Category: Public Choice

Government Funding Not Conducive to Serendipity

(p. 301) Even in the early twentieth century, the climate was more conducive to serendipitous discovery. In the United States, for example, scientific research was funded by private foundations, notably the Rockefeller Institute for Medical Research in New York (established 1901) and the Rockefeller Foundation (1913). The Rockefeller Institute modeled itself on prestigious European organizations such as the Pasteur Institute in France and the Koch Institute in Germany, recruiting the world’s best scientists and providing them with comfortable stipends, well-equipped laboratories, and freedom from teaching obligations and university politics, so that they could devote their energies to research. The Rockefeller Foundation, which was the most expansive supporter of basic research, especially in biology, between the two world wars, relied on successful programs to seek promising scientists to identify and accelerate burgeoning fields of interest. In Britain, too, the Medical Research Council believed in “picking the man, not the project,” and nurturing successful results with progressive grants.
After World War II, everything about scientific research changed. The U.S. government–which previously had had little to do with funding research except for some agricultural projects–took on a major role. The National Institutes of Health (NIH) grew out of feeble beginnings in 1930 but became foremost among the granting agencies in the early 1940s at around the time they moved to Bethesda, Maryland. The government then established the National Science Foundation (NSF) in 1950 to promote progress in science and engineering. Research in the United States became centralized and therefore suffused with bureaucracy. The lone scientist working independently was now a rarity. Research came to be characterized by large teams drawing upon multiple scientific disciplines and using highly technical methods in an environment that promoted the not-very-creative phenomenon known as “groupthink.” Under this new regime, the competition (p. 302) among researchers for grant approvals fostered a kind of conformity with existing dogma. As the bureaucracy of granting agencies expanded, planning and justification became the order of the day, thwarting the climate in which imaginative thought and creative ideas flourish.

Source:
Meyers, Morton A. Happy Accidents: Serendipity in Modern Medical Breakthroughs. New York: Arcade Publishing, 2007.

Consumers Cannot Count on Regulators for Safety

(p. A1) WASHINGTON — The nation’s top auto regulator faced withering criticism across Capitol Hill on Tuesday over its failure to identify a deadly defect in General Motors cars — even as its top official tried again and again to shift the blame back to the automaker.
Hours after a House committee released a scathing report about the agency’s yearslong failure to spot the ignition-stalling defect that has now been linked to 19 deaths, a Senate subcommittee hearing turned angry and tense. Lawmakers from both parties accused the agency, the National Highway Traffic Safety Administration, of overlooking evidence that could have saved lives and of deferring to the auto industry rather than standing up to it.
The agency was “more interested in singing ‘Kumbaya’ with the manufacturers than being a cop on the beat,” said Senator Claire McCaskill, the subcommittee’s chairwoman, in sharp questioning reminiscent of her interrogation of G.M.’s chief executive, Mary T. Barra, in a hearing before the same panel in the spring.
. . .
(p. B2) “You want to obfuscate responsibility, rather than take responsibility,” Ms. McCaskill, a Missouri Democrat, said, her voice rising. “We’ve all said shame on G.M.” She added, “You’ve got to take some responsibility that this isn’t being handled correctly.”
. . .
Watching from a seat just behind Mr. Friedman [deputy administrator of the N.H.T.S.A.] was Laura Christian, the birth mother of Amber Rose, a teenager who was killed in 2005 when her Cobalt ran off the road, into a tree, and the air bags did not deploy.
As Mr. Friedman continued to speak, Ms. Christian said she could feel herself getting flushed and increasingly upset over the agency’s lack of remorse.
“It was extremely frustrating to hear David Friedman go on about how his agency was this wonderful thing,” she said. “All along they missed the glaringly obviously defects.”

For the full story, see:
HILARY STOUT and AARON M. KESSLER. “Congress Castigates Auto Regulator Over a Deadly G.M. Defect.” The New York Times (Weds., SEPT. 17, 2014): A1 & B2.
(Note: ellipses, and bracketed words, added.)
(Note: the online version of the story has the date SEPT. 16, 2014, and has the title “Senators Take Auto Agency to Task Over G.M. Recall.” In the Midwest edition that I receive, this article started on p. A1; according to the indexes, and the online edition, in the New York edition, the article started on p. B1.)

Catering to Auto Dealers, State Governments Restrict Consumers Right to Buy Direct from Tesla

(p. 7B) Backed by dealership trade groups, several states, including Arizona, New Jersey, Maryland, Texas and Virginia, have banned or restricted Tesla from selling to the public.
The Iowa Department of Transportation asked Tesla to stop its West Des Moines test drives after being alerted to the event by the Iowa Automobile Dealers Association, said Paul Steier, director of the DOT’s Bureau of Investigation and Identity Protection.
. . .
State law requires auto dealers to be licensed, and by offering test drives, Tesla was acting as a dealer, Steier said. “You can’t just set up in a hotel parking lot and sell cars,” said Bruce Anderson, president of the Iowa Automobile Dealers Association. “This is a regulated industry.”

For the full story, see:
Joel Aschbrenner, The Des Moines Register. “With Farm Robotics, the Cows Decide When It’s Milking Time.” USA Today (Weds., September 26, 2014): 7B.
(Note: ellipsis added.)
(Note: the online version of the story has the date September 25, 2014, and differs in some respects from the print version. In the quotes above, I have followed the print version.)

FDR Ruthlessly Manipulated Political Process

(p. D8) Michael C. Janeway, a former editor of The Boston Globe and executive editor of The Atlantic Monthly who wrote two books chronicling what he saw as the intertwined decline of democracy and journalism in the United States, died on Thursday [April 17, 2014] at his home in Lakeville, Conn.
. . .
The second book, “The Fall of the House of Roosevelt: Brokers of Ideas and Power From FDR to LBJ,” published in 2004, measured some of the ideas in his first book against the history of the New Deal. It focused on President Franklin D. Roosevelt’s inner circle of advisers, a group of political operatives and thinkers often called Roosevelt’s “brain trust,” who helped conceive ideas like the minimum wage, Social Security and federal bank deposit insurance.
Mr. Janeway’s father, Eliot Janeway, an economist, Democratic hand and columnist for Time magazine (a portfolio not unheard-of in those days), was a prominent member of that group.
Michael Janeway suggested that in undertaking the radical changes necessary to yank the “shattered American capitalist system into regulation and reform,” Roosevelt and his team manipulated the political process with a level of ruthlessness that may have been justified by the perils of the times. But in the years that followed, he wrote, the habit of guile and highhandedness devolved into the kind of arrogance that defined — and doomed — the presidency of Lyndon B. Johnson, Roosevelt’s last political heir.

For the full obituary, see:
PAUL VITELLO. “Michael Janeway, 73, Former Editor of The Boston Globe.” The New York Times (Sat., APRIL 19, 2014): D8.
(Note: ellipsis, and bracketed date, added.)
(Note: the online version of the obituary has title “Michael Janeway, Former Editor of The Boston Globe, Dies at 73.”)

The book mentioned in the passage quoted above is:
Janeway, Michael. The Fall of the House of Roosevelt: Brokers of Ideas and Power from FDR to LBJ, Columbia Studies in Contemporary American History. New York: Columbia University Press, 2004.

Nevada Government Lets Tesla Sell Directly to Consumers

(p. A13) . . . in addition to rubber-stamping the agreement that waived Tesla’s property, sales and business taxes for a decade or more–while throwing in discount power rates–the Nevada legislature also approved a bill last week that would exempt the auto maker from franchising regulations outlawing the company’s retail approach. The state’s auto dealers, who only weeks ago threatened to sue over the matter, shifted gears and endorsed the legislation.
“My car dealers want to assist in any way they can,” John Sande of the Nevada Franchise Auto Dealers Association told the Reno Gazette Journal. “Nevada law does not allow Tesla to come in and sell directly to the consumer, so we are going to have to come in and change it so they can sell directly to the consumer.”
No doubt the dealers balanced the pros and cons of agitating for their own self-interest against overwhelming political support for the deal and the spending potential of thousands of new, well-paid workers who may prefer a Ford or Chevy pickup over a $70,000 Tesla Model S. But the fact that Nevada legislators so quickly jettisoned a key provision of the state’s dealership-franchise provisions speaks volumes about how essential these statutes really are to the well-being of their constituents.
There is no rational reason Tesla–or any other automobile manufacturer–should be restricted from selling new cars directly to those who seek to buy them.

For the full commentary, see:
JOHN KERR. “OPINION; Tesla Breaks the Auto Dealer Cartel; Nevada lets the electric car maker sell directly to consumers. Too bad everyone else still can’t.” The Wall Street Journal (Weds., Sept. 17, 2014): A13.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date Sept. 16, 2014.)

Feds Allow Hollywood to Use Drones

(p. B1) LOS ANGELES — The commercial use of drones in American skies took a leap forward on Thursday [Sept. 25, 2014] with the help of Hollywood.
The Federal Aviation Administration, responding to applications from seven filmmaking companies and pressure from the Motion Picture Association of America, said six of those companies could use camera-equipped drones on certain movie and television sets. Until now, the F.A.A. has not permitted commercial drone use except for extremely limited circumstances in wilderness areas of Alaska.
Put bluntly, this is the first time that companies in the United States will be able to legally use drones to fly over people.
The decision has implications for a broad range of industries including agriculture, energy, real estate, the news media and online retailing. “While the approval for Hollywood is very limited in scope, it’s a message to everyone that this ball is rolling,” said Greg Cirillo, chairman of the aviation practice at Wiley Rein, a law firm in Washington.
Michael P. Huerta, the administrator of the F.A.A., said at least 40 similar applications were pending from companies beyond Hollywood. One is Amazon, which wants permission to move forward with a drone-delivery service. Google has acknowledged “self-flying vehicle” tests in the Australian outback.
“Today’s announcement is a significant milestone in broadening commercial use,” Anthony R. Foxx, secretary of transportation, told reporters in a conference call.

For the full story, see:
BROOKS BARNES. “Drone Exemptions for Hollywood Pave the Way for Widespread Use.” The New York Times (Fri., SEPT. 26, 2014): B1 & B7.
(Note: bracketed date added.)
(Note: the online version of the story has the date SEPT. 25, 2014.)

The Vagueness and Regulatory Discretion of Dodd-Frank Is “a Recipe for Cronyism”

(p. 218) Aaron Steelman has an “Interview” with John Cochrane. On Dodd-Frank: “I think Dodd-Frank repeats the same things we’ve been trying over and over again that have failed, in bigger and bigger ways. . . . The deeper problem is the idea that we just need more regulation–as if regulation is something you pour into a glass like water–not smarter and better designed regulation. Dodd-Frank is pretty bad in that department. It is a long and vague law that spawns a mountain of vague rules, which give regulators huge discretion to tell banks what to do. It’s a recipe for cronyism and for banks to game the system to limit competition.” On how to stop bailing out large financial institutions: “You have to set up the system ahead of time so that you either can’t or won’t need to conduct bailouts. Ideally, both. . . . The worst possible system is one in which everyone thinks bailouts are coming, but the government in fact does not have the legal authority to bail out.” . . . Econ Focus, Federal Reserve Bank of Richmond, Third Quarter 2013, pp. 34-38. https://www.richmondfed
.org/publications/research/econ_focus/2013/q3/pdf/interview.pdf.

Source:
Taylor, Timothy. “Recommendations for Further Reading.” Journal of Economic Perspectives 28, no. 1 (Winter 2014): 235-42.
(Note: italics, and first two ellipses, are in original; the last ellipsis is added.)

Political Entrepreneurs Can Find Ways to Overcome Vested Interests

[p. 202] In their recent book, Leighton and López (2013) place special emphasis on political entrepreneurship in making policy reform possible. For new ideas to overcome vested interests, they write (p. 134), it must be the case that “entrepreneurs notice and exploit those loose spots in the structure of ideas, institutions, and incentives.” They provide four case studies of this process: spectrum license auctions, airline deregulation, welfare reform, and housing finance. In their words (p. 178): “[T]he public face of political change may be that of a madman, an intellectual, or an academic scribbler. But whatever form these leaders may take, they are political entrepreneurs–people whose ideas and actions are focused on producing change.” As these authors stress, political entrepreneurship can be socially harmful, as when the pursuit of individual rents comes at the expense of overall inefficiency. But the returns from shifting the political transformation frontier out can be very large as well.
. . .
(p. 206) I owe a special debt to the recent book by Edward López and Wayne Leighton (2012 sic) for stimulating me to put down on paper a number of ideas I had been mulling over for some time.

Source:
Rodrik, Dani. “When Ideas Trump Interests: Preferences, Worldviews, and Policy Innovations.” Journal of Economic Perspectives 28, no. 1 (Winter 2014): 189-208.
(Note: the bracketed page number refers to the Rodrik article; the page number in parentheses refers to the Leighton and López book; ellipsis added; italics, and the bracketed letter, in the original.)

The book Rodrik discusses is:
Leighton, Wayne A., and Edward J. López. Madmen, Intellectuals, and Academic Scribblers: The Economic Engine of Political Change. Stanford, CA: Stanford University Press, 2013.

Summers’s Unbreakable Washington Power Elite Rule: Insiders Don’t Criticize Other Insiders

(p. 5) A telling anecdote involves a dinner that Ms. Warren had with Lawrence H. Summers, then the director of the National Economic Council and a top economic adviser to President Obama. The dinner took place in the spring of 2009, after the oversight panel had produced its third report, concluding that American taxpayers were at far greater risk to losses in TARP than the Treasury had let on.
After dinner, “Larry leaned back in his chair and offered me some advice,” Ms. Warren writes. “I had a choice. I could be an insider or I could be an outsider. Outsiders can say whatever they want. But people on the inside don’t listen to them. Insiders, however, get lots of access and a chance to push their ideas. People — powerful people — listen to what they have to say. But insiders also understand one unbreakable rule: They don’t criticize other insiders.”
“I had been warned,” Ms. Warren concluded.
A spokeswoman for Mr. Summers did not respond to a request for comment.

For the full commentary, see:
GRETCHEN MORGENSON. “Fair Game; From Outside or Inside, the Deck Looks Stacked.” The New York Times, SundayBusiness Section (Sun., APRIL 27, 2014): 1 & 5.
(Note: italics in original commentary, and in Warren book. I added a missing quotation mark.)
(Note: the online version of the commentary has the date APRIL 26, 2014.)

The Warren passages quoted above are from p. 106 of her book:
Warren, Elizabeth. A Fighting Chance. New York: Metropolitan Books, 2014.

Environmental Regulations Cause Housing Crisis in Cities

(p. 16) The developed world’s wealthiest cities are facing housing crises so acute that not only low-income workers, but also the middle and creative classes, find them increasingly difficult places to afford.
. . .
(p. 19) The difficulty of deciding where and what to build means that cities with a shortfall of hundreds of thousands of apartments often have only the vaguest plans for how to meet the deficit.
“It’s not that it would be physically impossible,” says Ed Glaeser, a Harvard economist who has studied housing and deregulation. “After all, the construction industry would love such a challenge. But it’s politically totally impossible.” Glaeser says cities approve lovely things like landmark districts and sidewalk setbacks without doing any cost-benefit analysis of their effect on housing supply. “One of my pet peeves is that environmental reviews are only focused on the local environmental impact of building the project, but not the global environmental impact of not building the project.”

For the full story, see:
SHAILA DEWAN. “It’s the Economy; Rent Asunder.” The New York Times Magazine (Sun., MAY 4, 2014): 16 & 18-19.
(Note: ellipsis added.)
(Note: the online version of the story has the date APRIL 29, 2014, and has the title “It’s the Economy; Rent Too High? Move to Singapore.”)

Government Pushed Kiewit to Ignore Worker Safety

TrappedUnderTheSeaBK2014-04-25.jpg

Source of book image: http://d202m5krfqbpi5.cloudfront.net/books/1369819962l/17934699.jpg

(p. C9) Boston Harbor’s filth is legendary. It was mock-celebrated in the 1966 song “Dirty Water.” The city’s water-treatment plants were hopelessly inadequate, and barely treated sewage had been pouring into the harbor for decades.
. . .
The Deer Island Sewage Treatment Plant was supposed to solve these problems. Begun in 1990, the $3.8 billion facility would process human and industrial waste on a small island in Boston Harbor and then send it through a 9.5-mile tunnel into the deep waters of the Atlantic. Fifty-five vertical pipes called risers spurred off the tunnel’s final section to further diffuse waste before releasing it into the sea. Temporary safety plugs, likened to giant salad bowls, had been placed near the bottom of each riser to keep water from seeping in before construction was complete.
These plugs were a source of conflict between the tunnel’s owner, the Massachusetts Water Resources Authority (MWRA), and the company they hired to build it, Kiewit, “the Omaha-based construction giant” that, Mr. Swidey notes, “had built more miles of the U.S. highway system than any other contractor.” The director of MWRA, Doug MacDonald, had left a job as a partner in a Boston law firm to take over the authority, a behemoth of 1,700 employees and, at the peak of harbor cleanup, an additional 3,000 construction workers. Mr. MacDonald’s job included mollifying various parties who disagreed about how the Deer Island project would reach completion: Kiewit; the tunnel’s designers, mostly out of the picture by 1998; ICF Kaiser Engineers, hired by MWRA to protect its interests and act as Mr. MacDonald’s eyes and ears; the union “sandhogs” who bored out 2.4 million tons of rock to create the tunnel; the Occupational Safety and Health Administration, ostensibly looking out for worker safety but seeming more interested in handing out fines; and, though federal funds for harbor cleanup had long since dried up, “a bow-tied federal judge who served as the cleanup project’s robed referee, threatening stiff fines or worse if the deadlines he imposed were not met.”
. . .
The problem weighed most heavily on Kiewit. The firm was contractually obligated to deliver on time, subject to late-fee penalties of $30,000 a day, and to cover cost overruns. More, Kiewit had fronted the construction costs and would only be paid by selling the tunnel, piece by piece, to MWRA. The contract further obligated Kiewit to provide “lighting and ventilation (or breathing apparatus) for the personnel” that pulled the plugs but, in what seemed a senseless conflict, mandated that the plugs “could be removed only after the tunnel was completed,” writes Mr. Swidey, “meaning after the sandhogs had cleared out, taking their extensive ventilation, transportation, and electrical systems with them.”
Kiewit protested that clearing the tunnel of its life-sustaining infrastructure would make “the risk of catastrophe [to the workers pulling the plugs] . . . exponentially higher !” They offered several sound alternatives. In response, ICF Kaiser accused them of just wanting their payday. After a “year-long memo war,” Kiewit capitulated, cleared the tunnel and hired a commercial dive team to go into a pitch-black airless tube.

For the full review, see:
NANCY ROMMELMANN. “BOOKS; One Mile Down, Ten Miles Out; Their oxygen was starting to get thin. On the verge of passing out, Hoss radioed back to the Humvees. The reply was an expletive, and the line went dead.” The Wall Street Journal (Sat.,March 15, 2014): C9.
(Note: ellipses between paragraphs, added; ellipsis inside last paragraph, in original.)
(Note: the online version of the review has the date March 14, 2014, and has the title “BOOKSHELF; Book Review: ‘Trapped Under the Sea’ by Neil Swidey; In 1999, five deep-sea welders had to traverse a tunnel beneath Boston Harbor with no breathable air, no light and no chance for rescue should things go horribly wrong.” )

The book under review is:
Swidey, Neil. Trapped under the Sea: One Engineering Marvel, Five Men, and a Disaster Ten Miles into the Darkness. New York: Crown Publishers, 2014.