Topic: Regulatory Studies

When Did Hillary Clinton Become President of China?

The Wall Street Journal reports on the Chinese government’s energetic effort to improve the quality of its citizens:

Beijing officials have distributed 4.3 million copies of an etiquette book outlining rules on good manners and foreign customs, including rules about what not to wear. The guide is part of an effort by various departments within China’s government to clean the city up in preparation for the at least 400,000 foreign visitors who are expected to descend on its capital for the Olympic Games, which start Aug. 8.

Among the no-no’s: more than three color shades in an outfit, white socks with black shoes, and pajamas and slippers in public.

“No matter what, never wear too many colors…especially during formal occasions,” the book said. “When you wear [formal shoes], be sure to wear socks in good condition…socks should be a dark color – never match black leather shoes with white socks.”

“Older women should choose shoes with heels that aren’t too high,” it said.

The book, published by the Beijing Municipal Government’s Capital Ethics Development Office, is part of the department’s effort to make Beijing more “civilized,” officials said.

Along the same lines, Beijing authorities announced earlier this year that they would step up efforts to fine people who spit in public as much as 50 yuan ($7.33).

Other guidelines range from the obvious to overly specific. Public displays of affection aren’t acceptable, for example. In a section about escalators and elevators, the book said people should place their hands on escalator railings to avoid falling. It then addresses a pet peeve of many in Beijing: “When entering an elevator…let people walk out before you enter,” it said. It goes on to say riders should look only straight ahead and never stare at other passengers.

It also warns readers of the “Eight Things Not to Ask” foreigners, including their age, marital status, income or religious and political beliefs.

It sounds like the woman who wants to create government programs to help people “quit smoking, to get more exercise, to eat right, to take their vitamins” has found her niche.

Of course, you might suspect that the idea to require taxi drivers to wear uniforms came from John McCain.

10,000 Bills in Congress, and the Annual Spending Process Ignored

Before leaving for its August recess last week, Congress saw the introduction of its 10,000th bill. Meanwhile, not a single one of the twelve annual bills that direct the government’s spending priorities in 2009 has passed the Senate and only one has passed the House. Congress is neglecting its basic responsibility to manage the federal government, and is instead churning out new legislation about everything under the sun.

What does Congress occupy itself with? A commemorative postage stamp on the subject of inflammatory bowel disease. Improbable claims of health care for all Americans. And, of course, bringing home pork. Read about it on the WashingtonWatch.com blog.

Maryland Meets the Laffer Curve

Greedy politicians in Annapolis doubled the cigarette tax in Maryland for the ostensible purposes of reducing a budget deficit and financing more government spending. They increased spending (of course), but their tax hike is not generating much additional revenue. As the Washington Post reports, consumers are adjusting their behavior to minimize their tax burden:

Cigarette sales have dropped by nearly 25 percent in Maryland since the state’s tobacco tax doubled in January, as sticker shock apparently has curtailed some residents’ smoking and sent others across the border for better deals. Maryland lawmakers voted last fall to raise the tax to $2 a pack to help bridge a budget shortfall and expand subsidized health care. Fiscal analysts predicted that the new rate, the sixth highest in the nation, would cause cigarette sales to drop off, following a pattern with past increases. But the decline during the first six months of the year significantly exceeded their projections, exacerbating Maryland’s budget problems… Legislative analysts say they are looking at the degree to which Marylanders are crossing borders to buy cheaper cigarettes. It seems to be happening to some extent. On a recent afternoon, two service stations along South Dakota Avenue NE in the District were packed with vehicles with Maryland tags, many belonging to commuters heading to Maryland by Route 50 or the Baltimore-Washington Parkway. “The tax is not going to stop people from buying cigarettes,” said Mike Brockington, a 40-year-old Prince George’s County resident, adding that he was purchasing cigarettes in the District because of Maryland’s tax increase. … Maryland law seeks to limit out-of-state cigarette purchases. It is illegal for Maryland residents to be in possession of more than two packs of cigarettes lacking stamps showing that taxes were paid in the state.

Fannie and Freddie

Paul Gigot has an outstanding piece on Fannie Mae and Freddie Mac today in the WSJ. “The abiding lesson here is what happens when you combine private profit with government power.” Exactly.

Here’s what I said about the twin-headed hydra in my 2005 Downsizing the Federal Government:

Federal taxpayers also face financial exposure from the mortgage giants Fannie Mae and Freddie Mac. These ‘government-sponsored enterprises’ are private firms, but taxpayers might become responsible for their debts because of their close ties to the government. The value of these ties created an implicit federal subsidy of $23 billion in 2003. The large size of GSEs threatens to create a major financial crisis should they run into trouble. Balance sheet liabilities of the housing GSEs grew from $374 billion in 1992 to $2.5 trillion by 2003.

A benefit of fully privatizing the GSEs would be to end the corrupting ties that these entities have with the federal establishment. Fannie Mae’s expansive executive suites are filled with political cronies receiving excessive salaries. They spend their time handing out campaign contributions to protect the agency’s subsidies.

Federal Reserve Chairman Alan Greenspan and others have argued that Fannie and Freddie need to be subject to more regulatory control because they pose a threat to financial market stability. But a better solution is to make these and other GSEs play by the same rules as other businesses, and to end the distortions caused by federal subsidies. The federal government should completely sever the ties with Fannie, Freddie, and the other GSEs.

My analysis sadly proved to be correct, and my policy solution is more needed than ever.

Arrogant European Bureaucracy Run Amok

The European Commission is an unelected bureaucracy that is slowly but surely seizing powers to govern member nations. This is bad news for national sovereignty and jurisdictional competition, but it also leads to crazy regulations, including proposals to prohibit the British from using acres instead of hectares, banning the traditional preparation of Peking Duck, and detailed rules about the proper size and shape of vegetables. 

But regulatory overkill is just the tip of the iceberg. Far more troubling is the effort to subvert democracy in order to further centralize power in Brussels. The EU Constitution, which would have expanded the powers of the European Commission, was rejected by the voters of France and the Netherlands a few years ago. Rather than shelve the proposal, the European elites renamed it the Lisbon Treaty and said that it no longer was necessary to let the people vote. Fortunately, Ireland still has the rule of law and held a referendum - and the EU Constitution/Lisbon Treaty was decisively rejected. 

The French President has since asserted that the Irish should vote again (and presumably again and again) until they reach the “right” decision. But perhaps the most Kafkaesque reaction came from a French bureaucrat, who was quoted in Le Figaro stating, “It isn’t about putting pressure on the Irish.  We well understand that they have expressed themselves democratically.  But so have the other 26!” Only the French could deny their people the right to vote and then claim their voters (and the disenfranchised people in the European Union’s other 25 nations) had somehow expressed their views.

On Google-Yahoo! as an Antitrust Problem

My favorite anti-Google gadfly Scott Cleland has a post up entitled “Debunking the Google-Yahoo Antitrust Myths” in which he purports to debunk some erroneous thinking about the Google-Yahoo! deal.

Scott often furnishes the world with interesting ideas in an over-the-top way, but here I think he’s gotten it wrong.

He walks through a series of purported “myths” about the antitrust implications of Google-Yahoo!, which got a hearing in the Senate this week. I want to walk through just a couple of them because I think he’s framing the relevant market wrongly.

Cleland’s “Myth #1” is that there can’t be an antitrust problem as long as consumers are just one click away from a competitive search engine. Rather, he says, “Google is becoming a de facto essential facility for advertisers seeking to reach the global Internet audience.”

It’s helpful for him to frame the antitrust discussion of Google as being not about consumers’ access to search, but about advertisers access to eyeballs. The low barriers to entry for Google competitors is relevant, though. Too much success on the part of Google in capturing advertising market share will draw competitors to go after Google’s traffic, which is obviously crucial for holding advertising market share. They can do so easily because, indeed, consumers are one click away from competitive search engines and every other site or service they might visit.

“Myth #2: There can be no antitrust problem because Google and search advertising comprise such a small percentage of the advertising market.” Debunking it, Cleland says:

The relevant antitrust market is search advertising because there is no competitive substitute for search advertising. As Google has successfully convinced advertisers, search is a unique way to reach consumers because people self-identify their intentions through active search that they don’t do when they are a passive consumers of mass media advertising through: TV, radio, newspapers, magazines, billboards, or direct mail. Moreover, the search medium enables collection of unprecedented private information about intentions, preferences, economic suitability, etc., which enables unprecedented “targeting” of users with “relevant” advertising that consumers will be most receptive to.

(characteristically quirky formatting omitted)

This I think is wrong. Cleland has whittled down the market to where Google has unique strengths, but that is not the relevant market to this dispassionate, forward-thinking observer. Of course Google has convinced advertisers of how special search advertising is, but that doesn’t make it true. There are plenty of ways to target advertising equally well or better than through search, and the large consumer data and targeted marketing industry is there because of it. (Here’s the DMOZ directory of “micromarketing” firms, for example.)

What’s more, there are plenty of ways to target equally well or better than with search terms. Providers of hosted email, hosted documents, chat, microblogging, and other services have access to information as good or better than what Google has about people’s particular interests at particular times. They are all positioned to deploy targeted ad systems like Google’s keyed to the content that they process for users.

Whether they deploy such a thing or not depends on whether Google is able to reap higher than ordinary rents from its access to search information. If Google-Yahoo! is prevented from going forward and the two companies are prevented from increasing their profits through the combination – it remains speculative that they will – a signal to potential competitors will not go out, and innovations along many vectors will not materialize.

With due respect: Not this time, Scott! Let the markets and the technologies play out as they will.

‘Ballooning Commodities’?

“The S&P GSCI commodities index is up 73% in the past 12 months,” writes Edward Hadas of breakingviews.com in The Wall Street Journal.

The author goes on to speculate about speculation, concluding, “This bubble could get bigger still.” Unfortunately, he assumes the S&P commodity index (which is shown in a graph) demonstrates a huge ongoing boom in the prices of commodities in general. In reality, all the index shows is that oil prices doubled over the past year and that most of that increase happened in the past four months. Energy commodities (mainly crude oil) account for 78 percent of the S&P GSCI commodity index.

The price of crude oil rose from $100 a barrel on March 4 to $136 on July 8, so the energy-dominated S&P GSCI index naturally soared too.

What happens to the widely reported “commodities boom” if you leave out oil? Look at The Economist’s index of 25 farm and industrial commodities, which excludes oil. The Economist’s commodity price index fell from 271.9 on March 4 to 265.6 on July 8.

It is on the basis of such fatally flawed evidence as the S&P commodity index that Congress has been trying to bully the Commodities Futures Trading Commission into bullying U.S. commodity traders to stop some sort of “commodity boom.”

The dollar was also quite stable during the past four months, contrary to numerous angry and overconfident Journal editorials about the alleged commodity boom being caused by the supposedly falling dollar. The Fed’s broad index of the dollar’s value was 95.97 on February 28 and 95.97 on July 8.