Topic: Regulatory Studies

Brazil Welcomes Airbnb Amid World Cup

The largest sporting event on Earth is taking place this summer in Brazil. Yet, despite having known since 2007 that Brazil would be hosting the 2014 FIFA World Cup Brazilian authorities failed to adequately prepare for the event, which is estimated to cost more than $11 billion. Not only has the construction of the stadiums and the relevant infrastructure been far from ideal, Brazil also has a hotel room shortage.

In light of the shortage of hotel rooms Brazilian authorities have welcomed Airbnb, the San Francisco-based company that connects those looking for a place to stay with property owners willing to provide short-term accommodation. Patrick Hoge of the San Francisco Business Times explains:

While Airbnb has been controversial in many cities around the world, Brazilian officials, facing shortages of hotel rooms, have been more welcoming to the San Francisco company, seeing it as a resource for housing the massive influx of tourists expected.

Hoge also reported that, according to Airbnb Brazil general director Christian Gessner, the number of Airbnb listings in Brazil increased from around 3,000 to more than 35,000 in the two year period ahead of the start of the World Cup.

Considering their state of preparation for the World Cup it is not hard to see why Brazilian officials have welcomed a company that makes it easier for private individuals to do what they have been doing for thousands of years: letting strangers stay in their property for a short time in exchange for money.

Suppressing Competition from Migrant Doctors

The claim for physician licensure is that it protects consumers from “quacks;”  it is just a coincidence that licensure also reduces competition and raises doctors’ incomes!  In this case, the strength of licensing should be similar across states, and licensure requirements should determine whether a prospective doctor is competent, not whether a U.S. native or a migrant.

Recent research by Brenton Peterson, Sonal Pandya, and David Leblang (University of Virginia), however, finds the opposite: 

Licensure regulations ostensibly serve the public interest by certifying competence, but they can simultaneously be formidable barriers to entry by skilled migrants. From a collective action perspective, skilled natives can more easily secure sub-national, occupation-specific policies than influence national immigration policy. We exploit the unique structure of the American medical profession that allows us to distinguish between public interest and protectionist motives for migrant physician licensure regulations. We show that over the 1973–2010 period, states with greater physician control over licensure requirements imposed more stringent requirements for migrant physician licensure and, as a consequence, received fewer new migrant physicians. By our estimates over a third of all US states could reduce their physician shortages by at least 10 percent within 5 years just by equalizing migrant and native licensure requirements.

Little evidence suggests that professonal licensure promotes quality or protects the public, but arbitrary discrimination against migrant physicians (many trained in the United States!) is particularly insane.  As are all restrictions on high-skill (or other) immigration.

The Story Of Detroit, In Three Observations

1) In the city of Detroit, more than one violent crime per day now takes place at a gas station. Specifically, reports the Detroit News, “Police have investigated nearly 700 violent crimes at Detroit gas stations during the past year, prompting city officials and citizen patrol groups to try to quell the steady beat of murders, carjackings, shootings and armed robberies.”

2) The Detroit city government does an astoundingly poor job of protecting gas stations, their customers, and pretty much everyone else from crime. It suffers from notoriously poor police response times (58 minutes for serious crimes) and closure rates on crime investigations (8.7 percent rate of solving cases). According to Motor City Muckraker, the Detroit Police Department has quietly discontinued putting out its “Major Crime Summary Report” and instead now puts out a summary report of cases that have resulted in arrests, which is better for its image.

3) The city council’s response? It’s to load new legal burdens on the gas stations, specifically by way of “a recent ordinance requiring owners to install security cameras by Aug. 31.” While some stations say they’re already doing that, Auday Arabo, the head of a dealer association, says the requirement “would present a financial hardship for many station owners”: “Is this what government is supposed to do? Mandate you become the surveillance company for the government?”

That’s certainly what Detroit seems to be doing. Strange how when governments fail utterly at their claimed core function of preventing violence, they so often can be found muscling into entirely new areas of coercion at the same time.

London Cabbies Hold Uber Regulation Protest

Today, thousands of drivers of London’s iconic black cabs are taking part in a possibly illegal demonstration in response to how Transport for London (TfL), the city’s transportation agency, is treating Uber. The drivers plan to cause congestion which Kabbee, a mini cab app company, believes will cost the London economy an estimated £125 million. Licensed taxi drivers are also holding protests related to Uber across other European cities today.

The Licensed Taxi Drivers Association (LTDA) believes that Uber, the San Francisco-based transport technology company, is operating illegally in London. Thanks to the Private Hire Vehicles (London) Act 1998, it is illegal for a London vehicle with a private hire vehicle license to have a taximeter. Up until yesterday Uber’s website stated that anyone who wanted to be an Uber driver in London must have a private hire vehicle license. Today those requirements remain the same, however in response to the London protest Uber has opened to licensed black cabs.

TfL disagrees with LTDA and believes that the phones used by Uber should not be considered taximeters because they are not physically attached to the vehicle:

Smartphones used by private hire drivers – which act as GPS tracking devices to measure journey distances and relay information so that fares can be calculated remotely from the vehicle – do not constitute the equipping of a vehicle with a taxi meter.

However, TfL has asked the High Court to rule on the matter. LTDA’s secretary general, Steve McNamara, believes the court is unlikely to announce a ruling before the end of the year.

McNamara has used blunt language when discussing Uber and its presence in London:

This is not some philanthropic friendly society, it’s an American monster that has no qualms about breaching any and all laws in the pursuit of profit, most of which will never see a penny of tax paid in the UK.

Becoming a driver of one of London’s black cabs is a long process. In order to be a London black cab driver you need to pass “The Knowledge,” a rigorous test on London’s thousands of streets, roads, and landmarks, which takes years to prepare for. Not only do those hoping to become London cabbies have to spend years studying London, they also have to pay the relevant fees to complete the application process.

Speaking to the BBC, London black cab driver Lloyd Baldwin said:

Our beef with Uber is that these drivers have come straight into London, and have been licensed straight away by Transport for London. We’re regulated to within an inch of our lives.

We don’t do protests willy-nilly for petty things, we feel it’s our only course.

and,

We just want them to be treated exactly the same as we are.

Baldwin’s frustrations make sense in light of the time and money invested into becoming a driver of one of London’s iconic taxis. But, as in other jurisdictions, the answer is not to make new and innovative companies like Uber conform to already out-of-date regulations and legislation, but rather to liberalize the market Uber and London black cabs are competing in. When the Private Hire Vehicles Act was signed in 1998 the iPhone was still nine years away, and “The Knowledge” test, which began almost 150 years ago, predates cell phones (never mind smartphones). Regulations such as the ban on private hire vehicle license holders from having taxi meters are out of date, and it is long past due for them to be repealed in order to allow traditional cabs to compete with companies like Uber.

FDA Decides Not to Walk the Cheese Plank… for Now

FDA:  You know that artisanal cheese you love, that you have to age on wood planks? That’s dangerous and we don’t approve.

Fancy Cheese Lovers:  Hey, FDA, these cheese wheels will be your tombstones.

FDA:  Oh. What? Did you think we meant we were going to regulate your much loved, centuries-old practices out of existence just because we’re a regulatory agency that stops people from doing things for a living? Of course we’re not doing that… right now… while the media spotlight is so bright it’s hurting our eyes… but you’d better convince us we should allow you to do that anyway.

The latter bit is what has apparently played out this morning, according to Forbes online.

But as Cato’s Walter Olson explains, this apparent victory for sanity and liberty may simply be due to the fact that the usual advocates of regulatory encroachment in every aspect of our lives happened to have been personally inconvenienced this time around, and may have had the subject-area knowledge to realize how ridiculous this encroachment was. So, for once, they pushed back instead of rooting for leviathan.

If so, let’s hope they learn a broader lesson from this experience: maybe other people should also be left to make their own choices in the areas about which they care deeply. Maybe all that stifles is not gold.

And if you call Uber or Lyft to pick up your fancy cheese in Virginia, be prepared to get busted…they’re still banned.

Did the FDA Just Ban European Cheese?

Up till now, the biggest concern of European cheesemakers in the U.S. markets has been to establish “geographic indicators” that would keep American companies from using names like gorgonzola, feta, or parmesan.  But does it matter what the product is called if no one is allowed to eat it?  A recent decision by the U.S. Food and Drug Administration (FDA) to ban cheese aged on wooden boards could potentially shut out the bulk of imports from Europe.

The FDA’s recent move seems to be part of a bizarre crusade to ban flavorful cheese.  Last year the FDA targeted mimolette cheese, inspiring informative commentary and a video by my Cato colleagues.  The stated reason for the ban was that mimolette rinds might contain trace amounts of cheese mites, a harmless critter essential to the creation of certain cheese flavors.

Now the FDA has gone full throttle and banned all cheese aged on wood.  According to the agency:

“The porous structure of wood enables it to absorb and retain bacteria, therefore bacteria generally colonize not only the surface but also the inside layers of wood. The shelves or boards used for aging make direct contact with finished products; hence they could be a potential source of pathogenic microorganisms in the finished products.”

Cheese on Wood

Does placing food on wood really make it too dangerous for humans to eat?

While this is certainly a problem for artisanal cheese makers in the United States, it could have serious implications for cheese imports from Europe.  According to the Cheese Underground blog, most cheeses imported into the United States are aged on wood.

Businesses in the United States often complain that European regulators are overly cautious when it comes to permitting new methods of producing food products with genetic modification or growth hormones.  The most common complaint is that European regulations are based on irrational fear of new things and not based on hard science.  Practices that are common in the United States are outlawed in Europe, preventing U.S. producers from selling their products overseas.

The FDA, apparently, is interested in eradicating the more traditional methods.  Can “science” truly justify the criminalization of patently safe production techniques intentionally employed to improve product quality.

Regulatory differences are the most salient issue being addressed in ongoing negotiations toward a free trade agreement between the United States and the European Union.  As U.S. negotiators push Europeans to adopt a more scientific approach to regulation, perhaps the EU negotiators should demand a bit more common sense.

Morris Adelman, RIP

According to the New York Times Morris Adelman, professor emeritus of economics at M.I.T. died on May 8 at the age of 96.  His work, including Genie Out of the Bottle (M.I.T. Press 1995), informed the papers and articles on energy policy published by the Cato Institute over the last 30 years.  A good summary of his views can be found in this article in Regulation from 2004.

His writing was refreshingly honest and is worth quoting at some length.

…conventional wisdom (there is that term again) is that Middle Eastern nations wield an “oil weapon” that they can use to punish the United States or any other nation.  In support of this belief, many people point to the 1973 “oil embargo” against the United States by Arab members of OPEC (except Iraq — Saddam Hussein profited by it). Secretary of State Henry Kissinger cruised around the Middle East many times to negotiate an “end” to it. Ten years later, he explained that the significance of the “embargo” was psychological, not economic. Recently, the London Economist quoted approvingly what I said in July 1973: If an embargo was declared, it would have no effect because diversion would nullify it. And so it was.

The embargo against the United States never happened, and could not happen. The miserable, mile-long lines outside of U.S. gasoline stations resulted from domestic price controls and allocations, not from any embargo. We ought not blame the Arabs for what we did to ourselves.”

“The real moral is this: It does not matter how much oil is produced domestically and how much is imported. Presidents may declare that there is an “urgent need” to cut imports and boost “energy independence” — no one ever lost political support by seeing evil and blaming foreigners. The facts are less dramatic.