Latest Cato Research on Energy and Environment https://www.cato.org/rss/research/energy-and-environment en John Glaser discusses the Saudi Arabian oil attacks on WWL's First News with Tommy Tucker https://www.cato.org/multimedia/media-highlights-radio/john-glaser-discusses-saudi-arabian-oil-attacks-wwls-first-news?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Wed, 18 Sep 2019 12:12:08 -0400 John Glaser https://www.cato.org/multimedia/media-highlights-radio/john-glaser-discusses-saudi-arabian-oil-attacks-wwls-first-news Randal O'Toole's research on the cost of rail in Hawaii is cited on KHVH's The Rick Hamada & Scotty B Show https://www.cato.org/multimedia/media-highlights-radio/randal-otooles-research-cost-rail-hawaii-cited-khvhs-rick-hamada?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Wed, 18 Sep 2019 11:52:38 -0400 Randal O'Toole https://www.cato.org/multimedia/media-highlights-radio/randal-otooles-research-cost-rail-hawaii-cited-khvhs-rick-hamada John Glaser discusses the Saudi Arabian oil attacks on KURV's The Drive Home https://www.cato.org/multimedia/media-highlights-radio/john-glaser-discusses-saudi-arabian-oil-attacks-kurvs-drive-home?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Mon, 16 Sep 2019 10:40:52 -0400 John Glaser https://www.cato.org/multimedia/media-highlights-radio/john-glaser-discusses-saudi-arabian-oil-attacks-kurvs-drive-home David B. Kopel discusses Adams County approving 1,000 oil and gas setbacks on CPTV's Colorado Inside Out https://www.cato.org/multimedia/media-highlights-tv/david-b-kopel-discusses-adams-county-approving-1000-oil-gas-setbacks?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Fri, 06 Sep 2019 10:38:18 -0400 David B. Kopel https://www.cato.org/multimedia/media-highlights-tv/david-b-kopel-discusses-adams-county-approving-1000-oil-gas-setbacks Does Self-Regulation Sufficiently Protect Consumers? https://www.cato.org/publications/commentary/does-self-regulation-sufficiently-protect-consumers?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Peter Van Doren <div class="text-default"> <p>Investigation into the crashes of Boeing 737 Max planes has revealed that the actual task of airworthiness certification was made by Boeing employees rather than government inspectors. Does such corporate self-certification sufficiently protect consumers? Let me first introduce some general claims about safety, markets and regulation before addressing the question of administrative delegation.</p> <p>How safe should products be? People's preferences about risk vary. Some people are risk averse and others are not. Some people would refrain from using a drug until it has undergone clinical trials, while others would simply accept recommendations from friends and relatives.</p> <p>Markets can accommodate all these possibilities simultaneously. One firm can sell something with evidence of safety, while other firms can offer things for sale without such evidence. Underwriters Laboratories and kosher certification are examples of the private provision of evidence of quality. Consumers can choose the combination of price and safety that they prefer.</p> </div> , <div class="pullquote pullquote--default"> <div class="pullquote__content h2"> If markets can provide differentiated safety and quality outcomes, why does government intervene? </div> </div> , <div class="text-default"> <p>If markets can provide differentiated safety and quality outcomes, why does government intervene? An important component of the answer is that companies use government assurance of quality through regulation to reduce competition over price-quality tradeoffs and consumers' attention to such tradeoffs. If consumers think that everything for sale has been approved by government as safe, it severely reduces the incentive for companies to differentiate themselves by investing in quality and safety assurance. Under a laissez faire approach, firms would have to work harder to earn consumers' trust.</p> <p>In the last decade, lead paint was discovered on children's toys imported from China. Toy suppliers did not respond by shifting to U.S.-made toys that emphasized quality and safety in return for a higher price. Instead, they requested that the Consumer Product Safety Commission increase its regulation of the industry. They used regulation to convince the consumer not to think about price-quality tradeoffs.</p> <p>In this context, how should we evaluate the delegation of compliance to the employees of Boeing? Staffing a public safety organization with scientists or engineers to comprehensively evaluate and second-guess every design decision would be prohibitively expensive. And because the organization would face scrutiny only if bad outcomes occur, it would always recommend more safety rather than an amount of safety for which the public would actually pay. Thus, delegation allows “regulation” to survive by reducing its cost and actual effect on outcomes. In this attenuated form, “regulation” is closer to laissez faire than the public realizes, but without any of the scrutiny firms would face under explicit laissez faire: the best or worst possible outcome depending on your views on markets and regulation.</p> </div> Thu, 05 Sep 2019 10:21:45 -0400 Peter Van Doren https://www.cato.org/publications/commentary/does-self-regulation-sufficiently-protect-consumers Amtrak Accounting Tricks Cover Up Losses https://www.cato.org/publications/commentary/amtrak-accounting-tricks-cover-losses?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Randal O&#039;Toole <div class="lead text-default"> <p>Amtrak <a href="https://media.amtrak.com/2019/07/amtrak-offers-acela-nonstop-service-between-washington-d-c-and-new-york-city/" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://media.amtrak.com/2019/07/amtrak-offers-acela-nonstop-service-between-washington-d-c-and-new-york-city/&amp;source=gmail&amp;ust=1567771574938000&amp;usg=AFQjCNHq4FZa0J8hHDQfaMT-hr16P486lA">recently announced</a> that it will begin operating nonstop service between New York and Washington in 2 hours and 35 minutes in September. This would be exciting were it not for the fact that this is slower than trains operated before Amtrak 50 years ago. In 1969, the Penn Central Railroad ran trains between New York and Washington in just <a href="http://streamlinermemories.info/Eastern/PC69Metroliner.pdf" target="_blank" data-saferedirecturl="https://www.google.com/url?q=http://streamlinermemories.info/Eastern/PC69Metroliner.pdf&amp;source=gmail&amp;ust=1567771574938000&amp;usg=AFQjCNHCX5sPbmMKEX17YpKO4gxn3THSng">two hours and thirty minutes</a>.</p> </div> , <div class="text-default"> <p>Five minutes may not seem like much, but 50 years of progress should have resulted in faster, not slower, trains. This is especially true as Amtrak brags that its trains go “<a href="https://www.amtrak.com/acela-train" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.amtrak.com/acela-train&amp;source=gmail&amp;ust=1567771574938000&amp;usg=AFQjCNF6Pu0O0Guisy0kBAgvPsVfYg6fsw">up to 150 mph</a>” while Penn Central’s trains were limited to 120. Amtrak also claims the Acela is profitable, but if that were true, Amtrak would have put some of those profits into improving its infrastructure. Instead, Amtrak acknowledges that the Boston-to-Washington corridor has a <a href="https://nec.amtrak.com/readytobuild/" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://nec.amtrak.com/readytobuild/&amp;source=gmail&amp;ust=1567771574938000&amp;usg=AFQjCNFCk1-ykUCybjj0nim4tY1A2g_Gzw">$38 billion backlog</a> of maintenance needs. If the route were truly profitable, Amtrak would never have allowed such a backlog to build up.</p> <p>The reality is that Amtrak can only claim a profit by using an accounting system that, as the <a href="https://www.railpassengers.org/" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.railpassengers.org/&amp;source=gmail&amp;ust=1567771574938000&amp;usg=AFQjCNFYS_EBH310tbo6GEXtt9ZHrt1t9Q">Rail Passengers Association</a> charges, is “<a href="https://www.railpassengers.org/site/assets/files/5819/amtraks_route_accounting_-_fatally_flawed.pdf" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.railpassengers.org/site/assets/files/5819/amtraks_route_accounting_-_fatally_flawed.pdf&amp;source=gmail&amp;ust=1567771574938000&amp;usg=AFQjCNEq0jhaeX8KFdn48AQEFphv7JQx_g">fatally flawed, misleading and wrong</a>.” This is the same accounting system that Amtrak uses to claim that nationally its trains earn enough passenger revenues to <a href="https://nec.amtrak.com/news/amtrak-sets-ridership-revenue-and-earnings-records/" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://nec.amtrak.com/news/amtrak-sets-ridership-revenue-and-earnings-records/&amp;source=gmail&amp;ust=1567771574938000&amp;usg=AFQjCNEq5s9TH63odUQCRNeyIP5v7DEjfg">cover 95 percent</a> of their operating costs.</p> <p></p> </div> , <aside class="aside--right aside pb-lg-0 pt-lg-2"> <div class="pullquote pullquote--default"> <div class="pullquote__content h2"> <p> Rather than give it billions of dollars to restore or build infrastructure that it can't afford to maintain, Congress should simply agree to pay Amtrak a given amount for every passenger mile it carries. This will give Amtrak an incentive to focus on passengers, not politics.</p> </div> </div> </aside> , <div class="text-default"> <p>Amtrak covers up its losses with two major accounting tricks. First, Amtrak counts subsidies it receives from 17 states as “passenger revenues” even though the vast majority of taxpayers who pay those subsidies never ride Amtrak.</p> <p>Second, Amtrak doesn’t count the second biggest operating cost on its <a href="https://www.amtrak.com/content/dam/projects/dotcom/english/public/documents/corporate/financial/Amtrak-Audited-Consolidated-Financial-Statements-FY2018.pdf" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.amtrak.com/content/dam/projects/dotcom/english/public/documents/corporate/financial/Amtrak-Audited-Consolidated-Financial-Statements-FY2018.pdf&amp;source=gmail&amp;ust=1567771574938000&amp;usg=AFQjCNGbxvff84wmgBZYYGCDgDib6j2APw">expense sheet</a>: depreciation. Depreciation is not just an accounting fiction; it is a real cost indicating how much a company needs to spend or set aside to keep its capital improvements running. After correcting these two tricks, passenger revenues cover only 55 percent of operating costs and none of the trains earn a profit.</p> <p>Amtrak’s fantasy that depreciation shouldn’t be counted as a cost shows that it is engaged in the old railroad accounting trick of propping up the bottom line by deferring maintenance. For example, Amtrak’s fleet of passenger cars have an expected lifespan of 25 years, yet their average age is <a href="https://www.bts.gov/content/age-and-availability-amtrak-locomotive-and-car-fleets" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.bts.gov/content/age-and-availability-amtrak-locomotive-and-car-fleets&amp;source=gmail&amp;ust=1567771574938000&amp;usg=AFQjCNGa2UOL3Rr2jMLR4azTBFXklLYVHw">more than 33 years</a> and <a href="https://en.wikipedia.org/wiki/List_of_Amtrak_rolling_stock#Passenger_cars" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://en.wikipedia.org/wiki/List_of_Amtrak_rolling_stock%23Passenger_cars&amp;source=gmail&amp;ust=1567771574938000&amp;usg=AFQjCNGCttd5DMsJHLAQz4GuYITb0hUcUQ">less than a quarter</a> are under 25 years.</p> <p>Amtrak’s biggest trick of all is making people think that intercity passenger trains are vital to our economy. In fact, the typical American rode Amtrak <a href="https://www.bts.dot.gov/content/us-passenger-miles" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.bts.dot.gov/content/us-passenger-miles&amp;source=gmail&amp;ust=1567771574938000&amp;usg=AFQjCNFLzAmRuDOA7X50n2txszG4VNMQzg">just 20 miles</a> in 2017, compared with nearly 15,000 miles by automobile, 2,100 miles by air, and more than 1,100 miles by bus. If Amtrak disappeared tomorrow, hardly anyone would notice, not even in the Northeast Corridor, where Amtrak reluctantly acknowledges it carries <a href="http://www.amtrak.com/ccurl/214/393/A-Vision-for-High-Speed-Rail-in-the-Northeast-Corridor.pdf" target="_blank" data-saferedirecturl="https://www.google.com/url?q=http://www.amtrak.com/ccurl/214/393/A-Vision-for-High-Speed-Rail-in-the-Northeast-Corridor.pdf&amp;source=gmail&amp;ust=1567771574938000&amp;usg=AFQjCNF5CwuxnbQsJOyOs2lb95REjseoiw">just 6 percent</a> of intercity travelers.</p> <p>There’s a good reason few people ride Amtrak: passenger trains are expensive. Amtrak fares in 2017 averaged more than <a href="https://www.amtrak.com/content/dam/projects/dotcom/english/public/documents/corporate/monthlyperformancereports/2018/Amtrak-Monthly-Performance-Report-September-2018.pdf" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.amtrak.com/content/dam/projects/dotcom/english/public/documents/corporate/monthlyperformancereports/2018/Amtrak-Monthly-Performance-Report-September-2018.pdf&amp;source=gmail&amp;ust=1567771574938000&amp;usg=AFQjCNGDi-NyFvhEBlnNuhKtY5O66Tx-ag">33 cents a passenger mile</a>, compared with average airfares of 13 cents a mile. Federal and state subsidies to Amtrak added around 33 cents per passenger mile, bringing the total cost of passenger train travel to more than 66 cents a passenger mile.</p> <p>Of course, airlines and highways are also subsidized, and we should end those subsidies as well. But federal, state and local subsidies to air and auto travel average around a penny per passenger mile. So why does Amtrak deserve subsidies of more than 30 cents per passenger mile?</p> <p>Despite the imbalanced subsidies, Amtrak’s already minuscule share of travel is steadily eroding. In the last five years, air travel has grown 23 percent and auto driving <a href="https://www.fhwa.dot.gov/policyinformation/travel_monitoring/18dectvt/18dectvt.xls" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.fhwa.dot.gov/policyinformation/travel_monitoring/18dectvt/18dectvt.xls&amp;source=gmail&amp;ust=1567771574938000&amp;usg=AFQjCNGBO0RCyVXu8kRYrGdB-jbPN-HTHQ">8 percent</a>, but Amtrak’s passenger miles have declined 7 percent.</p> <p>Personally, I love passenger trains, and rode Amtrak more than 11,000 miles in 2017. But I don’t think other people should be forced to subsidize my hobby. As much as I enjoy them, passenger trains are an expensive, archaic form of travel that has no more business in the 21st century than dirigibles or horse-drawn streetcars.</p> <p>So what should Congress do about Amtrak? Rather than give it billions of dollars to restore or build infrastructure that it can’t afford to maintain, Congress should simply agree to pay Amtrak a given amount for every passenger mile it carries. This will give Amtrak an incentive to focus on passengers, not politics.</p> <p>Over time, Congress should reduce that amount until Amtrak receives no more per passenger mile than airlines or highways — by which time I hope airline and highway subsidies will also be eliminated. Any trains that can truly be profitable will survive, but if they do it will be because Amtrak has found ways to efficiently transport people, not because of accounting tricks.</p> </div> Thu, 05 Sep 2019 08:49:00 -0400 Randal O'Toole https://www.cato.org/publications/commentary/amtrak-accounting-tricks-cover-losses Chelsea Follett discusses climate change on WPRO’s The Matt Allen Show https://www.cato.org/multimedia/media-highlights-radio/chelsea-follett-discusses-climate-change-wpros-matt-allen-show?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Wed, 04 Sep 2019 10:00:00 -0400 Chelsea Follett https://www.cato.org/multimedia/media-highlights-radio/chelsea-follett-discusses-climate-change-wpros-matt-allen-show Property Rights as a Foundation for Conservation https://www.cato.org/multimedia/cato-daily-podcast/property-rights-foundation-conservation?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Holly Fretwell, Caleb O. Brown <p>Are property rights the enemy of conservation? Holly Fretwell of the Property and Environment Research Center comments.</p> Mon, 02 Sep 2019 16:55:00 -0400 Holly Fretwell, Caleb O. Brown https://www.cato.org/multimedia/cato-daily-podcast/property-rights-foundation-conservation Federal Rules and Housing Affordability https://www.cato.org/multimedia/cato-daily-podcast/federal-rules-housing-affordability?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Emily Hamilton, Caleb O. Brown <p>Housing and Urban Development Secretary Ben Carson has altered Obama-era federal housing rules. What does that mean for making housing more affordable and plentiful? Emily Hamilton of the Mercatus Center comments.</p> Fri, 30 Aug 2019 16:55:00 -0400 Emily Hamilton, Caleb O. Brown https://www.cato.org/multimedia/cato-daily-podcast/federal-rules-housing-affordability Steve H. Hanke discusses Universal Time Zones on CNN's Fareed Zakaria GPS https://www.cato.org/multimedia/media-highlights-tv/steve-h-hanke-discusses-universal-time-zones-cnns-fareed-zakaria-gps?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Sun, 25 Aug 2019 12:05:00 -0400 Steve H. Hanke https://www.cato.org/multimedia/media-highlights-tv/steve-h-hanke-discusses-universal-time-zones-cnns-fareed-zakaria-gps Steve H. Hanke discusses a Universal Calendar on CNN's Fareed Zakaria GPS Web Extra https://www.cato.org/multimedia/media-highlights-tv/steve-h-hanke-discusses-a-universal-calendar-on-cnns-fareed-zakaria-gps-web-extra?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Sun, 25 Aug 2019 11:49:01 -0400 Steve H. Hanke https://www.cato.org/multimedia/media-highlights-tv/steve-h-hanke-discusses-a-universal-calendar-on-cnns-fareed-zakaria-gps-web-extra Steve H. Hanke discusses the economy and the Jackson Hole conference on Hearst TV https://www.cato.org/multimedia/media-highlights-tv/steve-h-hanke-discusses-economy-jackson-hole-conference-hearst-tv?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Fri, 23 Aug 2019 11:53:00 -0400 Steve H. Hanke https://www.cato.org/multimedia/media-highlights-tv/steve-h-hanke-discusses-economy-jackson-hole-conference-hearst-tv Save the Endangered Species Act with Common Sense https://www.cato.org/publications/commentary/save-endangered-species-act-common-sense?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Randal O&#039;Toole <div class="lead text-default"> <p>The Endangered Species Act has been called the strongest environmental law Congress has ever written because it gives the government almost unlimited power to regulate private landowners with the objective of saving wildlife, fish, and even insects. Environmental groups that <a href="https://naturalresourcereport.com/2011/12/failures-and-abuses-of-the-endangered-species-act/" target="_blank">relish seeing this law enforced </a>are upset that the Trump administration is <a href="https://www.foxnews.com/science/trump-overhauling-enforcement-of-endangered-species-act" target="_blank">proposing</a> to change how the law is administered.</p> </div> , <div class="text-default"> <p>The Fifth Amendment to the Constitution forbids the taking of private property for public use without compensation. The Endangered Species Act violates the spirit, if not the letter, of this amendment.</p> <p>Under the law, if you have an endangered species on your land, or if the government thinks you might have an endangered species on your land, or if the government knows you don't have an endangered species on your land but thinks that you might someday have that species on your land, then the government can so strictly regulate your land that you can't get any economic use out of it. For example, the government told Louisiana landowners that they <a href="https://www.wsj.com/articles/the-feds-bungle-frog-hospitality-1538329013" target="_blank">couldn't develop their property</a> because it was defined as "critical habitat" for a rare frog — even though the frog didn't, and couldn't, live on the land without completely removing existing trees and replacing them with other species.</p> <p>Effectively, the government is requiring some private landowners to house and feed certain species of wildlife at the landowners' expense. Moreover, the government can force this without providing any compensation at all. The law doesn't require the government to consider the cost of its regulation, so government officials can write overly strict rules just in case it might help a species.</p> <p>Yet there is little evidence that giving the government this power has done much to save species. The few species that have recovered from danger did so mostly for other reasons.</p> <p></p> </div> , <aside class="aside--right aside pb-lg-0 pt-lg-2"> <div class="pullquote pullquote--default"> <div class="pullquote__content h2"> <p>Those who truly want to save rare species should support revisions to the law that give people incentives to save species without imposing the costs on a handful of landowners.</p> </div> </div> </aside> , <div class="text-default"> <p>For example, America's symbol, the bald eagle, was once considered endangered. But scientists agree that it recovered primarily because the Environmental Protection Agency <a href="https://www.edf.org/news/25-years-after-ddt-ban-bald-eagles-osprey-numbers-soar" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.edf.org/news/25-years-after-ddt-ban-bald-eagles-osprey-numbers-soar&amp;source=gmail&amp;ust=1566328152960000&amp;usg=AFQjCNFHuawtDw2Q0Cgy5r8oIfR7f-RHpw">banned the use of the pesticide DDT </a>a year before the Endangered Species Act was passed.</p> <p>Moreover, the Endangered Species Act may actually do more harm than good to endangered species. To avoid regulation, the law gives private landowners incentives to do everything they can to <a href="https://digitalcommons.unl.edu/cgi/viewcontent.cgi?article=1002&amp;context=nwrchumanconflicts" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://digitalcommons.unl.edu/cgi/viewcontent.cgi?article%3D1002%26context%3Dnwrchumanconflicts&amp;source=gmail&amp;ust=1566328152960000&amp;usg=AFQjCNG4WEQADlXDB1HsYChh3_EQzAjTUw">keep endangered species off their land</a>, leading to the phrase, "shoot, shovel, and shut up."</p> <p>This entire system is unfair because it forces a few people to pay the costs for something that benefits everyone else. While it is unknown whether the Supreme Court would agree that the law is unconstitutional, we shouldn't have to ask it because we shouldn't have imposed such an inequitable burden on a few people in the first place.</p> <p>The Trump administration has proposed to revise how the law is administered in several ways. Among other things, the proposed rules would allow the government to consider the costs of its regulation and would impose less intrusive regulations for the protection of species that are considered "threatened" as opposed to "endangered."</p> <p>While these changes may ease the burden on some private landowners, Congress and the administration could do much more to assure species recovery without imposing the costs on a few landowners. Carrots work better than sticks, meaning we can save more species by rewarding people for doing so rather than punishing them for having those species on their land.</p> <p>First, a share of public land recreation fees should go into trust funds for protecting endangered species. To adequately fund this program, federal agencies such as the National Park Service, Forest Service, and Bureau of Land Management should be allowed to charge for all recreation on public lands.</p> <p>Currently, most public land recreation, including hunting, fishing, hiking, boating, and off-road vehicles, is free. It is perfectly fair to ask people who use public lands to pay such fees, and many will be happy to pay such fees knowing that by doing so they are helping to save endangered species.</p> <p>Second, on a case-by-case basis, it may be appropriate to give people ownership rights to selected species. In Britain, wildlife are owned by the owners of the land the wildlife use, which can give landowners incentives to protect such wildlife. Giving Americans similar ownership rights can help save many species.</p> <p>People go to great lengths to save rare breeds of dogs, cattle, and other domestic animals, not for any economic reward but simply for the pride in doing so. Creating ownership rights in some species of wildlife can put this energy to work in saving rare species.</p> <p>Saving endangered species is important, but imposing the costs of doing so on a few people is unfair, counterproductive, and may be unconstitutional. Those who truly want to save rare species should support revisions to the law that give people incentives to save species without imposing the costs on a handful of landowners.</p> </div> Tue, 20 Aug 2019 14:16:00 -0400 Randal O'Toole https://www.cato.org/publications/commentary/save-endangered-species-act-common-sense Who Benefits When Firms Game Corrective Policies? https://www.cato.org/publications/research-briefs-economic-policy/who-benefits-when-firms-game-corrective-policies?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Mathias Reynaert, James M. Sallee <div class="lead text-default"> <p>Sometimes firms comply with a regulation by gaming the measure targeted by policy rather than by changing their behavior. This relates to Goodhart's Law, which posits that "when a measure becomes a target, it ceases to be a good measure." We study how gaming of this sort can impact consumers who rely on manipulable measures for making choices in a market. Gaming erodes consumer information and induces mistakes. But when the gaming is done in reaction to a regulatory constraint, it lowers the costs to firms, which benefits consumers via pass-through. The impact of gaming on consumer welfare is thus ambiguous, even when the gaming completely fools consumers, and the net effect depends critically on whether gaming is done in response to a policy.</p> </div> , <div class="text-default"> <p>We explore the impact of gaming on consumer welfare both theoretically and empirically for the case of automobile fuel-consumption ratings. We do three things: First, we use a novel data set to measure on-road fuel consumption and document gaming of fuel-consumption ratings, which escalates dramatically following the introduction of regulations that target this rating. Second, we develop a theoretical model that derives the impact of gaming on buyer welfare in a setting where sellers game energy-efficiency ratings, which buyers use to evaluate products. Third, we conduct welfare analysis using estimates of the automobile demand system to quantify the welfare effects identified by our theory.</p> <p>Our empirical analysis considers the introduction of stringent corrective policy in the EU automobile market. Prior to 2007, there were no policies in Europe that hinged directly on fuel-consumption ratings; since then, both EU standards and nation-specific tax schemes have created policy incentives that reward lower laboratory fuel-consumption test ratings. To measure gaming, we compare the laboratory ratings, which form the basis of policy, with direct measures of on-road fuel consumption that we construct from a data set that tracks fuel consumption and kilometers traveled for a panel of more than 250,000 drivers for a period of 12 years in the Netherlands. Using these data, we estimate the percentage difference between the laboratory test and on-road performance (which we call the performance gap) for each vehicle vintage and model.</p> <p>We document a sharp rise in the performance gap coincident with policy change. Vehicles produced before 2007 show a small, relatively stable performance gap. Vehicles produced after that exhibit a large and rising performance gap, so that 2014 model-year vehicles have performance gaps in excess of 50 percent on average. The rise in the performance gap implies that around 65 percent of the gains in fuel economy since the introduction of policy, as measured by laboratory tests, are false. Using conventional estimates of lifetime distance traveled and a social cost of carbon at $40 per ton, the difference between apparent and actual emission reductions amounts to $1.2 billion annually from 2010 to 2014 when extrapolated to all of Europe. We interpret the rise in the performance gap as evidence of gaming in response to policy incentives, in the spirit of Goodhart's Law, and then turn our attention both theoretically and in welfare simulations to our central question: Who benefits when firms game corrective policy?</p> <p>Our theoretical model considers a monopolist who sells a good to a representative consumer. The good has some attribute that is desirable to consumers, but it also creates a negative externality that motivates corrective policy. The attribute closely matches the role of fuel economy ratings in the automobile market. The attribute is not directly observable, however, so consumer demand and government regulation are based on a measure provided by the seller. The seller can change the measure either by changing the true attribute or by gaming, both of which are costly.</p> <p>In our model, we allow that some fraction of gaming is undetected by buyers. In the absence of policy, this means that gaming lowers buyer welfare for two reasons. First, gaming causes buyers to misoptimize (choose the wrong quantity of the good), which leads to a loss in buyer surplus that we call choice distortion. Second, gaming causes the seller to raise prices because buyers perceive an improvement in the product. This price effect further reduces buyer surplus.</p> <p>Corrective policy disrupts this logic by flipping the sign of price effects. Regulation raises the cost of production. Gaming allows the seller to lower its costs, and this benefits buyers through lower prices in the same way a reduction in a tax would. When this price effect dominates choice distortions from faulty information, buyers benefit from the seller's gaming even when they are fooled by it.</p> <p>We focus on buyer surplus as a notion of the private surplus of consumers that consider buying the good. This is narrower than consumer surplus, which would encompass the externality, but gaming will also impact the level of the externality. The ultimate effect of gaming on the environment depends on the sophistication of the policymaker, who may increasingly tighten policy to achieve real gains, and of the buyers, who may expand the overall size of the market when they mistakenly perceive lower costs of ownership.</p> <p>Next, we set out to quantify the price effect and choice distortions in our empirical setting. We demonstrate that the price effects and choice distortions identified by our theory have direct empirical analogs in a discrete choice setting. We then estimate a demand model of the European car market that provides us estimates of consumer preferences and the marginal costs of products. Given these preferences and costs, we calibrate the incidence of gaming for a range of alternative assumptions regarding consumer awareness, policy stringency, and the degree of gaming.</p> <p>We find robust results that align with our theoretical predictions. When there is no corrective policy and when consumers are fooled by gaming, we find that lowering perceived fuel costs through gaming leads to modest losses in buyer surplus. A significant majority of these losses come through the price effect. As a result, firm profits rise with gaming, and this comes at the expense of lower buyer surplus.</p> <p>As suggested by the theory, the welfare effects of gaming change when we introduce a corrective policy. We model a mandated decrease in average fuel-consumption ratings that firms comply with via shifting their sales mix toward more efficient models. When firms comply honestly, private consumer surplus falls substantially, as consumers are forced into less desirable products. When we allow firms to relax this regulatory constraint by gaming to meet the standard, we find beneficial price effects for buyers that consistently dominate choice distortions so that the net impact of gaming is to raise buyer surplus. Gaming with or without a policy induces a similarly sized choice distortion, but we find that this is an order of magnitude smaller than the price effect for a significant range of parameter choices. These results provide empirical validation for our theoretical prediction: gaming benefits consumers in the presence of stringent policy, even when buyers are fooled. We also show that a corrective policy roughly triples the private benefit to a single firm that games when all others are honest, which implies that policy amplifies competitive pressures that incentivize gaming.</p> <p><strong>NOTE:</strong><br />This research brief is based on Mathias Reynaert and James M. Sallee, "Who Benefits When Firms Game Corrective Policies?," Energy Institute at Haas Working Paper no. 289, April 2018, <a href="https://ei.haas.berkeley.edu/research/papers/WP289.pdf" target="_blank">https://ei.haas.berkeley.edu/research/papers/WP289.pdf</a>.</p> </div> Wed, 14 Aug 2019 00:00:00 -0400 Mathias Reynaert, James M. Sallee https://www.cato.org/publications/research-briefs-economic-policy/who-benefits-when-firms-game-corrective-policies A Tool Meant to Help Minorities Buy Homes Is Instead Speeding up Gentrification in D.C. https://www.cato.org/publications/commentary/tool-meant-help-minorities-buy-homes-instead-speeding-gentrification-dc?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Diego Zuluaga <div class="lead text-default"> <p>More than 50 years after the passage of comprehensive <a href="https://history.house.gov/HistoricalHighlight/Detail/15032451325?ret=True" title="history.house.gov" target="_blank">anti-discrimination legislation</a>, American cities remain <a href="https://www.brookings.edu/blog/the-avenue/2018/12/17/black-white-segregation-edges-downward-since-2000-census-shows/" title="www.brookings.edu" target="_blank">highly segregated</a>. The nation’s capital is a glaring example: The D.C. area’s African American residents are concentrated in the Northwest D.C. neighborhoods of Brightwood, 16th Street Heights and Petworth — and, above all, in Northeast D.C. and east of the Anacostia River, where 25 census tracts (the U.S. Census Bureau’s geographic subdivisions) have African American population shares exceeding <a href="https://censusreporter.org/profiles/61000US11008-ward-8-dc/" title="censusreporter.org" target="_blank">90 percent</a>.</p> </div> , <div class="text-default"> <p>Yet Washington is also the most rapidly gentrifying metropolitan area in the United States. Since 2000, <a href="https://ncrc.org/gentrification/" title="ncrc.org" target="_blank">22 percent of D.C. census tracts</a> have seen a large influx of <a href="https://www.dcpolicycenter.org/publications/demographic-change-d-c-neighborhoods/" title="www.dcpolicycenter.org" target="_blank">wealthier residents</a>. Gentrification has demographic implications, too. Between 1990 and 2010, the <a href="https://greaterdc.urban.org/data-explorer?geography=tr10&amp;topic=population" title="greaterdc.urban.org" target="_blank">two tracts</a> covering the section of Columbia Heights between 14th and 16th streets saw the black share of the population drop by 20 and 30 percentage points, respectively. The white share in each jumped by more than 20 points.</p> <p>As they renovate dilapidated buildings and attract new businesses, “gentrifiers” are having a positive impact on many communities. Yet a common downside of gentrification is the displacement of historic low-income residents, particularly renters, who struggle to keep up with a rising cost of living. Now evidence suggests that a major financial regulation enacted to promote financial inclusion may in fact be accelerating displacement, at least in the D.C. area.</p> <p></p> </div> , <aside class="aside--right aside pb-lg-0 pt-lg-2"> <div class="pullquote pullquote--default"> <div class="pullquote__content h2"> <p>The CRA appears to be accelerating the displacement of minority renters in gentrifying communities, without increasing the proportion of minority residents who can buy homes.</p> </div> </div> </aside> , <div class="text-default"> <p>The <a href="https://www.investopedia.com/terms/c/community_reinvestment_act.asp" title="www.investopedia.com" target="_blank">Community Reinvestment Act</a> (CRA), passed in 1977, sought to stem “<a href="https://www.investopedia.com/terms/r/redlining.asp" title="www.investopedia.com" target="_blank">redlining</a>,” the systematic exclusion of minority communities and neighborhoods from access to credit. Redlining made it hard for black Americans to buy homes and move closer to economic opportunities. Its legacy persists in the form of a <a href="https://www.federalreserve.gov/econres/files/BulletinCharts.pdf" title="www.federalreserve.gov" target="_blank">$154,000 median wealth gap</a> between whites and blacks, much of it explained by <a href="https://www.stlouisfed.org/publications/housing-market-perspectives/2017/homeownership-racial-wealth-divide" title="www.stlouisfed.org" target="_blank">differences in home values</a>.</p> <p>The CRA requires banks to demonstrate a record of lending in low-income communities and gives bank regulators the authority to <a href="https://www.law.cornell.edu/uscode/text/12/2903" title="www.law.cornell.edu" target="_blank">block bank mergers</a> if the banks fail to perform. Banks have a strong incentive to get high CRA marks.</p> <p>According to the National Community Reinvestment Coalition, banks have made a cumulative <a href="https://ncrc.org/wp-content/uploads/2017/11/CRA-101_b.pdf" title="ncrc.org" target="_blank">$6 trillion worth of CRA-related commitments</a> since 1992. In the District, banks lent out $2.7 billion worth of mortgages eligible for CRA points in 2017. But making loans in compliance with the CRA is no guarantee that they will reach historically underserved residents, because loans in a low-income census tract might still be going to people with high incomes who would qualify even without the CRA.</p> <p>In fact, using detailed mortgage loan data for 2017, my colleague and research associate Andrew Forrester and I found that two-thirds of the mortgage loans eligible for the CRA in the District went to higher-income borrowers living in low-income areas — gentrifiers. In previous years, the gentrifiers' share of CRA mortgages frequently exceeded 70 percent.</p> <p>Not only is CRA lending failing to reach its target population, but also evidence suggests it has accelerated the displacement of minorities. Between 2012 and 2017, an additional percentage-point increase in CRA loan volume was associated with a three-percentage-point decline in the minority share of that census tract's population. However, when we limited our analysis to borrowers, we found that CRA lending did not correlate with an increase in the minority share of those getting mortgage loans.</p> <p>In plain English: The CRA appears to be accelerating the displacement of minority renters in gentrifying communities, without increasing the proportion of minority residents who can buy homes. That is quite a disappointment to those who see the CRA as an instrument for financial inclusion.</p> <p>It would be a mistake to blame banks for this failure. Banks have a mandate to lend in the communities where they have branches without incurring risks that might cause them to fail. They seek to make viable loans throughout the communities where they operate, in compliance with regulation and their own underwriting standards. That their CRA-eligible loans mostly go to gentrifiers is likely the result of attempting to reconcile many different objectives at once.</p> <p>Although mandating banks to lend to low-income borrowers may seem the obvious solution to address the CRA's shortcomings, history suggests this approach is fraught with risks. In the run-up to the 2007 financial crisis, government steadily raised the share of mortgages going to low-income borrowers, some of whom could not afford to repay. This cost taxpayers hundreds of billions of dollars and <a href="https://www.stlouisfed.org/publications/housing-market-perspectives/2016/the-end-is-in-sight-for-the-us-foreclosure-crisis" title="www.stlouisfed.org" target="_blank">forced millions of vulnerable people from their homes</a>.</p> <p>Instead of using the CRA's perverse consequences as reason to give politicians more power to dictate who gets loans, we should ask what effective financial inclusion policy looks like in 2019.</p> <p>For example, many of the 8.4 million <a href="https://www.fdic.gov/householdsurvey/2017/2017report.pdf" title="www.fdic.gov" target="_blank">U.S. households that lack a bank account</a> — disproportionately black, Latino and low-income — say they do so not because they live far from branches but because they deem fees too high and banks untrustworthy. Why not let other businesses — such as retailers and tech firms — provide basic banking services? In Africa, nonbanks offering mobile money accounts have brought <a href="https://www.gsma.com/r/wp-content/uploads/2019/05/GSMA-State-of-the-Industry-Report-on-Mobile-Money-2018-1.pdf" title="www.gsma.com" target="_blank">tens of millions of people into the financial system</a>. The same solution could help resolve America’s “unbanked” problem. Policymakers are also right to examine ways that “<a href="https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=404003" title="financialservices.house.gov" target="_blank">credit-invisible</a>” consumers, typically <a href="https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=404003" title="financialservices.house.gov" target="_blank">young and minority</a>, can make relevant credit information more easily available to lenders. These people are often creditworthy, but they lack the history and assets to qualify using traditional credit scores only.</p> <p>The legacy of redlining continues to have an impact on the economic opportunities available to different communities across the country. And while there has been progress thanks to <a href="https://www.cato.org/publications/policy-analysis/community-reinvestment-act-age-fintech-bank-competition" title="www.cato.org" target="_blank">growing competition and innovation</a>, decades-old policies such as the CRA no longer work well in many low-income urban areas. It is time to try something different.</p> </div> Fri, 09 Aug 2019 08:56:00 -0400 Diego Zuluaga https://www.cato.org/publications/commentary/tool-meant-help-minorities-buy-homes-instead-speeding-gentrification-dc Caquelin v. United States https://www.cato.org/publications/legal-briefs/caquelin-v-united-states?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Mark F. (Thor) Hearne II, Stephen S. Davis, Ilya Shapiro, Trevor Burrus <div class="lead text-default"> <p>Railroad lines once extended throughout the United States. At the peak in 1916, more than 270,000 miles of track crisscrossed the country. As railroads became less popular, however, thousands of miles of rail lines were left unused. Since the 1980s, the Rails-to-Trails Act has converted former rail lines into hiking and biking trails. But many of those rail lines were originally easements across private property. Under common-law doctrine, when an easement is abandoned and no longer used for the original purpose, the land “reverts” back to the property over which the easement was granted. Therefore, if the government wants to use part of an abandoned rail line for a trail, it needs to pay for the land under the Takings Clause of the Fifth Amendment.&#13;</p> </div> , <div class="text-default"> <p>Norma Caquelin’s great grandfather purchased a prime piece of Iowa farmland in 1892. Railroad tracks were placed on the land in 1870 and were part of the property when he purchased it. The farm was still in the family when the railroad company sought permission from the Surface Transportation Board (STB) to abandon the tracks. Under the Rails-to-Trails Act, after a railroad seeks permission to abandon tracks, potential trail developers can file a Notice of Interim Trail Use (NITU) to develop the tracks into a trail. After the railroad sought to abandon the tracks on Caquelin’s land, the city of Ackley and the Iowa National Heritage Foundation filed an NITU, which began a 180-day period of negotiations with the railroad to acquire the land. In the end, no deal was reached.&#13;</p> <p>This case is about an abstract but important question: when does the government take land under the Rails-to-Trails Act? Is it when the NITU is filed or after the negotiation period ends? Since an agreement was never reached, the land was eventually abandoned and reverted back to Caquelin. But what about the 180-day period after an NITU is filed? Previously, the government has argued that the land is taken when an NITU is filed. In Ms. Caquelin’s case the judge in the lower courts awarded her $900 for that 180-day period. The government has now changed its mind, however, and rather than pay $900 they’re arguing that a taking only occurs after an agreement is reached. In rails-to-trails cases, landowners’ property is often tied up for years before a trail-use agreement is either executed or rejected. Therefore, if the government prevails in here, many owners’ land could be taken without compensation.&#13;</p> <p>Cato has filed a brief in the Federal Circuit supporting Ms. Caquelin, and we’re joined by the National Association of Reversionary Property Owners, the Southeastern Legal Foundation, the Reason Foundation, and Professor James W. Ely. We argue that the original judgment awarding $900 to Ms. Caquelin was correct, and the government’s new theory is both a logical and practical disaster. Moreover, if the Court accepts the government’s theory, it will throw Trails Act jurisprudence into disarray—and there are a lot of these cases because there are a lot of unused railroad tracks. The court shouldn’t pay attention to the government’s change of mind, and it should maintain consistency and workability in Trails Act cases.</p> </div> Tue, 30 Jul 2019 17:00:00 -0400 Mark F. (Thor) Hearne II, Stephen S. Davis, Ilya Shapiro, Trevor Burrus https://www.cato.org/publications/legal-briefs/caquelin-v-united-states Congress Should Bring 'New Starts' to an End https://www.cato.org/publications/commentary/congress-should-bring-new-starts-end?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Randal O&#039;Toole <div class="lead text-default"> <p>In 1991, Congress created the "New Starts" program to help fund the construction of new transit infrastructure. Unfortunately, New Starts has done more harm to our cities than any federal program since the urban renewal projects of the 1950s.</p> </div> , <div class="text-default"> <p>On July 16, the Subcommittee on Highways and Transit of the House Transportation &amp; Infrastructure Committee held a hearing on New Starts, which will expire in 2020 unless it is reauthorized. Transit agencies attending the hearing told the subcommittee that New Starts has helped them build high-capacity transit projects that have generated economic development, provided mobility for low-income people, and helped protect the environment. None of this is true.</p> <p>New Starts is an "open bucket" fund that requires local matching funds, and the more expensive the project, the more money is provided by New Starts. This has led cities to plan increasingly expensive projects to get “their share” of federal funds.</p> <p>For example, the average, inflation-adjusted cost of new light-rail lines has increased from $17 million a mile in 1981 to more than $200 million a mile today. To provide local matching funds, transit agencies have imposed large increases in taxes and gone heavily into debt.</p> <p>Worse, light rail is an obsolete form of transportation because buses are not only less expensive to buy and less expensive to operate than light rail, they can move far more people per hour. In fact, light rail is <a href="https://tinyurl.com/y5m5tm6x" target="_blank">by definition</a> low-capacity transit because, for safety reasons, light-rail lines can only move about 20 trains per hour.</p> <p>By comparison, busways can move hundreds of buses per hour, enabling them to move more than <a href="https://wrirosscities.org/news/istanbul%E2%80%99s-metrob%C3%BCs-bus-rapid-transit-system-receives-international-recognition-sustainable" target="_blank">twice as many people</a> per hour as the highest capacity of any light-rail line in America. Because of this, a recent <a href="https://tinyurl.com/y3yxl2ge" target="_blank">report</a> from the Institute for Transportation &amp; and Development Policy concluded, “there are currently no cases in the US where LRT [light-rail transit] should be favored over BRT [bus-rapid transit].”</p> <p>Streetcars, as illustrated by Washington's H Street streetcar, are even worse than light rail and commuter trains are no better. Most new commuter-rail lines carry so few riders that it would have been <a href="http://ti.org/antiplanner/?p=15347" target="_blank">less expensive</a> to give every daily round-trip rider a new Toyota Prius every other year for the life of the project than to build and run the rail line.</p> <p>Contrary to claims that rail transit generates economic development, <a href="https://tinyurl.com/24ggm2j" target="_blank">research</a> funded by the Federal Transit Administration concluded, "Urban rail transit investments rarely ‘create’ new growth, but more typically redistribute growth that would have taken place without the investment."</p> <p>This hasn't stopped transit agencies from claiming that everything that happened to be built near a rail line was built because of the rail line. Phoenix's Valley Metro Rail claims that its light-rail line stimulated more than $11 billion worth of new development, but its <a href="https://ti.org/docs/VMEconDev.xlsx" target="_blank">list of developments</a> includes gas stations, an automobile dealership, and more than 70,000 parking spaces, not to mention many government and government-subsidized buildings.</p> <p>Far from helping the poor, rail transit <a href="https://ti.org/pdfs/APB10.pdf" target="_blank">often hurts low-income commuters</a>. Rail lines built to entice middle-class commuters out of their cars have been so expensive that many transit agencies have been forced to cut bus service to working class neighborhoods. Los Angeles has lost more than 4 bus riders (mostly minorities) for every new rail rider (most of them white) it has attracted by building light rail.</p> <p>As a result, most low-income families have bought cars and no longer rely on transit. Data collected by the Census Bureau show that people who earn under $25,000 a year are <a href="https://ti.org/pdfs/TPB1.pdf" target="_blank">significantly less likely</a> to take transit to work today than they were a decade ago, while people who earn more than $75,000 a year are significantly more likely to ride transit to work.</p> <p>Nor is rail transit particularly green. Except on the West Coast, even electric powered transit gets most of its energy from fossil fuels. The Washington Metrorail system <a href="https://tinyurl.com/y2uz7f4d." target="_blank">uses more energy</a> and emits more greenhouse gases, per passenger mile, than the average car, while the DC streetcar is dirtier than the worst coal-rolling truck. Even on the West Coast, encouraging people to drive more fuel-efficient cars does far more to help the environment than building rail transit.</p> <p>For all these reasons, Congress should not reauthorize New Starts in 2020. If Congress wants to continue subsidizing transit agencies, it should distribute the money using a formula that takes transit fares heavily into account. This will encourage transit agencies to put riders first and to emphasize programs that increase ridership rather than ones that increase costs.</p> </div> Mon, 29 Jul 2019 15:10:00 -0400 Randal O'Toole https://www.cato.org/publications/commentary/congress-should-bring-new-starts-end David B. Kopel discusses William Perry Pendley overseeing the Bureau of Land Management on CPTV's Colorado Inside Out https://www.cato.org/multimedia/media-highlights-tv/david-b-kopel-discusses-william-perry-pendley-overseeing-bureau-land?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Fri, 26 Jul 2019 10:36:00 -0400 David B. Kopel https://www.cato.org/multimedia/media-highlights-tv/david-b-kopel-discusses-william-perry-pendley-overseeing-bureau-land David B. Kopel discusses the US 36 Investigation on CPTV's Colorado Inside Out https://www.cato.org/multimedia/media-highlights-tv/david-b-kopel-discusses-us-36-investigation-cptvs-colorado-inside-out?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Fri, 19 Jul 2019 13:31:00 -0400 David B. Kopel https://www.cato.org/multimedia/media-highlights-tv/david-b-kopel-discusses-us-36-investigation-cptvs-colorado-inside-out Grizzly Bears and Endangered Species Recovery https://www.cato.org/multimedia/cato-daily-podcast/grizzly-bears-endangered-species-recovery?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Brian Yablonski, Caleb O. Brown <p>Species recovery is a key goal of the Endangered Species Act. So why are recovering species so rarely removed from the list? Brian Yablonski of the Property and Environment Research Center comments.</p> Thu, 18 Jul 2019 12:59:00 -0400 Brian Yablonski, Caleb O. Brown https://www.cato.org/multimedia/cato-daily-podcast/grizzly-bears-endangered-species-recovery The Democrats Plan to Nationalize Land, Democratic Socialism in Action https://www.cato.org/publications/commentary/democrats-plan-nationalize-land-democratic-socialism-action?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Steve H. Hanke <div class="lead text-default"> <p>A <a href="https://www.wsj.com/articles/a-fund-that-will-never-run-dry-11562715333" target="_blank"><em>Wall Street Journal editorial</em></a> of July 10th lays out what the House Democrats’ most recent socialist scheme (H.R.3195 - Land and Water Conservation Fund Permanent Funding Act) is all about. In June, the Democrats who sit on the <a href="https://naturalresources.house.gov/about/our-members" target="_blank">House Natural Resources Committee</a> passed H.R.3195, which is currently winding its way through the House. This bill mandates permanent funding of $900 million to the Land and Water Conservation Fund (LWCF) each year. This would be a whopping two and a half times greater than the Fund’s average annual expenditures over the past 15 years. Just what does the LWCF do? The Fund was created in 1964. It is primarily funded by federal oil and gas drilling royalties. Its main activity has been to gobble up private land (read: nationalize) and put it under government ownership, management, and political control. Among other things, this means that the newly nationalized lands will be poorly managed.&#13;</p> </div> , <div class="text-default"> <p>The government’s poor land management practices should come as no surprise. After all, Adam Smith diagnosed the problems associated with government ownership of land in his classic treatise, the <a href="https://www.amazon.com/Wealth-Nations-Adam-Smith/dp/1604598913" target="_blank"><em>Wealth of Nations</em></a> (1776). Smith concluded that “no two characters seem more inconsistent than those of the trader and the sovereign” since people are more prodigal with the wealth of others than with their own. In that vein, he estimated that lands owned by the state were only about 25% as productive as comparable private holdings. Smith believed Europe’s great tracts of crown lands to be “a mere waste and loss of country in respect both of produce and population.”&#13;</p> <p>As the <em>Wall Street Journal</em> indicated, the Democrats in the House are not the only ones who favor more nationalization, political control, and bureaucratic management of land. For example, two Republicans are on board: Colorado Senator Cory Gardner and Montana Senator Steve Daines.&#13;</p> <p>What a difference a few decades make. Indeed, it brings back memories of my work with President Reagan and Nevada's late, legendary Senator Paul Laxalt in the early 1980s, when I served on President Reagan’s Council of Economic Advisers. It was then that President Reagan tasked me with the job of developing a program for the privatization of federal lands. Reagan was in an anti-socialist sell mode, not a socialist buy mode.&#13;</p> <p>The program I developed proposed privatizing commercial grazing lands and timberlands. The president endorsed my program, which was subsequently outlined in the president’s Budget Message for fiscal-year 1983: “Some of this property is not in use and would be of greater value to society if transferred to the private sector. In the next three years we would save $9 billion by shedding these unnecessary properties, while fully protecting and preserving our national parks, forests, wilderness and scenic areas.”&#13;</p> <p>In taking this position, Reagan was following the footsteps of our nation’s founders. Although the Founders differed on the modalities of land privatization, they agreed that land held by government should be privatized as rapidly as possible. Indeed, the Founders believed that lands should be privately owned and that this would promote economic development and strengthen the nation. In the 1800s, many laws were passed to implement their ideas and to accelerate the settlement of the West.&#13;</p> <p>The Founders understood that the way land was owned would affect all else. As a result of the foundation laid by the Founders and subsequent legislation in the 19th century, about 816 million acres of public domain land was privatized between 1781 and 2015, with 97% of the privatization taking place before 1940.&#13;</p> <p>But, the privatization process was left incomplete. As a result, the U.S retains a huge inventory of lands owned by the federal government. These public lands amount to roughly 640 million acres, an area over seven times larger than Germany.&#13;</p> <p>Rather than permanently funding the LWCF so that it can augment the already massive inventory of government lands, Congress should embrace the Founders’ principles and vision for land ownership in the United States. The federal government’s commercial grazing lands and timberlands should be privatized. Also, of the 11.4 million acres of land managed by the Department of Defense, a significant portion are clearly “surplus” and should be included in any privatization initiative. I am not talking about national parks, wildlife refuges, national conservation areas, national monuments, wilderness areas, national historic sites, national memorials, national battlefields, national recreational areas, wild and scenic rivers, national seashores and lake shores, and national trails. These lands would be excluded from privatization.&#13;</p> <p>Not only would such a privatization program be desirable in principle, but it would also generate significant benefits:&#13;</p> <p>1) The productivity of privatized lands would increase. With private ownership, it would be possible to obtain more commercial, recreational, and environmental outputs than with federal ownership. For example, in <a href="http://sites.krieger.jhu.edu/iae/files/2017/12/The-Revolution-in-Development-Economics-Siletz-Indians-Hanke-Dowdle-1.pdf" target="_blank">a study of timberlands in Western Oregon</a>, I found that the value of those public lands would increase 13-fold if they were privately owned.&#13;</p> <p>2) With increased productivity, not only would the value of the lands surge, but employment and economic activity would also be enhanced.&#13;</p> <p>3) Consumers would be served more effectively, and lands would be allocated to their most highly valued uses. After all, the only way that private-land owners can profit from their property is to employ it for the satisfaction of other people’s wants. Serving consumers, of course, is the social function of private property. Private consumers and producers, not politicians and bureaucrats, would call the tune. The politicization of land use would be swept aside, and the political controversies that accompany public land ownership would be swept aside, too.&#13;</p> <p>4) Land sales would generate revenues for the federal government. These could be earmarked to pay down the federal debt. To give some idea of the magnitude of a potential debt write down, consider that federal lands, excluding mineral rights and oil and gas, have been estimated by the <a href="https://www.gpo.gov/fdsys/pkg/BUDGET-2013-PER/pdf/BUDGET-2013-PER.pdf" target="_blank">U.S. Office of Management and Budget</a> to be as high as $1.04 trillion.&#13;</p> <p>5) The reported annual cost of the federal government’s land holdings (which incorrectly omits capital carrying charges) exceed the annual revenues generated from federal lands by a wide margin. Privatization would eliminate these massive losses for the federal government. This would benefit all United States taxpayers, who must pay taxes to support the federal government’s retention of federal lands.&#13;</p> <p>6) State and local tax bases would be created, and in-lieu transfer payments from Washington would be reduced.&#13;</p> <p>7) Land-use decisions would become less politicized. Both commercial and non-commercial land users would spend less of their time and money attempting to obtain land-use rights through political and bureaucratic processes.&#13;</p> <p>These are just seven good reasons to dump the Democrats' latest socialist scheme to permanently fund the Land and Water Conservation Fund, a fund designed to nationalize even more American lands.</p> </div> Tue, 16 Jul 2019 09:58:00 -0400 Steve H. Hanke https://www.cato.org/publications/commentary/democrats-plan-nationalize-land-democratic-socialism-action Saving Cities from Bad Federal Policies https://www.cato.org/blog/saving-cities-bad-federal-policies?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Randal O&#039;Toole <p>Since 1992, federal taxpayers have helped fund construction of urban rail transit lines through a program called <em>New Starts</em>. This program is due to expire in 2020, and today the Highways and Transit Subcommittee of the House Transportation and Infrastructure Committee will hold a hearing on whether or not to renew it.&#13;<br /> &#13;<br /> No doubt most of the witnesses at the hearing will be transit agency officials bragging about how their expensive projects have created jobs and generated economic development. But a close look at the projects built with this fund reveals that New Starts has done more damage to American cities than any other federal program since the urban renewal projects of the 1950s. Here are eight reasons why Congress should not renew the program.&#13;<br /> &#13;<br /><em>1. New Starts encourages cities to waste money</em>. The more expensive the project, the more money New Starts provides, so transit agencies plan increasingly expensive projects to get "their share" of the money. As a result, average light-rail construction costs have exploded from under $17 million per mile (in today’s dollars) in 1981 to <a href="https://www.transit.dot.gov/funding/grant-programs/capital-investments/current-capital-investment-grant-cig-projects">more than $220 million a mile</a> today. </p> <p><em>2. New Starts encourages cities to build obsolete technologies</em>. There are good reasons why more than a thousand American cities replaced their rail transit lines with buses between 1920 and 1970: buses cost less and can do more than trains. A train can hold more people than a bus, but for safety reasons a rail line can only move a few trains per hour. A busway can move hundreds of buses and <a href="https://wrirosscities.org/news/istanbul%E2%80%99s-metrob%C3%BCs-bus-rapid-transit-system-receives-international-recognition-sustainable">twice as many people per hour</a> as any light-rail line. As one recent <a href="https://tinyurl.com/y3yxl2ge">report</a> concluded, "there are currently no cases in the US where LRT [light-rail transit] should be favored over BRT [bus-rapid transit]."&#13;<br /> &#13;<br /><em>3. Rail transit often increases congestion</em>. Light rail, streetcars, and even new commuter-rail lines often add more to congestion by running in streets or at grade crossings than the few cars they take off the road. The <a href="https://www.purplelinemd.com/component/jdownloads/send/28-technical-reports/181-traffic-analysis-technical-report">traffic analysis</a> for Maryland's Purple Line, for example, found that it would significantly increase delays experienced by DC-area travelers.&#13;<br /> &#13;<br /><em>4. New Starts forces transit agencies to go heavily in debt</em>. New Starts pays only half of construction costs, and transit agencies often borrow heavily to pay the other half. This leaves them <a href="https://arxiv.org/pdf/1609.00415.pdf">economically fragile</a> so that, to avoid going into default in an economic downturn, they are forced to make heavy cuts in transit service.&#13;<br /> &#13;</p> <p><em>5. New Starts forces cities to double-down on subsidies to generate rail ridership</em>. To promote ridership and attract so-called transit-oriented developments near rail lines, many cities <a href="https://www.cato.org/pubs/pas/pa-596.pdf">subsidize such developments</a> through tax breaks, infrastructure subsidies, and direct financing. This has added billions to the cost of rail transit projects.&#13;<br /> &#13;<br /><em>6. Far from promoting economic development, New Starts may actually </em><a href="http://ti.org/antiplanner/?p=8412"><em>slow economic growth</em></a>. A Federal Transit Administration-funded study concluded that, "<a href="http://onlinepubs.trb.org/onlinepubs/tcrp/tcrp_rrd_07.pdf">Urban rail transit investments rarely 'create' new growth</a>, but more typically redistribute growth that would have taken place without the investment." Yet transit agencies claim that every <a href="https://ti.org/pdfs/APB11.pdf">gas station, auto dealership, and parking lot</a> built near a rail line was somehow stimulated by that line. The reality is that the high taxes imposed to pay for rail construction and subsidize transit-oriented developments are likely to discourage employers from moving to urban areas with new rail transit lines.&#13;<br /> &#13;<br /><em>7. New Starts harms low-income commuters</em>. Most new rail lines aim to get middle-class people out of their cars, but when the inevitable cost-overruns take place, transit agencies often <a href="https://ti.org/pdfs/APB10.pdf">cut bus service to low-income neighborhoods</a>. Due to service cuts and fare increases, for example, Los Angeles has lost more than four bus riders for every rail rider it gained from opening new rail lines.&#13;<br /> &#13;<br /><em>8. Rail transit harms the environment</em>. Some rail transit is electrified, but except in the Pacific Coast states most of that electricity still comes from burning fossil fuels. The Washington Metrorail system <a href="https://tinyurl.com/y2uz7f4d.">uses more energy</a> and emits more greenhouse gases per passenger mile than the average car, while DC’s H Street streetcar is more environmentally harmful than a coal-rolling truck.&#13;<br /> &#13;<br /> Transit is a local matter and should be funded at the state or local level, not by federal taxpayers. If Congress is going to fund transit at all, it should give transit agencies incentives to focus on riders, not contractors. Instead of renewing New Starts, Congress should fund transit agencies according to the amount of fares they collect, allowing the agencies to spend the money on buses or trains and on capital improvements or rehabilitation of worn-out systems. In addition to encouraging agencies to increase revenues, not costs, this would more fairly distribute federal dollars to the regions that need them the most.</p> Tue, 16 Jul 2019 08:00:00 -0400 Randal O'Toole https://www.cato.org/blog/saving-cities-bad-federal-policies David B. Kopel discusses the Peña Boulevard expansion on CPTV's Colorado Inside Out https://www.cato.org/multimedia/media-highlights-tv/david-b-kopel-discusses-pena-boulevard-expansion-cptvs-colorado?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Fri, 12 Jul 2019 10:03:00 -0400 David B. Kopel https://www.cato.org/multimedia/media-highlights-tv/david-b-kopel-discusses-pena-boulevard-expansion-cptvs-colorado Boris Johnson Must Stop the Hamster Wheel of Doom - Starting with Electric Scooters https://www.cato.org/publications/commentary/boris-johnson-must-stop-hamster-wheel-doom-starting-electric-scooters?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Ryan Bourne <div class="lead text-default"> <p>Boris Johnson has been talked up as Britain’s first likely <a href="https://www.telegraph.co.uk/politics/2019/07/06/margaret-thatcher-really-believed-personal-freedom-question/" id="LPlnk702673" target="_blank">pro-freedom prime minister since Margaret Thatcher</a>. He burnished those credentials further in this week’s TV debate, “peddling optimism” by making the case “with renewed power and conviction” for “a dynamic market economy”.</p> </div> , <div class="text-default"> <p>Let us consider a specific litmus test of whether Boris will live up to his pro-market promise.</p> <p>A crystal-clear examination of whether he will take us off “the hamster wheel of doom” associated with excessive regulatory precaution, or rather embrace the permissionless innovation, risk-taking, and proportionate regulatory reaction associated with free-market credentials: will Boris give the green-light to electric rental scooters in the UK?</p> <p>Across US and Western European cities, including Washington DC, Paris, Brussels, Barcelona and Munich, companies compete in delivering these services. </p> <p>Starting in the US, fleets of scooters have arrived in cities, delivered Father Christmas-like from venture capital-backed Silicon Valley tech firms with four-letter names.</p> <p>Operated through smartphone apps, these small, motorized vehicles can be unlocked then rented by the minute. Dockless and tracked using GPS, they have obvious appeal given they are inexpensive and versatile for short journeys, or for tourists marveling at cities’ landmarks.</p> <p>Unsurprisingly, use worldwide is sky-rocketing. Yet here, antiquated laws have killed the market before its British birth. The 1835 Highways Act prohibits motorised scooter use on pavements. The Road Traffic Act 1988 effectively bans them on roads, given the DVLA’s requirements for roadworthy vehicles.</p> <p>Given ownership is legal, police time, particularly in London, is spent chasing private use in public spaces, while corporate rental activity is effectively banned <a href="https://www.telegraph.co.uk/technology/2019/03/08/electric-scooter-start-up-bird-extends-olympic-park-trial/" id="LPlnk668115" target="_blank">bar a small scheme in the Olympic Park</a>.</p> <p>Though former transport minister Jesse Norman previously <a href="https://www.telegraph.co.uk/technology/2019/03/19/electric-scooters-should-allowed-britains-roads-first-time-minister/" id="LPlnk185613" target="_blank">flashed some leg on legislative change</a>, the Government seems to be prevaricating to devise comprehensive legislation, rather than taking a permissive approach that would regulate when problems arise. Given the environmental and transport challenges the country faces, such cautiousness is a self-inflicted mistake. The potential benefits are huge.</p> <p>The 2017 National Travel Survey showed 68pc of people’s trips are under five miles, making electric scooters highly viable, and a counter-force against congestion. In international cities such as Tel Aviv, residents are already flocking to them to escape traffic jams.</p> <p>Results of a four-month pilot study in Portland, Oregon highlight this potential for car-to-scooter substitution too. Just over a third of resident users there and 48pc of visitors said they took a scooter instead of driving a personal car or using Uber, Lyft or a taxi. That brings a potentially large environmental dividend.</p> <p>Electric scooters are incredibly energy efficient, due to their light weight. One operator, Lime, reports the company worldwide has “prevented more than 8,000 metric tons of carbon emissions; and saved over 900,000 gallons of gas — equivalent to taking over 1,700 passenger vehicles off the road for a year” already.</p> <p>One must factor in the lifecycle environmental costs of building the scooters and the emissions from vehicles needed to collect them for recharging, of course. But the bigger viable markets, the more operators will invest and achieve economies of scale to lessen these costs.</p> <p>After all, it’s in their self-interest to develop long-lasting vehicles which can be collected for recharging with minimal journeys. Some readers will instinctively bridle at the idea of small motorised scooters bombing around UK towns and cities at 10 to 15mph and cluttering public spaces when unused.</p> <p><a href="https://www.telegraph.co.uk/news/2019/05/14/paris-forces-operators-anarchic-e-scooters-sign-charter-good/" id="LPlnk841126" target="_blank">Wherever they have been deployed, there have been backlashes</a>, with opponents highlighting collisions and anti-social discarding. Even these legitimate concerns though are usually overblown.</p> <p>A study in Austin, Texas found an injury-trip rate of just 0.02pc, and the Portland survey found the majority of residents favoured the scheme after the trial. Individual companies try to meet concerns about safety too, with Bolt Monility distributing free helmets to all who apply for them, and Lime distributing 250,000 worldwide.</p> <p>Others tinker with the specifications of the scooter and fleet management to assuage environmental complaints. They desire the trust of consumers and cities’ residents.</p> <p>That is the key point. Whenever new forms of transport arise, they bring legitimate worries about externalities. Given city or town-specific conditions (not least prevalence of viable cycle pathways), continual innovation, uncertainty about the consideration of users to pedestrians, or even the long-term likelihood of this vehicle type’s success, the best regulatory approach is surely evolutionary and devised once we observe how operations fare in practice.</p> <p>Only then can you consider whether there should be restrictions on fleet management, tighter speed restrictions, or reconfiguration of public spaces and transport infrastructure, according to a rational cost-benefit analysis.</p> <p>In Washington DC, the shock of cluttered paths and users whizzing past is evolving towards a happy equilibrium. City licensing has probably restricted scooter numbers too far and made some firms unviable.</p> <p>Yet innovative measures such as a geo-fencing (locking the scooters from being used around certain landmarks), permitting use on pavements in areas outside the central business district, capping of speeds, and naturally evolving areas for storage has quelled complaints.</p> <p>The market is working. Five firms are licensed and new laws are proposed as other issues arise (for example, on drink-driving, as with cars). For now, the UK has spurned this evolutionary approach though in favour of an effective ban.</p> <p>We are falling behind even <a href="https://www.telegraph.co.uk/technology/2019/07/04/e-scooter-company-dott-raises-34m-funding-ahead-uk-launch/" id="LPlnk114945" target="_blank">our European neighbours</a> through over-caution, leaving a potential mitigating solution to climate change and congestion untapped.</p> <p>The change of prime minister should be the catalyst for a new strategy. What better way to show that Brexit Britain will embrace free-market dynamism than throwing off the current precautionary straitjacket, and taking a flexible, pro-freedom approach to electric scooter regulation?</p> <p>Boris has talked the talk on economic liberty. Now he needs to scoot the scoot. </p> </div> Fri, 12 Jul 2019 00:00:00 -0400 Ryan Bourne https://www.cato.org/publications/commentary/boris-johnson-must-stop-hamster-wheel-doom-starting-electric-scooters LA Metro's Climate Strategy https://www.cato.org/blog/la-metros-climate-strategy?utm_source=rss_topic&utm_medium=rss&utm_campaign=rss Randal O&#039;Toole <p>An article in the <em>Los Angeles Times</em> last week frets that Los Angeles transit buses are "<a href="https://www.latimes.com/local/lanow/la-me-ln-bus-ridership-falling-los-angeles-la-metro-20190627-story.html">hemorrhaging riders</a>," which is supposedly "worsening traffic and hurting climate goals." In fact, the decline of bus transit is actually helping California achieve its climate goals.&#13;<br /> &#13;<br /> In 2017, Los Angeles Metro buses used 4,223 BTUs and emitted 349 grams of greenhouse gases per passenger mile. By comparison, the average light truck used only 3,900 BTUs and the average car just 2,900, with light trucks emitting 253 grams and cars 209 grams per passenger mile. By raising bus fares and reducing bus service, L.A. Metro is getting people out of dirty buses and into clean cars.&#13;<br /> &#13;<br /> Of course, L.A. Metro officials probably don't realize they are doing that. They are so bone-headed that they want to convert a <a href="https://en.wikipedia.org/wiki/Orange_Line_(Los_Angeles_Metro)">dedicated bus route</a> into a <a href="https://www.progressiverailroading.com/passenger_rail/news/LA-Metro-to-break-ground-on-Orange-Lines-light-rail-conversion-project--55871">light-rail line</a> in order to "increase its capacity." At present, they run a maximum of 15 buses an hour on the dedicated bus lanes, which is less than 6 percent of its capacity.&#13;<br /> &#13;<br /> Dedicated bus lines in other parts of the world move as many as <a href="https://www.nctr.usf.edu/wp-content/uploads/2013/03/16.1_yazici.pdf">30,000 people per hour</a> in each direction. By comparison, no light-rail line can move more than about 12,000 people per hour. As <a href="https://www.itdp.org/wp-content/uploads/2013/11/More-Development-For-Your-Transit-Dollar_ITDP.pdf">one study</a> concluded, "there are currently no cases in the US where LRT [light rail transit] should be favored over BRT [bus-rapid transit]."&#13;<br /> &#13;<br /> Los Angeles Metro's CEO is currently paid well over <a href="https://la.streetsblog.org/2015/03/12/metro-board-unanimously-votes-to-hire-new-ceo-phil-washington/">$300,000 a year</a>, which is almost twice as much as the <a href="https://www.thoughtco.com/highest-paid-united-states-governors-3367624">governor of California</a> and far more than the director of the state Department of Transportation, whose agency moves far more people and ton-miles of freight per day than Metro moves in a month. Yet Metro's CEO is not being paid to move people, but to separate people from their tax dollars, and so far he is doing that very well. &#13;<br /> &#13;<br /> For more information about the future of public transit, see my <a href="https://ti.org/pdfs/APB10.pdf">recent article</a> about LA Metro's climate strategy.</p> Tue, 02 Jul 2019 10:19:00 -0400 Randal O'Toole https://www.cato.org/blog/la-metros-climate-strategy