Topic: Regulatory Studies

Historic Preservation: When It Takes a Village

In 2003 the state of Connecticut offered the coastal village of Stony Creek a $250,000 grant to make possible the long-overdue restoration of Seaside Hall, home of its beloved fife-and-drum corps. After a hard look at the extensive strings the state attached to the money, the townspeople decided to do the job themselves instead. Now the renovation is nearing completion after years of spaghetti dinners, auctions, and other local efforts. Karen Lee Torre recounts the story in the Connecticut Law Tribune.

The fife and drum corps can be seen in period regalia here and, performing at the hall in civilian clothes, here. For some readers, incidentally, the village of Stony Creek may ring a bell as the place where author Ayn Rand worked on her novel “Anthem” while summering with husband Frank O’Connor in 1937.

OSHA and a Chimney Rebuilder

Bill McClellan, the excellent St. Louis Post-Dispatch columnist, had a must-read column the other day telling the story of Gary Heffernan, a 35-year veteran of the tuckpointing (masonry repair) business, and his recent run-in with an inspector from the federal government’s Occupational Safety and Health Administration (OSHA). The inspector wrote up Heffernan with thousands of dollars in fines, though no one had been injured and the business’s only other employee – Heffernan’s nephew – had not complained. The violations? I won’t spoil the suspense, but they included, to name one, letting the nephew work on a chimney without posted warnings of the toxic dangers of sand. [Whole column here.]

Regulatory ordeals like Heffernan’s may soon become much more frequent and more likely to imperil business survival, under proposed legislation that would greatly expand OSHA’s authority [GovTrack/Thomas; Chamber letter in opposition]. Here’s a description from J.L. Wilson of Associated Oregon Industries:

HR 5663, also known as the Miner Safety and Health Act of 2010, included dramatic changes to OSHA’s enforcement procedures, penalties, abatement and whistleblower provisions. The proposed changes were extremely costly to implement, difficult to administer, created more conflict in the workplace, and encouraged lawsuits. For example, HR 5663 imposed new and vague standards for criminal liability, including felony criminal sanctions against “any company officer or director” for “knowing” violations of OSHA. The bill; however, provided no definition of “knowing,” nor did it provide any limitation or guidance on which “officers or directors” could face criminal charges.

Notice the bill’s misleading name, intended to capitalize on much-publicized recent disasters in underground mines; despite this terminology, the bill would impose broad new federal regulation in workplaces of every other sort as well. And note that although Wilson used the past tense in his account, the bill is very much alive: following hearings before the House Education and Labor Committee it cleared the committee late last month and now heads for the House floor.

Egg Farming and the Salmonella Recall

The New York Times invited me to contribute to its “Room for Debate” feature on the big egg recall and here is an excerpt from my reply:

…Advocates cite the current outbreak, at last report limited to two related Iowa egg farms, as reason to enact pending legislation that would intensify federal regulation of food-making in the name of safety. Large food and agribusiness companies have generally signed off on most of the new proposals as acceptable. Many smaller producers, on the other hand, suspect there will be less room for them, and for local variety generally, in this reassuring new world of business and government cooperation.

I go on to cite the CPSIA debacle, in which a safety enactment devastated small producers of children’s goods while entrenching some of the dominant industry players.

Read the full New York Times post here. Some other perspectives worth checking out: Ronald Bailey, Ira Stoll, Ann Althouse.

Journalists Warn of Regulation’s Costs

All too often, news stories about proposed new regulations mention all the supposed benefits of the regulation while ignoring such potential costs as higher prices, reduced service, or even the demise of the business. Today I’m glad to see journalists noting those costs right up front in their discussions of a new regulation proposed by Virginia attorney general Ken Cuccinelli. Public radio WAMU says:

Currently there are 21 abortion clinics in Virginia. Abortion service providers say at least 17 of those might shut down if state officials use their authority to regulate those clinics.

Attorney General Ken Cuccinelli says abortion clinics provide many other medical services beyond abortions, so they’re subject to the same regulations as larger medical facilities.

That opinion was issued in response to a request from Virginia State Senator Ralph Smith, who says his only interest is to protect the health of the patient.

“I certainly feel that for the safety of all involved that they should be as regulated as other procedures,” says Smith.

For most clinics, meeting a higher regulatory standard could mean additional equipment or space renovation.

Tarina Keene director of NARAL Pro-choice Virginia says the cost involved could drive some clinics out of business.

Yes, indeed, they noted those potential costs right there in the first line. And so did the Washington Post, front page, third sentence:

Virginia Attorney General Ken Cuccinelli II has concluded that the state can impose stricter oversight over clinics that perform abortions, a move immediately decried by abortion-rights organizations and others as an attempt to circumvent the General Assembly, which has repeatedly rejected similar measures.

Cuccinelli’s legal opinion empowers the Board of Health, if it chooses, to require the clinics to meet hospital-type standards. Abortion-rights advocates say that could force some clinics to close because they would be unable to afford to meet the new requirements.

Now if only we could get journalists to take such prominent note of the costs that new regulations impose on other kinds of services, from lemonade stands to local restaurants to for-profit colleges to internet service providers.

Free Parking and the Geography of Cities

Unlike Randal O’Toole, I was delighted by Tyler Cowen’s New York Times article on the high cost of free parking. And indeed, if I’m reading O’Toole’s post right, it sounds like Cowen and O’Toole don’t actually disagree on the policy issue: both agree that business owners should be free to decide how much parking to supply.

The debate so far has focused on whether parking mandates push the price of parking below the market rate. But I think the more important effect is on the geography of cities. Parking mandates (and other regulations) preclude developers from catering to people who want to live in pedestrian-friendly neighborhoods.

Parking mandates necessarily mean that every large building is surrounded by a large parking lot. And for someone who doesn’t own a car, a parking lot is just a nuisance: a big, empty space he must walk across to get anywhere. Regulations that effectively require a parking lot around every store and restaurant almost guarantees that walking to them won’t be practical.

As Jane Jacobs pointed out, pedestrian traffic is highly sensitive to density. Even a modest reduction in the density of a neighborhood can have a big effect on pedestrian traffic. And as the number of pedestrians falls, so too will the number of businesses that cater to pedestrians. So it’s probably true, as O’Toole says, that charging for parking spaces wouldn’t dramatically reduce the amount of driving people do. But this is partly because the proliferation of parking lots has made walking impractical. Fewer free parking spaces wouldn’t just raise the price of car ownership; it would make car non-ownership more pleasant and convenient.

Government regulations often have subtle unintended consequences. Parking regulations have been on the books so long that the results have come to seem perfectly natural to us. But free markets are unpredictable. If developers had the freedom to decide how much parking to supply, the results might surprise us.

Paul Krugman on Carter and Reagan: Wrong Again

Measured in constant 2005 dollars, real federal revenues rose from $968.4 billion in 1970 to $1,197.6 billion in 1980 and to $1508.7 billion in 1990.   In other words, the cumulative real revenue gain was 23.7% under the high and rising tax rates of the 1970s, and 26% under the dramatic reduction in tax rates of the 1980s.

Paul Krugman recently looked at these same figures through his logarithmic Kaleidoscope, and concluded that “the revenue track under Reagan … is exactly what you would expect to see if supply-side economics were just plain wrong: revenues are permanently reduced relative to what they would otherwise have been.”

Financial Times columnist Martin Wolf was so awed by Krugman’s creative artwork that he imagined “the theory that cuts would pay for themselves has proved altogether wrong.”

Notice that Krugman starts his trend with 1970, which was a year of recession and falling revenue.  If he had instead measured real revenue growth between the cyclical peaks of 1969 and 1979, the overall increase would have dropped to 19.5%.  Note too that Krugman ends his trend with 1981 rather than 1980, while suggesting 1981 was part of the glorious Carter years:

The Carter years, contrary to legend, were not a period of economic stagnation and falling revenue because high tax rates were strangling the economy; there was a nasty recession starting in 1979, largely thanks to an oil shock, but overall growth was respectable.

The comment is strange.  There was no recession in 1979, nasty or otherwise.  And non-energy inflation topped 11 percent that year – before oil prices peaked in early 1980.

The continually accelerating inflation during the Carter years, 1977 to 1980, pushed more and more families into higher and higher tax brackets.  It also resulted in brutal taxation of illusory, nominal capital gains and ephemeral inventory profits.   As a percentage of GDP, federal taxes soared from 17.1% of GDP in 1976 to 19% in 1980 and 19.6% in 1981.   Does that really look like a sustainable trend that President Reagan interrupted for no good reason?

Social Science Friday

Science!

A few odds and ends from the social science blogosphere: