Regulations – Page 71 – artdiamondblog.com

Countries that Protect Jobs Stifle Economic Growth

(p. 240) In an “Interview” conducted by Jessie Romero, John Haltiwanger discusses changing patterns of job creation and destruction: “But now we’re seeing a decline in the entry rate and a pretty stark decline in the share of young businesses. . . . But it’s also important to recognize that the decline in the share of young firms has occurred because the impact of entry is not just at the point of entry, it’s also over the next five or 10 years. A wave of entrants come in, and some of them grow very rapidly, and some of them fail. That dynamic has slowed down. . . . If you look at young small businesses, or just young businesses period, the 90th percentile growth rate is incredibly high. Young businesses not only are volatile, but their growth rates also are tremendously skewed. It’s rare to have a young business take off, but those that do add lots of jobs and contribute a lot to productivity growth. We have found that startups together with high-growth firms, which are disproportionately young, account for roughly 70 percent of overall job creation in the United States. . . . “I think the evidence is overwhelming that countries have tried to stifle the [job] destruction process and this has caused problems. I’m hardly a fan of job destruction per se, but making it difficult for firms to contract, through restricting shutdowns, bankruptcies, layoffs, etc., can have adverse consequences. The reason is that there’s so much heterogeneity in productivity across businesses. So if you stifle that destruction margin, you’re going to keep lots of low-productivity businesses in existence, and that could lead to a sluggish economy. I just don’t think we have any choice in a modern market economy but to allow for that reallocation to go on. Of course, what you want is an environment where not only is there a lot of job destruction, but also a lot of job creation, so that when workers lose their jobs they either immediately transit to another job or their unemployment duration is low.” Econ Focus, Federal Reserve Bank of Richmond, Second Quarter 2013, pp. 30-34. http://www.richmondfed.org/publications/research/econ_focus/2013/q2/pdf/interview.pdf.

Source:
Taylor, Timothy. “Recommendations for Further Reading.” Journal of Economic Perspectives 28, no. 1 (Winter 2014): 235-42.
(Note: italics, ellipses, and bracketed word, in original.)

The Opportunity Cost of Surgeons Dictating and Documenting Health Records

(p. A13) Across the country, doctors waste precious time filling in unnecessary electronic-record fields just to satisfy a regulatory measure. I personally spend two hours a day dictating and documenting electronic health records just so I can be paid and not face a government audit. Is that the best use of time for a highly trained surgical specialist?

For the full commentary, see:
DANIEL F. CRAVIOTTO JR. “A Doctor’s Declaration of Independence; It’s time to defy health-care mandates issued by bureaucrats not in the healing profession.” The Wall Street Journal (Tues., April 29, 2014): A13.
(Note: the online version of the commentary has the date April 28, 2014.)

Instead of 50 Silicon Valleys, Andreessen Sees 50 Kinds of Silicon Valley

“Marc Andreessen, co-founder of the first major web browser, Netscape, has a record for knowing what’s coming next with technology.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B8) Mr. Andreessen said new valleys will eventually emerge. But they won’t be Silicon Valley copycats.

Over the past couple of years, venture firms have invested in start-ups in Los Angeles, New York, Chicago and all over China. Los Angeles, for example, is home to Snapchat, Tinder, Whisper, Oculus VR and Beats, some of the big tech stories of the year. Mr. Andreessen said another hot place is Atlanta, the home of Georgia Tech.
But he offers a caveat.
“My personal view is that Silicon Valley will continue to take a disproportionate share of the No. 1 positions in great new markets, and I think that’s just a reflection that the fact that the valley works as well as it does,” Mr. Andreessen said.
There is a caveat to his caveat.
In Mr. Andreessen’s view, there shouldn’t be 50 Silicon Valleys. Instead, there should be 50 different kinds of Silicon Valley. For example, there could be Biotech Valley, a Stem Cell Valley, a 3-D Printing Valley or a Drone Valley. As he noted, there are huge regulatory hurdles in many of these fields. If a city wanted to spur innovation around drones, for instance, it might have to remove any local legal barriers to flying unmanned aircraft.

For the full interview, see:
NICK BILTON. “DISRUPTIONS; Forecasting the Next Big Moves in Tech.” The New York Times (Mon., MAY 19, 2014): B8.
(Note: the online version of the interview has the date MAY 18, 2014, and has the title “DISRUPTIONS; Marc Andreessen on the Future of Silicon Valley(s), and the Next Big Technology.” )

Occupational Licensing Hurts Poor and Restricts Innovation and Worker Mobility

Source of book image: http://www.upjohn.org/sites/default/files/bookcovers/soor_0.JPG

(p. A31) In the 1970s, about 10 percent of individuals who worked had to have licenses, but by 2008, almost 30 percent of the work force needed them.

With this explosion of licensing laws has come a national patchwork of stealth regulation that has, among other things, restricted labor markets, innovation and worker mobility.
. . .
Occupational licensing, moreover, does nothing to close the inequality gap in the United States. For consumers, there is likely to be a redistribution effect in the “wrong” direction, as higher income consumers have more choice among higher quality purveyors of a service and lower income individuals are left with fewer affordable service options.
. . . , government-issued licenses largely protect occupations from competition. Conservatives often see members of the regulated occupation supporting licensing laws under claims of “public health and safety.” However, these laws do much more to stop competition and less to enhance the quality of the service.
Also, all consumers do not demand the same level of quality. If licensure “improves quality” by restricting entry into the profession, then some consumers will be forced to pay for more “quality” than they want or need. Not everyone wants a board-licensed hairdresser.

For the full commentary, see:
MORRIS M. KLEINER. “Why License a Florist?” The New York Times (Thurs., MAY 29, 2014): A31.
(Note: the online version of the commentary has the date MAY 28, 2014.)

Kleiner’s most recent book on occupational licensing is:
Kleiner, Morris M. Stages of Occupational Regulation: Analysis of Case Studies. Kalamazoo, Michigan: W.E. Upjohn Institute, 2013.

How Medicaid Rewards Doctors Who Mistreat Patients

(p. A13) I recently operated on a child with strabismus (crossed eyes). This child was covered by Medicaid. I was required to obtain surgical pre-authorization using a Current Procedural Terminology, or CPT, code for medical identification and billing purposes. The CPT code identified the particular procedure to be performed. Medicaid approved my surgical plan, and the surgery was scheduled.
During the surgery, I discovered the need to change my plan to accommodate findings resulting from a previous surgery by another physician. Armed with new information, I chose to operate on different muscles from the ones noted on the pre-approved plan. The revised surgery was successful, and the patient obtained straight eyes.
However, because I filed for payment using the different CPT code for the surgery I actually performed, Medicaid was not willing to adjust its protocol. The government denied all payment. Ironically, the code-listed payment for the procedure I ultimately performed was an amount 40% less than the amount approved for the initially authorized surgery. For over a year, I challenged Medicaid about its decision to deny payment. I wrote numerous letters and spoke to many Medicaid employees explaining the predicament. Eventually I gave up fighting what had obviously become a losing battle.

For the full commentary, see:
ZANE F. POLLARD. “The Bureaucrat Sitting on Your Doctor’s Shoulder; When I’m operating on a child, I shouldn’t have to wonder if Medicaid will OK a change in the surgical plan..” The Wall Street Journal (Thurs., May 22, 2014): A13.
(Note: the online version of the commentary has the date May 21, 2014.)

“A Backhanded Slap to Overweening European Union Rule Makers”

“Lemons sold by Ugly Fruit.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 6) At a time of lingering economic hardship for many in the European Union, whose penchant for regulation has extended even to the shape, size and color of the foods its citizens eat, Ms. Soares has bet that there is a market for fruits and vegetables deemed too ugly by government bureaucrats, supermarkets and other retailers to sell to their customers.

Six months ago, she and a handful of volunteers started a cooperative called Fruta Feia, or Ugly Fruit, which in its short life is already verging on a kind of countercultural movement. It has taken off with hard-pressed consumers, won applause from advocates outraged by Europe’s skyrocketing food waste, and provided a backhanded slap to overweening European Union rule makers. In its own way, it has even quietly subverted fixed notions of what is beautiful, or at least edible.
“The E.U. norms are based on the mistaken idea that quality is about appearance,” said Ms. Soares, 31, who formerly worked in Barcelona as a renewable energy consultant. “It’s of course easier to measure the exterior aspect rather than interior features like sugar levels, but that is the wrong way to determine quality.”
She said her goal was “to break the dictatorship of aesthetics, because it has really helped increase food wastage.”
Europe wastes 89 million tons of food a year, according to a study presented in May by the Dutch and Swedish governments, which called on the European Union “to reduce the amount of food waste caused by the labeling system.”
For her part, Ms. Soares estimates that a third of Portugal’s farming produce goes to waste because of the quality standards set by supermarkets and their consumers. She says the waste is also a striking example of misplaced regulatory intervention by the European Union, which has tried to unify food standards across the 28-nation bloc.

For the full story, see:
RAPHAEL MINDER. “Tempting Europe With Ugly Fruit.” The New YorkTimes, First Section (Sun., MAY 25, 2014): 6 & 8.
(Note: the online version of the story has the date MAY 24, 2014.)

Government Regulations Favor Health Care Incumbents

Source of book image: online version of the WSJ review quoted and cited below.

(p. A11) The rise in U.S. health-care costs, to nearly 18% of GDP today from around 6% of GDP in 1965, has alarmed journalists, inspired policy wonks and left patients struggling to find empathy in a system that tends to view them as “a vessel for billing codes,” as the technologist Dave Chase has put it.

Enter Jonathan Bush, dyslexic entrepreneur, . . .
. . .
. . . , Mr. Bush touts technology as a driver of change. It has revolutionized the way we shop for books and select hotels, but health-care delivery has been stubbornly resistant. Mr. Bush notes that the number of people supporting each doctor has climbed to 16 today from 10 in 1990–half of whom, currently, are administrators handling the mounting paperwork. Astonishingly, as Mr. Bush observes, the government had to pay doctors billions of dollars, via the 2009 HITECH Act, to incentivize them to upgrade from paper to computers. Meanwhile, fast-food chains discovered computers on their own, because the market demanded it.
. . .
Let entrepreneurs loose on these challenges, Mr. Bush believes, and they will come up with solutions.
Mr. Bush identifies three major obstacles to the kinds of change he has in mind. First, large hospital systems leverage their market position to charge hefty premiums for basic services, then use the proceeds to buy more regional hospitals and local practices. “As big ones take over the small,” Mr. Bush laments, “prices shoot up. Choices vanish.” Second, government regulations, especially state laws, favor powerful incumbents, shielding “imaging centers and hospitals from competition.” Third, heath care suffers from a risk-avoidant culture. The maxim “do no harm,” Mr. Bush says, should not be an excuse for clinging to a flawed status quo.

For the full review, see:
David A. Shaywitz. “BOOKSHELF; A System Still in Need of Repair; Routine medical services can be done for less cost–one of many obvious realities that current health-care practices studiously ignore.” The Wall Street Journal (Mon., May 19, 2014): A11.
(Note: ellipses added.)
(Note: the online version of the review has the date May 18, 2014, and has the title “BOOKSHELF; Book Review: ‘Where Does It Hurt?’ by Jonathan Bush; Routine medical services can be done for less cost–one of many obvious realities that current health-care practices studiously ignore.”)

The book under review is:
Bush, Jonathan, and Stephen Baker. Where Does It Hurt?: An Entrepreneur’s Guide to Fixing Health Care. New York: Portfolio, 2014.

In France “‘Liberté, Égalité, Fraternité’ Means that What’s Yours Should Be Mine”

Guillaume Santacruz is among many French entrepreneurs now using London as their base. He said of his native France, “The economy is not going well, and if you want to get ahead or run your own business, the environment is not good.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 1) Guillaume Santacruz, an aspiring French entrepreneur, brushed the rain from his black sweater and skinny jeans and headed down to a cavernous basement inside Campus London, a seven-story hive run by Google in the city’s East End.
. . .
A year earlier, Mr. Santacruz, who has two degrees in finance, was living in Paris near the Place de la Madeleine, working in a boutique finance firm. He had taken that job after his attempt to start a business in Marseille foundered under a pile of government regulations and a seemingly endless parade of taxes. The episode left him wary of starting any new projects in France. Yet he still hungered to be his own boss.
He decided that he would try again. Just not in his own country.
“A lot of people are like, ‘Why would you ever leave France?’ ” Mr. Santacruz said. “I’ll tell you. France has a lot of problems. There’s a feeling of gloom that seems to be growing deeper. The economy is not going well, and if you want to get ahead or run your own business, the environment is not good.”
. . .
(p. 5) “Making it” is almost never easy, but Mr. Santacruz found the French bureaucracy to be an unbridgeable moat around his ambitions. Having received his master’s in finance at the University of Nottingham in England, he returned to France to work with a friend’s father to open dental clinics in Marseille. “But the French administration turned it into a herculean effort,” he said.
A one-month wait for a license turned into three months, then six. They tried simplifying the corporate structure but were stymied by regulatory hurdles. Hiring was delayed, partly because of social taxes that companies pay on salaries. In France, the share of nonwage costs for employers to fund unemployment benefits, education, health care and pensions is more than 33 percent. In Britain, it is around 20 percent.
“Every week, more tax letters would come,” Mr. Santacruz recalled.
. . .
Diane Segalen, an executive recruiter for many of France’s biggest companies who recently moved most of her practice, Segalen & Associés, to London from Paris, says the competitiveness gap is easy to see just by reading the newspapers. “In Britain, you read about all the deals going on here,” Ms. Segalen said. “In the French papers, you read about taxes, more taxes, economic problems and the state’s involvement in everything.”
. . .
“It is a French cultural characteristic that goes back to almost the revolution and Robespierre, where there’s a deep-rooted feeling that you don’t show that you make money,” Ms. Segalen, the recruiter, said. “There is this sense that ‘liberté, égalité, fraternité’ means that what’s yours should be mine. It’s more like, if someone has something I can’t have, I’d rather deprive this person from having it than trying to work hard to get it myself. That’s a very French state of mind. But it’s a race to the bottom.”

For the full story, see:
LIZ ALDERMAN. “Au Revoir, Entrepreneurs.” The New York Times, SundayBusiness Section (Sun., MARCH 23, 2014): 1 & 5.
(Note: ellipses added.)
(Note: the online version of the story has the date MARCH 22, 2014.)

‘Diane Segalen moved most of her executive recruiting practice to London from Paris. In France, she says, “there is this sense that ‘liberté, égalité, fraternité’ means that what’s yours should be mine.”” Source of caption and photo: online version of the NYT article quoted and cited above.

Delta Overcomes Obstacles that Ground Other Airlines

Source of graphic: online version of the WSJ article quoted and cited below.

Cancellations due to mechanical failures, piliot illness and government regulations are often announced as though they were acts of God, outside the possible control of airlines, for which the airline is blameless. But airlines can take actions, and improve processes, to reduce the frequency and consequences of such cancellations. In airlines, and in other firms, there is not a sharp line between what can and what cannot be under the firm’s control.

(p. D3) Atlanta

The crew of Delta Air Lines Flight 55 last Thursday couldn’t legally fly from Lagos, Nigeria, to Atlanta unless they waited a day due to new limits on how much pilots can fly in a rolling 28-day period. The trip would have to be canceled.
Instead, Delta headquarters told the captain to fly to San Juan, Puerto Rico, which they could reach within their duty limits. There, two new pilots would be waiting to take the Boeing 767 on to Atlanta. The plane arrived in San Juan at 2:44 a.m., quickly took on fuel and pilots, and landed in Atlanta only 40 minutes late.
The episode, unorthodox in the airline industry, illustrates the fanaticism Delta now has for avoiding cancellations. Last year, Delta canceled just 0.3% of its flights, according to flight-tracking service FlightStats.com. That was twice as good as the next-best airlines, Southwest and Alaska, and five times better than the industry average of 1.7%.
. . .
Managers in Delta operations centers move planes, crews and parts around hourly trying to avoid canceling flights. How well an airline maintains its fleet and how smartly it stashes spare parts and planes at airports affect whether your flight goes or not.
Delta thinks it has come up with new analytical software and instruments that can help monitor the health of airplanes and predict which parts will soon fail. Empty planes are ferried to replace crippled jets rather than waiting for overnight repairs.
Mechanics developed a vibration monitor to install on cooling fans for cockpit instruments. A plane can’t be sent out on a new trip with a broken fan.
Now when vibration starts to increase, indicating that a bearing may be wearing down and getting close to failing, a new fan is swapped in. The wobbly fan goes to the shop for new bearings. That has reduced canceled flights.
So has spending $2 million to have spare starters for Boeing 767 engines at all 767 stations abroad. Starters last about five years. While each plane has two and both engines can be started with one, you can’t send a plane out on a long trip over oceans with only one working.

For the full story, see:
SCOTT MCCARTNEY. “THE MIDDLE SEAT; A World Where Flights Aren’t Canceled; How Smartly an Airline Stashes Spare Parts and Planes at Airports Affects Whether or Not Your Flight Takes Off.” The Wall Street Journal (Thurs., April 3, 2014): D3.
(Note: ellipsis added.)
(Note: the online version of the story was updated April 2, 2014, and has the title “THE MIDDLE SEAT; A World Where Flights Aren’t Canceled; Inside Delta’s new strategies to avoid stranding fliers.”)

Government Pushed Kiewit to Ignore Worker Safety

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.

Government Wire Inspectors Only Showed Up to Get Their Pay

(p. 121) Edison had originally planned to offer service to the entirety of south Manhattan, south of Canal Street and north of Wall Street, but engineering considerations forced him to carve out a smaller district, bounded by Wall, Nassau, Spruce, and Ferry Streets. Still, his company had to place underground some eighty thousand linear feet of electrical wire. This had never been attempted before, so it should not have been a surprise when H. O. Thompson, the city’s commissioner of public works, summoned Edison to his office to explain that the city would have to be assured that the lines were installed safely. Thompson was assigning five inspectors to oversee the work, whose cost would be covered by an assessment of $5 per day, per inspector, payable (p. 122) each week. When Edison left Thompson’s office, he was crestfallen, anticipating the harassment and delays ahead that would be caused by the inspectors’ interference. On the day that work began, however, the inspectors failed to appear. Their first appearance was on Saturday afternoon, to draw their pay. This set the pattern that the inspectors followed as the work proceeded through 1881 and into 1882.

Source:
Stross, Randall E. The Wizard of Menlo Park: How Thomas Alva Edison Invented the Modern World. New York: Crown Publishers, 2007.