Category: Public Choice

Italian Bureaucracy Leaves Innovative Restaurateur Feeling “Psychologically Violated”

(p. A7) ROME–The campaign leading up to Italy’s national elections on March 4 [2018] has featured populist promises of largess but neglected what economists have long said is the real Italian disease: The country has forgotten how to grow.
Take Gianni Angelilli’s pizzeria in downtown Rome. He uses an innovative dough mix and flexible cooking methods, drawing long lines and rave reviews. But Italy is too bureaucratic, the locals have no money and his ambition isn’t what it used to be, Mr. Angelilli said. If he opens more outlets, they will be abroad.
“Now, foreigners have more desire to eat well than Italians,” he said. “Italy is dead. Italy is finito.”
. . .
Italian politics have become measurably more chaotic since the country’s old party system–largely frozen during the Cold War–collapsed amid corruption scandals in the early 1990s. Data collected by Einaudi economist Luigi Guiso and others show that since 1992, coalitions have become more likely to crumble, lawmakers to defect and governments to need confidence votes in parliament. Politicians jostling for attention push more frequent, longer and more-complicated legislation.
“An excess has cluttered the bureaucratic machine,” says Mr. Guiso. “The country has become cumbersome.”
Yet the weakness of transient politicians has paradoxically made the public administration more powerful, at the same time as constant legal changes immobilize it, he says.
Mr. Guiso has practical experience. He is helping to set up a government-supported program to send young Italians to learn about entrepreneurship in Silicon Valley and at U.S. business schools, and he said Italian civil servants decided a tender offer inviting U.S. organizations to participate could be published in Italian only. After much persuasion, the civil servants agreed to publish the tender in English too–but insisted all applications must be in Italian, said Mr. Guiso. He said political friends apologized, saying there was nothing they could do.
Mr. Angelilli said his encounters with Italian bureaucracy while running his Pinsere pizzeria have left him feeling “psychologically violated.” He said he had to pay a fine recently because his oven’s air extraction, made to comply with European, national and regional laws, ran afoul of new city rules.

For the full story, see:
Marcus Walker and Giovanni Legorano. “The Real Italian Job: Rev Up Productivity.” The Wall Street Journal (Wednesday, Feb. 28, 2018): A7.
(Note: ellipsis, and bracketed year, added.)
(Note: the online version of the article has the date Feb. 27, 2018, and has the title “Italy: The Country That Forgot How to Grow.”)

Occupational Licensing Hurts Military Spouses

(p. A15) Heather Kokesch Del Castillo launched a dietary advice business in Monterey, Calif., in 2014. The business grew and Ms. Del Castillo eventually established a nationwide client base as a “health coach.” But when her husband, who is in the Air Force, was transferred to a base in Florida, her business hit a roadblock. A Florida Department of Health investigator showed up at the door of their new home with a cease-and-desist letter and a $750 fine.
After nearly two years of operating her business in Florida, Ms. Del Castillo learned that she had run afoul of a law requiring any person offering dietary advice to possess a state-issued license. Qualifying for that permit requires a bachelor’s degree in dietetics, a 900-hour internship, a passing grade on an exam administered by the state Commission on Dietetic Registration, and a $355 fee. A licensed dietitian had tipped off the Health Department that Ms. Del Castillo was giving unauthorized advice. She retained the Institute for Justice, a public-interest law firm, to fight the law that stripped her of her livelihood.
State licensing laws pose a particular burden on military spouses like Ms. Del Castillo. About 1 in 4 Americans need licenses to perform their occupations. In some states, florists, taxidermists and even fortune-tellers need licenses to operate. Far too often, these licenses serve less as safeguards of public health and safety than as barriers to entry. In many cases, the state-appointed boards that issue licenses are stocked with industry insiders seeking to restrict competition.
. . .
Military spouses were 10 times as likely to have moved to a new state in the past year than the average American, according to a combined 2012 study by the Treasury and Defense departments. Surveys suggest that anywhere from 35% to 50% of military spouses work in professions that require licensure, and nearly 75% of them would need to be relicensed upon transferring to a new state. Perhaps as a result, the unemployment rate for military spouses is 16%, while the national unemployment rate is only 4.1%

For the full commentary, see:
Shoshana Weissmann and C. Jarrett Dieterle. “Why Do You Need a College Degree to Give Diet Advice?; State licensing laws overly burden military spouses, who move frequently only to find they can’t work.” The Wall Street Journal (Thursday, February 1, 2018): A15.
(Note: ellipsis added.)
(Note: the online version of the obituary has the date Jan. 31, 2018.)

Politicians Build Costly Megaprojects to Burnish Their Legacy

(p. 14) Petroski, a professor of both engineering and history at Duke and the author of such books as “The Pencil” and “The Evolution of Useful Things,” brings an eye for the little things: what kinds of guardrails are best, how roads can be made safer through better signage, which paving materials last longest. One of his key lessons is that small thinking can be a virtue, because the history of infrastructure is a series of experimental and incremental improvements.
Local governments tried endless variations of asphalt and concrete before developing paving surfaces that didn’t produce excess dust or deteriorate quickly under rain and snow. They gradually built longer bridges, learning from earlier designs that worked, and that didn’t. They tried out different paint colors for lane markings, finding the ones that drivers could see best.
This little-things perspective is needed at a time when America’s infrastructure agenda is simultaneously characterized by grandiose ambitions and limited budgets. Money is tight, and infrastructure needs are going unaddressed. At the same time, despite funding limitations, politicians have a tendency to fall in love with novel, pathbreaking, expensive projects that frequently go astray, resulting in arguments against spending more on infrastructure.
. . .
Politicians aren’t drawn to megaprojects just because they believe the initial rosy cost projections and therefore underestimate the risk of complications. They also see an opportunity to build their legacy: It’s more fun to say “I built that bridge” than “I retrofitted that bridge.”

For the full review, see:
JOSH BARRO. “Getting There.” The New York Times Book Review (Sunday, March 20, 2016): 14.
(Note: ellipsis added.)
(Note: the online version of the review has the date MARCH 18, 2016, and has the title “‘The Road Taken,’ by Henry Petroski.”)

The Petroski book under review, is:
Petroski, Henry. The Road Taken: The History and Future of America’s Infrastructure. New York: Bloomsbury USA, 2016.

Incentive Packages to Big Incumbent Firms Hurt Local Start-Ups

(p. A1) When New Jersey announced a $7 billion package of tax incentives to try to lure Amazon’s second headquarters to Newark, local officials saw a chance to jump-start a city that has long struggled with poverty and joblessness.
Many economists, however, saw something else: a failed development strategy that they had hoped was falling out of favor.
. . .
(p. A15) Gina Schaefer, who owns a dozen hardware stores in the Washington area, said she did not mind paying taxes, and had learned to deal with the bureaucratic hurdles that come with running a small business in the area. But she said it was frustrating to watch local governments — three of the 20 finalists for the Amazon project are in the Washington area — roll out the red carpet for a multibillion-dollar corporation. Suddenly, she said, her tax dollars could be flowing to one of her most daunting competitors.
“There are no incentives for those of us who are already here,” Ms. Schaefer said. Alluding to Amazon’s chief executive, Jeff Bezos, she added, “Why should the richest man in the history of the world get money to open his business?”
Indeed, tax incentives tend to flow overwhelmingly to big, established companies, rather than to the local start-ups that research has shown are a more significant source of job growth. And some who have studied the issue say incentives rarely work: Companies will play cities and states off one another to save money, but ultimately base site-selection decisions mostly on other factors.

For the full story, see:
BEN CASSELMAN. “Risks for Cities In Sweetening Amazon’s Pot.” The New York Times (Sat., JAN. 27, 2018): A1 & A15.
(Note: ellipsis added.)
(Note: the online version of the story has the date JAN. 26, 2018, and has the title “Promising Billions to Amazon: Is It a Good Deal for Cities?”)

“The Transforming Power of the Individual Will”

(p. A10) “These deep transformations have started and will continue with the same force, the same rhythm, the same intensity in 2018,” the French president told his compatriots in his New Year’s Eve greetings a few days before.
Mr. Macron was hinting at the real disruptions he has brought about in French political life — in employment and fiscal policy so far, with other big jolts promised soon. Remarkably in so hidebound a country he is getting away with it.
. . .
Mr. Macron imbibed from his mentor, the late philosopher Paul Ricoeur, a belief in the transforming power of the individual will. As proof, the young president can point to his own quick rise to the top, a stunning success that undergirds many of his pronouncements.
Similarly, the changes he has pushed through so far — like his lightening of the mammoth French labor code, with barely a whimper from the opposition — only buttress the narrative of individual determination, which he now hopes to infuse in his fellow citizens.
It is an unusual position for a French politician, who for generations have emphasized the protective power of the state — and the proof of any success will come only with a significant drop in the stubborn 10-percent jobless rate, elusive so far. But already surveys show higher levels of confidence among business executives than have been seen in many years.

For the full story, see:
ADAM NOSSITER. “French President Opens Year With Scolding for Journalists.” The New York Times (Sat., JAN. 6, 2018): A10.
(Note: ellipsis added.)
(Note: the online version of the story has the date JAN. 5, 2018, and has the title “Macron Opens Year Pulling No Punches With Journalists, or Anyone.”)

Britain’s Peaceful Ceding of Global Dominance Was a “Shining Exception”

(p. A13) At Harvard, the scholar Graham Allison, with a research team, has studied the historical precedents for power transitions, and his findings are not encouraging. In almost every case, he discovered, conflict was the result. The perennial danger, he explained in “Destined for War,” published earlier this year, is that the weakening greater power will force a confrontation with its growing rival in order to stem its own decline, as Athens did with Sparta in the Peloponnesian War. The results can be disastrous, as they were for Athens.
The shining exception to the pattern is the peaceful shift in global dominance between 1870 and 1945. Kori Schake, a research fellow at the Hoover Institution, tackles this subject in “Safe Passage: The Transition From British to American Hegemony,” a remarkable and timely chronicle–living history of the best sort.
. . .
In the 1840s, the two powers clashed over the Oregon Territory. Britain, though stronger militarily, accepted a compromise that endures to this day in the U.S.-Canadian border along the 49th parallel. Then, during the Civil War, London resisted the temptation to halt the rise of a competitor-power by supporting the Confederacy–say, by breaking the Union blockade. Britain’s reasoning, in this case, rested on the self-interested desire to maintain the integrity of the blockade weapon for its own use and, in part, on a growing abhorrence of slavery.
As a result of such decisions, a peaceful transition–a “safe passage”–became possible. Its core logic, in Ms. Schake’s view, was a mutuality of ideological and geopolitical interests, a realistic grasp of shifting military and economic power, and a kind of political cross-pollination: The United States, to paraphrase Ms. Schake’s formulation, became more imperial as Britain became more democratic.

For the full review, see:
Brendan Simms. “BOOKSHELF; Make Way for the New Boss; The world’s dominant nation, as it weakens, often goes to war with its growing rival. In the 19th century, power transferred peaceably. Why?” The Wall Street Journal (Wednesday, Dec. 27, 2017): A13.
(Note: ellipsis added.)
(Note: the online version of the review has the date Dec. 26, 2017, and has the title “BOOKSHELF; Review: The ‘Safe Passage’ From British to American Hegemony; The world’s dominant nation, as it weakens, often goes to war with its growing rival. In the 19th century, power transferred peaceably. Why?”)

The book under review, is:
Schake, Kori. Safe Passage: The Transition from British to American Hegemony. Cambridge, MA: Harvard University Press, 2017.

Union Blocks Firing of Teachers Who Do Not Teach

(p. A1) Francis Blake has not held a permanent position in a New York City public school in at least five years. At his last job, in a Bronx elementary school, records show he was disciplined for incompetence, insubordination and neglect of duties — he had been caught sleeping in a classroom when he was supposed to be helping with dismissal.
Felicia Alterescu, a special-education teacher, has been without a permanent post since 2010, despite high demand for special education teachers. According to records, in addition to getting a string of unsatisfactory ratings, she was disciplined for calling in sick when she actually went to a family reunion. She also did not tell the Education Department that she had been arrested on harassment charges.
This month, Mr. Blake, Ms. Alterescu and hundreds of other teachers who are part of a pool known as the Absent Teacher Reserve could be permanently back in classrooms, as the city’s Education Department places them in jobs at city schools.
The reserve is essentially a parking lot for staff members who have lost their positions, some because of school closings and budget cuts, others because of disciplinary problems, but cannot be fired. It grew significantly as a result of a 2005 deal between the Bloomberg administration, which wanted to give principals control over hiring, and the teachers’ un-(p. A17)ion. Since then, the union has fiercely protected the jobs of teachers in the reserve, resisting attempts to put a time limit on how long a teacher can remain there.

For the full story, see:
KATE TAYLOR. “Caught Sleeping or Worse, Idled Teachers Head Back to Class.” The New York Times (Sat., OCT. 23, 2017): A1 & A17.
(Note: the online version of the story has the date OCT. 22, 2017, and has the title “Caught Sleeping or Worse, Troubled Teachers Will Return to New York Classrooms.”)

The System Is “Rigged” by the “Unelected Permanent Governing Class”

(p. 10) With its broad historical scope, Eisinger’s book lacks the juicy, infuriating details of “Chain of Title,” David Dayen’s chronicle of foreclosure fraud — another instance of white-collar crime that went largely unpunished. With its emphasis on institutions and incentives, it doesn’t serve up the red meat of Matt Taibbi’s “The Divide,” a stinging indictment of the justice system’s unequal treatment of corporate executives and street-level drug offenders. But for someone familiar with the political landscape of the contemporary United States, Eisinger’s account has the ring of truth.
After decades in which Wall Street masters of the universe were lionized in the media and popular culture, star investment bankers — rich, usually white men in nice suits — just don’t match the popular image of criminals. Democrats as well as Republicans cozied up to big business, outsourcing the Treasury Department to Wall Street and the Justice Department to corporate law firms. Even after the financial system collapsed, the Obama administration’s priority was to bail out the megabanks — to “foam the runway,” in Treasury Secretary Tim Geithner’s words. The Justice Department became increasingly staffed by intelligent, status-seeking, conformist graduates of the nation’s top law schools — all of whom had friends on Wall Street and in the defense bar. In that environment, the easy choice was to play along, strike a deal with an impressive-sounding fine (to be absorbed by shareholders) that held no one responsible, and avoid risking an acquittal or a hung jury. (The book’s title comes from then-U.S. Attorney James Comey’s name for prosecutors who had never lost a trial.) Corruption can take many forms — not just bags of cash under the table, but a creeping rot that saps our collective motivation to pursue the cause of justice. As Upton Sinclair might have written were he alive today: It is difficult to get a man to understand something, when his résumé depends upon his not understanding it.
There’s just one problem. While the “unelected permanent governing class” may have been willing to look the other way when highly paid bankers wrecked the economy, many of the workers who lost their jobs and families who lost their homes were not. Outside the Beltway, the fact that the Wall Street titans who blew up the financial system suffered little more than slight reductions in their bonuses only reinforced the perception that the “system” is “rigged” — with the consequences we know only too well. Many people simply want to live in a world that is fair. As Eisinger shows, this one isn’t.

For the full review, see:
JAMES KWAK. “Getting Away With It.” The New York Times Book Review (Sunday, JULY 9, 2017): 10.
(Note: ellipsis added.)
(Note: the online version of the review has the date JULY 5, 2017, and has the title “America’s Top Prosecutors Used to Go After Top Executives. What Changed?”)

The book under review, is:
Eisinger, Jesse. The Chickenshit Club: Why the Justice Department Fails to Prosecute Executives. New York: Simon & Schuster, 2017.

FCC Spectrum Regulations Drive Innovators to Bankruptcy

(p. A17) In 2004 the FCC moved to relax L-Band rules, permitting deployment of a terrestrial mobile network. Satellite calls would continue, but few were being made, and sharing frequencies with cellular devices made eminent sense. By 2010, L-Band licensee LightSquared was ready to build a state-of-the-art 4G network, and the FCC announced that the 40 MHz bandwidth would become available. LightSquared quickly spent about $4 billion of its planned $14 billion infrastructure rollout. Americans would soon enjoy a fifth nationwide wireless choice.
But in 2012 the FCC yanked LightSquared’s licenses. Various interests, from commercial airlines to the Pentagon, complained that freeing up the L Band could cause interference with Global Positioning System devices, since they are tuned to adjacent frequencies. Yet cheap remedies–such as a gradual roll-out of new services while existing networks improved reception with better radio chips–were available. In reality, the costliest spectrum conflicts emanate from overprotecting old services at the expense of the new. With its licenses snatched away, LightSquared instantly plunged into bankruptcy.
. . .
. . . regulatory impediments continue to block progress. Years after the L-Band spectrum was slated for productive use in 4G, it lies fallow–now delaying upgrades to 5G.

For the full commentary, see:
Thomas W. Hazlett. “How Politics Stalls Wireless Innovation; The FCC unveiled its National Broadband Plan in 2010–but couldn’t stick to it.” The Wall Street Journal (Mon., Oct. 2, 2017): A17.
(Note: ellipses added.)
(Note: the online version of the commentary has the date Oct. 1, 2017.)

The commentary, quoted above, is related to the author’s book:
Hazlett, Thomas W. The Political Spectrum: The Tumultuous Liberation of Wireless Technology, from Herbert Hoover to the Smartphone. New Haven, CT: Yale University Press, 2017.

Federal and State Mandates Constrain “Creativity in the Classroom”

(p. A11) Mrs. DeVos sees choice as a means to the end of promoting educational innovation–including within traditional public schools. “Instead of focusing on systems and buildings, we should be focused on individual students,” she says. That means encouraging young people “to pursue their curiosity and their interests, and being OK with wherever that takes them–not trying to conform them into a path that everybody has to take.”
What stands in the way? “I think a real robust defense of the status quo is the biggest impediment,” Mrs. DeVos says. She doesn’t mention teachers unions until I raise the subject, whereupon she observes: “I think that they have done a good job in continuing to advocate for their members, but I think it’s a focus more around the needs of adults” rather than students.
Many of the adults are frustrated, too. Recently I met a veteran middle-school teacher who said his creativity in the classroom has been increasingly constrained by federal and state mandates on curriculum and testing. Another teacher I know, who wants to start a charter, complains that “it is getting harder and harder to work for the idiots in traditional schools.”
That sounds familiar to Mrs. DeVos. “I do hear sentiments from many teachers like that,” she says, “and particularly from many teachers that are really effective and creative themselves. I’ve also heard from many teachers who have stopped teaching because they feel like they can’t really be free to do their best, because they’re either subtly or not subtly criticized by peers who might not be as effective as they are–or by administrators who don’t want to see them sort of excelling and upsetting the apple cart within whatever system they’re in.”
She continues: “I talked to a bunch of teachers that had left teaching that had been Teachers of the Year in their states or their counties or whatever. I recall one of the teachers said he just felt so beaten down after being told repeatedly to have his class keep it down–that they were having too much fun, and the kids were too engaged. Well, what kind of a message is that?”

For the full interview, see:
James Taranto, interviewer. “THE WEEKEND INTERVIEW with Betsey DeVos; The Teachers Union’s Public Enemy No. 1.” The Wall Street Journal (Sat., Sept. 2, 2017): A11.
(Note: the online version of the interview has the date Sept. 1, 2017, and has the title “THE WEEKEND INTERVIEW; The Teachers Union’s Public Enemy No. 1.”)

For Innovators to Seek the Way to San Jose, City’s Bureaucrats Should “Get Out of the Way”

The passages quoted below are authored by the Democratic mayor of the city of San Jose, California.

(p. A17) Recently, states and cities have been luring companies with subsidies. . . . The commonwealth of Massachusetts and city of Boston brought General Electric headquarters to Beantown with a $145 million incentive deal.
. . .
But my city won’t be offering incentives to Amazon. Why? Because they are a bad deal for taxpayers. With many subsidies, the jobs a company brings to an area don’t generate revenues commensurate with public expenditures. The GE deal will cost taxpayers more than $181,000 for every job created in Boston. Most experts insist that other factors–particularly the presence of a skilled workforce–play a far larger role in determining boardrooms’ corporate location decisions. Moreover, some 95% of Silicon Valley’s job growth comes from new small-business formation and when those homegrown companies develop into larger firms.
. . .
A healthy economic ecosystem that supports innovation and growth is what makes a community attractive to a company like Amazon.
. . .
As elected officials, we would do well to resist ribbon-cutting and take the longer view. To attract innovative employers, let’s all stay in our lanes, create safe and attractive cities for talented people to live in, and clear bureaucratic red tape. In other words: Get out of the way.

For the full commentary, see:

Sam Liccardo. “Why I’m Not Bidding for Amazon’s HQ; San Jose won’t offer subsidies for favored corporations, which are a bad deal for city taxpayers.” The Wall Street Journal (Thurs., Oct. 5, 2017): A17.
(Note: ellipses added.)
(Note: the online version of the commentary has the date Oct. 4, 2017.)