Topic: Regulatory Studies

Yes, Florida, the Constitution Protects Property Rights

David and Susan Kentner own residential lots along San Carlos Bay in Sanibel, Florida. Because their property is along the high-tide line, the Kentners enjoy an age-old common-law right to build docks over the water abutting their property, subject to reasonable regulation. But Sanibel passed an ordinance forbidding the Kentners and others from taking advantage of this common-law right. The city claimed that the ordinance was necessary to protect seagrass, which it called an “invaluable natural resource.”

Whether or not seagrass is invaluable, the city passed the ordinance without considering whether seagrass was actually present in the areas subject to the ordinance and whether modern technology could effectively be used to avoid harming the seagrass. Moreover, there is evidence that the city passed the ordinance in order to satisfy the aesthetic preferences of certain interest groups and to enhance the property values of other dock-holders. On top of that, in 2006 the city issued itself an exemption to build a dock in San Carlos Bay, explaining that it should be allowed to build a dock because no seagrass was found on the site.

The Kentners, represented by the Pacific Legal Foundation, challenged the ordinance on the ground that it did not substantially advance any legitimate government interest. In other words, the Kentners claimed that the ordinance violated the due-process rights to their property, which is lawyer-speak for laws that don’t have a good-enough justification. Both the trial and appellate judges held that property rights aren’t “fundamental rights” protected by due process, thus ruling that the government didn’t need a good reason to pass these restrictions. In other words, property rights simply don’t enjoy protection against irrational government regulations.

On appeal to the Supreme Court, the Kentners argue that the lower courts were mistaken in treating property rights as no-class—not even second-class—rights. In support of the Kentners’ petition to have the Supreme Court hear the case, Cato joined the National Federation of Independent Business, Owners Council of America, and Rutherford Institute on a brief arguing that the lower courts were gravely mistaken in classifying property rights as not deserving of due-process protections. The Fourteenth Amendment, after all, explicitly says that no state shall deny “life, liberty, or property” without due process of law.

Further, the Court should review the case to clarify and solidify longstanding precedents that treat property rights as on par with other rights. After all, if the government is allowed to violate property rights with no justification whatsoever, then any ordinance that confiscates, destroys, or restricts property will be simply unassailable, regardless of how unreasonable or shocking it may be. The high court should take this case to reaffirm that property rights are indeed constitutionally protected and cannot be abridged with impunity by opportunistic, corrupt governments.

The Supreme Court will decide later this year or early in 2015 whether to take Kentner v. City of Sanibel.

What Public Choice Theory Says about Ebola

What does public choice theory say about responding to Ebola?

That is: What are the costs and benefits of various policies – not to the public – but to self-interested politicians? Public choice theory holds that politicians’ interests don’t always coincide with the public’s, and sometimes they diverge quite sharply. When interests diverge, politicians will often side with their own self-interest, even at the expense of the public.

So what do they want? Politicians want public esteem. They want above all to be seen as heroes. If that means sacrificing civil liberties - to little or no public benefit - then they will do so.

This remains true even if the “heroic” measures at hand amount to Ebola security theater. It would appear that’s what we’re getting - a set of state-level quarantines that are actually contrary to what doctors and epidemiologists recommend. (No, the public probably won’t care what the experts say. I mean, look – the public still buys antibacterial soaps, and public health experts don’t recommend those either.)

In general, then, we can expect politicians to be eager to quarantine. This eagerness will be completely independent of the specific facts of any particular disease. Recall that lots of politicians once wanted to be able to set up an HIV quarantine, too, even long after it was well known that HIV can’t be transmitted by hugging, kissing, sharing utensils, sharing toilet seats, non-euphemistic cuddling, or what have you. (Wasn’t that a loooong time ago? No: It was just last year. And they got what they wanted.)

In short, whether or not a quarantine is right in any particular case – and it might be right in some cases, though I wouldn’t know – public choice theory says that politicians will err on the side of quarantine.

If that seems cynical, consider the flip side: Politicians also don’t want to look like the ones who let Ebola into the country. Note that one might look like the person who brought Ebola into the country even when one’s policies are responsible for exactly zero additional Ebola risk. Life is unfair sometimes. Even to politicians.

To look like a screwup, all you have to do… is nothing. The public will be left to stew in its fears, and they hate it when that happens. So they will punish you, and your party, at the next possible opportunity. (When is that again?)

The costs of doing nothing here are especially high if your constituency happens to be made up of conservatives – in whom Jonathan Chait has pointed out a strong emotional preference for purity and cleanliness. We should thus expect to find fear of contamination at or near the top of the to-do list for conservatives, who will try, first, to intensify these fears, and second, to promote their own policies as the only ones capable of relieving them.

Nevada Cracks Down on Uber

Unsurprisingly, Nevada officials are cracking down on Uber. Last Friday, the San Francisco-based transport technology company announced its launch in Sin City. On the day of the launch eight Uber drivers in Las Vegas had their cars impounded and were issued citations for providing an “unlicensed for-hire transportation service.” In addition, District Court Judge James Russell banned Uber drivers from offering ridesharing services in Nevada until at least early November.

Instead of spending time and money on impounding ridesharing vehicles Nevada officials should turn to their attention to reforming taxi regulations, which make it difficult for taxis in Las Vegas to compete with Uber.

As I noted last week, Las Vegas has especially over burdensome taxi regulations in place. Taxi drivers in Las Vegas are restricted in regards to where, how, and sometimes (depending on which medallion they have) when they pick can up passengers. Uber drivers are not nearly as restricted. Given such an environment it shouldn’t be surprising that yesterday Uber was reporting an “insane” level of demand.

According to an Uber spokeswoman, the company is financially and legally supporting drivers dealing with citations and impounded vehicles, as it has done in other jurisdictions where drivers have run afoul of regulators. According to one Uber driver in Las Vegas, five Nevada Taxicab Authority vehicles and two undercover officers with black ski masks were used to impound his Ford Focus while he was trying to drop off passengers.

In an ideal regulatory framework taxis and ridesharing driverswould fairly compete and Uber drivers would not have their cars impounded. Unfortunately, many taxi regulations in the U.S. allow for incumbent protection and do little to encourage competition and innovation that would benefit consumers.

Uber drivers’ experiences in Las Vegas highlight the regulatory grey area that Uber and other sharing economy companies occupy. Before the rise of the sharing economy the distinction between private car owners and taxis was clear. Today, Uber, Lyft, and Sidecar make that distinction more difficult to make, and regulators across the U.S. are struggling to keep up with the changes in technology that allow for the sharing economy to exist. 

Yet rather than deal with companies like Uber by reexamining and updating existing taxi regulations or taking steps to make taxis more competitive, the Nevada Taxicab Authority has deployed officials to crack down on drivers using Uber. This is an overreaction to the emergence of ridesharing. The Nevada Taxicab Authority ought to consider a range of changes to existing regulations such as not restricting how and where Las Vegas taxi drivers can pick up passengers.

The technology that allows Uber and other ridesharing companies to operate is not going anywhere. The Nevada Taxicab Authority cannot possibly expect the impounding of ridesharing vehicles to be an effective long-term strategy. In the short term, however, it shouldn’t be surprising if the Nevada Taxicab Authority continues to use the existing outdated regulatory environment to its advantage in order to protect taxi drivers from competition.

Las Vegas Is Ripe For Ridesharing

The regulations that govern taxis in the Las Vegas area impose especially heavy restrictions on consumer choice and driver availability. Such an environment is ideal for rideshare companies, which provide consumers with more choice and drivers with more flexibility. Yet perhaps unsurprisingly, regulators and market incumbents in Sin City may prove to be among ridesharing companies’ most defensive and rigid opponents.

Taxi drivers in Las Vegas are not only restricted in regards to where they can pick up passengers, they are also restricted in how they pick up passengers. For instance, individuals are unable to hail Las Vegas cabs from the street. Cabs must be called and requested or found at designated areas.

The Nevada Taxicab Authority has a web page dedicated to describing the sixteen different taxi medallions available in the state.

The “North Las Vegas” medallion allows operators to drive 24 hours a day, seven days a week. Holders of this medallion “are permitted to stage on any taxicab stand North of Owens Avenue. They can then provide an on-call service within a five-mile radius of North Las Vegas. The southern border of North Las Vegas is Flamingo Road. Taxis with the “North Las Vegas” medallion may pick up passengers when directed to do so by a dispatcher; however the ride must originate north of Flamingo Road and cannot originate on Las Vegas Boulevard or Paradise Road (in the map below Owens Avenue is blue, Flamingo Road is green, and Las Vegas Boulevard and Paradise Road are highlighted in brown). 

“Providing that adequate service is maintained” in North Las Vegas, taxis with this medallion are permitted to provide service from ten specified locations, most of which are hotels.  

Cato Conference: “Pruitt, Halbig, King & Indiana: Is ObamaCare Once Again Headed to the Supreme Court?”

On October 30, the Cato Institute will host a conference featuring leading experts on four legal challenges that critics understandably yet mistakenly describe as “the most significant existential threat to the Affordable Care Act”:

PruittHalbigKing & Indiana: Is ObamaCare Once Again Headed to the Supreme Court?

Thursday, October 30, 2014, 9:00AM – 1:30PM. 

Luncheon to follow.

Featuring: Oklahoma Attorney General Scott Pruitt; Indiana Attorney General Greg ZoellerRobert BarnesThe Washington PostJonathan Adler, Case Western Reserve University School of Law; David Ziff, University of Washington School of Law; Brianne Gorod, Constitutional Accountability Center; James Blumstein, Vanderbilt University; Michael F. Cannon, Cato Institute; Len Nichols, George Mason University; Tom Miller, American Enterprise Institute; and Robert Laszewski, Health Policy and Strategy Associates, LLC.

In Pruitt v. Burwell and Halbig v. Burwell, federal courts have ruled that the Internal Revenue Service is misinterpreting the Patient Protection and Affordable Care Act, unlawfully paying billions of dollars to private health insurance companies, and unlawfully subjecting more than 50 million individuals and employers to the Act’s individual and employer mandates. In King v. Burwell, another federal court found the IRS’s interpretation is permissible. A fourth lawsuit, Indiana v. IRS, is due a ruling at any time.

While these cases attempt to uphold the ACA by challenging the Obama administration’s interpretation, supporters and critics agree they could have as large an impact on the law as any constitutional challenge. Is the IRS acting within the confines of the law? Is the ACA unworkable as written? Is it inevitable that the Supreme Court will hear one of these cases, or a similar challenge yet to be filed? What is the impact of the IRS’s (mis)interpretation? What impact would a ruling for the plaintiffs have on the health care sector and the ACA? Leading experts, including the attorneys general behind Pruitt v. Burwell and Indiana v. IRS, will discuss these and other dimensions of this litigation.

To register to attend this event, click here and then submit the form on the page that opens, or email events [at] cato.org, or fax (202) 371-0841, or call (202) 789-5229 by 9:00 a.m. on Wednesday, October 29, 2014.

How The Supreme Court Can Stop Consumers From Getting Ripped Off

Today, the Supreme Court hears a case about whether dentists and other professions should be allowed to use state licensing boards to engage in anti-competitive behavior that would be illegal if not done under the auspices of state governments. The case is North Carolina State Board of Dental Examiners v. FTC, and involves actions taken by that state’s dental board to prevent non-dentists from providing teeth-whitening services.

In the University of Pennsylvania Law Review, Cato Institute adjunct scholars David Hyman and Shirley Svorny explain:

A majority of the courts of appeals gives state licensing boards and similar entities considerable latitude to engage in anticompetitive conduct, even when that conduct would be clearly unlawful were it undertaken individually by the licensed providers that typically dominate these licensing boards…

[T]he North Carolina Board of Dental Examiners (N.C. Board) became concerned that non-dentists were providing teeth whitening services. In North Carolina, teeth-whitening was available from dentists, either in-office or in take-home form; as an over-the-counter product; and from non-dentists in salons, malls, and other locations. The version provided by dentists was more powerful and required fewer treatments, but was significantly more expensive and less convenient. In response to complaints by dentists that non-dentists were providing lower-cost teeth-whitening services, the N.C. Board sent dozens of stern letters to non-dentists, asserting that the recipients were engaged in the unlicensed practice of dentistry, ordering them to cease and desist, and, in some of the letters, raising the prospect of criminal sanctions if they did not do so. The N.C. Board also sent letters to mall owners and operators, urging them not to lease space to non-dentist providers of teeth whitening services.

The Supreme Court will decide whether the North Carolina dental board should be able to claim a “state action” exemption to federal laws against anti-competitive conduct. Hyman and Svorny argue they should not, noting that doctors, lawyers, and other professions have used government licensing to stamp out competition, to the detriment of consumers:

Other occupations provide no shortage of similar examples, whether it is states requiring hair braiders to obtain cosmetology licenses (even though the requisite training has absolutely nothing to do with hair braiding), laws prohibiting anyone other than licensed funeral directors from selling coffins, states prohibiting anyone other than veterinarians from “floating” horse teeth, or ethics rules prohibiting client poaching by music teachers. 

“Antitrust has historically focused on private restraints on competition, but publicly imposed limitations can pose greater peril,” they write, “since they are likely to be both more effective and more durable.”

Hyman and Svorny make three further recommendations for the courts:

First, in reviewing the decisions of licensing boards, courts should presume that states were not actively supervising the boards, absent compelling evidence to the contrary. Second, defendant–licensing boards should be required to present persuasive evidence of actual harm that their proposed licensing restrictions or restraints will prevent and should be required to show that private market and non-regulatory forces (including brand names, private certification, credentialing, and liability) are insufficient to ensure that occupations maintain a requisite level of quality. Finally, we argue that legislators should take steps to roll back existing licensing regimes.

Hyman signed onto an amicus brief filed by antitrust scholars. (Here are two more amicus briefs filed by public-choice economists and the Cato Institute.) Svorny argues for the complete repeal of government licensing of medical professionals, and illustrates how the market for medical-malpractice liability insurance does more to promote health care quality than licensing

(Cross-posted at Darwin’s Fool.)

Uncle Sam’s Vestigial Feudalism

In the feudal era, rulers funded their households by taking a share of the crops farmers in their territory produced. The lords called this tribute and the peasants would’ve called it extortion.

We like to think that we’ve come quite a ways since then. After all, taxes are now paid withmoney—or even a digital abstraction of money—and forms, not cartloads of grain. We can even feel good (well, sanguine) about paying taxes, because we know that we’re funding the government of our own choosing—a democratically elected leadership restrained by the Constitution—not just feeding the avarice of a local warlord.

Except if you’re a raisin farmer in California, a state responsible for 40% of the world’s and 99% of America’s raisins. If you’re a California serf raisin farmer, you’re required by federal law to hand over up to 47% of each year’s crop to the U.S. government so the government can control the supply and price of raisins under a New Deal-era regulatory scheme.

The Fifth Amendment says that “private property [shall not] be taken for public use, without just compensation,” however, so it’s hard to see how it would be constitutional for the government to take nearly half a farmer’s harvest without any payment—let alone “just compensation.” (To be clear, if you grow grapes for use in wine or juice, you’re fine. It’s only if you dry out those grapes that you have to watch your property rights evaporate.)

Yet the U.S. Court of Appeals for the Ninth Circuit has done just that, repeatedly. In 2012, the en banc court held that nobody could challenge this taking in federal court. The Supreme Court unanimously disagreed. (For more background and to read Cato’s merits brief in that case go here.)

Failing to take the hint, the Ninth Circuit has now held that the Fifth Amendment’s protection against state expropriation simply doesn’t apply to personal property (as opposed to real estate). To put it bluntly, that’s an arbitrary, unprecedented, and ahistorical distinction, so raisin farmers are once again forced to ask the Supreme Court to correct lower court’s failure to protect their rights.

Joined by the five other organizations, Cato has filed a brief urging the Court to take this case, thus insuring that the farmers’ constitutional rights aren’t left to wither on the vine. We argue that the Ninth Circuit’s distinction between real and personal property has no basis in the text and history of the Constitution, Supreme Court precedent, or a reasonable understanding of the English language.

The Fifth Amendment embodies the notion that property rights are central to a free people and a just government. It could not be more clear that property can’t be taken without “due process,” and that when it is taken, the government must pay “just compensation.” These guarantees reflect the many values inherent in private property, such as individual achievement, privacy, and autonomy from government intrusion.

By devaluing property rights of all sorts, the Ninth Circuit weakens the values of autonomy and reliance that undergird the Takings Clause and conflicts with the very foundations of our constitutional order.

Raisin farming ain’t easy; five pounds of grapes yield only one pound of raisins. Raisin farmers shouldn’t have to hand over half of that pound to the federal government.

The Supreme Court will decide whether to take Horne v. U.S. Dept. of Agriculture later this fall.

Cato legal associate Gabriel Latner co-authored this blogpost.