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Regulation Magazine
Volume 25, Number 3

Abstracts
Vol. 25, No. 3, Fall 2002


Briefly Noted
Features
In Review
Final Word

Briefly Noted

Real Campaign Reform
By Erik S. Jaffe and Robert A. Levy

Some 80 parties represented by 50 high-octane law firms have filed court challenges to the Bipartisan Campaign Finance Reform Act of 2002. Yet not a single party really hit the mark with its challenge. Yes, the BCRA is unconstitutional. But the real culprit is not the new law; it is a 26-year-old Supreme Court case, Buckley v. Valeo, in which the Court somehow decided the First Amendment allows restrictions on political speech in the form of campaign contributions and explicit election advocacy.

EPA’s $32 Trillion Negligible Risk
By Ben Lieberman

It is no surprise that federal agencies often tailor their interpretation of the facts and the law to support various policy goals. It should also be no surprise that the agencies sometimes “re-tailor” those interpretations if they conflict with other policy goals. For an example, consider the Environmental Protection Agency and its opposing appraisals of ozone.

Features

Transportation

Toward Truly Open Skies
By Kenneth J. Button

After the U.S. domestic air market, the Europe-North America international market is the largest air transport market in the world. Because of its size and vitality, there have been numerous calls for the relaxation of regulation that limits U.S. and European carriers from expanding service to each other’s nations. The potential efficiency gains in the system from such deregulation could well lead to traffic and revenue generation that leaves net benefits on both sides of the Atlantic even if individual carriers suffer.

A New Approach to Private Roads
By Eduardo Engel, Ronald Fischer and Alexander Galetovic

Roadway privatization offers many benefits, from decreasing transportation’s dependence on public coffers to using market forces to decrease the number of “white elephant” roadway projects. But, in the United States, only two private road projects have been undertaken in the last two years, in part because potential investors and the government worry about the financial risks of such projects. We believe those risks can be overcome through government awarding of “Present-Value-of-Revenue” franchises to private roadway companies, which would protect those companies’ investment but would also protect taxpayers.

Real Estate

Zoning’s Steep Price
By Edward Glaeser and Joseph Gyourko

A chorus of voices appears to proclaim unanimously that America is in the midst of an affordable housing crisis. But an examination of housing price data from across the country reveals that, in most areas of the country, home prices appear to be fairly close to the physical costs of construction. Only in particular areas, especially New York City and California, do housing prices diverge substantially from the costs of new construction. The bulk of the evidence that we marshal suggests that zoning and other land use controls are heavily responsible for high prices where we see them; measures of zoning strictness are highly correlated with high prices.

Energy

CAFE Changes, By the Numbers
By Andrew N. Kleit

To the casual observer, proposals to increase the Corporate Average Fuel Economy (CAFE) standards on vehicles seem to be a good idea. However, according to the data presented in this article, tighter CAFE standards would save very little gasoline, increase car buyers’ costs and lower their benefits, increase pollution and auto fatalities, and shift revenue away from U.S. automakers to foreign firms. Instead of raising the fuel efficiency standards, policymakers would better address any externalities associated with gasoline by raising the gas tax.

FERC’s New Regulatory Agenda
By Thomas M. Lenard

During the past year and a half, the Federal Energy Regulatory Commission (FERC) has embarked on a significantly more regulatory course than it was on before. The new approach is most evident with respect to transmission, where FERC’s leadership is moving aggressively to divide the nation’s grid into a small number of quasi-governmental entities called Regional Transmission Organizations (RTOs) and to prescribe in detail how those RTOs should operate. FERC is also engaging in more aggressive “market-monitoring” that will place generators under the continuing threat of price caps, mandated refunds, and loss of market-based rate authority. This new regulatory activism is occurring without sufficient analysis of whether the approach will improve the functioning of markets or be beneficial for consumers.

Telecommunications

A Free-Market Scorecard
By Randolph J. May

The 1996 Telecommunications Act gave federal regulators greater authority to preempt state or local laws that restrict intrastate telecommunications competition. However, that authority only goes so far, and many states continue to tightly control intrastate telecommunications even as lawmakers claim the states’ policies are market-oriented. To identify true, innovative, free-market state policies, I offer criteria, which are meant to provide a guide for determining whether a state’s telecommunications policies are, in the main, “deregulatory” and “pro-competitive.”

Antitrust

The Antitrust Emperor’s Clothes
By George Bittlingmayer

Antitrust policy over the last 25 years can claim substantial achievements. First, the stated terms of the debate have shifted to consumer welfare and efficiency, and away from vague and easily misused goals such as dispersion of political and economic power. Second, the 1982 and subsequent Merger Guidelines and the Hart-Scott-Rodino review process provide safe havens, comparative predictability, and effective protection against suits filed after a deal is done. Third, the agencies still file large-firm monopolization cases, as illustrated by the Microsoft case, but they have done so less frequently. But more recently, the antitrust pendulum has swung back, and a new bipartisan consensus has emerged under the Clinton and the two Bush administrations. The basic merger regime has remained stable, but other aspects of policy – notably large-firm monopolization cases – represent a partial return to the 1970s.

Risk

Safety at Any Price?
By W. Kip Viscusi and Ted Gayer

After three decades of experience with extensive government regulation and oversight of health, safety and environmental matters, we have reason to believe that those measures have largely failed to fulfill their initial promise, but many of the initial promises were infeasible goals of a “zero-risk” society. Economic findings with respect to risk-risk tradeoffs highlight the fallacies inherent in government’s zero-risk mentality. Agencies that make an unbounded financial commitment to safety frequently are sacrificing individual lives. There continues to be major opportunities to improve regulatory performance by targeting existing inefficiencies and using market mechanisms (rather than strict command-and-control mechanisms) to achieve regulatory goals.

In Review

Final Word

Too Insufferable for Professional Satirists
By Penn Jillette

As someone who uses comedy for a living, I take notice of news stories that are too funny or too messed up for good comedians to touch. The latest example is the Terrorism Information and Prevention Service. TIPS is so boffo that quality stand-ups and satirists can’t make a crack on it. For that matter, civil libertarians can’t crack on TIPS either. What can they say? Even Michael Moore could find the correct side of this issue. Maybe the real reason it’s hard to get laughs out of this is because losing our country’s freedom and dignity just isn’t that funny.

Regulation, 2002, Vol. 25, No. 3. Published four times a year by the Cato Institute. Please send changes of address and subscription correspondence to: Circulation Department, Regulation, 1000 Massachusetts Ave., N.W., Washington, D.C. 20001, or call 202-842-0200. Subscribe to Regulation online.