Liberty Balls to raise a legal-defense fund against an unusual action by federal regulators." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B1) Over the last three weeks, more than 2,200 people have placed orders for $10-to-$40 sets of magnetic stacking balls, rising to the call of a saucy and irreverent social media campaign against a government regulatory agency.

. . .

It involves an effort by the federal Consumer Product Safety Commission to recall Buckyballs, sets of tiny, powerfully magnetic stacking balls that the magazines Rolling Stone and People once ranked on their hot products lists.

Last year, the commission declared the balls a swallowing hazard to young children and filed an administrative action against the company that made the product, demanding it recall all Buckyballs, and a related product called Buckycubes, and refund consumers their money. The company, Maxfield & Oberton Holdings, challenged the action, saying labels on the packaging clearly warned that the product was unsafe for children.

But the fuss now has less to do with safety. After Maxfield & Oberton went out of business last December, citing the financial toll of the recall battle, lawyers for the product safety agency took the highly unusual step of adding the chief executive of the dissolved firm, Craig Zucker, as a respondent in the recall action, arguing that he con-
(p. B6)trolled the company's activities. Mr. Zucker and his lawyers say the move could ultimately make him personally responsible for the estimated recall costs of $57 million.

While the "responsible corporate officer" doctrine (also known as the Park doctrine) has been used frequently in criminal cases, allowing for prosecutions of individual company officers in cases asserting corporate wrongdoing, experts say its use is virtually unheard-of in an administrative action where no violations of law or regulations are claimed.

. . .

Three well-known business organizations -- the National Association of Manufacturers, the National Retail Federation and the Retail Industry Leaders Association -- banded together this summer to file a brief urging the administrative law judge reviewing the recall case to drop Mr. Zucker as a respondent.

The groups argue that holding an individual responsible for a widespread, expensive recall sets a disturbing example and runs counter to the business desire for limited liability. They contend that such risk would have a detrimental effect on entrepreneurism and openness in dealing with regulatory bodies.

. . .

Conservative legal groups like Cause of Action, a nonprofit that targets what it considers governmental overreach, have been watching the proceedings with interest and weighing taking some action.

"This really punishes entrepreneurship and establishes a bad precedent for businesses working to create products for consumers," said Daniel Z. Epstein, the group's executive director. "It undermines the business community's ability to rely upon the corporate form."

For the full story, see:

HILARY STOUT. "In Regulators' Sights; Magnetic-Toy Recall Gives Rise to Wider Legal Campaign." The New York Times (Fri., November 1, 2013): B1 & B6.

(Note: ellipses added.)

(Note: the online version of the article has the date October 31, 2013, and has the title "Buckyball Recall Stirs a Wider Legal Campaign.")

December 11, 2013

Portland Government Stops Girl from Selling Mistletoe to Pay for Braces

In Portland, the government is stopping an 11 year old girl from selling mistletoe to raise money for her braces. Here is a link to the KATU local Portland ABC news station video report: It also has been posted to YouTube at:

November 24, 2013

Fed Regulations Are "a Wild Card" Since "Regulators Have a Lot of Leeway"

(p. 1D) The president of First National of Nebraska, the nation's largest privately held banking firm, said new federal regulatory and com­pliance efforts stand to cost the company as much as $30 million this year.

"It is a big uncertainty in the banking world," said Dan O'Neill, speaking Wednesday at the com­pany's annual meeting in Omaha. "They are not operating off of concrete rules. A lot of it is their interpretation."

The federal Consumer Fi­nancial Protection Bureau was formed as a result of the federal Dodd-Frank laws passed in 2010 after widespread bank failures and bailouts using taxpayer money.

. . .

The bureau, he said, worries banks because there is not a "clear body of rules" from which the regulator is operating in eval­uating the fairness of a bank's business practices. He said the agency's regulators have a lot of leeway in deciding what to do af­-(p. 2D)ter examining a bank; penalties for running afoul include fines.

"So it is a bit of a wild card," he said.

For the full story, see:

RUSSELL HUBBARD. "ANNUAL MEETING; First National Chief Says Regulatory Costs Mounting." Omaha World-Herald (Thurs., June 20, 2013): 1D-2D.

(Note: ellipsis added.)

November 10, 2013

If Feds Stalled Skype Deal, Google Would Have Been "Stuck with a Piece of Shit"

Even just the plausible possibility of a government veto of an acquisition, can stop the acquisition from happening. The feds thereby kill efficiency and innovation enhancing reconfigurations of assets and business units.

(p. 234) . . . , an opportunity arose that Google's leaders felt compelled to consider: Skype was available. It was a onetime chance to grab hundreds of millions of Internet voice customers, merging them with Google Voice to create an instant powerhouse. Wesley Chan believed that this was a bad move. Skype relied on a technology called peer to peer, which moved information cheaply and quickly through a decentralized network that emerged through the connections of users. But Google didn't need that system because it had its own efficient infrastruc-(p. 235)ture. In addition, there was a question whether eBay, the owner of Skype, had claim to all the patents to the underlying technology, so it was unclear what rights Google would have as it tried to embellish and improve the peer-to-peer protocols. Finally, before Google could take possession, the U.S. government might stall the deal for months, maybe even two years, before approving it. "We would have paid all this money, but the value would go away and then we'd be stuck with a piece of shit," says Chan.


Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.

(Note: ellipsis added.)

November 9, 2013

Entrepreneurial Spirit Values "Voyaging into the Unknown"


"Edmund Phelps, winner of the 2006 Nobel Prize for economics." Source of caption and photo: online version of the WSJ review quoted and cited below.

(p. C7) Edmund Phelps's "Mass Flourishing" could easily be retitled "Contra-Corporatism," for at its heart this fine book is an attack on that increasingly common "third way" between capitalism and socialism. Mr. Phelps cogently argues that America's current economic woes reflect a reduction in the innovative dynamism that generates economic success and personal satisfaction. He places little hope in the Democratic Party, which "voices a new corporatism well beyond Franklin Roosevelt's New Deal or Lyndon Johnson's Great Society," or in Republicans in the thrall of "traditional values," who see "the good economy as mercantile capitalism plus social protection and social insurance." He instead yearns for legislative solons who "could usefully ask of every bill and regulatory directive: How would it impact the dynamism of our economy?"

. . .

The book eloquently discusses the culture of innovation, which can refer to both an entrepreneurial mind-set and the cultural achievements during an age of change. He sees modern capitalism as profoundly humanist, imbued with "a spirit that views the prospect of unanticipated consequences that may come with voyaging into the unknown as a valued part of experience and not a drawback."

. . .

In . . . [the] new corporatism, the state protects both organized labor and politically connected companies. and the state has acquired a "panoply of new roles," from regulations "aimed at shielding companies or workforces from competition" to lawsuits that "add to the diversion of income from earners to those receiving compensation or indemnification." It is as if "every person in a society is a signatory to an implicit contract" in which "no person may be harmed by others without receiving compensation." But protection against all conceivable harm also means protection against almost all change--and this is the death knell of dynamism and innovation.

. . .

But what is to be done? The author wants governments that are "aware of the importance of the role played by dynamism in a modern-capitalist economy," and he disparages both current political camps. He has a number of thoughtful ideas about financial-sector reform. He is no libertarian and even proposes a "national bank specializing in extending credit or equity capital to start-up firms"--not my favorite idea.

For the full review, see:

EDWARD GLAESER. "How to Unleash the Economy." The Wall Street Journal (Sat., Oct. 19, 2013): C7.

(Note: ellipses, and bracketed word, added.)

(Note: the online version of the review has the date Oct. 18, 2013, and has the title "BOOKSHELF; Book Review: 'Mass Flourishing' by Edmund Phelps; Innovative dynamism is the key to economic success and personal satisfaction, a Nobel-winner argues.")

The book under review is:

Phelps, Edmund S. Mass Flourishing: How Grassroots Innovation Created Jobs, Challenge, and Change. Princeton, New Jersey: Princeton University Press, 2013.


Source of book image:

October 5, 2013

"SEC Rules Demanded Complexity"

(p. 152) Google had considerable experience with pleasing users, but in the case of the auction, it could not create a simple interface. SEC rules demanded complexity. So the Google auction was a lot more complicated than buying Pokémon cards on eBay. People had to qualify financially as bidders. Bids had to be placed by a brokerage. If you made an error in reg-(p. 153)istering, you could not correct it but had to reregister. All those problems led to a few postponements of the start of the bidding period.

But the deeper problem was the uncertainty of Google's prospects. As the press accounts accumulated--with reporters informed by Wall Streeters eager to sabotage the process-- the perception grew that Google was a company with an unfamiliar business model run by weird people. A typical Wall Street insider analysis was reflected by columnist Scott Reeves, who concluded that Google's target price, at the time pegged to the range between $ 108 and $ 135 a share, was excessive. "Only those who were dropped on their head at birth [will] plunk down that kind of cash for an IPO," Reeves wrote.


Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.

October 1, 2013

SEC Told Google to Delete "Making the World a Better Place" from Document

(p. 150) . . . , the Securities and Exchange Commission was unimpressed by the charms of Page's "Owner's Manual." "Please revise or delete the statements about providing 'a great service to the world,' 'to do things that matter,' 'greater positive impact on the world, don't be evil' and 'making the world a better place,'" they wrote. (Google would not revise the letter.) The commission also had a problem with Page's description of the lawsuit that Overture (by then owned by Yahoo) had filed against Google as "without merit." Eventually, to resolve this issue before the IPO date, (p. 151) Google would settle the lawsuit by paying Yahoo 2.7 million shares, at an estimated value of between $ 260 and $ 290 million.

That set a contentious tone that ran through the entire process. The SEC cited Google's irregularities on a frequent basis, whether it was a failure to properly register employee stock options, inadequate reporting of financial results to stakeholders, or the use of only first names of employees in official documents. It acted toward Google like a junior high school vice principal who'd identified an unruly kid as a bad seed, requiring constant detentions.


Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.

(Note: ellipsis added.)

September 24, 2013

Nanny Feds Take Revenge on Zucker for Trying to "Save Our Balls"


Craig Zucker. Source of caricature: online version of the WSJ article quoted and cited below.

(p. A11) Mr. Zucker is the former CEO of Maxfield & Oberton, the small company behind Buckyballs, an office toy that became an Internet sensation in 2009 and went on to sell millions of units before it was banned by the feds last year.

A self-described "serial entrepreneur," Mr. Zucker looks the part with tussled black hair, a scraggly beard and hipster jeans. Yet his casual-Friday outfit does little to subdue his air of ambition and hustle.

Nowadays Mr. Zucker spends most of his waking hours fighting off a vindictive U.S. Consumer Product Safety Commission that has set out to punish him for having challenged its regulatory overreach. The outcome of the battle has ramifications far beyond a magnetic toy designed for bored office workers. It implicates bedrock American notions of consumer choice, personal responsibility and limited liability.

. . .

In August 2009, Maxfield & Oberton demonstrated Buckyballs at the New York Gift Show; 600 stores signed up to sell the product. By 2010, the company had built a distribution network of 1,500 stores, including major retailers like Urban Outfitters and Brookstone. People magazine in 2011 named Buckyballs one of the five hottest trends of the year, and in 2012 it made the cover of Brookstone's catalog.

Maxfield & Oberton now had 10 employees, 150 sales representatives and a distribution network of 5,000 stores. Sales had reached $10 million a year. "Then," says Mr. Zucker, "we crashed."

On July 10, 2012, the Consumer Product Safety Commission instructed Maxfield & Oberton to file a "corrective-action plan" within two weeks or face an administrative suit related to Buckyballs' alleged safety defects. Around the same time--and before Maxfield & Oberton had a chance to tell its side of the story--the commission sent letters to some of Maxfield & Oberton's retail partners, including Brookstone, warning of the "severity of the risk of injury and death possibly posed by" Buckyballs and requesting them to "voluntarily stop selling" the product.

It was an underhanded move, as Maxfield & Oberton and its lawyers saw it. "Very, very quickly those 5,000 retailers became zero," says Mr. Zucker. The preliminary letters, and others sent after the complaint, made it clear that selling Buckyballs was still considered lawful pending adjudication. "But if you're a store like Brookstone or Urban Outfitters . . . you're bullied into it. You don't want problems."

. . .

Maxfield & Oberton resolved to take to the public square.On July 27, just two days after the commission filed suit, the company launched a publicity campaign to rally customers and spotlight the commission's nanny-state excesses. The campaign's tagline? "Save Our Balls."

Online ads pointed out how, under the commission's reasoning, everything from coconuts ("tasty fruit or deadly sky ballistic?") to stairways ("are they really worth the risk?") to hot dogs ("delicious but deadly") could be banned.

. . .

. . . in February [2013] the Buckyballs saga took a chilling turn: The commission filed a motion requesting that Mr. Zucker be held personally liable for the costs of the recall, which it estimated at $57 million, if the product was ultimately determined to be defective.

This was an astounding departure from the principle of limited liability at the heart of U.S. corporate law.

. . .

Given the fact that Buckyballs have now long been off the market, the attempt to go after Mr. Zucker personally raises the question of retaliation for his public campaign against the commission. Mr. Zucker won't speculate about the commission's motives. "It's very selective and very aggressive," he says.

For the full interview, see:

SOHRAB AHMARI, interviewer. "THE WEEKEND INTERVIEW with Craig Zucker; What Happens When a Man Takes on the Feds; Buckyballs was the hottest office game on the market. Then regulators banned it. Now the government wants to ruin the CEO who fought back." The Wall Street Journal (Sat., August 31, 2013): A11.

(Note: ellipses, and bracketed year, added.)

(Note: the online version of the interview has the date August 30, 2013, and has the title "THE WEEKEND INTERVIEW; Craig Zucker: What Happens When a Man Takes on the Feds. Buckyballs was the hottest office game on the market. Then regulators banned it. Now the government wants to ruin the CEO who fought back.")

September 1, 2013

"Inflexible Labor Laws" Lead Indian Firms "to Substitute Machines for Unskilled Labor"

(p. A19) . . . , India is failing to make full use of the estimated one million low-skilled workers who enter the job market every month.

Manufacturing requires transparent rules and reliable infrastructure. India is deficient in both. High-profile scandals over the allocation of mobile broadband spectrum, coal and land have undermined confidence in the government. If land cannot be easily acquired and coal supplies easily guaranteed, the private sector will shy away from investing in the power grid. Irregular electricity holds back investments in factories.

India's panoply of regulations, including inflexible labor laws, discourages companies from expanding. As they grow, large Indian businesses prefer to substitute machines for unskilled labor.

For the full commentary, see:

ARVIND SUBRAMANIAN. "Why India's Economy Is Stumbling." The New York Times (Sat., August 31, 2013): A19.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date August 30, 2013.)

July 23, 2013

If Driverless Cars Only Kill Half a Million Per Year, that "Would Be an Improvement"

(p. 261) . . . , human-piloted cars cause great harm, killing millions of people each year worldwide. If robot-controlled cars killed "only" half a million people per year, it would be an improvement!


Kelly, Kevin. What Technology Wants. New York: Viking Adult, 2010.

(Note: ellipsis added.)

July 19, 2013

The Precautionary Principle Is Biased Against the New, and Ignores the Risks of the Old

(p. 250) In general the Precautionary Principle is biased against anything new. Many established technologies and "natural" processes have unexamined faults as great as those of any new technology. But the Precautionary Principle establishes a drastically elevated threshold for things that are new. In effect it grandfathers in the risks of the old, or the "nat-(p. 251)ural." A few examples: Crops raised without the shield of pesticides generate more of their own natural pesticides to combat insects, but these indigenous toxins are not subject to the Precautionary Principle because they aren't "new." The risks of new plastic water pipes are not compared with the risks of old metal pipes. The risks of DDT are not put in context with the old risks of dying of malaria.


Kelly, Kevin. What Technology Wants. New York: Viking Adult, 2010.

July 15, 2013

Chinese Peasants Applied Precautionary Principle to Scythe Technology

(p. 249) In a letter Orville Wright wrote to his inventor friend Henry Ford, Wright recounts a story he heard from a missionary stationed in China. Wright told Ford the story for the same reason I tell it here: as a cautionary tale about speculative risks. The missionary wanted to improve the laborious way the Chinese peasants in his province harvested grain. The local farmers clipped the stalks with some kind of small hand shear. So the missionary had a scythe shipped in from America and demonstrated its superior productivity to an enthralled crowd. "The next morning, however, a delegation came to see the missionary. The scythe must be destroyed at once. What, they said, if it should fall into the hands of thieves; a whole field could be cut and carried away in a single night." And so the scythe was banished, progress stopped, because nonusers could imagine a possible--but wholly improbable--way it could significantly harm their society.


Kelly, Kevin. What Technology Wants. New York: Viking Adult, 2010.

July 11, 2013

Millions Die Due to Precautionary Principle Ban of DDT

(p. 248) . . . , malaria infects 300 million to 500 million people worldwide, causing 2 million deaths per year. It is debilitating to those who don't die and leads to cyclic poverty. But in the 1950s the level of malaria was reduced by 70 percent by spraying the insecticide DDT around the insides of homes. DDT was so successful as an insecticide that farmers eagerly sprayed it by the tons on cotton fields--and the molecule's by-products made their way into the water cycle and eventually into fat cells in animals. Biologists blamed it for a drop in reproduction rates for some predatory birds, as well as local die-offs in some fish and aquatic life species. Its use and manufacture were banned in the United States in 1972. Other countries followed suit. Without DDT spraying, however, malaria cases in Asia and Africa began to rise again to deadly pre-1950s levels. Plans to reintroduce programs for household spraying in malarial Africa were blocked by the World Bank and other aid agencies, who refused to fund them. A treaty signed in 1991 by 91 countries and the EU agreed to phase out DDT altogether. They were relying on the precautionary principle: DDT was probably bad; better safe than sorry. In fact DDT had never been shown to hurt humans, and the environmental harm from the miniscule amounts of DDT applied in homes had not been measured. But nobody could prove it did not cause harm, despite its proven ability to do good.


Kelly, Kevin. What Technology Wants. New York: Viking Adult, 2010.

(Note: ellipsis added.)

July 7, 2013

The Precautionary Principle Stops Technological Progress

(p. 247) All versions of the Precautionary Principle hold this axiom in common: A technology must be shown to do no harm before it is embraced. It must be proven to be safe before it is disseminated. If it cannot be proven safe, it should be prohibited, curtailed, modified, junked, or ignored. In other words, the first response to a new idea should be inaction until its safety is established. When an innovation appears, we should pause. Only after a new technology has been deemed okay by the certainty of science should we try to live with it.

On the surface, this approach seems reasonable and prudent. Harm must be anticipated and preempted. Better safe than sorry. Unfortunately, the Precautionary Principle works better in theory than in practice. "The precautionary principle is very, very good for one thing--stopping technological progress," says philosopher and consultant Max More. Cass R. Sunstein, who devoted a book to debunking the principle, says, "We must challenge the Precautionary Principle not because it leads in bad directions, but because read for all it is worth, it leads in no direction at all."


Kelly, Kevin. What Technology Wants. New York: Viking Adult, 2010.

June 27, 2013

$30 Million First National Bank Regulatory Costs Due to Dodd-Frank Replacing Clear Rules with Regulator "Wild Card" Leeway

(p. 1D) The president of First National of Nebraska, the nation's largest privately held banking firm, said new federal regulatory and compliance efforts stand to cost the company as much as $30 million this year.

"It is a big uncertainty in the banking world," said Dan O'Neill, speaking Wednesday at the company's annual meeting in Omaha. "They are not operating off of concrete rules. A lot of it is their interpretation."

The federal Consumer Financial Protection Bureau was formed as a result of the federal Dodd-Frank laws passed in 2010 after widespread bank failures and bailouts using taxpayer money. . . .

. . .

The bureau, he said, worries banks because there is not a "clear body of rules" from which the regulator is operating in evaluating the fairness of a bank's business practices. He said the agency's regulators have a lot of leeway in deciding what to do af-(p. 2D)ter examining a bank; penalties for running afoul include fines.

"So it is a bit of a wild card," he said.

For the full story, see:

Russell Hubbard. "First National Chief Says Regulatory Costs Mounting." Omaha World-Herald (THURSDAY, JUNE 20, 2013): 1D-2D.

(Note: ellipses added.)

June 8, 2013

The Eccentric History of How Bureaucratic Paper-Pushing Drives Clerks Crazy


Source of book image:

(p. C4) If paperwork studies have an unofficial standard-bearer and theoretician, it's Mr. Kafka. In "The Demon of Writing" he lays out a concise if eccentric intellectual history of people's relationship with the paperwork that governs (and gums up) so many aspects of modern life. The rise of modern bureaucracy is a well-established topic in sociology and political science, where it is often related as a tale of increasing order and rationality. But the paper's-eye view championed by Mr. Kafka tells a more chaotic story of things going wrong, or at least getting seriously messy.

It's an idea that makes perfect sense to any modern cubicle dweller whose overflowing desk stands as a rebuke to the utopian promise of the paperless office. But Mr. Kafka traces the modern age of paperwork to the French Revolution and the Declaration of the Rights of Man, which guaranteed citizens the right to request a full accounting of the government. An explosion of paper followed, along with jokes, gripes and tirades against the indignity of rule by paper-pushing clerks, a fair number of whom, judging from the stories in Mr. Kafka's book, went mad.

For the full story, see:

JENNIFER SCHUESSLER. "The Paper Trail Through History." The New York Times (Mon., December 17, 2012): C1 & C4.

(Note: the online version of the story has the date December 16, 2012.)

Kafka's book, mentioned above, is:

Kafka, Ben. The Demon of Writing: Powers and Failures of Paperwork. Cambridge, Mass.: Zone Books, 2012.

KafkaBenAuthor2013-05-13.jpg "Ben Kafka, author of "The Demon of Writing: Powers and Failures of Paperwork."" Source of caption and photo: online version of the NYT article quoted and cited above.

May 26, 2013

Harry Reid Hires GE Employee to Be His Chief Tax Policy Advisor

The "Capture Theory" associated with scholars George Stigler and Gabriel Kolko says that government regulatory bodies tend to be captured by the companies that they are intended to regulate. Stigler and Kolko would not be surprised by the passage quoted below.

(p. B5) . . . on Jan. 25, Mr. Reid's office announced that he had appointed Cathy Koch as chief adviser to the majority leader for tax and economic policy. The news release lists Ms. Koch's admirable and formidable experience in the public sector. "Prior to joining Senator Reid's office," the release says, "Koch served as tax chief at the Senate Finance Committee."

It's funny, though. The notice left something out. Because immediately before joining Mr. Reid's office, Ms. Koch wasn't in government. She was working for a large corporation.

Not just any corporation, but quite possibly the most influential company in America, and one that arguably stands to lose the most if there were any serious tax reform that closed corporate loopholes. Ms. Koch arrives at the senator's office by way of General Electric.

Yes, General Electric, the company that paid almost no taxes in 2010. Just as the tax reform debate is heating up, Mr. Reid has put in place a person who is extraordinarily positioned to torpedo any tax reform that might draw a dollar out of G.E. -- and, by extension, any big corporation.

Omitting her last job from the announcement must have merely been an oversight. By the way, no rules prevent Ms. Koch from meeting with G.E. or working on issues that would affect the company.

For the full story, see:

JESSE EISINGER, ProPublica. "A Revolving Door in Washington With Spin, but Less Visibility." The New York Times (Thurs., February 21, 2013): B5.

(Note: ellipsis added.)

(Note: the online version of the story has the date February 20, 2013.)

May 21, 2013

Governments Stop Errol Joseph from Repairing His House

JosephErrolNewOrleansHouseFixer2013-05-04.jpg "Errol Joseph and his wife, Esther, at their Forstall Street property in New Orleans. Mr. Joseph, 62, had spent his life fixing houses." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A1) NEW ORLEANS -- Errol Joseph has the doorknobs. He has the doors, too, as well as a bathtub and a couple of sinks, stacks of drywall, a hot water heater, pipes, an air-conditioner compressor, and big pink rolls of insulation. They are sitting in a shed.

A few blocks up the street sits the gaunt frame of a house, the skeleton in which all these insides are supposed to fit. They have sat apart for years. The gap between: permits, procedures, policies, rules and the capricious demands of bureaucracy.

As people in the Northeast set off on the road back from Hurricane Sandy, there are those here, like Mr. Joseph, who are keen to offer warnings that recovery can be far more difficult than they imagine. Mr. Joseph sees his own story as a cautionary tale, though he admits he is unsure what he would have, or should have, done differently.

"Do the right thing and fall further behind," said Mr. Joseph, a big man with a soft voice.

. . .

(p. A4) But Mr. Joseph, who had spent his life repairing houses, figured he could do it himself, and would be back at home by that summer. He spent most of his rebuilding grant buying materials, including windows, shingles and everything else in the shed. In the spring of 2009, he elevated the frame of the house, leaving it propped on wooden cribbing.

Before he took any further steps, he contacted the state for an inspection, as he had been instructed.

Then the inspectors showed up.

" 'Do not do anything to this house until you get a letter of continuance,' " he recalled one inspector saying. "He said that three times. He said you would lose your money."

So Mr. Joseph did not do anything to the house. Months went by. No letter arrived. The inspector disappeared. Officials denied that anyone had ever said anything about a letter, said Mr. Joseph, who in his regular visits to state offices would then ask for written permission to move forward anyway.

In 2010, told that he would not be allowed to do the work himself, he drew up a contract with an elevation specialist. But permission from the state to move forward was still elusive. "Your paperwork is in the system," Mr. Joseph was told.

Though Mr. Joseph did not know it, his paperwork was blocked for months in the federal clearance process, but for reasons that remain a mystery.

The drywall rotted in the shed. The frame sat in the elements. The city, unaware of Mr. Joseph's travails, warned of demolition.

For the full story, see:

CAMPBELL ROBERTSON. "Katrina Rebuilder Can't Rise Above Red Tape." The New York Times (Thurs., February 21, 2012): A1 & A4.

(Note: ellipses added.)

(Note: the online version of the story has the date February 20, 2012, and has the title "Routed by Katrina, Stuck in Quagmire of Rules.")

JosephErroBlockAfterKatrina2013-05-04.jpg "A photograph of Mr. Joseph's block taken shortly after Hurricane Katrina. It took years to prove his house was salvageable." Source of caption and photo: online version of the NYT article quoted and cited above.

February 16, 2013

IKEA Says Government Bureaucracy Slows Job Creation

OhlssonMikaelCEOofIKEA2013-02-03.jpg "The economy 'will remain challenging for a long time,' says IKEA Chief Executive Mikael Ohlsson." Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. B3) MALMO, Sweden--IKEA is poised to embark on a global spending spree, but its departing chief executive says red tape is slowing how fast the home-furnishings retailer can open its pocket book.

With the company set to report record sales on Wednesday, CEO Mikael Ohlsson said the amount of time it takes to open a store has roughly doubled in recent years.

"What some years ago took two to three years, now takes four to six years. And we also see that there's a lot of hidden obstacles in different markets and also within the [European Union] that's holding us back," he said in an interview recently at an IKEA store on Sweden's western coast.

. . .

IKEA plans to invest €2 billion in stores, factories and renewable energy this year. But the company fell €1 billion short of its goal of investing €3 billion in new projects last year, largely because of bureaucratic obstacles, he said. For 10 years IKEA has tried unsuccessfully to relocate a store in France, for example. The company also is challenging German policy dictating what can be sold and where, saying the rules are out of sync with EU legislation.

"It's a pity, because it can help create jobs and investments at a time when unemployment is high in many countries," Mr. Ohlsson said. A new IKEA store creates construction and store jobs for about 1,000 workers, he said.

. . .

The company's highest-profile headaches have come in India, an untapped market where IKEA wants to open a first store in at least five years and roll out an additional three soon thereafter.

For the full story, see:

ANNA MOLIN. "IKEA Chief Takes Aim at Red Tape." The Wall Street Journal (Weds., January 23, 2013): B3.

(Note: ellipses added.)

(Note: the online version of the story has the date January 22, 2013.)

October 9, 2009

Doctors Seek to Regulate Retail Health Clinic Competitors

NursePractitioner2009-09-26.jpg"A nurse practitioner with a patient at a retail clinic in Wilmington, Del." Source of caption and photo: online version of the WSJ article quoted and cited below.

Clayton Christensen, in a chapter of Seeing What's Next, and at greater length in The Innovator's Prescription, has persuasively advocated the evolution of nurse practitioners and retail health clinics as disruptive innovations that have the potential to improve the quality and reduce the costs of health care.

An obstacle to the realization of Christensen's vision would be government regulation demanded by health care incumbents who would rather not have to compete with nurse practitioners and retail health clinics. See below for more:

(p. B1) Retail health clinics are adding treatments for chronic diseases such as asthma to their repertoire, hoping to find steadier revenue, but putting the clinics into greater competition with doctors' groups and hospitals.

Walgreen Co.'s Take Care retail clinic recently started a pilot program in Tampa and Orlando offering injected and infused drugs for asthma and osteoporosis to Medicare patients. At some MinuteClinics run by CVS Caremark Corp., nurse practitioners now counsel teenagers about acne, recommend over-the-counter products and sometimes prescribe antibiotics.

. . .

As part of their efforts to halt losses at the clinics, the chains are lobbying for more insurance coverage, and angling for a place in pending health-care reform legislation, while trying to temper calls for regulations.

. . .

(p. B2) But such moves are raising the ire of physicians' groups that see the in-store clinics as inappropriate venues for treating complex illnesses. In May, the Massachusetts Medical Society urged its members to press insurance companies on co-payments to eliminate any financial incentive to use retail clinics.

. . .

The clinics are helping alter the practice of medicine. Doctors are expanding office hours to evenings and weekends. Hospitals are opening more urgent-care centers to treat relatively minor health problems.

For the full story, see:

AMY MERRICK. "Retail Health Clinics Move to Treat Complex Illnesses, Rankling Doctors." The Wall Street Journal (Thurs., SEPTEMBER 10, 2009): B1-B2.

(Note: ellipses added.)

A brief commentary by Christensen (and Hwang) on these issues, can be found at:

CLAYTON CHRISTENSEN and JASON HWANG. "How CEOs Can Help Fix Health Care." The Wall Street Journal (Tues., July 28, 2009).

For the full account, see:

Christensen, Clayton M., Jerome H. Grossman, and Jason Hwang. The Innovator's Prescription: A Disruptive Solution for Health Care. New York: NY: McGraw-Hill, 2008.


Source of graph: online version of the WSJ article quoted and cited above.



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