Topic: Regulatory Studies

Ohio’s Issue 3: The Runt of the Marijuana Crop

By nearly a 2 to 1 margin, Ohio’s Issue 3 has failed. It may be just as well. Jacob Sullum writes at Reason:

[I]t’s not clear whether the rejection of Issue 3 reflects general resistance to legalization or opposition to the initiative’s most controversial feature: a cannabis cultivation cartel that would have limited commercial production to 10 sites controlled by the initiative’s financial backers. The ballot description highlighted that aspect of the initiative, saying Issue 3 “grants a monopoly for the commercial production and sale of marijuana for recreational and medicinal purposes” and would “endow exclusive rights for commercial marijuana growth, cultivation, and extraction to self-designated landowners who own ten predetermined parcels of land.”

This is nothing like the model that prevailed in Colorado, and that seems to be working well so far.

Establishing a permanent commercial pot cartel has no clear public policy rationale. It appears rather to have been an instance of shameless self-dealing by individuals who hoped to extract rents based on the public’s anxiety about change. Even – and I don’t say this lightly – even a state monopoly on commercial sales might have been better, in that the rents would have gone to a public purpose, rather than to some well-connected speculators, who ought not to profit from a law written specifically to favor them. Indeed, such laws are not properly called laws at all; they are privileges – private laws, rather than public ones, and as such they come under grave suspicion.

Go Ahead, Have a Lasik!

This morning, I saw a TV ad for Lasik eye surgery and that got me wondering, “What’s happened to the price of Lasik since I had my procedure 10 years ago?” We hear a lot about the rising cost of healthcare. (By the way, how is that Obamacare working out for you?) But, what about medical procedures that patients pay for themselves? And so I called the ophthalmologist who performed my Lasik operation (with superb results, I might add) to find out the details. 
Back in 2005, he charged $3,500 for fixing nearsightedness and astigmatism in both eyes, or $4,264 in 2015 dollars. Today, he charges $3,000. That amounts to a real price reduction of 30 percent. In the meantime, average hourly earnings of production and nonsupervisory employees (a close approximation to the quintessential “blue collar worker”), rose from $15.91 in January 2005 to $20.80 in January 2015. So, an ordinary American needed to work for 220 hours to afford a Lasik surgery in 2005. S/he needs to work 144 hours to afford the same procedure today. That’s a 35 percent decrease in terms of work time.
And, as my doctor reminded me, the price was not the only thing that has changed. Lasik machines today are significantly more precise, achieving 20/20 vision with greater regularity for nearsightedness, farsightedness and astigmatism. They are much safer and disastrous complications, such as the loss of sight, have become even rarer (i.e., Lasik has been a very safe procedure for a very long time). The doctors performing the operation are more experienced and the screening of potentially problematic patients has improved. 
Candidly, my doctor has admitted that the prices could come down even more. One reason for Lasik prices being what they are is that only ophthalmologists are allowed to perform Lasik operations. Optometrists, however, are banned. And, of course, draconian immigration rules make it super difficult for foreign doctors to work in the United States.
Still, relative to 10 years ago, today a prospective Lasik patient enjoys the benefits of better and safer machines, and a price/time reduction of 35 percent. Not bad, not bad at all. Please visit HumanProgress and search for “cost of cosmetic procedures” to see how other elective medical procedures have become cheaper over time.


China Abandons One Child Policy—Ends Suffering For Millions

Today, China abandoned its 35-year-old one-child policy. Based on the now debunked threat of overpopulation that was popularized by Stanford University scholar Paul Ehrlich, the communist government subjected the Chinese people to forced sterilizations and abortions. Many newborn babies were either killed or left to die. Today, the Chinese population suffers from a dangerous gender imbalance that favors boys over girls at a ratio of 117:100, and a demographic implosion that threatens future economic growth and prosperity. In fact, as Human Progress advisory board member Matt Ridley shows in his book The Rational Optimist, population growth and economic expansion go hand in hand. The horrific consequences of the Chinese one-child policy are a reminder of what happens when governments are allowed to interfere in the deeply personal decisions of individual citizens and their families.

Minimum Wage Hikes in Theory and Reality

Don Boudreaux recently despaired that only 26 percent of economists surveyed agreed that

If the federal minimum wage is raised gradually to $15-per-hour by 2020, the employment rate for low-wage US workers will be substantially lower than it would be under the status quo.

In the University of Chicago Booth School of Business’s regular survey of distinguished policy economists chosen for ideological diversity, 24 percent disagreed with the statement, and 38 percent said they were uncertain.

Some said that employment effects were likely, but they might not be “substantial.” That’s an empirical question, of course, and knowing the direction of a change doesn’t necessarily tell us its magnitude. In addition, each person’s definition of “substantial” might be different. Boudreaux doesn’t think there should be much uncertainty:

Would 74 percent of my fellow economists either disagree that, be “uncertain” that, or have no opinion on the question of whether a forced 107 percent increase in the price of the likes of 737, 777, and 787 jetliners would cause airlines to cut back substantially on the number of new jetliners they buy from Boeing?  Or what if the question were about the prices of fast-food?  Would 74 percent of these economists either disagree that, be “uncertain” that, or have no opinion on the question of whether a forced 107 percent increase in the prices of the likes of Big Macs, Baconators, and buckets of KFC fried chicken would cause consumers to cut back substantially on the amount of food they purchase at fast-food restaurants?

But who am I to jump into this battle of economists? Just a lowly newspaper reader, that’s all. And as it happens, Boudreaux posted his critique on Sunday, and on Monday I read an interview in the Wall Street Journal with Sally Smith, CEO of Buffalo Wild Wings. She runs a chain of more than 1,000 sports bars, and she’s trying to expand. Here’s part of her interview:

WSJ: How are minimum-wage increases affecting the way you make business decisions?

MS. SMITH: You look at where you can afford to open restaurants. We have one restaurant in Seattle, and we probably won’t be expanding there. That’s true of San Francisco and Los Angeles, too. One of the unintended consequences of rising minimum wages is youth unemployment. Almost 40% of our team members are under age 21. When you start paying $15 an hour, are you going to take a chance on a 17-year-old who’s never had a job before when you can find someone with more experience?

WSJ: Are you turning to automation to reduce labor costs?

MS. SMITH: We are testing server hand-held devices for order-taking in 30 restaurants now, and we’ll roll them out to another 30 in the next month and another 30 by the end of the year. Servers like it because they can take on more tables and earn more tips. Eventually we’ll have tablets where guests can place their own order from the table and pay for it.

Ms. Smith is no economist. (She has a BSBA in accounting and finance, and served as CFO of Buffalo Wild Wings and other companies for about 10 years before becoming CEO in 1996.) She’s just a CEO trying to make revenues come out ahead of costs. And when she thinks about a substantial increase in the minimum wage, her thoughts turn to not expanding, hiring more experienced workers, and using technology so fewer servers can serve more customers.

She doesn’t seem as uncertain about the effects on employment as the academic economists do.  

Everything Is On Sale Compared to 1979

Wage appreciation, or lack thereof, does not tell us everything we need to know about our standard of living. Wages often fail to capture changes that come from competition and technological breakthroughs. 

One—much underutilized—way in which we can get a sense of the improvements in our standard of living is to look at the number of hours an average employee needs to work in order to buy commonly used items. When cost is measured in terms of hours worked, almost everything in 2015 is “on sale” when compared to the same product in 1979. 

Consider two common kitchen appliances: the microwave and the refrigerator.

Those are some impressive discounts! Look at the data for yourself and you will find that the trend of falling prices, when measured in hours of labor, is widespread. The main exceptions when it comes to the cost of living are the highly distorted healthcare, education and housing markets. In contrast, when market competition thrives, it tends to bring down prices and raise living standards for all of us. 

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, 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 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. 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”.