Tag Archives: regulation

Flavors of Freedom

There is a book review in the latest issue of the Washington Monthly of “No Freedom Without Regulation: The Hidden Lesson of the Subprime Crisis.”  It was written by a Professor Singer of Harvard Law School, and in it, he considers a type of freedom that gets short shrift from the various special interests who are constantly insisting that any and all government regulation constrains our liberties.

I found this passage illuminating:

When the state sets minimum standards of safety and transparency for the manufacture and sale of consumer products, it affords me the freedom to buy a toaster oven without first hiring a lawyer to read the fine print and an electrician to look over the specs to make sure it won’t catch on fire. Other restrictions protect us from negative externalities. Building codes may limit my neighbor’s ability to contract for the construction of a house with cheap material and bad wiring, but it protects my house from the fire likely to erupt in his.

As I have noted in previous posts, I’m grateful for the Food and Drug Administration that relieves me of the need to test that chicken I bought at Kroger for e coli. (Before the recent news from Flint, Michigan, I used to be more grateful for the EPA’s monitoring of water quality–now, I’d like to see those regulations stiffened up a bit…)

The ongoing debate about government regulatory activity displays all the deficiencies of American policy arguments generally: it oversimplifies, assumes an “either/or” answer, and focuses on the wrong questions.

Can regulation be too stifling? Can a “nanny-state” approach impose unnecessary costs on businesses and consumers? Sure.

Can the lack of appropriate regulation endanger innocent people, and impose additional costs on those same businesses and consumers? You betcha!

The questions we should be addressing are the “how” questions: is this particular regulation necessary? Is it “narrowly tailored” to accomplish its goal? Does it make sense from a cost-benefit standpoint?

We’ll still disagree, still argue about the extent and substance of regulatory activity. But at least we’d be arguing about the right things.

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Bought and Paid For

A Federal District Court judge in Washington recently upheld new Obama administration rules that deny federal aid to career training programs that charge outrageous amounts, saddle students with crushing debt, and give them useless degrees in return.

As the New York Times editorialized

The ruling strongly reaffirms the government’s authority to regulate these often-corrupt programs — and comes at a time when federal and state investigations are uncovering fraud and misconduct by for-profit schools all over the country. Regrettably, however, Republicans in both houses are moving bills that would block the Obama administration from enforcing the rules.

As the editorial notes, the new rules were inspired by data showing that students in for-profit schools account for only about 12 percent of college enrollment, but nearly half of student loan defaults.

We the taxpayers have been footing the bill for these predatory practices.

Research has consistently shown that graduates of for-profit institutions are more likely than graduates of other institutions to have debt of more than $40,000 by the time they leave school, and far less likely to find the employment promised by those marketing these programs.  What is particularly odious about these “schools” is that they deliberately target veterans, minorities and the poor.

Republican attempts to block the new rules are not sitting well with organizations that work on behalf of consumers, veterans and the poor. This spring, a coalition of these groups sent a letter reminding Congress that 37 state attorneys general are jointly investigating allegations of fraud in for-profit schools. Various investigations have already uncovered deceptive tactics; dismal graduation rates; false or inflated job placement rates; and dubious sales and admissions policies that target veterans and students of color.

It’s hard to argue with the Times‘ conclusion.

At issue here is an industry that routinely exploits the country’s most vulnerable citizens and fleeces the federal student aid program at the same time. The administration’s effort to bring it under control deserves support, not legislative sabotage.

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Struggling Against Impotence

A friend of mine who lives in Wisconsin sent me a link to a story in his local paper, reporting on a study about hormone levels in the waterways. 

“All over the country, chemicals known to disrupt or act like hormones seem to have permeated the waters and may be harming wildlife — or people.

‘The more you know, the more scared you are,’ said Kimberlee Wright, executive director of the Wisconsin-based nonprofit law center Midwest Environmental Advocates.”

Just one more example of our human interdependence and individual powerlessness–an example to join with random terrorist attacks like the most recent example from Boston, industrial accidents like the one that leveled much of a small Texas town last week, the periodic outbreaks of e coli caused by contaminated foodstuffs….the list goes on.

In a country and culture that has always emphasized individual responsibility and self-determination, the increasing evidence of our individual impotence is particularly disorienting and destabilizing. We are forcibly reminded that we have few alternative to collective measures–government measures–to protect us. We have to trust that those we entrust with responsibility for public health and safety are doing their jobs properly–that police and OSHA investigators and FDA inspectors are well-trained and honest, and that there are enough of them.  In our complex modern world, the only alternative to that trust is withdrawal from the human “grid”–retreat into the woods somewhere, and a life without modern amenities.

No one likes feeling impotent. I have a hunch that much of the “crazy” we see around us–the anti-government “patriots,” the conspiracy theory wackos, the stereotypical angry old white guys–is a response to those feelings of impotence. The notion that we actually have to rely upon our common institutions, the constant reminders that our common lives are complicated and interwoven, and that we require a social infrastructure upon which to “stand on our own two feet” is particularly galling to people who grew up in a less interdependent time. It’s one more element of the dizzying change that confuses and infuriates them.

The reality is, in today’s world, we can’t afford to make government small enough to drown in a bathtub. As unwelcome as that truth is, we need agencies with the authority to require safe factories, to prevent harmful discharges in our waterways, to ensure the food at the supermarket is uncontaminated…Instead of starving government, we need to make sure that it is doing what it is supposed to do–and only those things–and doing them well.

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Live and Let Live in a Connected World

Watching the Indiana legislature is sort of like driving past a big wreck….hard not to slow down and stare, even when you know you should look away. The debate over a measure intended to close down “clinics” (aka Planned Parenthood) by requiring them to build mini-hospitals and force patients to undergo two trans-vaginal ultrasounds got me thinking more generally about the nature of law in our contemporary society.

I often tell students that the underlying premise of the Bill of Rights is “live and let live.” There was a libertarian philosophy that heavily influenced our approach to government, a respect for the individual right to personal autonomy, best summed up as: people have a right to live their lives as they see fit, so long as they don’t harm the person or property of a non-consenting other, and so long as they are willing to extend an equal right to self-determination to others.

The seeming simplicity of that construct belies the difficulty Americans have had in applying it. The confounding issue is the nature of harm (and sometimes, as in the so-called “abortion wars,” the definition of “person”).

Smoking is a good example. If you are an adult, the government has no business interfering with your choice to engage in a bad habit. When it became known that passive smoke is harmful, however, the government was justified in stepping in with regulations intended to protect non-smokers from the effects of your bad habit. Seat belts are a more dicey proposition; there is an argument that drivers who fail to buckle up sustain more injuries in accidents, thus driving up the insurance premiums for everyone else, but that’s a pretty speculative harm on which to base a fairly substantial intrusion.

The problem is, as a society, we are becoming more and more connected. Increasingly, the actions of one person affect many others, and if those actions threaten some sort of harm, we look to government to intervene. Worse, the Puritans who have always been a part of American culture remain with us, insistent scolds who want government-as-moral-nanny-state, government that both protects us from ourselves and prevents us from sinning (as they define sin).

We may never agree on where to draw the line. Government surely has the right to tell us we can’t rob the local liquor store, and it just as surely has no right to insist that we eat our broccoli, but between those poles lies great conflict.

We need to become much more thoughtful about the nature of the harms that justify government interventions in our lives. I understand the ongoing debates about abortion–those debates spring from very different beliefs about “personhood.” Seat belts, not so much.

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The Frame Game

It’s a new year, and with it has come a whole new crop of state and local elected officials. It’s early, but the signs are not auspicious.

One of the first official pronouncements from Indiana’s newly inaugurated Governor was a solemnly-delivered promise to stop regulating—to cease issuing administrative rules except when “absolutely necessary.” Cynics noted that the language of the executive order pretty much anticipated business as usual, but they missed the point of the exercise, which was to confirm the new Governor’s conservative, small-government “bona fides.”  And what better way to accomplish that than by demonstrating his profound misunderstanding of his own job responsibilities and the role of the state in the operation of the market?

What is the proper role of government in a capitalist system? It is to act as “umpire” or referee, ensuring that everyone plays by the rules. Wasn’t it Teddy Roosevelt who reminded us that monopolies distort markets? If one company can dominate a market, that company can dictate prices and other terms with the result that free-market transactions—defined as exchanges between a willing buyer and a willing seller both of whom possess the necessary relevant information—will no longer be a genuinely voluntary transaction.

If Manufacturer A can avoid the cost of disposing of the waste produced by his factory by dumping it into the nearest river, he will be able to compete unfairly with Manufacturer B, who is following the rules governing proper waste disposal.

If Chicken Farmer A is able to control his costs and gain market share by failing to keep his coops clean and his chickens free of disease, unwary consumers will become ill.

Most economists agree that in order for markets to operate properly, government must act as an “umpire” in such situations, assuring a level playing field.  They use the term “market failure” to describe  three situations in which Adam Smith’s “invisible hand” doesn’t work: when monopolies or corrupt practices replace competition; when so-called “externalities” like pollution harm people who aren’t party to the transaction (who are neither buyer nor seller); and when there are “information asymmetries,” that is, when buyers don’t have access to information they need to bargain in their own interest.

Policymakers and economists may disagree about the need for particular regulations, or the optimum number of regulations, or the relative costs and benefits of suggested regulations, but most do agree that capitalism requires appropriate regulation. Unregulated markets can lead to a very different system, a system about which I have previously blogged, called corporatism. In corporatist systems, government regulations favoring powerful corporate interests are the result of lobbying by corporate and monied special interests that stand to benefit from them. You might think of it as a football game where one side has paid the umpire to make calls favorable to that team.

The rhetorical framework employed by Governor Pence, where the forces of Leviathan–defined as the government in which he serves–are in opposition to the creative energy of the market, has been a staple of American politics for at least three decades. Unfortunately, it’s an incomplete and misleading framework, and its continued use undermines both the government’s ability to do its job and, ironically, citizens’ ability to impose appropriate limits on government authority.

American politics has devolved into an exchange of bumper-sticker slogans and labels barely masquerading as discussion. Terms like capitalist, fascist, socialist and communist are used as epithets by people who rather clearly have no real acquaintance with the elements of those economic philosophies. The result is a discourse that has more in common with a mud fight than a debate, a faux “conversation” where everyone is talking nonsense, but it really doesn’t matter because no one is listening anyway.

Those of us who teach public administration talk a lot about transparency. An essential element of that transparency is a “back to basics” honest discussion about the role of government. Americans may be talking a lot, but we are not having that discussion.

It’s seductively easy to blame “Washington” or “government” or “the Statehouse” for doing too much or not doing enough or doing the wrong things. It’s a lot more difficult to have an adult discussion with one’s constituents about the complexities and ambiguities of decision-making in the administrative state. I get that: no one was ever elected using a campaign slogan proclaiming “On the one hand…but on the other hand..” (I know. I once tried.)

Until we elect people who are willing to have that honest discussion, however, we will continue to see officeholders—many of whom have spent their entire lives in government—rhetorically biting the hand that feeds them, and continuing to undermine the enterprise they claim to serve by mischaracterizing the questions we face.

Government officials do not face a choice between regulation and the free market. They face a much more difficult question: which regulations will protect the operation of the market and ensure a level playing field? How much is enough, and how much is too much? What are the costs and what are the benefits? Who will bear those costs?

Elected officials who don’t understand that this is the question aren’t likely to endorse sensible answers.

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