FDA Doesn’t Want E-Cigs Marketed as Safer Than Tobacco Cigarettes

In a forthcoming article in Regulation California Polytechnic State University economics professor Michael Marlow describes the negative effects on public health of the proposed regulation of e-cigarettes. The FDA proposes to expand its authority granted under of Section 911 of the Family Smoking Prevention and Tobacco Control Act. “Section 911 bans marketing tobacco products as modified risk products without FDA approval. Moreover, manufacturers are unable to inform consumers their products do not contain tobacco.”

The prohibition on marketing e-cigarettes as safer than traditional cigarettes has not been subject to cost-benefit analysis. This is particularly significant given that the literature on e-cigarettes suggests that they help smokers quit. Even the JAMA Patient Page, published by The American Medical Association last January, highlighted a number of potential e-cigarette benefits such as their lack of tobacco and the less toxic nature of e-cigarette vapor compared to cigarette second-hand smoke.

In his back-of-the envelope calculation using quit rates from the published literature, Marlow estimates that the benefits related to e-cigarettes would be between $15.6 and $49.2 billion a year as the result of between 2.4 and 6.4 million smokers becoming former smokers every year. “Prohibiting sales to youth and requiring a clear description of product ingredients may be appropriate. But prohibiting any information regarding potential efficacy in harm reduction is hard to justify given substantial benefits reported in currently available studies.”

Joe McNamara, RIP

Joe McNamara was a former police chief and scholar at the Hoover Institution.  He was an outspoken critic of the drug war and devoted much of his time to converting people within the law enforcement community. 

Here is a talk that he gave at Cato’s 1999 conference, Beyond Prohibition:
https://www.dropbox.com/s/ucftsgfrtshr7jk/McNamara.m4v?dl=0

Here is an article he prepared for Regulation Magazine in the wake of the 9/11 terrorist attacks, “The Defensive Front Line.”

Joe McNamara, RIP

Use Education to Transform China From Within

BEIJING—China’s university system is growing.  However, the People’s Republic of China still lags behind the U.S. and other Western nations.  Chinese students increasingly are heading to America for higher education. 

While recently playing tourist in Beijing I spoke to a number of young Chinese.  They were bright and inquisitive, ambitious and nationalistic.  They worried about finding good jobs and were irritated by government restrictions on their freedom. 

Beijing’s global influence depends upon domestic economic growth and political stability.  And that ultimately depends upon China’s young. 

The PRC’s university students today are most likely to become the country’s leaders tomorrow.  The number of college graduates has increased to seven million, a four-fold jump over the last decade. 

While the number of universities in China is growing, few have national, let alone international, reputations.  Undoubtedly that will change over time.  Today, however, competition for the few available spots at top schools is extraordinary. 

For instance, Peking and Tsinghua Universities are the only Chinese universities among the world’s top 100.  They have space only for 6000 new students a year. 

Obviously, far more Chinese students could succeed, indeed thrive, at fine universities.  So more than 400,000 young Chinese are heading abroad every year. 

Federal Prosecutorial Ethics

Arkansas businessman, John Stacks, is about to stand trial in federal court.  Mr. Stacks is attacking the charges and the conduct of the government agents.  Prosecutors don’t like what he’s been saying and asked a judge to squelch their target’s ‘false allegations.’

From the Arkansas Democrat-Gazette [Sept. 4]:

Prosecutors sought an order preventing Stacks, his attorneys or any witnesses on his behalf from airing the “false and/or misleading” allegations in front of jurors. They cited a video “re-enactment” he posted online of agents executing a search warrant at his business, along with allegations he has aired in a lawsuit over the raid. “At the time that the lawsuit was filed, Stacks knew that a grand jury investigation was under way,” the government’s motion notes….

In July, [Judge] Holmes ordered prosecutors to supply a “bill of particulars” providing more detail about the criminal accusations against Stacks than what was stated in the indictment. This was in response to Stacks’ claim that he couldn’t figure out exactly what he was accused of doing wrong, and that when he asked for details, prosecutors handed over 80,000 un-navigable pages of documents.

The Constitution guarantees free speech.  It also says the accused has the right to be informed of the nature and cause of the accusation against him.  Two constitutional violations and the trial has not even started yet.

I have hosted two policy forums about federal prosecutorial abuses the past few months.  We may need to host such events even more regularly.  

School Choice Safe in Florida…for Now

Earlier this year, Florida’s largest teachers union filed a legal challenge to prevent the expansion of school choice. As I explained then:

The Florida Education Association is suing the state of Florida to eliminate the new Personal Learning Scholarship Account (PLSA) program, among other recent education reforms, including an expansion of the state’s scholarship tax credit law. Modeled after Arizona’s popular education savings account (ESA), the PLSA would provide ESAs to families of students with special needs, which they could use to pay for a wide variety of educational expenses, such as tuition, tutoring, textbooks, online learning, and educational therapy. Six families with special-needs children who would have qualified for the program are seeking to intervene as defendants in the lawsuit, represented by the Goldwater Institute’s Clint Bolick.

The union’s lawsuit argues that the legislation creating the PLSA, Florida’s Senate Bill 850, violated the state constitution’s “one subject rule” because it contained a variety of education reforms.

Today a circuit court judge dismissed the lawsuit, ruling that the plaintiffs lacked standing to sue because they could not show how they were harmed by the law. Last month, the New Hampshire Supreme Court unanimously ruled that plaintiffs lacked standing to challenge the Granite State’s scholarship tax credit law because they also could not demonstrate that they suffered any harm.

We Shall Not Be Moved. Unless There’s a Democrat in the White House.

Dana Milbank reports in the Washington Post:

The anti-Obama left was out in force. All 22 of them.

As the president stood on the South Lawn to announce the bombing campaign in Syria, liberal demonstrators gathered on Pennsylvania Avenue on the other side of the White House to protest the man they thought was their ally….

“If George W. Bush were launching wars with Congress out of town, oh, it would be flooded,” longtime liberal activist David Swanson said, looking across mostly empty Pennsylvania Avenue “They would be screaming.”

My thoughts from 2011 on the disappearance of the antiwar movement. Buzzfeed worries that antiwar celebrities may have been kidnapped.

Financial Crisis Lessons From Experimental Economics

Economic scholarship tends to operate in silos. That is, banking scholars don’t talk to macroeconomists, etc. Sadly, this is even more so between finance, monetary and experimental economics.  In his latest book, Rethinking Housing Bubbles, Nobel Prize winner Vernon Smith, the father of experimental economics, offers a number of lessons that could greatly improve the stability of our financial system.

Some of these include:

  • Markets for perishable goods behave generally well and do not tend to display bubbles, whereas asset markets commonly display bubble behavior in experimental settings.
  • Allowing margin buying (leverage) significantly increases bubble size and duration for inexperienced buyers, but not for experienced.
  • Even sophisticated buyers, when inexperienced, display bubble behavior. 
  • Experience helps: repeated play in an experimental game brings price behavior closer to fundamentals.
  • Informed “inside traders” can reduce size of bubbles.
  • Presence of futures markets can stabilize prices in spot markets.
  • Additional liquidity increases size and duration of bubbles.
  • Bubbles can develop even when participants are fully informed as to operation of the market (they know with certainty future incomes streams and how the market functions).

In terms of policy recommendations, the list above suggests a few things to me. First, policymakers should pay close attention to asset markets. Second, higher down-payments, particularly among first-time buyers, are likely to reduce housing bubbles. Policy should be tolerant of informed buyers, such as hedge funds, buying-up foreclosed homes. 

Consumer disclosures, like Truth in Lending, are likely to be useless. Financial literacy should focus less on information and more on experience. Excess central bank liquidity is likely to contribute to asset bubbles.

Perhaps the biggest lesson is that bubbles in experimental asset markets are quite common, especially markets were buyers have little experience and engage in few transactions (sounds like the housing market). 

We will touch upon some of these issues, and others, when Vernon Smith comes to Cato next week to discuss his new book. You can register (or watch streaming) here.