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Occupational licensing is often a tool that a more politically powerful supplier of some service uses against a politically weaker, competing kind of supplier. For instance, dentists use licensing to restrict competition from dental hygienists.  A recent working paper by Chevalier, Harrington, and Morton looks at how licensing in Florida has been used by funeral directors to protect them from competition from direct disposers, who offer cheaper “no frills” cremations. It’s an excellent case study for how these regulations work.

Funeral directors used to be the only ones allowed to perform cremations in Florida. But the state changed it’s licensing laws in 1979 to create a new type of worker, direct disposers, and a new type of firm, direct disposal establishments, who would be allowed to specialize in a much simpler cremation with less regulatory burden.

Both occupations have required a license, but becoming a direct disposer is easier than becoming a funeral director. Direct disposers only need a high school degree and a few courses, which means one could become one in a few months. In contrast, funeral directors are required to have some college, mortuary school, and an apprenticeship. The difference in crematorial services that each could offer is that direct depositors can not include viewing or memorial services.

As a result, by 1999 direct disposers performed around 20% of cremations in Florida each year. In response to the increased competition, the Florida Funeral Directors Association lobbied for licensing changes that would end direct disposers.

What they got was a series of regulatory changes starting in 2000 that severely reduced the competitiveness of direct disposers. These included setting facility requirements, preventing disposers from operating at the same location as a funeral home, and requiring that disposal facilities have a licensed funeral director in charge. The last one was the nail in the coffin (or lid on the cremation jar?) for direct disposers. The tying of the lower-skilled occupation to the higher-skilled one is analogous to the requirements used to protect dentists from competition from hygienists, and doctors from nurses.

These restrictions have been a success from the point of view of the Florida Funeral Directors Association. As shown in the chart below, they have helped funeral homes regain market share, cutting the market share of direct disposers nearly in half over the past decade. Note that this does not even reflect the 2010 change that requires each disposal facility be managed by a funeral director. The authors speculate that this regulation will increase funeral home market share back to 100%, killing off disposers completely.

 The result of this decrease in competition is that prices have predictably increased. The authors estimate that people are paying 9% more for cremations than they would be without these laws, and that the total impact was to increase cremation expenses by $9 million a year. What this amounts to is tax on grieving families to protect one kind of worker at the expense of another, less educated worker.

This is an understudied economic issue relative to other labor market regulations like unions or minimum wage, so it’s good to see more research in this area.

In an attempt to tamp down rising prices, the Obama administration is setting a 10% maximum increase for health insurance rates, above which insurers would have justify the increases based on higher costs. Starting in 2012 they will set different rates for individual states. I don’t know if there is any literature on this in health insurance, but there is evidence that when regulators set price points it can serve as a focal point, or “Schelling point” for economist Thomas Schelling, for collusion. Here is how Knittel and Stango describe the theory:

In practical terms, the problem of tacit collusion often reduces to one of successful coordination.Firms can resolve the coordination problem in many ways; one such way is through the use of a focal point. The theory of focal points dates at least to Thomas Schelling (1960), who noted that in simple games with many equilibria, agents can quite often recognize a focal point and use it to coordinate. In one of his more well-known examples, Schelling discusses the problem of two people simultaneously choosing a common location (in which to meet) in New York City. Given that the game possesses an infinite number of equilibrium location-pairs, we might expect the odds of successful coordination to be quite low. Nonetheless, in practice most people who play the game choose a well-known spot—such as Times Square or the Statue of Liberty—and can successfully coordinate. In situations where firms set prices, it is often suggested that the “clustering” of prices occurs at certain natural focal points (e.g., $9.99).

Like I said, I have no idea whether this would or has occurred in health insurance markets. But regulators should certainly consider it a potential cost to setting prices.

It is hard for some people to believe this, but markets can and do provide people with products and services produced in accordance with their values in a way in which many presume requires regulators. A lot of what we would think of as unethical behavior on the part of firms could be done away with if consumers demanded it.

I think progressives would disagree with me here by pointing to surveys that show consumers want all sorts of goods produced in accordance with progressive values that the market isn’t providing. Yes, I’m sure if you ask them, consumers say they would pay $.01 more per pound to give tomato pickers a $2 an hour raise. I’m sure people tell survey respondents they’d love organically grown food, or higher gas mileage cars, and that they would definitely pay a lot more for it, it’s just that companies are providing them.  The progressive response here is that businesses must be forced, nudged, or subsidized into providing what consumers want. But what people will tell a surveyor that they want and what they say they’d be willing to pay for it doesn’t actually determine the market-wide willingness to pay.  It’s what they actually would pay. This is what economists call “stated preference” versus “revealed preference”. As you can imagine, revealed preference holds a lot more weight among academics.

I think the demand for more environmentally friendly and ethical agriculture is a good thing, and will in the long-run lead to improved conditions better than what regulations alone can or would provide. Sometimes regulations can even get in the way of market outcomes that would be more in accordance with progressive values.

Case in point is slaughterhouses. A recent story in the New York Times details how a slaughterhouse shortage is stymieing a variety of local, organic, and more humane meat producers:

One might expect the Bay Area — as the epicenter of the eat-local movement and a region with a long tradition of cattle ranching — to be a mecca for producers of organic and grass-fed beef. But there is a problem: a shortage of slaughterhouses is so acute that it is stunting the growth of this emerging industry….

Slaughterhouses have been on the decline nationwide, but a demand for more niche products has led to an increase of small slaughterhouses nationwide. In California however, there remains a shortage. The story explains why:

…Mr. Thiboumery is pessimistic about the chances for new facilities in California. Here, potential operators face stringent state regulations, unforgiving zoning laws and the dreaded Nimby factor.

“Basically, if I were to build a slaughterhouse, the last place I would build it is California,” Mr. Thiboumery said.

The article doesn’t go into it, but as I’ve written before, USDA regulations set equipment mandates designed for large, industrial, high volume slaughterhouses in a way that is too costly for smaller slaughterhouses ones to afford at the scale and volume demanded from them. Loosening these regulations seems like an area for cooperation between progressives and libertarians.

Of course, libertarians would argue that once you decide to set equipment standards you’re destined for regulatory capture such that the only way to really prevent this type of subtle protectionism is to stop setting equipment standards. Progressives would counter that if you don’t set these standards, then the companies will race to the bottom and use the least safe equipment possible, the costs of which will be borne by workers. The libertarian counter-counter-point is that more dangerous conditions will mean they will need to pay higher wages, but progressives would respond….. Wait, why did I think this was a possible area for libertarian and progressive agreement again?

Economists like to say that buying a house is basically like becoming a landlord and then renting the home to yourself. This makes sense because landlords and tenants don’t always see eye-to-eye, but if you are your own landlord this problem goes away.

Consequently, in my mind,  the most important price in the housing market has always in my mind has always be then price-to-rent ratio. When I first started fretting about CDOs – and yes if you have forgotten it really was all about CDOs – was when the price-to-rent started to climb above 1.4.

My case at the time is that there was no way we could have faith that the models would hold in a world that no one had ever seen. The models only operate on data that they have, going to far out of sample, and you just don’t know what might happen.

Anyway, back to the question at hand – do we have too many homes. Hitherto my case has been based on units per person. We have been cranking out new homes at slower than average rates. It may look like we were building a lot of houses, but that was primarily offset by the fact that we weren’t building very many apartment buildings.

So in fact the number of housing units per person in the US is getting fairly tight. We can see something of that in the price-to-rent ratio.

The price-to-rent ratio is closing in on its long term average of 1-to-1.

However, it doesn’t look to me like there are any forces set to boost housing prices in the near term. Rates are only rising from what were record lows. Credit standards show no sign of loosening. Lots of folks have distressed credit and there are still likely a shadow inventory of used homes on the market.

On the other hand the fundamentals for rent look bright. Right now, rents are depressed primarily by a depressed economy and – in my opinion – a Fed that was slow in loosening monetary policy.

Both of those factors are set to change. Couple this with the shortage of units per person and we are looking ahead to a surge in rents. With that we will probably see a rapid increase in home building. Yet, I am betting that this time it is apartment homes that come roaring to the forefront. At the beginning this will likely contain a high fraction of build to rent, but unless rent prices can be held down we should expect a condo boom to run on its heels.

I am cuing Matt Yglesias to talk about how building restrictions over the next five to ten years are going to define cities for decades to come.

When the apartment boom comes – and the fundamentals suggest it is near at hand – will your locality be ready?

Felix Salmon has a post about occupational licensing where he says a lot that I want to disagree with. First, he claims that licensing probably decreases inequality:

…broadly speaking, the more constraints you have on a profession, the less likely you are to see massive inequality within that profession. If you got rid of licensing for profession X, you’d see many more low-paid Xs than you do right now, and you’d also see a significant uptick in earnings at the very top of the X profession. It’s a second-order effect, to be sure, but I’m pretty sure that at the margin, licensing helps to reduce inequality.

Yes, licensing may reduce inequality within a particular occupation, but it’s just as likely that it increases inequality overall. Licensing creates an up front cost to enter a profession. This means that those who will be pushed out of the profession by these laws are those who are least able to say, take 6 months to go without working while undergoing training and pay for requisite classes, which are of course are going to be individuals with less economic resources overall. So you’re taxing those who are credit constrained, those who need to work full-time to support their family, single-parent families, etc. in order to benefit those who can overcome such constraints and thus have more economic resources at their disposal. Do you think this will increase or decrease inequality?

In addition, everyone pushed out of a skilled job with a license is pushed into a lower wage job, increasing the supply of workers and driving down wages. The woman who can’t get a job as a masseuse because she’s a single mother -with a knack for massage-  instead has to work as a hotel maid, which drives down wages of hotel maids. These laws systematically push people out of more skilled jobs into lower skilled ones, decreasing the labor supply in the former and increasing it in the latter.

To use a more broad and likely more common example, the higher than necessary levels of education required by licensing boards to become health professionals make it more expensive to enter these professions and pushes out those most responsive to these prices, which are again going to be the worst off economically.

Felix also argues the following:

But at the same time I think they are, in a sense, a form of worker protection which is acceptable to Republicans — think of them as unions for people who hate unions. And that’s not entirely a bad thing.

But licensing is just as likely to be a cudgel that one group of workers uses against another, and in particular they are likely to be used to help a higher paid, more educated group at the expense of a against a lower paid, less educated group. Take dentists and dental hygienists. Felix has complained this issue lacks data, so let me bring some by quoting myself:

…many states have regulations preventing dental hygienists from practicing without the supervision of a dentist. Dentists have an average of six years more schooling than a hygienists, who on average have 2.6 years of post high-school education. In addition, dentists make on average $100 an hour, and are 80% male, whereas hygiensts are 97% female and make around $37 an hour. Kleiner and Park find that these regulations transfer $1.5 billion dollars a year from hygiensts to dentists. This is a highly regressive transfer to a male dominated, higher educated, higher paid job from a female dominated, lower educated, lower paid job. In a very similar vein with likely similar impacts, many states restrict the ability of nurses to practice without the supervision of doctors. In fact these regulations are currently growing as regulators rush to restrict the number nurses working in retail health clinics in a variety of ways to prevent them from competing with doctors.

Hardly sounds like a law that you’d want to characterize as providing “worker protection”.

Felix also wonders whether the increasing percent of jobs licensed over time is just a result of the shift of the economy from manufacturing into services, likewise Kevin Drum wonders if we can chalk it up to more workers in health care. No doubt this explains a greater opportunity for occupations to be licensed, but it does not explain the amount that have been licensed. This can be seen clearly in state by state variations in licensing. According to Morris Kleiner 30% of California’s workforce is  licensed, while Indiana’s is at around 11%. Is this about more workers in healthcare and education in California? No, according to BLS data health and education services account for 12.8% of the non-farm workforce in California and 15.1% in Indiana.  Overall services jobs account for 87% of employment in California, and 80% in Indiana; not nearly enough to account for having almost triple the percent of jobs licensed. It’s about regulatory capture, not sectoral shift.

State by state variation also provides a useful rebuttal to occupational licensing defenses that appeal to our desire to have quality services. Do you really think of Indiana as a laissez-faire, low quality free-for-all where you can’t tell whether your dentist is illiterate and your heart surgeon is a legally blind imbecile who  works a night shift at White Castle? No, you don’t, and it’s likely that if California adopted the much lower licensing regulations of Indiana they wouldn’t become one either.

Now that’s not to say licensing doesn’t increase quality sometimes. If you mandated that every masseuse had a Ph.D in massage therapy and 10,000 hours of training, then yes, the quality of legal massages consumed would skyrocket. But you’d also push a lot of massages into the black market, where the lack of transparency and legality makes it difficult for non-license quality monitoring institutions to evolve. This means that for those pushed out of the market quality will go down.

Black market massages probably aren’t a big deal, but what does this mean for something like electricians? People priced out of the market by licensing may either choose to forgo repairs or do them by themselves. This turns the public safety rationale on it’s head: the more important the public safety rationale the more we should be concerned about people either foregoing the service or being pushed out of the market. This is particularly important with respect to laws that restrict who can offer primary care services. As an institution licensing just does not work very well. It pushes up prices too high, which pushes too many people out of the market, and if it evolves at all it evolves towards more and more protectionism because of the inherent public choice problem. Just because we want something done well doesn’t mean we want it licensed.

Now there are times when licensing is probably the best way to handle things. This is when you have a clear public safety interest, a minimal set of standards that are easy to agree upon, low price elasticity of demand, unlikely chance of a black market, and the economic forces interested in limiting licensing are as strong as those pushing for more of it. Airplane pilots come to mind here. But huge state by state variation in licensing without concomitant state by state variation in quality shows that we have a lot of licenses we can get rid of without any hugely negative consequences. In the meantime, the most disadvantaged workers and consumers are being hurt.

First, I’m sorry about my extended absence from blogging, both to my co-bloggers and audience. My schedule has been very full, and I’ve been battling mysterious fatigue and abdominal pain which makes it hard to concentrate on anything. I’ve been seeing multiple doctors and am heading to a specialist here at the end of the month. They have ruled out Chron’s, celiac sprue, acute intermittent porphyria, and irritable bowel syndrome…along with the more common stomach problems. I know that is not a real excuse, and I should battle through it for the good of you readers. For that, I’m sorry.

In any case, the story that caught my eye today is that Obama has issued an order to government to trim rules that are not “cost-effective and cost justified, transparent, coordinated/simplified, flexible, science-driven, or necessary and up-to-date.”

And then there were flying pigs. The NYT identifies a few rules that are simply dumb:

There is a federal regulation that dictates that place names on new highway signs must be spelled with just one capital letter — like This, not THIS.

Federal rules say that beef from a state-regulated slaughterhouse cannot be sold in other states, but bison from the same slaughterhouse can.

And as President Obama told the nation on Tuesday, one federal agency until recently listed saccharin, a common coffee sweetener, as a form of toxic waste.

Of the stupid rules listed above, only the second has any real material consequence. The NYT Economix blog also has a discussion of further stupid rules.

And then there was pie in the sky. I don’t have much faith that this is of much consequence. As noted above, we may be able to get rid of some quirky rules that are left over because no one notices that they are there…but most dumb rules exist because they benefit somebody, somewhere. Perfect competition is a very cruel mistress. If there is a rule that is of material (economic) consequence, it is likely that it exists because some interest agitated that it be so. Thus, trimming the government of rules that aren’t cost-effective, or aren’t coordinated or flexible is a political battle.

However, I can think of something that is of extreme consequence, that is not cost effective or cost justified, flexible, coordinated/simple, science-driven. It’s also of dubious necessity and certainly not up-to-date. I wonder if it’s on the chopping block?

Recently the FDA banned Four Loko, which was silly because I can still go into a bar and order a Red Bull and vodka to satisfy my caffeinated alcohol needs. Of course the slipper slope being what it is, some lawmaker somewhere was sure to step and draw the logical conclusion that these drinks too should be banned. And right on cue, Iowa state senator Brian Schoenjahn has proposed a bill to outlaw any caffeinated alcoholic beverages from being sold, including mixed drinks from your neighborhood bartender. I’ve argued before that paternalists are wrong to scoff at the notion that a slippery slope exists, but sometimes lawmakers make it way to easy to prove them wrong.

H/T @jbarro

Jonathan Chait has been having a back and forth with Will Wilkinson over the extent and insurmountability of regulatory capture. In his last reply, Chait summed up his position like this:

If [Will] has access to some study showing that regulation usually, as a rule rather than the exception, become s a weapon of the powers it was intended to regulate and winds up serving the opposite of its intended purpose, then I’m willing to listen. But if his only argument is “look at all of Tim Carney’s articles,” then no, I’m not persuaded, and and not many people outside the economic libertarian world are going to be, either.

Given the varieties and scope of regulation this would be a difficult question to answer with a particular study, or even with a handful of studies. Another problem is defining the challenge as showing that regulations end up “serving the opposite of its intended purpose”.  Shouldn’t it be enough to show that regulations don’t serve their intended purpose at all but instead simply raise prices?

To focus on one class of regulations in particular, consider occupational licensing. In his book“Licensing Occupations: Ensuring Quality or Restricting Competition?”, Morris Kleiner surveys the literature on occupational licensing and finds a lot of evidence that it does nothing to improve quality. From teachers to interior designers to medical professionals. Now here, at the mention of medical professionals, is where alarm bells start going off in everybody’s heads except libertarians. I’m not arguing that any regulation of medical professionals represents inefficient capture in-and-of-itself, but that on the margin the restrictions put into place on medical professionals represent attempts to control competition rather than quality.

For instance, there are studies showing that the wide state-by-state variations in these regulations do not affect outcomes. In medicine there are studies showing that malpractice insurance premiums aren’t lower in states with occupational licensing, which you would expect if licensing was increasing service quality. There is evidence that nurses provide providing primary care services as effectively as doctors. There are the studies showing that licensing and certification for teachers do not improve outcomes. This is unsurprising given that in most cases how one qualifies for a license is strongly influenced by or even directly set by some group representing the interests of the industry.

In some cases it can even worsen outcomes by driving people priced out of the market into the black market, where quality is very low due to informational problems caused by regulation pushing these markets into the shadows. It’s difficult to develop a good or bad reputation when having any reputation whatsoever risks attracting law enforcement.

So I don’t know if this quite represents an answer to Chait’s challenge. But the balance of the evidence shows that on the margin occupational licensing does not improve quality. How important is that margin? Well there is a huge variety in the level of occupational licensing in states. Indiana has around 11% of it’s workforce licensed, while California has 30%. If all states moved towards regulatings more like Indiana, based on the evidence it seems unlikely that quality would be impacted despite cutting the number of licensed occupations down to nearly a third of the current level for some states.

There’s obviously a lot of regulation other than occupational licensing, so this doesn’t rebut Chait’s wider point. But it is a very important and widespread class of regulation. At the very least I would hope Chait would agree that regulatory capture is decidedly more than an exception to the rule when it comes to occupational licensing.

Finally, I’d also like to answer the challenge that libertarians aren’t interested in making these laws work better, and are only in abolishing them. Yes, because regulatory capture here has proven fairly intractiable, so just getting rid of many occupational licenses will be a huge improvement. But I am also interested in improving occupational regulations.

One thing that states can do is write these laws with sunset provisions that force legislators to reexamine them at some point. This was a suggestion by the Cato Institute in a paper I can’t find. Another thing that states can do is have mandatory registration for certain occupations, which is what Pennsylvania does for contractors. This help solves informational problems by ensuring that contractors can’t lie about who they are and then rip you off, and allows sites like Angie’s List to work better by ensuring that someone can’t dodge bad reviews by using fake names. States should also look at other states and see what works for them, given the wide variety of licensing there is a lot of improvement states can make by following their neighbors. The last suggestion is to give Matt Yglesias millions of dollars to start a think tank dedicated to identifying and calling attention to bad occupational licenses, and identifying good examples of occupational regulation.

With over 20 years of incrementally strict regulation of pseudoephedrine failing to prevent meth usage, states are again ratcheting up the regulatory burden, because, you know, this time it will work. I recently wrote about an Oregon district attorney who was calling on states to require prescriptions for over-the-counter allergy medicine containing pseudoephedrine, and now Missouri is heeding the call:

The Missouri governor and attorney general want to make Missouri the third state to require a doctor’s prescription to buy cold and allergy medicines that can be used to make the illegal drug methamphetamine.

Gov. Jay Nixon and Attorney General Chris Koster announced their support on Tuesday for legislation imposing a prescription mandate on medicines containing pseudoephedrine, which is sold under brands such as Sudafed,Claritin-D and Aleve Cold & Sinus.

Missouri for years has led the nation in busts of methamphetamine labs, even while enacting increasingly stricter laws.

This is an attempt to transfer welfare from allergy sufferers to meth addicts and their families. Unfortunately, I predict it will largely result in a permanent destruction of welfare for the former, and, at best, a temporary increase for the latter.

One of the biggest problems with regulations is their inflexibility. You try and regulate one product that is viewed by some as potentially dangerous, and as a result you end up harming a product that shares enough qualities to make it fall under the regulation, yet does not share the qualities that motivated the regulation in the first place. For instance, when safety regulations targeting large toy manufacturers put handmade toy companies out of business. This is exactly what has happened with the Four Loko regulation, which has also banned a small microbrew that uses caffeine.

The beer is called Moonshot ’69, and it was created by one of the founders of Sam Adams. The New York Times provides the details, including the fact that the beer was going to be sold at a beer festival this month, and that the owner has $25,000 worth of inventory she can’t get rid of.

As you read about Moonshot ’69 you may find yourself thinking that the regulation was clearly not designed to affect a microbrew like this, and that the ban shouldn’t affect the kind of beers that get sold at beer festivals. This is because while the regulation is ostensibly about caffeinated beer, as Robin Hanson argues, it’s actually about regulating a “particular vaguely-imagined classes of people”. Politicians want to regulate Four Loko drinkers, not caffeinated beer.

If you find this troubling just be glad that you and all the former Four Loko and Moonshot ’69 drinkers can, for some strange reason, console yourselves with a Redbull and Vodka. That is, for now.

It’s rare that a plea for regulation presents as clear of a picture of the slippery slope as Oregon D.A. Rob Bovett’s recent op-ed in the New York Times did. He asks us to walk with him farther down the slope, acknowledging that we’re already on it, and offering a preview of what’s next.

The regulation he is proposing concerns pseudoephedrine, an ingredient in several allergy medicines and, unfortunately, methamphetamine. Where we are on the slope right now is that it can only be sold from behind the counter and buyers are required to present some for of photo identification. Purchases are recorded and buyers are prevented from going over a certain amount in a given time-period. Lost your allergy medicine? Too bad, we gave you 10 days worth, so you have to wait 10 days before you can get more.

This, however, has not stopped the determined meth makers who still manage to get enough pseudoephedrine to keep the streets supplied. Which brings us to the next step on the slippery slope. Bob Bovett wants us to follow Oregon and Mississippi’s leads and require a prescription for any drugs with pseudoephedrine.

Uncharacteristically for regulation advocates, he provides a glimpse into the next and final step on the slippery slope: complete prohibition.

In 2009, Mexico, which had been the source of most of the methamphetamine on the streets of the United States, went further, banning pseudoephedrine entirely. The potency of meth from Mexico has since plummeted. This is great news. But now the ball is back in our court.

You will notice not an inkling that Mexico may have gone too far. Clearly he believes that if prohibition is what it takes to reduce the potency of meth (notice he’s not even promising it would get rid of it) then it’s worth it.

So we tried putting it behind the counter. That was step one on the slope, and it didn’t work. Now he wants us to require a prescription, that’s the second step. When that doesn’t work, he’s shown all indication that he’d be willing to push for complete prohibition. I’m not sure what we’ll do when that won’t actually get rid of meth users but simply reduces the potency of their meth. I guess from then on it will just be asking for more funding for enforcement, and stricter penalties for violators.

It’s also worth noting that the first step above isn’t really the first step down the slippery slope of pseudoephedrine regulation, just the most notable. There’s a long history of gradually increasing regulations, detailed nicely in this paper from the American Economic Review:

There were significant changes in the federal regulations enacted in 1988, 1993, 1996, 1997, 2000, and 2005. In 1988 the Chemical Diversion and Trafficking Act (CDTA) imposed reporting, record-keeping, and import/export notification requirements for regulated transactions in bulk (powder) ephedrine and pseudoephedrine. However, it did not control tablets or capsules. The Domestic Chemical Diversion Control Act (DCDCA) was passed in 1993 and implemented in 1994 and 1995. The legislation removed the record-keeping and reporting exemption for single-entity ephedrine products. The DCDCA also required distributors, importers, and exporters of List I chemicals to register with the DEA. The DEA could deny or revoke a company’s registration without proof of criminal intent. In 1996 the Methamphetamine Control Act (MCA 1996) regulated access to over-the-counter medicines containing ephedrine. The following year, the Methamphetamine Control Act (MCA 1997) regulated products containing pseudoephedrine or phenylpropanolamine with or without other active ingredients. Significant elements of the MCA were implemented in early 1998. In 2000, the Methamphetamine Anti- Proliferation Act (MAPA) established thresholds for pseudoephedrine drug products. Finally, in 2005 the Combat Methamphetamine Epidemic Act (CMEA) included limits on retail over-the-counter sales of products containing ephedrine, pseudoephedrine, and phenylpropanolamine.

Some of these may have been perfectly reasonable regulations, but it’s important to see where these seemingly sensible regulations have brought us, and where they appear to be leading us.

Also important is the result of the aforementioned study, which looked at the impact of a huge supply disruption in the illicit pseudoephedrine market by the DEA. Despite the huge success of the crackdowns in reducing supply and increasing prices, the long-run results they found are not encouraging for those who want to stop meth use by supply disruption:

The DEA successfully shutting down two major precursor suppliers in mid-1995 significantly disrupted the supply of methamphetamine. The evidence suggests that, at the peak of the short-age, supply was reduced by over 50 percent in California. During the four months after the intervention, the price per gram of methamphetamine tripled, and purity dropped from 90 percent to less than 20 percent. Prices recovered within 4 months, while purity required 18 months to recover to 85 percent of its original level.

This is quite possibly the DEA’s greatest success in disrupting the supply of a major illicit substance. This success was the result of a highly concentrated input supply market and consequently may be difficult to replicate for drugs with less centralized sources of supply, such as cocaine and heroin. That this massive market disruption resulted in only a temporary reduction in adverse health events and drug arrests, and did not reduce property and violent crimes, is disappointing.

The slogan for regulation like this  should be “Contrary our assurances that they would, the powers you’ve granted us to stop this problem have not worked. Therefore we need more powers, and we assure you they will work.”

The Wall Street Journal reports on a victory against a case of occupational licensing that appears to be pure protectionism:

Travis County District Court Judge Orlinda Naranjo ruled that the state board was out of bounds in early 2007 when it began ordering more than two dozen nonlicensed equine dentists to quit working. The board failed to conduct studies or seek public input before abruptly deciding that only veterinarians could float teeth. Judge Naranjo decided the disregard for due process by the board invalidated the new policy….

Horse-teeth floating is a lucrative job. Some practitioners say they can make $300,000 a year, and those who do it say it’s straightforward and requires no special training. But some veterinarians fear that unskilled floaters will damage the horse’s gums or strip away protective enamel.

The case came as a result of the Institute for Justice, the non-profit libertarian organization who does this sort of thing. Fear not horse-teeth floating veterinarians, protectionism is on the way:

Texas, however, likely will continue to press the issue, meaning the victory could be fleeting. Dewey E. Helmcamp III, executive director of the veterinary medical examiners board, said he feared the ruling puts horses in danger and expected both the veterinary board and the state legislature to take up the issue soon.

“It is safe to say that we will move by rule adoption to restrict in some fashion the unfettered practice of teeth floating by lay persons unless a veterinarian is involved with some form of supervision,” Mr. Helmcamp said.

Pushing for “supervision” seems to be a trend in occupational licensing when a restrictive rule that insiders fight for becomes accepted as unnecessary. If they can’t force you to pay them to perform the service, then they can at least force you to pay them to supervise. Dental hygienists become tethered to the supervision of dentists, nurse practitioners are required supervision by doctors, etc. Sometimes the regulation requires is as little doctors being available by phone, as in the case with retail clinics in some states, which by clearly diminishing the probability that they are making anyone safer makes the pure rent seeking nature of the law even more obvious.

 

hat tip from David Wessel via twitter @davidmwessel

I have argued that the slippery slope of paternalism is real, and we are sliding down it. Defenders of paternalism argue there is no slippery slope because a) where would we fall from here? and b) why haven’t we begun sliding yet? I rush to point out paternalism that targets sugar and salt, and the defenders argue “Well, that’s just good policy. Let me know when we’ve actually started sliding down the slippery slope”. What happens is paternalists are forever moving the goalposts, and declaring the newest ban or tax just reasonable policy. Their burden of proof demands that that we slide two, three, or four steps down the slope at once instead of one step at at time, since the one step we’re taking now is just reasonable. We’re always seemingly at the bottom of the slope, and things aren’t so bad from here are they?

Well folks, we’ve reached a new slope bottom: San Francisco has banned the McDonalds Happy Meal.

Since paternalism defenders will surely claim this is “just reasonable policy, and if there is a slippery slope then where could we possibly slide to next?”, let me repeat what I wrote awhile ago:

I think it would be useful to for critics of the slippery slope theory of paternalism to demarcate now what future policies would constitute evidence that they are wrong, because my guess is the point of demarcation will move right along down the slope with policy. Several years ago many of todays critics of slippery slope theory would have said that an attempt to regulate salt would constitute evidence. But now, farther down the slope, salt regulation is just sensible policy.

When the Institute of Medicine recommended broad, draconian regulation of salt last year, I pushed back against the idea, one might say, obsessively. Now, via Marion Nestle, comes a new paper in The American Journal of Clinical Nutrition arguing that the current level of sodium intake is not a problem for the population. The article comes with an accompanying editorial titled  “Science trumps politics: urinary sodium data challenge US dietary sodium guideline” that closes with this appeal:

The analyses of extensive measurements of 24-h UNaV, which these 2 reports have collected from the medical literature over the past 5 decades, are compelling. They provide plausible, scientific evidence of a “normal” range of dietary sodium intake in humans that is consistent with our understanding of the established physiology of sodium regulation in humans. This scientific evidence, not political expediency, should be the foundation of future government policies, thus respecting the known and unknown scientific complexities surrounding sodium’s role in health and disease. Guidance for sodium intake should target specific populations for whom a lower sodium intake is possibly beneficial. Such an approach would avoid broad proscriptive guidelines for the general population for whom the safety and efficacy are not yet defined. An appropriate next step is not to lower the sodium guideline further.

You can find my previous coverage of salt regulation here, herehereherehere, and here.

Arguing for more generous mandatory vacation laws, Ezra Klein writes:

Which goes to the reality of the situation, which is not that workers and employers “flexibly choose an arrangement that works for them.” Employer-employee relations are rarely so idyllic. Broadly speaking, employees with the power to demand more paid vacation do so, and employees without the power to demand more paid vacation get less — or in some cases, no — paid vacation. A law guaranteeing paid vacation would primarily tilt the playing field toward low-income workers, rather than against them, as is the case now.

The problem with this is defining the employer/employee “power” in terms of vacation setting only.  If an employer has the bargaining power negotiate a deal where the employees total compensation is less than their marginal product of labor , then they will have the power to negotiate lower wages when laws mandate less days of work. Or they can just take those hours back by negotiating longer work weeks, shorter breaks, working harder, or something like that. Unfortunately you can’t write a law mandates wages be equal to marginal product of labor, and there will be unintended consequences of any law that attempts to restrict hours whereby employers cash in their bargaining power in some other form.

UPDATE: And if you think only zany libertarians believe that labor markets work, here is Yglesias arguing basically the same thing several years ago.

In discussing ways to stimulate the housing market, Felix Salmon wonders why we aren’t seeing more landlords buy up cheap homes to rent:

The backstory here is basically the big secular shift that Richard Florida talks about a lot, especially in his latest book. In order to have more renters we’ll need more landlords, and they don’t seem to be buying, record-low mortgage rates notwithstanding. What’s going to entice them into the market?

One way to encourage more landlords in some areas would be to remove rent controls. Allowing landlords to raise prices increases the value of the investment to them, and thus increases their willingness to pay.  In most places in the country this has gone by the wayside, but according to the most recent American Housing Survey there are still 529,000 housing units subject to rent control. That’s nothing to sneeze at.

Are there any other regulatory burdens preventing people from becoming landlords? The legal documents required are pretty lengthy, but I can’t picture that being a serious impediment. Any suggestions?

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