Tag Archives: regulation

It All Depends on What Your Definition of “Job” is….

I’m getting tired of politicians piously declaiming that “government can’t create jobs.” (That statement is generally followed by that candidate’s jobs plan. Irony, anyone?)

The truth is that even if you reject the notion that public policy can create an atmosphere that facilitates job creation, government is a huge employer. Almost one of every five American workers is employed in the public sector – working in our schools, colleges, universities, police and fire departments, and providing many other vital public services. One of the biggest drags on employment since the start of the Great Recession–one of the reasons that job creation has not been more robust–is that state and local governments have laid off so many of those public sector workers. Such job growth as has occurred has been almost entirely in the private sector .

Those public sector jobs (we used to call them “public service” jobs) have become a handy target for ideologues who rant about bloated government and overpaid public sector workers, but the inconvenient truth is that modern society requires educators and police officers and people who work at the BMV. When their ranks get too thin, we complain about government inefficiency, or insufficient public safety, or classrooms that are too large.

A modern, complex society requires an agency that monitors the environment, that oversees food and drug quality (more meningitis, anyone?) and performs numerous other tasks that individuals in urban environments cannot do individually. Unfortunately, we still need soldiers. All these people may be bloated bureaucrats in the public imagination, but when that schoolteacher or firefighter is furloughed, we are suddenly faced with reality.

Of course, even the politicians who are fond of declaiming that government can’t create jobs betray their hypocrisy by accusing “big government” of killing jobs with taxes and regulation. Their claim–implicit and explicit–is that lower taxes and less regulation will foster job growth. But when tax cuts imperil our ability to provide essential services, jobs go elsewhere. When we go too far with deregulation, we get more instances like the recent deaths from meningitis.

I know it isn’t as satisfying as making sweeping proclamations about the evils of government and the glories of the private sector, but we need to admit that modern life is complicated. We need the right levels of taxes, the proper regulation. Those things need to be carefully calibrated to achieve our goals, not subjected to simple-minded “either-or” formulations.

And we need to laugh out loud the next time a political figure says that government doesn’t create jobs.

Comments

You’ll Never Get Your Hair Cut in this Town Again

Recently, a colleague of mine was asked to research the impact of professional licensing laws and to report her findings to a legislative study committee. Licensing laws have steadily proliferated—in1970, about 10% of the American workforce required a license of some sort in order to earn a living; by 2000, that percentage had doubled to 20%. It is now estimated to be around 29%.

Lest we think of these requirements as evidence of “big brother” or the much-deplored (and largely fanciful) triumph of an insatiable governmental regulatory fervor, most of these rules are the result of lobbying efforts by the occupational groups being regulated. The result is that Indiana—like many states—requires that workers be licensed before they can shampoo or braid your hair, hypnotize you, or decorate your family room.

Licensing laws are justified by concerns for public safety. We license doctors because most patients lack the knowledge to spot charlatans, and the consequences of what academics call “information asymmetry” can be fatal. We license architects and engineers because building collapses are similarly consequential. This justification seems weaker when we get to shampoo girls and interior decorators.

There is statistical evidence that licensing acts as a barrier to entry into a profession, and also as a barrier to labor mobility (since states have different requirements, licenses are considerably less portable than one might imagine). There is also clear evidence that licensing raises consumer prices—depending upon the profession, those increases range from 4-35%.

The study committee was weighing these benefits and burdens, and considering whether other means of protecting consumers in lower-risk situations might be more cost-effective. Certification, for example, might offer a middle ground. Physicians with specialties use this approach—they have numerous board certifications that are administered by professional organizations. Government isn’t involved, and taxpayers don’t pay the administrative costs, but consumers have the benefit of information about that particular doctor’s training and expertise.

Enter political reality.

Facebook postings warned of disease spread by unclean cosmetic instruments. Tweets went out to rally those in the affected occupations. On the day of the hearing, swarms of scissors-wielding hairdressers (and for all I know, livid interior designers and angry hypnotists) descended on the Indiana Statehouse. My colleague, somewhat shell-shocked, reported that those whose scissors were confiscated by security were furious—evidently it hadn’t occurred to them that weapons couldn’t be taken into the Statehouse. She may have to leave town to get her hair cut after this, and she wasn’t even there to advocate de-regulation; she was just reporting what the relevant research showed.

I am not a betting woman, but I’d give odds against any change in the status quo. As any political scientist can confirm, it is easier to stop change than to effect it.

There are a couple of lessons here, for those interested in reality, rather than the ideologies of Right or Left.

The Right needs to admit that government regulations are just as likely to be a product of the economic self-interest of the regulated industry as the expression of authoritarian impulses. At the state level, much of the drumbeat for licensure reflects the (understandable) belief that one’s occupation should be elevated to the status of a profession; much more comes from a less noble desire to restrict entry and increase profits.

The lesson for the Left is that regulations do, in fact, increase costs, and that they are not always the best way to achieve public goods. The perceived benefits in public safety must be weighed against those costs.

The lesson for my colleague is to avoid angry hairdressers brandishing scissors.

Comments

It’s Complicated

It’s election season, and as I’ve watched the various ads, debates and speeches—and grown impatient with the slogans and posturing—it’s occurred to me that the current complexity of our society and world may be outstripping our ability to govern ourselves.

Invoking Ronald Reagan or FDR appeals to partisans, and pledging fealty to American values or ones belief in American Exceptionalism (rarely defined) may provide a window into the philosophical orientation of the speaker, but these invocations give us no clue to how the candidate proposes to solve the growing numbers of problems that aren’t amenable to ideological solutions.

I don’t blame the candidates for this. After all, how many of us, however well educated and informed, really have the background to understand the complicated issues we face?

Take economic growth and job creation, and arguments over whether the proper solution is more stimulus or more austerity. I find certain economists’ arguments more compelling, but not because I have any expertise in economics. Like most of us, I read the competing arguments, compare the assertions to what I (think I) know, and decide which proposals seem most reasonable. Add in the European debt crisis, and I’m pretty much going with my gut.

Similarly, ongoing debates about government regulation are typically posed as “more” or “less,” when the real question is “which ones.” How many of us really know enough to opine about the safety of fracking, or the maximum amount of arsenic that’s safe in our drinking water?

The recent hysteria over health care reform was another case-in-point. That the American health care industry (it hasn’t been remotely coherent enough to be called a “system”) is a wasteful, costly monstrosity is admitted by virtually everyone. The question isn’t whether to keep it or change it; failure to change it will bankrupt the country. The question is how, and I defy any of the folks who got up and screamed at Town Hall meetings to offer a comprehensive, workable alternative to the Affordable Care Act—or even to demonstrate a grasp of how things currently work. This is not a defense of the Act (I personally favored “Medicare for All”), because I do not know enough to attack or defend it. My point is that neither did most of the people doing the attacking and defending.

Recognizing the limits of what “we the people” understand points to an uncomfortable challenge. When should democratic processes decide policies, and when should we trust impartial technocrats?

I am generally comfortable leaving such things as the assignments of air lanes, food safety standards, the disposal of chemicals and hundreds of similar decisions in the hands of people who actually have expertise in such matters. I want real scientists deciding whether global climate change is real, not Rick Perry. On the other hand, as we saw during the last administration, the people we elect can always appoint dubious “experts” who will favor solutions desired by their political allies.

Back before our politics became so toxic, we used to say that there is no Republican or Democratic way to pick up the garbage. There’s also no Republican or Democratic way to address food safety, environmental degradation, air traffic control, stock fraud and a million other tasks that government must provide.

None of this is to suggest that a candidate’s philosophy of government is irrelevant. The way in which a President or Mayor approaches the job will inevitably be guided by his or her belief in the proper role of government, and that’s as it should be.

We just shouldn’t elect people who mistake slogans for solutions.

A Seemingly Simple Question

The job of the School of Public and Environmental Affairs, where I teach, is to produce thoughtful public and nonprofit managers—people who can deal with the increasing complexities of public and regulatory policy. That requires spending a good deal of time analyzing what rules government should and should not enact.

Rulemaking is an especially important task of the various agencies set up to regulate highly technical industries like telecommunications. Too little regulation and the strong will take advantage of the weak; too much, and it can stifle competitiveness. In highly specialized, technical areas, corporate interests can—and do—lobby in relative secrecy for sweetheart deals, or—even worse—to prevent passage of regulations that would benefit the general public.

Case in point: mobile phones and broadcast radio.

Around the world, over 1.1 billion phones contain chips that allow them to receive radio broadcasts. Although it is estimated that 33% of phones here in the U.S. have those same chips (which cost approximately 30 cents each), in our phones they’ve been turned off. So people living elsewhere can and do listen to radio on their cell phones, but we Americans can’t.

That leads to two questions: why not, and why does it matter?

Cell phone users in the U.S. can’t choose to have radio on our phones because when the ability to download first threatened the music industry’s business model, the carriers—AT&T, Verizon, etc.—thought including broadcast radio would undermine their ability to sell music packages. With the passage of time, and development of free services like Pandora, it became obvious that there wasn’t going to be a market for such sales, but carriers continue to block radio from cellphones.

That refusal mystifies me. When you download news or music to your Blackberry or IPhone, you are using a lot of bandwidth, and bandwidth costs carriers a lot of money. (Granted, they pass along the cost to users when they can.) Turning on that 30 cent chip would free up badly needed bandwidth and save carriers money. As an observer with—admittedly—a very minimal understanding of the industry, I find their continued resistance to offering radio puzzling.

If the issue was just that carriers are making a seemingly dumb business decision, it wouldn’t make much difference to most of us. (I’m certainly not going to lose sleep over AT&T’s profit margins!) The reason this matters to the rest of us is that it significantly affects public safety.

When natural disasters occur—think Joplin, Missouri—the government needs to be able to issue immediate alerts, and those alerts need to reach the widest possible audience in the shortest possible time. It is literally a matter of life and death. In 2006, the federal government passed the Warn Act, requiring wireless providers to develop the capacity to issue those emergency alerts. Thus far, the industry has done very little to build the widespread text-messaging system that it is developing to satisfy the Act.

Adding radio to cell phones would allow government to use the existing emergency broadcast system, which has proven much more reliable than cell phone towers. (When electricity goes, so does the cell system.) Furthermore, texting may get the attention of young people, but many of the older Americans most vulnerable to natural disasters are unlikely to check regularly for text messages.

The lack of an emergency notification system is a problem government can solve tomorrow by passing a simple regulation requiring carriers to use that 30 cent chip. Experts insist that there are no technical impediments, and costs would be far less than building out a text-based notification system.

Why doesn’t the government require this? What am I missing?

Comments