Topic: Regulatory Studies

Baptists and Pot-Growers

The L.A. Times reports that the city of Oakland has approved an ordinance paving the way for the industrial production of marijuana. There is more to this than simply a victory for liberty in the drug war.  As the story describes and Josh Blackman analyzes, the episode demonstrates “Baptists and Bootleggers”-style public choice economics in action: existing small-time growers are displeased at the competition, barriers to entry are high, the approved pot factories engaged in serious rent-seeking, and the city profits from a new stream of tax revenue.

And so, as liberty expands, government reserves the power to decide who gets to benefit most – after taking a slice for itself off the top.

Schools on Film

AEI’s Rick Hess worries that school choice advocates are moving into the public messaging arena with “brazenly manipulative” flicks that rely on shallow “sound bites.” He cites the screening of five documentaries at an upcoming national conference in San Franscisco to argue his point.

I can’t comment on them as a whole–I haven’t seen them all–but I would like to point out that there will actually be at least eight screenings at next month’s conference. Among them will be a brief sample of a proposed six-part documentary series called School, Inc.  Taking Educational Excellence from Candle to Flame. This series, inspired by James Burke’s Connections and Carl Sagan’s Cosmos, would take viewers on a world-wide quest to answer one very important question: why is excellence routinely replicated and spread on a massive scale in every field except education?

The series hasn’t been shot yet, and perhaps distributors today won’t think viewers are still interested in the kind of challenging, thought-provoking documentary series that so captivated me (and millions of others) in my teen years. But the project’s advisory board includes Jay Mathews, Paul PetersonJames Tooley, and Michael Horn, my co-producers and co-writers (Patrick Prentice and Tim Baney) have more than half-a-century of documentary filmmaking experience between them, and I’ve been studying school systems around the globe and across history for the better part of two decades. We’re confident that this series will be both substantive and entertaining, and think that American (and foreign) audiences are very interested in the subject matter. As we start to pitch to distributors in the coming months, we’ll find out if they agree.

Stay tuned….

Dear Health Care Journos, There’s Nothing Free about ObamaCare

The Obama administration announced yesterday its plans for implementing ObamaCare’s mandate that consumers purchase first-dollar coverage for preventive services.  The press release reads (emphasis added):

Administration Announces Regulations Requiring New Health Insurance Plans to Provide Free Preventive Care

Of course the administration would emphasize that consumers will pay nothing for these services at the moment of service, and elide the fact that this mandate will increase their health insurance premiums. The administration’s use of the word “free” is what we call spin.

What’s surprising–and more than a little disappointing–is that journalists and headline writers at major media organizations would repeat the administration’s spin, as if the government really is giving away free stuff:

  • New York Times: “Health Plans Must Provide Some Tests at No Cost…free coverage…free screenings…free preventive services…”
  • Los Angeles Times: “Healthcare law offers preventive care at no cost”
  • Politico: “New rules: Free preventive care…free under new federal guidelines.”
  • Reuters: “Healthcare overhaul mandates free preventive care…no extra cost to consumers…Medicare patients will have access to free prevention services…”
  • Wall Street Journal: “White House Unveils Free Preventative Services…services that will be free to consumers…free preventive care…free preventive care…”

Each use of “free” and “no cost” in these excerpts is false, even within its original context.  There’s no such thing as a free lunch. Everything has a cost.  No government can change that.  Mandating that insurers cover certain services does not magically make them free.  Consumers still pay, just in the form of higher health insurance premiums and lower wages.

The Wall Street Journal (in paragraph six), The New York Times (paragraph seven), Reuters (paragraph 16), and the Los Angeles Times (paragraph 19 or so) do mention that consumers will pay for this mandate in the form of higher premiums–but that doesn’t make the untrue stuff true.  It just makes the article internally inconsistent.  Moreover, the Los Angeles Times incorrectly suggests that the higher premiums would be offset by lower out-of-pocket spending.  (The change in premiums will be larger due to moral hazard and administrative costs.)  And Reuters mentions higher premiums only vaguely, and as if insurers would bear that cost.  Each article also repeats the administration’s spin that spending more on preventive care would reduce health care costs, without mentioning that the Congressional Budget Office and other health care researchers dispute that claim.

Journalists need to be very careful with terms like “free” and “no cost.”

Don’t Look Around, Get the For-Profits!

Yesterday, I brought you up to date on the under-the-radar advance of federal K-12 education control. But that’s not the only education sector under largely silent assault. Most people are also probably unaware of the siege of for-profit colleges and universities, a group loathed because, well, they dare to be honest about trying to make a profit, and they do it in an industry utterly dependent on federal cash.

The complaint – which you might have heard before – is that for-profit enrollment is growing very fast; the schools are more expensive than taxpayer-subsidized public institutions or non-profit private schools; and for-profit students often struggle to graduate and pay back their mainly federal student loans. This story on NPR’s Marketplace is somewhat representative of the coverage afforded these schools, with its focus on a former for-profit employee accusing one school – but by implication the whole sector – of deceiving students about their employment and earning prospects after they’ve completed the school’s pricey program. Here’s the pretty standard stuff:

Garnett knows a lot about the value of education. She worked as director of graduate placement at for-profit Allied College in St. Louis. It’s now called Anthem College. Here’s a clip from one of its promotional videos.

Allied College video: We can help you break into that career you’ve always dreamed of, and your future starts right now!

It was Garnett’s job to help students start those careers as pharmacy technicians or dental assistants.

Garnett: We sent resumes on their behalf, we called potential employers on their behalf, we called the graduates every week, sometimes every day, to say “have you followed up on this, have you talked to anyone, what have you been doing?”

All that effort paid off. Garnett says more than 70 percent of graduates found the kinds of jobs they went to school for. But she says a lot of those jobs paid just $8 to $10 an hour. And the students often took on a lot of debt.

Garnett: A lot of it would depend on what program the student was in, how hard they were willing to work, the effort that they were willing to put in. But just being honest, if you’re making $10 an hour and you have $15,000 in student loans, that would be pretty difficult to pay back, for anyone.

You get the picture: The for-profit school deceived students so it could rake in cash for it’s owners. Well it’s stories like this – as well as some truly alarming statistics about for-profit costs and graduation rates – that are driving a series of Capitol Hill floggings of proprietary schools, as well as a drive to tighten regulation of the schools:

The law says career training and vocational programs have to prepare students for quote “gainful employment in a recognized occupation.” Otherwise, the programs aren’t eligible for federal student aid. But until now, no one’s defined what gainful employment means. The Department of Education is drawing up new rules meant to protect students from taking on more debt than they can expect to pay off….

New regulations could force some programs to lower their tuition or even go out of business. But the gainful employment rule doesn’t apply to traditional four-year colleges or liberal arts programs….because career colleges and vocational programs exist to train people for jobs. There may be other reasons people go to Vassar or UCLA.

Clearly, the intent is to implement regulations that will have a disparate impact on for-profit schools. Sure, some people go to UCLA or Vassar to study, say, art history, but many go to study business, or engineering, or education, or something else with a job as a final goal.

Thankfully, Marketplace had the integrity to bring in a somewhat balancing voice, one that summarized what I argue in a much more detailed way in a new op-ed defending – sort of – for-profit higher ed. Quite simply, for-profits do have lots of problems, but so do publics and non-profit privates:

Sara Goldrick-Rab teaches education policy at the University of Wisconsin, Madison. She says nonprofit colleges and public universities deserve a closer look too. Plenty of students graduate from those schools with piles of debt and slim job prospects.

Sara Goldrick-Rab: The fact is that when you talk to students these days, no matter where they are, their main focus is on getting a job – and its on getting a good-paying job. And that’s what they tell you that they’re there to do.

What Goldrick-Rab probably wouldn’t say – after all, she has publicly (and wrongly) heckled me for saying it – is that government aid likely deserves much of the blame for the overconsumption and skyrocketing prices of higher ed. By making students insensitive to costs, aid allows schools – all schools – to raise prices with impunity, and distorts students’ perceptions of the value of higher ed.

So are there problems in for-profit higher education? Absolutely! But they are the same problems we have throughout government-dominated academia. The only difference is that the for-profits are at least honest about grabbing every dollar they can get.

Free Trade Begins at Home

When pundits discuss “free trade,” most people think of international trade, eliminating tariffs, import quotas, and the like. That’s because the Constitution’s Commerce Clause – the one Congress has been using and abusing for decades – grants the government the power to “make regular” trade between the several states.  For example, Oklahoma can’t ban imports of beef from coming across the Red River and New York can’t have a different licensing regime for long-haul tracks entering from New Jersey rather than Pennsylvania.

While this commerce- (and liberty-) enhancing feature of our federal system has required a Supreme Court reminder for traditional wine retailers in recent years, Americans have generally taken for granted that buying and selling products between American jurisdictions is perfectly normal.

It may surprise you to learn, then, that in Lake Elmo, Minnesota, proprietors of a 40-year-old family farm that yields flowers, pumpkins and Christmas trees, are facing fines and 90-day jail sentences for attempting to sell their products in that town.  The reason?  Part of their farm lies outside city limits, and in Lake Elmo it’s illegal for farmers to sell products – even from their own land – unless they were grown within the city.  You can view a short video about their story here:

Thankfully, our friends at the Institute for Justice are stepping up to defend these folks for making a living by engaging in domestic free trade.  This blatant protectionism is harmful and foolish when practiced with foreign trading partners, and is all the more repugnant when practiced against one’s own neighbors who provide the community with valuable goods and services.  That these law-abiding entrepreneurs face potential jail time for the crime of “selling produce across city lines” is anathema to the Constitution.

You can read Cato’s work on agricultural free trade here

Calling in the World Court against the Gun Trade

Just before the holiday I sent off to Encounter Books the manuscript of my next book, tentatively titled Schools for Misrule: Law Schools and an Overlawyered America. One of the themes the book explores is how, after years of arguing that courts should read the U.S. Constitution as requiring the adoption of the liberal policy agenda of the moment (welfare rights, free health care, or whatever), cutting-edge law school thinking now promotes the idea that international human rights law requires the adoption of that same agenda. Thus the U.S. Supreme Court ruled in San Antonio v. Rodriguez (1973) and Milliken v. Bradley (1974) that the U.S. Constitution does not mandate (respectively) “Robin Hood” school finance redistribution and school busing across district lines; now it’s argued that both decisions need to be revisited and overturned as contrary to (ever-evolving) conceptions of international human rights. Similarly, there are said to be internationally recognized rights to government-provided housing, day care, and even (at least in Europe) tourism.

These notions are at odds with longstanding ideas of sovereignty and national independence, as held by (among many others) the Founders of this Republic. That they could also pose more direct dangers to individual liberty is suggested by a news item that drew only passing attention a few weeks ago: Chicago Mayor and long-time anti-gun advocate Richard Daley convened an assembly on global issues at which (per the Chicago Sun-Times) he “convinced more than a dozen of his counterparts from around the world to approve a resolution urging ‘redress against the gun industry through the courts of the world’ in The Hague.” According to another local news report, Daley “said American gun manufacturers should be held responsible in the World Court, since American-made guns are used in violent crime elsewhere in the world.” Philadelphia Mayor Michael Nutter and the mayor of Mexico City were among those endorsing the idea. David Kopel at Volokh Conspiracy has much more on the conditions that would have to be met for the World Court to assert jurisdiction.

Chicago and its mayor were in the Second Amendment spotlight most recently with the McDonald case, in which the U.S. Supreme Court struck down the city’s ultra-strict anti-gun ordinance as in violation of the Bill of Rights. But the real antecedent of Daley’s latest idea was the late-Nineties litigation ginned up by anti-gun advocates and trial lawyers on behalf of three dozen cities and counties, which mostly fared poorly in court, yet still, through sheer cost-infliction, very nearly achieved its goal of off-the-statute-books gun control through litigation). That litigation campaign was decisively rejected and stopped in its tracks by Congress in the Protection of Lawful Commerce in Arms Act, signed by then-President George W. Bush in 2005. In other words, Daley is seeking an international end run around both the Bill of Rights and the democratically expressed will of the American people. Aren’t Chicago voters tired of this yet?

Study: Competition Saves Lives in Britain’s NHS

This interesting NBER study just came across the transom:

The effect of competition on the quality of health care remains a contested issue.  Most empirical estimates rely on inference from non experimental data. In contrast, this paper exploits a pro-competitive policy reform to provide estimates of the impact of competition on hospital outcomes. The English government introduced a policy in 2006 to promote competition between hospitals. Patients were given choice of location for hospital care and provided information on the quality and timeliness of care. Prices, previously negotiated between buyer and seller, were set centrally under a DRG type system…

Our results constitute some of the first evidence on the impacts of a market-based reform in the health care sector. We find strong evidence that under a regulated price regime that hospitals engage in quality competition and that the 2006 NHS reforms were successful. Within two years of implementation the NHS reforms resulted in significant improvements in mortality and reductions in length-of-stay without changes in total expenditure or increases in expenditure per patient. Our back of the envelope estimates suggest that the immediate net benefit of this policy is around £227 million. While this is small compared to the annual cost of the NHS of £100 billion, we have only calculated the value from decreases in death rates. Allowing for improvements in other less well measured aspects of quality will increase the benefit, as will any further falls in market concentration which may occur as the policy continues in operation. If the UK were to pursue policies that lead to deconcentration of hospital markets, the gains could be substantially larger.

These results suggest that competition is an important mechanism for enhancing the quality of care patients receive. Monopoly power is directly harmful to patients, in the worst way possible - it substantially increases their risk of death. The adoption of pro-market policies in European countries, as well as policies directed at increasing or maintaining competition such as antitrust enforcement, appear to have an important role to play in the functioning of the health sector and assuring patients’ well being.

The study is, “Death by Market Power: Reform, Competition and Patient Outcomes in the National Health Service,” by Martin Gaynor (Carnegie-Mellon University), Rodrigo Moreno-Serra (Imperial College Business School), and Carol Propper (University of Bristol).