Category: Regulations

An Economist with “Enough Steel” to Cut “the Tentacles of Restrictive Government Regulation”

(p. A9) When Elizabeth Bailey was appointed in 1977 as the first woman to serve on the Civil Aeronautics Board, or CAB, she saw her job as freeing the airline industry “from the tentacles of restrictive government regulation.”

During a confirmation hearing, Sen. Ted Stevens of Alaska asked Dr. Bailey, a Republican with a Ph.D. in economics, whether she had “enough steel” for the task.

“I hope so,” she said. “I’m tougher than I look.”

The Airline Deregulation Act of 1978, approved by Congress with strong bipartisan support, led to abolition of the CAB at the end of 1984 and freed airlines to set fares without government permission. During her six years on the board, Dr. Bailey proved one of the most ardent advocates for swift deregulation, a process that reduced fares, increased choice and doomed inefficient airlines.

. . .

One summer, she accepted an offer to join a group studying regulatory issues at Bell Labs. She gave a presentation on regulatory distortions to a panel of economic advisers to AT&T, including William Baumol and Alfred Kahn.

Dr. Baumol helped her gain admission to Princeton as a doctoral candidate in economics. She delved into business-competition issues and received her Ph.D. in 1972.

Those studies prepared her to oversee economic research at Bell Labs and advise AT&T on its impending breakup by regulatory authorities. “We said, ‘Look, if the government is going to bust you up, there are some ways that are going to be a lot less costly and a lot more efficient than others,’ ” she recalled.

Dr. Kahn, later chairman of the CAB, became her mentor and ally at the agency, where she rose to vice chairman.

For the full obituary, see:

James R. Hagerty. “Economist Helped Free Airlines From Red Tape.” The Wall Street Journal (Saturday, Sept. 3, 2022): A9.

(Note: ellipsis added.)

(Note: the online version of the obituary has the date September 1, 2022, and has the title “Elizabeth Bailey Helped Free Airlines to Cut Fares.”)

U.S. Chips+ Act Rewards Intel for Being Less Innovative Than TSMC


(p. A15) Intel, with huge profit margins on its Pentium microprocessors, could spend more than its competitors on state-of-the-art fabs, but innovation eventually was pushed aside for predictability. Intel would get one fab working and then “copy exactly” new cookie-cutter fabs. For smaller feature sizes, Intel looked at the new Extreme Ultraviolet technology from Dutch equipment company ASML and thought it too expensive and risky to use. TSMC embraced ExtremeUV and won, especially for lower-power chips for mobile devices. TSMC can now spend more than anyone else on fabs.

With the Chips+ Act chock full of $52 billion in subsidies and tax credits for chip makers, Congress is saying that real countries have fabs. The act also authorizes $1 billion for carbon removal—weird, because chips are made from silicon. Worse, the U.S. is rewarding Intel, which just announced a disastrous quarter, for coming in third place behind TSMC and Samsung.

Nothing is free. Even Commerce Secretary Gina Raimondo admitted “there’s a lot of strings attached” in the 1,054-page law. National Economic Council director Brian Deese endorsed command-and-control industrial policy: “The question should move from ‘Why should we pursue an industrial strategy?’ to ‘How do we pursue one successfully?’ ” This is as wrong as Soviet or Chinese five-year plans. Industrial policy eventually leads to disaster. Japan’s Ministry of International Trade and Industry micromanaged the country’s domestic semiconductor industry and ended up presiding over its decline. Today no Japanese semiconductor company sits in the global top 10. Because China doesn’t have access to ASML ExtremeUV equipment, it has made little progress in advanced chips.

Yes, we need domestic supplies of advanced chips in case China invades Taiwan. But subsidies are the wrong approach.

. . .

Instead, the U.S. could enable suppliers to place large orders for chips for the military, intelligence agencies, whatever. They could even prepay. Silicon Valley was originally built on orders for transistors for intercontinental missiles and the space program.

For the full commentary, see:

Andy Kessler. “INSIDE VIEW; The Semiconductor Boondoggle.” The Wall Street Journal (Monday, Aug. 15, 2022): A15.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date August 14, 2022, and has the same title as the print version.)

So-Called “Inflation Reduction Act” Reduces Incentive for Pharma Firms to Seek Approval for New Uses of Drugs


(p. A17) It may take years before we can fully appreciate the impact of the Inflation Reduction Act on the pharmaceutical industry, but we’re already getting signs of the damage. While Democrats boast that they’ve given Medicare the power to “negotiate” drug prices, the effect has been to saddle manufacturers with a complex and ill-conceived price-setting scheme. In response, many have canceled drug-development programs, resulting in an unfortunate but predictable loss for patients nationwide.

One poorly crafted provision is driving companies away from research into treating rare diseases. In its Oct. 27 earnings statement, Alnylam announced it is suspending development of a treatment for Stargardt disease, a rare eye disorder, because of the company’s need “to evaluate impact of the Inflation Reduction Act.” Alnylam’s decision turns on a provision in the Democrats’ bill that exempts from price-setting negotiations drugs that treat only one rare disease. The company’s drug is currently marketed as treating only amyloidosis, and thus is exempt from Medicare’s price setting. If Alnylam proceeded with research into treating Stargardt, it would lose its exemption.

That disincentive might be most pronounced in cancer treatments. On Tuesday [Nov. 1, 2022], Eli Lilly announced it is canceling work on a drug that had been undergoing studies for certain blood cancers. “In light of the Inflation Reduction Act,” the company wrote to Endpoints News, “this program no longer met our threshold for continued investment.”

. . .

Nearly 60% of oncology medications approved a decade ago received additional approvals in later years. The new law eliminates the incentive to conduct additional research, because its price-setting mechanisms kick in after nine years for small-molecule drugs and 13 years for biologics, regardless of how much research companies conduct after the drug’s initial approval.

For the full commentary, see:

Joe Grogan. “The Inflation Reduction Act Is Already Killing Potential Cures.” The Wall Street Journal (Saturday, Nov. 4, 2022): A17.

(Note: ellipsis, and bracketed date, added.)

(Note: the online version of the commentary has the date November 3, 2022, and has the same title as the print version.)

To End Inflation, Fed Should Commit “To Good Policy Rules,” and Not Stray to Increase Jobs

(p. A9) Growing up in Glens Falls, N.Y., Edward C. Prescott got an insider’s view of business from chats with his father, an engineer and later comptroller for a global supplier of pigments. Those insights made the economics courses he took in college seem less theoretical and more relevant than they might have seemed to other students.

. . .

With Dr. Kydland, he published an influential 1977 paper called “Rules Rather Than Discretion: The Inconsistency of Optimal Plans,” concluding that policy makers could err by straying from long-term goals to address short-run problems. For instance, central bankers might be tempted to ease up on their commitments to contain inflation in the short run as a way to boost employment. If so, the professors argued, people might start assuming that prices were out of control, creating a psychology that led to faster inflation for long periods.

Sticking to a sound policy was far more effective than jolting the economy with frequent adjustments, they argued. “You should not think in terms of controlling the economy,” Dr. Prescott said. “That leads to bad outcomes. You should think in terms of committing to good policy rules.”

. . .

Though revered by many of his students and colleagues, Dr. Prescott sometimes baffled them. The problem, he once explained, was that he thought much faster than he could talk. He sometimes jumped from one topic to another with no transition.

“His brain did not work like other people’s,” said Timothy Kehoe, an economics professor at the University of Minnesota who worked with Dr. Prescott for four decades, “and in some ways that was a tremendous advantage.”

For the full obituary, see:

James R. Hagerty. “Economist’s Policy Advice: Stick to Long-Term Plan.” The Wall Street Journal (Saturday, November 12, 2022): A9.

(Note: ellipses added.)

(Note: the online version of the obituary was updated Nov. 8, 2022, and has the title “Nobel-Winning Economist Edward C. Prescott Dies at 81.”)

Forest Service Banned Private Logging to Thin Forests; Then Started an Uncontrolled “Controlled” Fire to Thin Same Forests

(p. A11) SEATTLE — In a high-altitude landscape parched by drought, U.S. Forest Service crews took advantage of some stable weather in eastern Oregon this month and prepared to burn off some thick underbrush and shrubbery at the edge of the Blue Mountains, part of an expanding strategy to remove forest fuel that can turn fires into conflagrations.

The target was a 300-acre tract of woodlands in the Malheur National Forest, adjacent to a private cattle ranch. But the controlled fire that the crew set on the afternoon of Oct. 19 [2022] jumped a containment line and charred through a portion of the nearby ranch. Two sisters from the family-owned Windy Point Cattle Company made their way through the smoke-filled landscape for a furious confrontation with the Forest Service’s “burn boss,” Ricky Snodgrass, and then dialed 911.

What happened next, federal officials say, was highly unusual in the modern history of the Forest Service and its programs for managing federal lands across the country. The Grant County sheriff arrived on scene, placed Mr. Snodgrass in handcuffs and sent him to jail.

. . .

With climate change driving an increase in the size, frequency and ferocity of wildfires, the Forest Service adopted a plan this year to step up those prescribed burns, and also more aggressively thin forest stands with strategic logging programs.

. . .

The Forest Service’s operations in this part of Oregon have long been the subject of contention in Grant County, where the U.S. government manages some 60 percent of the land.

Locals have long stewed over federal land management policies, including logging restrictions that have contributed to declines in timber production and the shuttering of the region’s sawmills.

For the full story, see:

Mike Baker. “A Strategy to Protect Forests Reopens Old Wounds in Oregon.” The New York Times (Saturday, October 29, 2022): A11.

(Note: ellipses, and bracketed year, added.)

(Note: the online version of the story has the date Oct. 28, 2022, and has the title “Prescribed Burns Are Encouraged. Why Was a Federal Employee Arrested for One?”)

Through Evolution, Body Parts Are Inelegantly Repurposed into Workaround Kluges

If the body itself is an amalgam of workaround kluges, then maybe our regulators should be more tolerant of medical MacGyvers who attempt to keep the body working through medical workaround kluges.

(p. A15) Mr. Pievani is a professor of biology at the University of Padua. His brief and thoughtful book (translated from the Italian by Michael Gerard Kenyon) isn’t just a description of imperfection, but a paean to it. There’s plenty of description and discussion, too, as “Imperfection” takes the reader on a convincing whirlwind tour of the dangers as well as the impossibility of perfection, how imperfection is built into the nature of the universe, and into all living things—including ourselves.

. . .

Readers wanting to get up to speed on imperfection would do well to attend to two little-known words with large consequences. The first is “palimpsest,” which in archaeology refers to any object that has been written upon, then erased, then written over again (sometimes many times), but with traces of the earlier writings still faintly visible. Every living thing is an evolutionary palimpsest, with adaptations necessarily limited because they’re built upon previous structures.

Consider, for example, childbirth. As smart critters, we’ve been selected (naturally) to have big heads. But in becoming bipedal, we had to rotate our pelvises, which set limits on the size of the birth canal. As a result, an unborn baby’s head is perilously close to being too big to get out. Usually, they manage it, but not without much painful laboring and sometimes, if this cephalopelvic disproportion is too great, or if the baby is malpositioned, by means of a cesarean delivery. In such cases, obstetricians take the newborn out the obvious way: through that large, unobstructed abdominal space between pelvis and lower ribs. Things would have been much easier and safer for mother and baby if the birth canal were positioned there, too, but our palimpsest nature precludes such a straightforward arrangement.

Which brings us to our second unusual word: “kluge,” something—assembled from diverse components—that shouldn’t work, but does. A kluge is a workaround: often clumsy, inelegant, inefficient, but that does its job nonetheless. Because we and all other living things are living palimpsests, we are kluges as well.

For the full review, see:

David P. Barash. “BOOKSHELF; Unintelligent Design.” The Wall Street Journal (Wednesday, October 26, 2022): A15.

(Note: ellipsis added.)

(Note: the online version of the review has the date October 25, 2022, and has the title “BOOKSHELF; ‘Imperfection’ Review: Unintelligent Design.”)

The book under review is:

Pievani, Telmo. Imperfection: A Natural History. Translated by Michael Gerard Kenyon. Cambridge, MA: The MIT Press, 2022.

California Law Mandating $22 Wage for Restaurant Workers Is “Discouraging” Entrepreneurs

(p. A3) A government-appointed council could increase wages for California’s estimated half-million fast food workers to as much as $22 an hour starting next year, under a new law signed by Gov. Gavin Newsom Monday [September 5, 2022].

. . .

“You can’t charge enough for food to offset what will happen from a labor perspective,” said Greg Flynn, president of Flynn Restaurant Group, which operates franchise brands in 44 states and owns 105 restaurants in California. “California is already the most difficult state in the nation to operate as a restaurateur. This just makes it more difficult and less attractive.”

. . .

Michaela Mendelsohn, an El Pollo Loco franchisee in Southern California, said she recently put on hold plans to add to her group of six stores because of the measure.

If wages shoot up, she added, she will consider eliminating cashier positions or installing kiosks in her California locations that allow customers to input orders.

“We’ve gone too far here,” Ms. Mendelsohn said. “It’s just really discouraging.”

For the full story, see:

Christine Mai-Duc and Heather Haddon. “California Fast-Food Bill Signed, Opening Path to Higher Pay.” The New York Times (Tuesday, September 6, 2022): A3.

[Note: ellipses, and bracketed date, added.]

(Note: the online version of the story was updated Sept. 5, 2022, and has the title “California Governor Signs Fast Food Bill, Opening Way to Higher Wages.” The last two sentences quoted above appeared in the online, but not the print, version.)

With Both Covid and Monkeypox, C.D.C. Wrongly “Tried to Maintain Control Over Testing”

(p. A14) Too often in a crisis, government officials look for easy solutions, with dramatic and immediate impact. But there are none for managing pandemics.

“A pandemic is by definition a problem from hell. You’re vanishingly unlikely to be able to remove all of its negative consequences,” said Bill Hanage, an epidemiologist at the Harvard T.H. Chan School of Public Health.

Instead, he added, officials should bet on combinations of imperfect strategies, with an emphasis on speed over accuracy.

In both the coronavirus pandemic and the monkeypox outbreak, for example, the C.D.C. at first tried to maintain control over testing, instead of disseminating the responsibility as widely as possible. The move led to limited testing, and left health officials blind to the spread of the viruses.

The Food and Drug Administration was slow to help academic labs develop alternatives for testing, and encouraged the highest quality of diagnosis. It may be reasonable for officials to ask which test is faster or which one produces the least errors, Dr. Hanage said, but “all of them are better than not doing anything.”

For the full commentary, see:

Apoorva Mandavilli. “Unprepared for Covid and Monkeypox. And the Next Outbreak, Too.” The New York Times (Saturday, October 1, 2022): A14.

(Note: the online version of the commentary was updated Sept. 30, 2022, and has the title “New Infectious Threats Are Coming. The U.S. Probably Won’t Contain Them.”)

Deregulation of Hearing Aids Will Lower Costs and Increase Innovation

(p. A1) The Food and Drug Administration decided on Tuesday to allow hearing aids to be sold over the counter without a prescription to adults, a long-sought wish of consumers frustrated by expensive exams and devices.

The high cost of hearing aids, which are not covered by basic Medicare, has discouraged millions of Americans from buying the devices. Health experts say that untreated hearing loss can contribute to cognitive decline and depression in older people.

Under the F.D.A.’s new rule, people with mild to moderate hearing loss should be able to buy hearing aids online and in retail stores as soon as October, without being required to see a doctor for an exam to get a prescription.

. . .

“This could fundamentally change technology,” said Nicholas Reed, an audiologist at the Department of Epidemiology at Johns Hopkins Bloomberg School of Public Health. “We don’t know what these companies might come up with. We may literally see new ways hearing aids work, how they look.”

. . .

The change has been percolating for years. In 2016, a proposal for the F.D.A. to approve over-the-counter hearing aids for adults with mild to moderate hearing was released in a report by the National Academies of Science, Engineering and Medicine. The following year, Senators Chuck Grassley, a Republican of Iowa, and Elizabeth Warren, a Democrat of Massachusetts, introduced a bill enabling the agency to make the change. Congress approved the legislation and President Trump signed it into law.

Finalizing regulations has moved slowly since then, with some conflict over details, like how the federal rule would interact with state laws on hearing aid returns or warranty policies and how much the devices should amplify sound.

Mr. Biden issued an executive order last July calling for greater competition in the economy, which urged the F.D.A. to take action “to promote the wide availability of low-cost hearing aids.”

For the full story, see:

Christina Jewett. “F.D.A. Decides to Allow Over-the-Counter Sales of Hearing Aids.” The New York Times (Wednesday, August 17, 2022): A1 & A23.

(Note: ellipses added.)

(Note: the online version of the story was updated Aug. 23, 2022, and has the title “F.D.A. Clears Path for Hearing Aids to Be Sold Over the Counter.”)

Senate Cedes Sovereignty on Air Conditioning HFC Regulation

(p. A17) WASHINGTON — The Senate voted on Wednesday to approve an international climate treaty for the first time in 30 years, agreeing in a rare bipartisan deal to phase out of the use of planet-warming industrial chemicals commonly found in refrigerators and air-conditioners.

. . .

Many American manufacturers had a business incentive to support the amendment. Under the pact, nations that do not ratify the amendment will have restricted access to expanding international markets starting in 2033.

Some Republicans from states with many chemical manufacturers supported the Kigali deal.

. . .

Americans for Prosperity, a political action committee founded by the billionaire Koch brothers, sent a letter to lawmakers last week saying that ratifying the Kigali Amendment would be an “abdication of U.S. sovereignty over environmental regulation” to the United Nations. The group also argued it would raise the price of air-conditioning, refrigeration and industrial cooling for American consumers.

For the full story, see:

Lisa Friedman and Coral Davenport. “Senate Ratifies Global Pact to Curb HFCs, Used in Cooling.” The New York Times (Thursday, September 22, 2022): A17.

(Note: ellipses added.)

(Note: the online version of the story has the date Sept. 21, 2022, and has the title “Senate Ratifies Pact to Curb a Broad Category of Potent Greenhouse Gases.” Where there is a minor difference between the online and print versions, the passages quoted above follow the online version.)

Netherlands Dairy Farmers “No Longer Allowed To Exist” Due to “Climate Tyranny”

(p. 6) WOUDENBERG, Netherlands — The dairy farmers of the Netherlands have had enough.

They have set fire to hay and manure along highways, dumped trash on roads to create traffic jams, and blockaded food distribution centers with their tractors, leading to empty shelves in supermarkets. Across the country, upside down flags wave from farmhouses in protest.

The anger of the farmers is directed at the government, which has announced plans for a national 50 percent reduction of nitrogen emissions by 2030, in line with European Union requirements to preserve protected nature reserves, that they believe unfairly targets them. Factories and cars also emit large amounts of nitrogen and have not been targeted, they say, although the government said that cuts associated with both polluters would be addressed in the future.

Agriculture is responsible for the largest share of nitrogen emissions in the Netherlands, much of it from the waste produced by the estimated 1.6 million cows that provide the milk used to make the country’s famed cheeses, like Gouda and Edam.

To realize those planned cuts, thousands of farmers will be required to significantly reduce livestock numbers and the size of their farming operations. If they cannot meet the cuts the government demands of them, they may be forced to close their operations altogether.

The Dutch government has set aside about 25 billion euros, about $26 billion, to carry out its plan, and some of that money will be used to help farmers build more sustainable operations — or buy them out, if possible.

“My livelihood and my network is being threatened,” said Ben Apeldoorn, whose farm in the province of Utrecht has about 120 cows producing milk for making cheese. “You’re just no longer allowed to exist,” said Mr. Apeldoorn, 52, who has been a farmer for 30 years.

. . .

Prime Minister Mark Rutte, who this month became the country’s longest-serving prime minister and has grappled with what is known in the Netherlands as “the nitrogen crisis,” has condemned the protests, calling them “unacceptable.”

. . .

Helma Breunissen, 47, a dairy farmer who with her husband also runs a veterinarian’s office, attended one of the meetings with Mr. Rutte to make her anger known.

“If half of the cattle needs to disappear, then my veterinary’s office will also end,” Ms. Breunissen said by telephone. “I don’t want a bag of money from the government, I just want to do my job.”

. . .

While many Dutch support the aims of a greener Netherlands, some right-wing groups have expressed support for the Dutch farmers as a way of opposing climate activism. The right-wing Forum for Democracy has declared that “there is no climate crisis” and opposes the government’s plans.

And the Dutch farmers have also received some support from abroad.

“Farmers in the Netherlands — of all places — are courageously opposing the climate tyranny of the Dutch government, can you believe it?” former President Donald J. Trump said at a rally last month.

For the full story, see:

Claire Moses. “Emission Cuts in the Netherlands Have Dairy Farmers Up in Arms.” The New York Times, First Section (Sunday, August 21, 2022): 6.

(Note: ellipses added.)

(Note: the online version of the story has the date Aug. 20, 2022, and has the title “Dairy Farmers in the Netherlands Are Up in Arms Over Emission Cuts.” Where there is a minor difference between the online and print versions, the passages quoted above follow the online version.)