Category: Regulations

Complex Regulations Stifle Innovation

(p. A15) In “The Innovation Illusion” . . . [Fredrik Erixon and Björn Weigel] argue that “there is too little breakthrough innovation . . . and the capitalist system that used to promote eccentricity and embrace ingenuity all too often produces mediocrity.”
The authors identify four factors that have made Western capitalism “dull and hidebound.” The first is “gray capital,” the money held by entities such as investment institutions, which are often just intermediaries for other investors. Their shareholders, say the authors, tend to focus on short-term outcomes, a perspective that makes company managers reluctant to invest in the research and development that is the lifeblood of the new. The authors’ second villain is “corporate managerialism,” which breeds a “custodian corporate culture” that searches for certainty and control instead of “fast and radical innovation.”
A third villain is globalization, though the authors have a novel complaint: The global economy, they say, has given rise to large firms that are more interested in protecting their turf than pursuing path-breaking ideas. Finally, they decry “complex regulation” for injecting uncertainty into corporate investment and thus stifling the emergence of new ideas and new products.
Echoing the views of Northwestern economist Robert Gordon, Messrs. Erixon and Weigel lament the paucity of big-bang innovation, writing that “the advertised technologies for the future underwhelm.” They wonder why there hasn’t been more progress in all sorts of realms, from the engineering of flying cars to the curing of cancer. Responding to those who worry that robots will drive up unemployment, they say that the real concern should be “an innovation famine rather than an innovation feast.”

For the full review, see:

MATTHEW REES. “BOOKSHELF; Bending the Arc of History.” The Wall Street Journal (Tues., December 13, 2016): A15.
(Note: first ellipsis added; second ellipsis in original.)
(Note: the online version of the review has the date Dec. 12, 2016,)

The book under review, is:
Erixon, Fredrik, and Björn Weigel. The Innovation Illusion: How So Little Is Created by So Many Working So Hard. New Haven, CN: Yale University Press, 2016.

Government Sugar Protectionism Kills More Jobs than It Saves

(p. A13) As if domestic price-fixing by the government–here, driving prices up by setting production limits–weren’t enough, the feds then set a limit on sugar imports, and punish any imports above that limit with heavy tariffs.
The result? Countries such as Canada openly advertise to U.S. companies that use sugar–for instance, in the food industry–that they will enjoy lower business costs if they move. And when companies leave, like some candy makers that have moved production overseas, they take their jobs with them. Even the Commerce Department admits that for every job that the sugar program “protects,” it kills three others.
Reforming this policy sounds like a no-brainer, but the small number of beneficiaries use their benefits to influence–by lobbying, for instance, or with campaign contributions–politicians who block any reforms. No wonder sugar was the only commodity program not to be reformed by having its subsidies reduced in the most-recent farm bill, in 2013.

For the full commentary, see:
JOE PITTS and DAVID MCINTOSH. “Your Funny Valentine Candy Pricing; Making a box of chocolates more expensive is one of many ways federal sugar policy hurts U.S. taxpayers.” The Wall Street Journal (Fri., Feb. 12, 2016): A13.
(Note: the online version of the commentary has the date Feb. 11, 2016.)

Rigid Labor Regulations Hurt Labor in India

(p. A9) . . . rigid and complex regulations have discouraged investment in labor-intensive industries in India, . . . .
Many economists say India’s labor laws have encouraged enterprises to stay small, rely on informal labor or substitute capital for workers. A report by the Paris-based Organization for Economic Cooperation and Development said for India to return to a high-growth trajectory, it must “reduce barriers to formal employment by introducing a simpler and more flexible labor law which doesn’t discriminate by size of enterprise.”

For the full story, see:
NIHARIKA MANDHANA. “India State Tests Labor-Law Overhaul.” The Wall Street Journal (Sat., Dec. 6, 2014): A9.
(Note: ellipses added.)
(Note: the online version of the article has the date Dec. 7 [sic], 2014, and has the title “Modi’s BJP-Controlled States Become Labs for Contentious Reform.”)

Double-Blind Trials Are Not the Only Source of Sound Knowledge

(p. 1) . . . while all doctors agree about the importance of gauging the quality of evidence, many feel that a hierarchy of methods is simplistic. As the doctor Mark Tonelli has argued, distinct forms of knowledge can’t be judged by the same standards: what a patient prefers on the basis of personal experience; what a doctor thinks on the basis of clinical experience; and what clinical research has discovered — each of these is valuable in its own way. While scientists concur that randomized trials are ideal for evaluating the average effects of treatments, such precision isn’t necessary when the benefits are obvious or clear from other data.
Clinical expertise and rigorous evaluation also differ in their utility at different stages of scientific inquiry. For discovery and explanation, as the clinical epidemiologist Jan Vandenbroucke has argued, practitioners’ instincts, observations and case studies are most useful, whereas randomized controlled trials are least useful. Expertise and systematic evaluation are partners, not rivals.
Distrusting expertise makes it easy to confuse an absence of randomized evaluations with an absence of knowledge. And this leads to the false belief that knowledge of what works in social policy, education or fighting terrorism can come only from randomized evaluations. But by that logic (as a spoof scientific article claimed), we don’t know if parachutes really work because we have no randomized controlled trials of them.

For the full commentary, see:
PAGAN KENNEDY. “The Thin Gene.” The New York Times, SundayReview Section (Sun., NOV. 27, 2016): 1 & 6.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date NOV. 25, 2016.)

The academic article calling for double-blind randomized trials to establish the efficacy of parachutes, is:
Smith, Gordon C. S., and Jill P. Pell. “Parachute Use to Prevent Death and Major Trauma Related to Gravitational Challenge: Systematic Review of Randomised Controlled Trials.” BMJ 327, no. 7429 (Dec. 18, 2003): 1459-61.

Uber Fights Regulations by Asking Forgiveness, Not Permission

(p. B3) For seven years, Uber’s stance on complying with regulations has been consistent: Ask forgiveness, not permission.
On Friday [December 16, 2016], the ride-hailing company stuck to that position. It said it had no intention of ending a new test of its self-driving vehicles in San Francisco, even though California regulators had said the service was illegal because Uber had not obtained the necessary permits. Uber said its self-driving cars were still on the road and picking up passengers.
The dispute is rooted in Uber’s refusal to seek a permit from the California Department of Motor Vehicles, which would allow it to test autonomous vehicles under certain conditions. Companies like Google, Tesla Motors and Mercedes-Benz have all gotten such permits.
Uber officials contend that under the letter of California law, the company does not need a permit because the motor vehicles department defines autonomous vehicles as those that drive “without the active physical control or monitoring of a natural person.” Uber said its modified, self-driving Volvo XC90s require human oversight, and therefore do not fit California’s definition of an autonomous vehicle.
. . .
The episode serves the latest volley in Uber’s war with local and state regulators — not only in the United States, but in many of the more than 70 countries in which the company operates. Uber has previously grappled with the authorities in California over safety concerns. And Otto, the self-driving trucking start-up founded by Mr. Levandowski and acquired by Uber in August, has flouted state laws in Nevada in the past.

For the full story, see:
MIKE ISAAC. “Uber Defies California Officials Over Self-Driving Cars.” The New York Times (Sat., December 17, 2016): B3.
(Note: ellipsis, and bracketed date, added.)
(Note: the online version of the story has the date DEC. 16, 2016, and has the title “Uber Defies California Regulators With Self-Driving Car Service.”)

Complex Labor Rules Reduce Work Choices for Older Workers

(p. B4) CALL them boomerang retirees: people who exit gracefully after their career at a company, then return shortly afterward to work there part time.
More and more companies are establishing formal programs to facilitate this, for reasons that benefit both the employer and the retiree. Leaving a satisfying job cold-turkey for a life of leisure can be an abrupt jolt to people accustomed to feeling purposeful, earning money and enjoying their colleagues. From the corporate perspective, it is useful to have experienced hands who can train younger people, pass along institutional wisdom and work with fewer strings attached.
“People in the U.S. define themselves by their work, and they like their co-workers,” said Roselyn Feinsod, senior partner in the retirement practice at the human resources firm Aon Hewitt, the human resources consultancy. Thus, unlike many retirees from past generations, people from both the blue-collar and white-collar sectors are more eager to retain ties to the familiar working world that they enjoyed (and sometimes loathed).
. . .
. . . , Atlantic Health Systems of Morristown, N.J., is among the growing ranks of employers that sponsor a formal program to invite retirees back into the work force, for no more than 1,000 hours a year. The company’s Alumni Club — formerly known as the 1,000 Hour Club — was established in 2006, and about 300 Atlantic Health retirees are currently on the company’s payroll in various capacities. “They’re engaged employees; they’re productive,” said Lesley Meyer, Atlantic Systems’ manager of corporate human resources. “They’re a stable talent pool.”
. . .
Most boomerang retirees return to work after an informal negotiation with a former boss. Programs like the one at Atlantic Systems are still relatively rare — for instance, about 8 percent of the 463 companies surveyed by the Society for Human Resource Management in 2015 had one — but they are on the rise.
They are also tricky to run: Establishing a boomerang retiree program involves a substantial commitment of resources, including systems for navigating complex labor market rules and pension law. Most returning retirees must wait several months before they can come back, and are often limited to that 1,000 hours a year. Companies are increasingly turning to outside staffing firms to manage the nuts and bolts.
. . .
It was a phone call from her former manager that lured Pat Waller, who spent 39 years as an intensive care nurse for Atlantic Health before retiring in 2005 at age 66, back to the work force part time. She joined the Alumni Club in 2007 after the hospital where she had worked, Morristown Medical Center in Morristown, N.J., applied to qualify as a federal center of excellence in knee and hip surgery; her former boss wondered if she would help gather data. Absolutely, she answered.
Since then, Ms. Waller has worked on several projects for Atlantic Health, gigs that easily give her the time to travel with her husband and see her six grandchildren.
Now that she is 77, Ms. Waller works mostly from home, sometimes three to four days a week and other times one to two, depending on the project, “I always said when I was at work I learned something every day,” she said. “Since I’ve come back, I feel the same way.”

For the full story, see:
CHRISTOPHER FARRELL. “Boomerang Boom: Firms Tapping Skills of the Recently Retired.” The New York Times (Sat., December 17, 2016): B4.
(Note: ellipses added.)
(Note: the online version of the story has the date DEC. 16, 2016, and has the title “Retiring; Boomerang Boom: More Firms Tapping the Skills of the Recently Retired.”)

Better Policies Can Turn Stagnation into Growth

(p. A19) . . . , now ought to be the time that policy makers in Washington come together to tackle America’s greatest economic problem: sclerotic growth. The recession ended more than seven years ago. Unemployment has returned to normal levels. Yet gross domestic product is rising at half its postwar average rate. Achieving better growth is possible, but it will require deep structural reforms.
The policy worthies have said for eight years: stimulus today, structural reform tomorrow. Now it’s tomorrow, but novel excuses for stimulus keep coming. “Secular stagnation” or “hysteresis” account for slow growth. Prosperity demands more borrowing and spending–even on bridges to nowhere–or deliberate inflation or negative interest rates. Others advocate surrender. More growth is impossible. Accept and manage mediocrity.
But for those willing to recognize the simple lessons of history, slow growth is not hard to diagnose or to cure. The U.S. economy suffers from complex, arbitrary and politicized regulation. The ridiculous tax system and badly structured social programs discourage work and investment. Even internet giants are now running to Washington for regulatory favors.
. . .
So why is there so little talk of serious growth-oriented policy? Regulated and protected industries and unions, and the politicians who extract support from them in return for favors, will lose enormously. The global policy elite, steeped in Keynesian demand management for the economy as a whole, and microregulation of individual businesses, are intellectually unprepared for the hard project of “structural reform”–fixing the entire economy by cleaning up the thousands of little messes. Even economists fight to protect outdated skills.

For the full commentary, see:
JOHN H. COCHRANE. “Don’t Believe the Economic Pessimists; Memo to Clinton and Trump: The U.S. economy can and will grow faster with the right policies.” The Wall Street Journal (Mon., Nov. 7, 2016): A19.
(Note: ellipses added.)

E.U. Regulations Protect Paris Rats

(p. A4) PARIS — On chilly winter mornings, most Parisians hurry by the now-locked square that is home to the beautiful medieval Tour St. Jacques. Only occasionally do they pause, perhaps hearing a light rustle on the fallen leaves or glimpsing something scampering among the dark green foliage.
A bird? A cat? A puppy?
No. A rat.
No. Three rats.
No. Look closer: Ten or 12 rats with lustrous gray-brown coats are shuffling among the dried autumn leaves.
Paris is facing its worst rat crisis in decades. Nine parks and green spaces have been closed either partly or entirely
. . .
In the 19th century, rats terrified and disgusted Parisians who knew that five centuries earlier, the creatures had brought the bubonic plague across the Mediterranean.
The plague ravaged the city, as it did much of Europe, killing an estimated 100,000 Parisians, between a third and half the population at the time. It recurred periodically for four more centuries. Not surprisingly, the experience left Paris with a millennium-long aversion to rodents.
. . .
. . . why are they proliferating? Could it be everybody’s favorite scapegoat — the European Union and its faceless, unaccountable bureaucrats?
Yes, it could.
New regulations from Brussels, the European Union’s headquarters, have forced countries to change how they use rat poison, said Dr. Jean-Michel Michaux, a veterinarian and head of the Urban Animals Scientific and (p. A14) Technical Institute in Paris.
. . .
While the poison could be a risk to human beings, so are the rats — potentially, although no one is suggesting that the bubonic plague is likely to return.

For the full story, see:

ALISSA J. RUBIN. “PARIS JOURNAL; The Rats Came Back. Blame the E,U.” The New York Times (Fri., DEC. 16, 2016): A4 & A14.
(Note: ellipses added.)
(Note: the online version of the story has the date DEC. 15, 2016, and has the title “PARIS JOURNAL; Rodents Run Wild in Paris. Blame the European Union.”)

Government Permission to Build Takes Longer than It Takes to Build

(p. A21) America used to be the envy of the world in building great projects responsibly, efficiently and on time. The Pentagon was built in 16 months. The 1,500-mile Alaska-Canadian Highway, which passes through some of the world’s most rugged terrain, took about eight months. Today, infrastructure projects across America often require several years simply to get through the federal government’s pre-build permitting process. Consider a few examples.
New U.S. highway construction projects usually take between nine and 19 years from initial planning and permitting to completion of construction, according to a 2002 Government Accountability Office study. It will have taken 14 years to permit an expansion of Gross Reservoir in Colorado, and it took almost 20 years to permit the Kensington gold mine in Alaska.
It took four years to construct a new runway at Seattle-Tacoma International Airport, but it took 15 years to get the permits. Todd Hauptli of the American Association of Airport Executives bitterly joked to the Senate Commerce Committee last year, “It took longer to build that runway than the Great Pyramids of Egypt.”
These problems have been building for decades as the U.S. regulatory state has grown.

For the full commentary, see:
DAN SULLIVAN. “How to Put Building Permits on a Fast Track; It can take 15 years to win approval for a new airport runway. No wonder U.S. infrastructure needs a lift.” The Wall Street Journal (Mon., Dec. 5, 2016): A21.
(Note: the online version of the commentary has the date Dec. 4, 2016.)

Unbinding Entrepreneurs Can Create Jobs and Speed Growth

(p. A21) This week more than 160 countries are celebrating Global Entrepreneurship Week. The Kauffman Foundation, which I once led, created this event eight years ago to encourage other nations to follow the American tradition of bottom-up economic success. Yet this example has been less powerful in recent years, as American entrepreneurship has waned. Fortunately, President-elect Donald Trump has plenty of options if he wants to resurrect America’s startup economy.
Consider the economic situation that the president-elect is inheriting. Despite the addition of 161,000 jobs in October, the labor-force participation rate fell to its second lowest level in nearly 40 years, according to the St. Louis Federal Reserve. More people have joined the ranks of the chronically unemployed, slipping into poverty at alarming rates as their skills decay and dependency on public assistance grows. Considering population growth, America needs at least 325,000 new jobs every month to stanch the growing numbers of discouraged workers, according to the Bureau of Labor Statistics.
Merely bringing back factories from overseas will not solve this problem. Technology has made every factory more productive. Fewer workers make more goods no matter where they’re located. At the same time, fewer U.S. businesses are being started. New firms are the country’s principal generator of new jobs. Data from the Kauffman Foundation suggest companies less than five years old create more than 80% of new jobs every year. While the nation seems more enthusiastic than ever about the promise of entrepreneurship, fewer than 500,000 new businesses were started in 2015. That is a disastrous 30% decline from 2008.
. . .
What can President Trump do to encourage more entrepreneurship?
. . .
Government must . . . widen the scope of innovation by stepping back and letting the market find the future. By promoting trendy ideas and subsidizing politically favored companies, government dampens diversity in creative business ideas.
. . .
Mr. Trump can also reverse regulatory sprawl and cut government-imposed requirements that add to every entrepreneurs’ costs and risks. Anti-growth policies like ObamaCare and minimum-wage increases make hiring workers prohibitively expensive.
. . .
With these policies in mind, President Trump should set another goal: that his administration will create an environment that enables one million Americans to start companies every year. Such an outcome would assure his target of 4% GDP growth, as well as full employment.

For the full commentary, see:
CARL J. SCHRAMM. “The Entrepreneurial Way to 4% Growth; Trump should set a goal: fix the business climate so a million Americans a year can start companies.” The Wall Street Journal (Weds., Nov. 16, 2016): A21.

Europeans Regulate, or Not, Based on Which Label They Arbitrarily Apply to Uber

(p. B8) LUXEMBOURG — Uber asserted on Tuesday [November 28, 2016] that it was helping to bolster Europe’s digital economy as part of its defense in a long-awaited hearing to decide how the popular ride-hailing service should be able to operate across the region.
. . .
At the heart of the European court case — a ruling is not expected until April, at the earliest — is whether Uber should be considered a transportation service or a digital platform, which acts independently to connect third-party drivers with passengers.
If the company is defined as a transportation service, it must comply with national laws that may restrict how Uber grows in Europe.
Yet if the judges rule the company is just an intermediary that connects drivers with passengers, legal experts say, Uber may gain greater freedom to offer more transportation, food delivery and other services to European consumers.

For the full story, see:
MARK SCOTT. “Is Uber a Car Service or a Digital Platform?” The New York Times (Weds., NOV. 30, 2016): B8.
(Note: ellipsis, and bracketed date, added.)
(Note: the online version of the story has the date NOV. 29, 2016, and has the title “Uber, Seeking to Expand, Defends Itself at Europe’s Highest Court.”)