Archives: 11/2012

Obama on Energy

Today Politico Arena asks:

What will the president’s reelection mean for gasoline and electricity prices over the next four years?

My response:

Unless Obama takes some extraordinary measure like imposing price controls, which is possible but not likely, his reelection will probably have little effect on energy prices over the next four years. Oil prices are determined largely by international markets, over which an American president has little if any control. If anything, the domestic shale oil boom that leads the news in the Wall Street Journal this morning is likely to result in lower energy prices.

But there’s a caveat, and that’s the global warming agenda of the environmental zealots. Al Gore, Governor Cuomo, and Mayor Bloomberg are only the latest to promote as conventional wisdom the idea that global warming causes more and more severe hurricanes, despite the lack of credible evidence supporting the claim. Thus, as less expensive fossil fuels promise to help our sluggish economy out of recession, environmentalists will be urging the president to wean the nation away from those fuels and toward far more expensive renewable energy.

We shouldn’t be surprised, therefore, if cap and trade and other such measures are again before us—perhaps through lawless executive order. Reaching vast areas of life, like Obamacare, the president’s energy agenda could, as he promised four years ago, “fundamentally transform e United States of America.”

Is America a ‘Center-Libertarian Nation’?

Los Angeles Times columnist James Rainey writes:

Many debates have broken out about the meaning of last week’s election, including over whether conservatives should still push their claim that America is a “center-right nation.”…

After 32 straight losses for same-sex wedding laws, four states approved marriage-equality proposals last week. Two other states legalized marijuana for recreational purposes….

But Americans appear to remain more receptive to conservative viewpoints on spending, debt and the size of government. A bare majority, 51%, of voters last Tuesday told exit pollsters that government should do less, with 43% saying it should do more….

A more precise verdict would be that the majority of the country remains slightly right of center when it comes to supporting lower spending, decreased debt and smaller government.  But America appears to have shifted left of center in allowing more liberal policies on drugs and the institution of marriage. So, left on social issues and right on economics. If you eliminated the desire to tax the rich, it would sound like we had a center-libertarian nation.

Good points! And of course reminiscent of arguments we’ve made here at Cato, including Brink Lindsey’s “libertarian center” and of course the work David Kirby and I have done on “the libertarian vote,” now available in a convenient ebook.

Liability Is ‘Wrong’ Solution for Rating Agencies

Last week, while America was occupied with elections, an Australian court found Standard & Poor’s liable for “misleading” local council governments by awarding AAA rating to derivatives that later lost value (more detail on the case here). Not surprisingly, after the financial crisis, dozens of suits were filed in the United States, Europe, and elsewhere claiming investors were “misled” by the rating agencies. Most of these suits were quickly dismissed or withdrawn. The Australian case is one of the few to find liability.

First, as I documented in a recent Cato Policy Analysis, the regulatory structure for the rating agency is fatally flawed and was without a doubt a contributor to the financial crisis. That said, subjecting rating agencies to legal liability would make the situation worse, not better. From that analysis:

[A] risk from subjecting rating agencies to liability for either their statements or processes is that, in order to protect themselves, the agencies would adopt a “reasonable man” approach. For instance, if the agencies used government forecasts of house prices in their mortgage default models, then it is likely that any court would deem such assumptions “reasonable”; after all, these are the assumptions that regulators rely upon. If such assumptions are, however, grossly in error, as were the housing price forecasts used by various federal agencies, then the value of information created by the rating agencies would also be reduced, if not compromised. A reasonable-man approach would also encourage rating agencies to utilize “consensus forecasts” of key economic variables. Yet the consensus could be dangerously off. The economic forecasting profession does not exactly have a great record at predicting turning points, and it also missed the decline in house prices. A system of liability would likely destroy whatever additional information the rating agencies bring to the market, as the agencies would face tremendous pressure to simply mimic widely held beliefs, which themselves would already be priced into the market.

Another problem would be that rating agencies would most likely face litigation risk from those being downgraded, especially by governments. Witness the abuse Standard & Poor’s received from the SEC right after it downgraded the U.S. federal government. Do we truly believe that we would have more accurate ratings if a Greek court were able to decide if a downgrade of Greek government debt was accurate? I would also go as far to argue that ratings of sovereign debt should be considered politically protected speech (but then I’m also for protecting most, if not all, speech).

Top General Weighs In

Oh, no, not that general. I’m talking about Eisenhower, as quoted in the June 16, 1952 issue of Quick magazine.

Asked what he thought about “compulsory health insurance,” Ike came out “against submitting our lives toward a control that would lead inevitably to socialism.” Now we get to find out if Ike was right.

 

Topics:

This Month’s Cato Unbound: The Online Education Revolution

As Joseph Schumpeter famously wrote, markets are agents of “creative destruction”: when market forces are free to operate, and when entrepreneurs are free to act on their ideas, the old must often give way to the new.

Innovation and cultural dynamism are the hallmarks of a free economy. This state of constant flux is to our way of thinking a welcome and valued thing. Only an economy that is constantly in transition can hope to approximate the changing needs and wants of a robust and flourishing society.

Our love of dynamism is one reason why libertarians aren’t really conservatives, and why we might even wish that we could claim the label “progressive” for ourselves—if it hadn’t been taken, long ago, by individuals whose beliefs differ sharply from our own.

At Cato Unbound this month we are discussing what may prove to be a remarkable example of creative destruction. Within the last few years, Massive Online Open Courses—MOOCs, for short—have become one of the most important trends in higher education. As our lead essayist Alex Tabarrok argues, traditional higher education hasn’t changed substantially for centuries. Yet there is no good reason why this should be, not with all of the new information technology that the market has put at our disposal.

Together with his colleague Tyler Cowen, Tabarrok has founded Marginal Revolution University, which is planned as a growing series of free, online courses that anyone can take. The lectures are brief, watchable on your own schedule, viewable on mobile devices, and replayable. You can ask questions of the professors and receive detailed, personalized feedback. You can study in a group or entirely on your own, and students are invited to create supplemental videos that might be included in future class sessions.

MR University, as it’s called for short, hopes to deliver flexible, inexpensive higher education to the masses, in a way that Oxford, Cambridge, and Harvard—for all their tradition—never could. And it’s just one small player in a burgeoning new educational sector. So how should educators and policymakers think about these developments?

To answer that question, we have recruited a panel of distinguished commentators: Siva Vaidhyanathan is the Robertson Professor in Media Studies and Chair of the Department of Media Studies at the University of Virginia; Alan Ryan is the former Warden of New College, Oxford, and a frequent commentator on developments in liberal education; and Kevin Carey is director of the education policy program at the New America Foundation.

As always, Cato Unbound readers are encouraged to take up our themes, and enter into the conversation on their own websites and blogs, or on other venues. We also welcome your letters. Send them to jkuznicki at cato dot org. Selections may be published at the editors’ option.

Sandy, LIPA and the Occupational Licensure Blues

Hurricane Sandy, an enormous disaster from the outset, has become a much worse one due to the painfully slow restoration of power and supplies to storm-ravaged New York City, Long Island, New Jersey, and neighboring areas. Per CBS,

As the power outages on Long Island drag on, New Yorkers railed Sunday against the utility that has lagged behind others in restoring power, criticizing its slow pace as well as a dearth of information.

That utility is LIPA, the Long Island Power Authority, and as its name implies LIPA is not a private company but an agency of New York State with a long history of being used by New York politicians to pursue their goals. I will leave to other critics the question of how LIPA’s history as a public-sector entity has influenced its capabilities for disaster response but per a New York Post account, local residents don’t seem impressed with its performance:

A Long Island Power Authority official told a crowd of 300 Rockaway residents that they would need to hire a licensed city electrician to inspect their homes before LIPA could restore power, and suggested the homeowners print out inspection forms — from the Internet.

“But we don’t have power!” the crowd shouted back at LIPA’s vice president of operations, Nicholas Lizanich. …

“On a scale of zero to 100, I give [LIPA] a zero,” grumbled homeowner Jim Silvestri, who asked whether he could use a Nassau County-certified electrician and was told no.

“There’s not enough licensed electricians in the City of New York to take care of this,” he added.

In a sane world, if occupational licensure existed at all, it would be automatically relaxed at a time of extremity like this, with lives as well as gigantic economic damage at risk. But this is New York, where apparently even the protectionist exclusion of qualified electricians who hold licenses in the next county over can’t be waived.

It’s at a time of disaster that the irrationality of so many market-blocking rules, licensure among them, becomes most obvious. In a splendid report issued by the Institute for Justice in May, License To Work: A National Study of Burdens from Occupational Licensing, by Dick M. Carpenter II, Lisa Knepper, Angela Erickson (formerly of Cato) and John K. Ross examine what should be the most dispensable tranche of occupational licensure laws, those for occupations like bartender, shampooer and animal trainer, typically lower-income and often somewhat entrepreneurial that are licensed in some but not all of the fifty states. Usually, the result is a controlled real-world demonstration that without the legal restriction of a given trade, life just goes on normally.

Of the 102 low-income occupations they examine, one with an obvious nexus to disaster recovery is tree trimmer, an occupation licensed in just 7 states. My own state of Maryland, I’m sorry to report, not only demands a license for such work but is quite burdensome about it, requiring “three years of training – two years of education and one year working in the field – for a ‘tree expert’ license.” Without such a license it is unlawful to accept compensation for “trimming, pruning, thinning, cabling, shaping, removing, or reducing the crown of” a tree 20 feet or higher. Three states that suffered extensive tree downage from Sandy – Maryland, Connecticut and Rhode Island – forbid unlicensed tree trimming, although many a property owner would probably have appreciated the legal right to hire someone from a neighboring state to clear a blocked driveway.

After the Sandy cleanup, we could use a cleanup of some of the deadweight laws that block the path of liberty and self-organizing economic prosperity.

Feds May Not Have ObamaCare Operational on Time

The Washington Post reports:

By the end of this week, states must decide whether they will build a health-insurance exchange or leave the task to the federal government. The question is, with as many as 17 states expected to leave it to the feds, can the Obama administration handle the workload.

“These are systems that typically take two or three years to build,” says Kevin Walsh, managing director of insurance exchange services at Xerox. “The last time I looked at the calendar, that’s not what we’re working with.”…

The Obama administration has known for awhile that there’s a decent chance it could end up doing a lot of this. Now though, they’re finding out how big their workload will actually become.

Betcha didn’t see that coming.

Part of the reason the workload is so heavy? “Buying health insurance is a lot more difficult than purchasing a plane ticket on Expedia.” You don’t say. But I thought that’s why we needed government to do it.