Not So Cool Rules

Wall Street Journal
Editorial
May 28, 2011

In the 1982 film Fast Times at Ridgemont High, the character Jeff Spicoli expresses the Jeffersonian thesis that American democracy required "cool rules . . . pronto," lest our polity become just as "bogus" as the British rule it replaced. Where's Spicoli when you need him in Washington?

The closest thing we have is White House regulatory czar Cass Sunstein, who this week delivered a progress report on Mr. Obama's January announcement that the feds were going to review and then kill unnecessary rules across the bureaucracy. Mr. Sunstein reported some anecdotal success, including the fact that the Environmental Protection Agency has agreed to stop treating milk spills as "oil" spills for the purpose of regulating farms.

You read that right. It took a Presidential-level review to get the EPA to stop treating spilled milk like an oil slick. After we wrote about this folly on January 27 ("Land of Milk and Regulation"), EPA Administrator Lisa Jackson assailed us at a Congressional hearing. We can only imagine the protest she put up against Mr. Sunstein.

More broadly, Mr. Sunstein reports that his review has resulted in "immediate steps to save individuals, businesses, and state and local governments hundreds of millions of dollars every year in regulatory burdens."

Alas, this doesn't begin to ease the economic burden of regulation. In research sponsored by the federal Small Business Administration, Lafayette College economists Mark and Nicole Crain have estimated that Americans were spending more than $1.7 trillion annually just to comply with federal regulations—and that was before Mr. Obama took office.

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More Weather Deaths? Wanna Bet?

by Donald J. Boudreaux

Wall Street Journal
May 28, 2011

Writing recently in the Washington Post, environmental guru Bill McKibben asserted that the number and severity of recent weather events, such as the tornado in Joplin, Mo., are too great not to be the result of fossil-fuel induced climate change. He suggested that government's failure to reduce emissions of greenhouse gases will result in more violent weather and weather-related deaths in the future.

And pointing to the tragedy in Joplin, Mr. McKibben summarily dismissed the idea that, if climate change really is occurring, human beings can successfully adapt to it.

There's one problem with this global-warming chicken little-ism. It has little to do with reality. National Weather Service data on weather-related fatalities since 1940 show that the risks of Americans being killed by violent weather have fallen significantly over the past 70 years.

The annual number of deaths caused by tornadoes, floods and hurricanes, of course, varies. For example, the number of persons killed by these weather events in 1972 was 703 while the number killed in 1988 was 72. But amid this variance is a clear trend: The number of weather-related fatalities, especially since 1980, has dropped dramatically.

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Moscow's Capitalist Manifesto

by Robert Maciejko

Wall Street Journal
May 27, 2011

Russian President Dmitri Medvedev has said he wants to transform Moscow into a global financial center. And he has made this transformation a core element of his plans to modernize the Russian economy. Yet Russia experienced $21 billion of capital outflows in the first quarter of this year. And Mr. Medvedev's own top economic adviser admitted recently that the president believes that "we did not have real progress in improving the investment climate. We need progress now in the short term. Investment is very low and capital flight is high."

The adviser's comments capture just one piece of the larger challenge in Moscow's quest to become a financial center. There are a number of significant obstacles to overcome.

Corruption is a corrosive force in the country. Russia comes in at 154th out of 178 countries on Transparency International's 2010 Corruption Perceptions Index. The country also has a well-deserved reputation for stifling bureaucracy. In a World Bank survey of the process required, in 182 countries, to obtain construction permits, Russia's was found to be the second most difficult in the world. Other obstacles include inadequate infrastructure, which contributes to massive traffic tie-ups, and occasional forced shutdowns of the stock market, a practice that began during the financial crisis.

For these and other reasons, the latest Z/Yen survey of 75 financial centers throughout the world ranks Moscow 68th, behind Manila, Jakarta and Malta.

Moscow's lowly status is also reflected in the local investor base, which is small in terms of both retail and institutional investors. Large Russian companies, even global leaders in their industries, frequently choose to raise capital in London or Hong Kong. Price-earnings ratios in other BRIC countries are, on average, 50% higher than those in Russia. The country's ratio of market capitalization to GDP is two to three times lower than in the most developed G20 countries, and lower also than in Latin America and in Eastern European countries like Poland. The upside potential for Russia, therefore, is large.

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Tim Harford on failure

Interviewed by Ezra Klein

Washington Post
May 27, 2011

Tim Harford is a British economist, a columnist for the Financial Times and author of the new book, Adapt: Why Success Always Starts With Failure. We spoke last week about why governments have so much trouble failing well, whether voters should prefer indecisive politicians and what we can learn from the Iraq surge. Parts of this interview ended up in my column on the constructive role that failure can, and perhaps must, play in the health-care system.

Ezra Klein: The basic argument of your book is that the only way to solve complex problems is to fail toward the correct solution. But one of the things you suggest is that this is particularly hard for governments to do. Why?

Tim Harford: Let’s think about the balance of risks in the market or the scientific method. In both cases, you could have 50 failures and one success and you’ll still come out ahead. The theory of relativity and Google and penicillin more than make up for all the failed experiments, theories and businesses. The same is true, of course, of biological evolution. The number of failures are orders of magnitude larger than the successes.

Now think about politics. Any politician knows they can have 50 policies going well and one failure the failure will dominate the next campaign. So the politician is just desperate to avoid provable failure. And they can do that either by never doing anything or by refusing to quantify and evaluate what should happen when they do do something, as that way no one can prove it went wrong.

EK: One way this manifests, I think, is that there’s a preference for sweeping, blunt policies that may or may not work as opposed to more modest policies that accumulate over time but require patience and diligence. There’s something more satisfying about a big plan, like the Ryan budget, where you can just say it cuts costs by trillions of dollars by refusing to pay for more health care, than something like the Affordable Care Act, where it’s saying it’ll cut costs through aggressively experimenting with new ways to deliver care and hoping some of them will work.

TH: In politics, we like people who sound like they have a plan. Everyone remembers the Bush-Kerry election. And that election seemed to come down to one guy could make up his mind and one couldn’t. John Kerry’s defenders, as I recall, said he was decisive and that decisiveness just wasn’t coming through. Not that many tried to sell the idea that indecision is a virtue, that the world is uncertain and it makes sense to change your mind. In the U.K., Margaret Thatcher and Tony Blair won six elections, and she famously said, “you turn if you want to, the lady is not for turning.” And Blair, after British forces had gone into Iraq, he said, “I don’t have a reverse gear.” Imagine if I tried to sell you a car that didn’t turn or have a reverse gear. Would you want to buy it? Of course not. But we like those politicians.

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21st-Century Regulation: An Update on the President's Reforms

by Cass Sunstein

Wall Street Journal
May 25, 2011

A 21st-century regulatory system must promote economic growth, innovation and job creation while also protecting public health and welfare. Earlier this year, President Obama outlined his plan to create such a system by adopting a simpler, smarter and more cost-effective approach to regulation. As a key part of that plan, he called for an unprecedented government-wide review of regulations already on the books so that we can improve or remove those that are out-of-date, unnecessary, excessively burdensome or in conflict with other rules.

Over the past four months, government agencies and departments have combed through their rules, listened carefully to the public, and developed plans to identify what works and what doesn't. The results of this review are in. Today, 30 agencies are laying out regulatory reforms that will save private-sector dollars and unlock economic growth by eliminating unjustified regulations, including what the president has called "absurd and unnecessary paperwork requirements that waste time and money."

We are taking immediate steps to save individuals, businesses, and state and local governments hundreds of millions of dollars every year in regulatory burdens. The reforms have the potential to save billions of dollars more over time while maintaining critical health and safety protections for the American people.

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The Problems with Precaution: A Principle without Principle

by Jonathan H. Adler

The American
May 25, 2011

It’s better to be safe than sorry. We all accept this as a commonsense maxim. But can it also guide public policy? Advocates of the precautionary principle think so, and argue that formalizing a more “precautionary” approach to public health and environmental protection will better safeguard human well-being and the world around us. If only it were that easy.

Simply put, the precautionary principle is not a sound basis for public policy. At the broadest level of generality, the principle is unobjectionable, but it provides no meaningful guidance to pressing policy questions. In a public policy context, “better safe than sorry” is a fairly vacuous instruction. Taken literally, the precautionary principle is either wholly arbitrary or incoherent. In its stronger formulations, the principle actually has the potential to do harm.

Efforts to operationalize the precautionary principle into public law will do little to enhance the protection of public health and the environment. The precautionary principle could even do more harm than good. Efforts to impose the principle through regulatory policy inevitably accommodate competing concerns or become a Trojan horse for other ideological crusades. When selectively applied to politically disfavored technologies and conduct, the precautionary principle is a barrier to technological development and economic growth.

It is often sound policy to adopt precautionary measures in the face of uncertain or not wholly known health and environmental risks. Many existing environmental regulations adopt such an approach. Yet a broader application of the precautionary principle is not warranted, and may actually undermine the goal its proponents claim to advance. In short, it could leave us more sorry and even less safe.

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Keep the Current Drinking Age?

Wall Street Journal
May 20, 2011

Two economists have concluded that lowering the drinking age to 18 could lead to an 8% increase in deaths among 18-to-20-year-olds, or an additional 8 deaths per 100,000 people. Recent proposals to lower the drinking age—including from college presidents—should therefore face “a very high burden of proof,” they say.

Currently, an 8% jump occurs at 21, the researchers found, using mortality statistics from the National Vital Statistics System, from 1997 to 2003—showing that alcohol laws continue to shape behavior, despite widespread flouting of those laws. Two important categories in which deaths jumped were motor vehicle deaths and suicide.

The researchers also looked at mortality, from 1975 to 1993, in the states that lowered their drinking ages during the 1970s and ’80s, only to raise them back. They compared people born just a few years apart, in each state, who got to drink legally at either 18 or 21. (The idea as that these groups were demographically identical, except for the legality of their drinking.) When 18-to-20-year-olds could drink, the study found, there was a 17% increase in nighttime driving deaths in that category.

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A New Gauge to See What’s Beyond Happiness

by John Tierney

New York Times
May 16, 2011

Is happiness overrated?

Martin Seligman now thinks so, which may seem like an odd position for the founder of the positive psychology movement. As president of the American Pyschological Association in the late 1990s, he criticized his colleagues for focusing relentlessly on mental illness and other problems. He prodded them to study life’s joys, and wrote a best seller in 2002 titled Authentic Happiness.

But now he regrets that title. As the investigation of happiness proceeded, Dr. Seligman began seeing certain limitations of the concept. Why did couples go on having children even though the data clearly showed that parents are less happy than childless couples? Why did billionaires desperately seek more money even when there was nothing they wanted to do with it?

And why did some people keep joylessly playing bridge? Dr. Seligman, an avid player himself, kept noticing them at tournaments. They never smiled, not even when they won. They didn’t play to make money or make friends.

They didn’t savor that feeling of total engagement in a task that psychologists call flow. They didn’t take aesthetic satisfaction in playing a hand cleverly and “winning pretty.” They were quite willing to win ugly, sometimes even when that meant cheating.

“They wanted to win for its own sake, even if it brought no positive emotion,” says Dr. Seligman, a professor of psychology at the University of Pennsylvania. “They were like hedge fund managers who just want to accumulate money and toys for their own sake. Watching them play, seeing them cheat, it kept hitting me that accomplishment is a human desiderata in itself.”

This feeling of accomplishment contributes to what the ancient Greeks called eudaimonia, which roughly translates to “well-being” or “flourishing,” a concept that Dr. Seligman has borrowed for the title of his new book, Flourish. He has also created his own acronym, Perma, for what he defines as the five crucial elements of well-being, each pursued for its own sake: positive emotion, engagement (the feeling of being lost in a task), relationships, meaning and accomplishment.

“Well-being cannot exist just in your own head,” he writes. “Well-being is a combination of feeling good as well as actually having meaning, good relationships and accomplishment.”

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Democracy Versus Economic Growth

by Richard W. Rahn

Washington Times
May 16, 2011

Is democracy incompatible with long-run economic growth? One’s initial reaction may be that this is a silly question, but in this day of a global debt crisis, it is worth recalling the warnings of America’s Founding Fathers that when the people find they can vote themselves benefits, that will bring along the end of the republic.The Founders understood the problems of democracies and why all of the previous democracies had failed, going back to ancient Athens.

A fundamental flaw with majoritarian democracy is that politicians get votes by promising their constituents benefits, particularly when they can promise those benefits will be paid by others or future generations. As the old line has it, “Any politician who promises Peter benefits to be paid by Paul will always have the vote of Peter.” The inherent problem with this model is that as the number of Peters who must be satisfied grows, more and more costs are shifted to the Pauls, who eventually rebel by not working or leaving. The United States may have reached the tipping point, where half of the population pays almost no income tax and the top 1 percent of taxpayers pay almost 40 percent of the tax revenue. The nation already has about the most progressive tax system in the world, so it is doubtful that the remaining taxpayers can be squeezed much further.

The United States is the world’s oldest continuous democracy, and it succeeded in being so by not being constituted as a democracy but as a federal republic. The American Founders feared the momentary passions of the majority, so they instituted an elaborate set of checks and balances in an attempt to ensure that rapid fundamental change would be most difficult. The system was designed for gridlock to protect individual liberty and economic opportunity. Despite its imperfections, the system basically worked until four years ago, when the political class used the financial crisis (caused by faulty government policies) to ramp up deficit and debt to unsustainable levels.

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See also

Census Data Reveals a Shift in Patterns of Childbearing

New York Times

May 9, 2011

College-educated women are waiting longer to have children than those without a college education, according to new data from the Census Bureau.

In 2000, the portion of women with college degrees between the ages of 25 and 34 who had children was 42 percent, according to the data. Ten years later, the same group of women, now ages 35 to 44 — representing about three million Americans — were far more likely to be mothers: About 76 percent had children, according to the data.

In contrast, women who did not finish high school were more likely to have children earlier. In 2000, about 83 percent of women ages 25 to 34 who did not have a high school diploma had children. The percentage rose to 88 percent by 2010.

The trend of educated women having children later accelerated in the 1980s, along with the rise in women’s educational attainment, said Andrew J. Cherlin, a demographer at Johns Hopkins University.

“College-educated women are following a different path to having children,” Mr. Cherlin said. “They wait until they’ve graduated from college, gotten married and started a career, before having a child.”

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