Topic: Regulatory Studies

Chicago’s Sheriff Crusades against Online Ads

Prior restraints—legal prohibitions on disseminating information before publication—are an odious burden on the freedom of expression and come with a “heavy presumption” against their constitutionality. Indeed, they are so disfavored in the law as to be virtually impossible to obtain outside of wartime.

Informal prior restraints—government pressure without formal sanction—are even more unconstitutional than formal ones, as the Supreme Court noted in Bantam Books v. Sullivan (1963). In that case, the Court forbade the Rhode Island Commission to Encourage Morality in Youth from sending threatening letters to book distributors in an attempt to nudge the distributors into not carrying “obscene” material.

But that strong precedent didn’t stop Cook County (Chicago) Sheriff Thomas Dart and his crusade against Backpage.com, an online commerce site similar to Craigslist. Rather than trying to get a formal prior restraint from a court, Dart used his office, letterhead, and title to send letters threatening investigation to Visa and MasterCard (Backpage’s primary financial transaction processors) to pressure them into dropping Backpage as a customer. Dart justifies his actions by asserting that there have been “years of growth in the online sex trade,” “driving demand even higher and increasing the enslavement of prostituted individuals, including children” due to commercial sites like Backpage.com hosting “adult services” classified ads.

It worked: when Backpage sued to stop Sheriff Dart, the district court denied a preliminary injunction, accepting Dart’s claims and ruling that the public interest weighed against the website. Backpage.com appealed to the U.S. Court of Appeals for the Seventh Circuit.

On Soda Taxes and Purported Health Benefits

This week, the New York Times editorial board wrote in support of greater taxes on sweetened drinks, citing new research from a team Mexican and American researchers. They praise the novel design of the tax, which is levied on drink distributors rather than consumers. This caused the tax to be included in shelf prices, making the increase in total cost clear to consumers. The research found that soda consumption fell 12 percent in a year, and 17 percent among the poorest Mexicans.

The Times admits that we do not know whether any health benefits will actually result from soda taxes.  In this article in Regulation, the University of Pennsylvania’s Jonathan Klick and Claremont McKenna’s Eric Helland examined the effects of soda taxes. They conclude that a one percent increase in soda taxes led to a five percent reduction in soda consumption among young people.  But consumers substituted to other beverages.  A 6-calorie reduction in soda consumption was accompanied by an 8-calorie increase in milk consumption and a 2-calorie increase in juice consumption. Thus, the tax on soda led to an increase in overall calorie consumption, which offset the benefits of falling soda consumption. Moreover, there was “no statistically significant effect of soda taxes on body weight or the likelihood of being obese or overweight”.

Air Traffic Control Privatization: Cato View Gains Ground

Five years ago, Bob Poole and I wrote that Canada’s privatized air traffic control (ATC) system would be “a very good reform model for the United States.” U.S. policymakers—including the chairman of the House committee that oversees ATC—are now coming around to that view. 

The Wall Street Journal reports:

The headquarters of Canada’s air traffic control corporation is becoming a busy destination for U.S. transportation officials and airline executives looking for a model to privatize U.S. airspace management.

John Crichton, chief executive of Nav Canada, has hosted more than a dozen U.S. delegations in the past 18 months as Congress considers stripping U.S. air-traffic control from the Federal Aviation Administration—much as Ottawa did 19 years ago.

U.S. admirers—including Rep. Bill Shuster (R., Pa.), chairman of the House Transportation and Infrastructure Committee—advocate similarly extricating air-traffic control from the FAA and its parent, the Transportation Department. They say that would assure more reliable funding than the current mix of taxes and congressional appropriations, and could help advance NextGen, a $40 billion FAA air-traffic modernization program criticized by government watchdogs for being delayed and over budget.

Mr. Shuster has been preparing a bill that could establish a Nav Canada-like corporate structure for the U.S. He may introduce it as soon as November, people familiar with the matter said.

No Way (to Violate Property Rights), San Jose

A San Jose ordinance requires developers to set aside 15 percent of their units for sale at an “affordable housing cost.” Those affordability restrictions remain in effect for 45-55 years. If developers don’t want to set aside affordable housing units, they have the option to build affordable units elsewhere, pay a fine, dedicate land for affordable units, or acquire or rehabilitate existing affordable units.

However laudable it is to construct affordable housing, the city is essentially appropriating part of the developers’ property for its own uses or conditioning the issuance of permits on paying out large amounts of money. The California Building Industry Association (CBIA) filed suit, arguing that the city’s restrictions violate the Fifth Amendment’s Takings Clause, which prohibits the government from taking private property for public use without just compensation.

Previous Supreme Court decisions, including Koontz v. St. Johns River Water Management District from 2013 (which Cato supported), held that such conditions on building permits can violate the Takings Clause if the exaction—whether a fine or a requirement to set aside affordable housing—is unrelated to the proposed building project. It would thus be unconstitutional to condition a permit for a housing development on the construction of a new library, because the library has nothing to do with the proposed building project.

In the CBIA case, however, the California Supreme Court ruled that, because the conditions in San Jose derive from a legislative act rather than an ad hoc permitting condition, the U.S. Supreme Court’s clear precedents don’t fully apply. The CBIA has asked the U.S. Supreme Court to set the California Supreme Court straight by making clear that the Takings Clause prohibits such permitting conditions whether they come from a legislature or a discretionary permitting process.

Cato, joined by the Reason Foundation, has filed a brief in support of the CBIA’s petition. We argue that there’s no basis in the Takings Clause for distinguishing between legislative conditions and ad hoc permitting conditions. To the landowner or the developer, the effect is the same: the government imposes onerous conditions before allowing them to use their land. Moreover, legislatively imposed conditions are worse because they have broader effects, thus magnifying the unconstitutional harms to property owners.

Finally, there’s no reason to expect less abuse from the legislature than from permitting officials. Legislatures are prone to being captured by special interests who demand all sort of exactions from and conditions on landowners. Government officials, whether they are legislators or permitting clerks, often see taking property without compensation as a way to get something for nothing.

The Supreme Court should take this case and say that this ain’t okay, San Jose.  

How TTIP Will Affect the Structure of Global Trade Policy

Swedish economist Fredrik Erixon, an authority on international trade policy, who heads up the Brussels-based think tank known as ECIPE (the European Centre for International Political Economy), was a big contributor to the discussions held this week in conjunction with Cato’s TTIP conference.  Among many other trade topics, Fredrik has written extensively on TTIP, the WTO, and how the former may impact the latter.

In his conference essay, Erixon agrees with alarmed, “pure” multilateralists that the TTIP will supplant the WTO as “the organising entity of future trade policy,” but explains why that is not necessarily a bad thing.  While he dismisses fears that the United States and European Union may be turning toward an arrangement that excludes the rest of the world, and explains how they will “leverage TTIP for global trade liberalisation,”  Fredrik does worry that TTIP – if it “succeeds” in the area of regulatory harmonization – will result in the export of failed regulatory policies to the rest of the world.

His concluding remarks on that topic: 

Currently, the differences between EU and U.S. regulations and regulatory approaches are far too wide for the TTIP to be a realistic candidate for setting the global rules in this area. But TTIP will likely push trade agreements further in the direction of prescriptive regulatory conditionality, making it harder for trade agreements in the future to advance global commercial freedom through deregulation and simple, transparent rules.

Read Erixon’s essay here; see him discuss the issues during this conference session; see all the conference essays here.

Whole Milk and Humility

Dr. Melik: This morning for breakfast he requested something called “wheat germ, organic honey and tiger’s milk.”

Dr. Aragon: [chuckling] Oh, yes. Those are the charmed substances that some years ago were thought to contain life-preserving properties.

Dr. Melik: You mean there was no deep fat? No steak or cream pies or… hot fudge?

Dr. Aragon: Those were thought to be unhealthy… precisely the opposite of what we now know to be true.

Science hasn’t yet advanced as far as Woody Allen imagined in the movie Sleeper. But the Washington Post does report on its front page today, as the House Agriculture Committee holds a hearing on the government’s official Dietary Guidelines, that decades of government warnings about whole milk may have been in error. 

In fact, research published in recent years indicates that the opposite might be true: millions might have been better off had they stuck with whole milk.

Scientists who tallied diet and health records for several thousand patients over ten years found, for example, that contrary to the government advice, people who consumed more milk fat had lower incidence of heart disease.

By warning people against full-fat dairy foods, the U.S. is “losing a huge opportunity for the prevention of disease,” said Marcia Otto, an assistant professor of epidemiology at the University of Texas, and the lead author of large studies published in 2012 and 2013, which were funded by government and academic institutions, not the industry. “What we have learned over the last decade is that certain foods that are high in fat seem to be beneficial.”

The Post’s Peter Whoriskey notes that some scientists objected early on that a thin body of research was being turned into dogma:

“The vibrant certainty of scientists claiming to be authorities on these matters is disturbing,” George V. Mann, a biochemist at Vanderbilt’s med school wrote in the New England Journal of Medicine [in 1977].

Ambitious scientists and food companies, he said, had “transformed [a] fragile hypothesis into treatment dogma.”

And not just dogma but also government pressure, official Dietary Guidelines, food labeling regulations, government support for particular lines of research, bans on whole milk in school lunches, taxes and regulations to crack down on saturated fats and then on trans fats and salt. Earlier today Walter Olson noted numerous past examples of bad government advice on nutrition.

It’s understandable that some scientific studies turn out to be wrong. Science is a process of trial and error, hypothesis and testing. Some studies are bad, some turn out to have missed complicating factors, some just point in the wrong direction. I have no criticism of scientists’ efforts to find evidence about good nutrition and to report what they (think they) have learned. My concern is that we not use government coercion to tip the scales either in research or in actual bans and mandates and Official Science. Let scientists conduct research, let other scientists examine it, let journalists report it, let doctors give us advice. But let’s keep nutrition – and much else – in the realm of persuasion, not force. First, because it’s wrong to use force against peaceful people, and second, because we might be wrong.

This last point reflects the humility that is an essential part of the libertarian worldview. As I wrote in The Libertarian Mind:

Libertarians are sometimes criticized for being too “extreme,” for having a “dogmatic” view of the role of government. In fact, their firm commitment to the full protection of individual rights and a strictly limited government reflects their fundamental humility. One reason to oppose the establishment of religion or any other morality is that we recognize the very real possibility that our own views may be wrong. Libertarians support a free market and widely dispersed property ownership because they know that the odds of a monopolist finding a great new advance for civilization are slim. Hayek stressed the crucial significance of human ignorance throughout his work. In The Constitution of Liberty, he wrote, “The case for individual freedom rests chiefly on the recognition of the inevitable ignorance of all of us concerning a great many of the factors on which the achievement of our ends and welfare depends…. Liberty is essential in order to leave room for the unforeseeable and unpredictable.” The nineteenth-century American libertarian Lillian Harman, rejecting state control of marriage and family, wrote in Liberty in 1895, “If I should be able to bring the entire world to live exactly as I live at present, what would that avail me in ten years, when as I hope, I shall have a broader knowledge of life, and my life therefore probably changed?” Ignorance, humility, toleration—not exactly a ringing battle cry, but an important argument for limiting the role of coercion in society.

Today’s scientific hypotheses may be wrong. Better, then, not to make them law.

Competition Could Propel Mankind to Mars

Humanity’s excitement about space exploration is evident, from the reaction to the recent announcement of potential water on Mars, to the box office success of The Martian–a movie about a manned mission to the red planet.  Given the public interest in space travel, why hasn’t a man or woman actually stepped foot on Mars yet? Let’s consider some key factors affecting the pace of progress.

First, there is the obvious: appropriate technology takes time to develop. The journey from rudimentary hot air balloons and gliders to supersonic jets did not happen overnight. There is good news on this front, however.  Thanks to better communications and computing, human knowledge has the potential to expand at an exponential rate.

Second, competition is a major driver of progress, and the space industry has not been subject to intense competition since the Cold War’s end. Increasing private sector involvement may change that. For example, even after civil aviation took off, flight was a luxury enjoyed by few. But as deregulation opened up the industry to more intense competition, flight rapidly became more accessible. Today, more people fly than ever.

Competition between the U.S. and the Soviet Union during the Space Race fueled most of humanity’s spaceflight achievements, but the Cold War’s conclusion brought this competition to an end. Today, governments have limited incentive to push the boundaries of the final frontier. As a result, space exploration has stagnated.

Fortunately, a new era of private space exploration may be dawning, enabling competition to once again flourish as profits drive a new space race. The conditions have never been better. There exist potential customers eager to pay large sums for the chance to go to space for a few minutes, and still others willing to leave Earth for a lifetime on Mars. Private enterprises like SpaceX, while still in their early phases, could rekindle competition and help spark a renewed sense of urgency in the realm of spaceflight.

Humanity has dreamt of space travel for as long as we have gazed up at the stars, and increased competition could help bring those dreams to fruition. This short video beautifully depicts some of the possibilities of human space exploration. You need only look back on how far humanity has come since 1915 to gain perspective on how far we may go in the next century.