Minor Thoughts from me to you

Baylen Linnekin, writing at Reason.com:

If a federal agency has the power to bar a court from overturning or halting the actions of that agency—an administrative rulemaking body to which Congress delegates far too much power already—then that body may (and will) act with impunity. The power of such an agency would, in fact, exceed that of Congress itself.

Such a law would be worse than almost any that preceded it in this country. Under no theory of agency with which I'm familiar can one delegate more power than one has. And yet this new amendment to the GMO law appears to place some USDA powers almost entirely outside the scope of judicial review.

In effect, this amendment gives the USDA the power to ignore a federal judge’s ruling in some cases. It would take the power of judicial review out of the hand of judges, crumple it up, toss it on the ground, step on it, and set it ablaze.

I know many people have an irrational hated of genetically modified food. When I first heard about this provision, I just assumed that it would protect Monsanto against these biased attacks. This analysis completely changes my opinion. Congress should vote this down.

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Dr. Pauline Chen, writing at the New York Times.

The researchers then compared these outcomes to those of patients who were not covered by Medicare and therefore not restricted to having their operations done at centers of excellence. Even after adjusting for individual patient risk factors and the specific type of bariatric procedure performed, they found no differences in complication rates or outcomes between Medicare and non-Medicare patients. Moreover, they discovered that many of the improvements had been under way prior to 2006.

In other words, the much-heralded policy of funneling patients to centers of excellence has had little effect on how patients do.

Over the past several years, I've seen lots of people talking about how this or that government program fixed this or that problem in the United States. And, almost invariably, I'll see economists pointing out that the trend line was already declining before the government got involved and that the government's involvement did nothing to speed up the change.

Without this research, this Medicare policy would have received the same praise even though it, too, deserves none of the credit.

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Congresswoman Cathy McMorris Rodgers and Congressman Fred Upton, writing in National Review:

The nutritional boards may cost a lot of dough, but at least the pizza-loving populace will be exposed to the caloric details of their feast, right? Hardly. Ninety percent of Domino’s customers never see the menu sign. That’s because they place their orders on the Internet or over the phone; whether the pie is delivered or picked up in-store, at best the consumer would see the calorie sign only after the order is placed.

Thanks to an Obamacare provision, restaurants will have to spend thousands of dollars putting up government mandated signs that few of their customers will ever see. All in the name of bullying you into eating healthier. Who's your nanny now?

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Alex Tabarrok, of George Mason University, shares an interesting account of regulation, deregulation, and increased safety. In the mid-90's, Piper, Cessna, and Beach were no longer producing small airplanes for the general public. They were too afraid of lawsuits over planes that were decades old.

Congress eventually responded by saying that "manufacturers could not be held liable for accidents involving aircraft more than 18 years old". The result: an increase in overall safety.

a significant (on the order of 13.6 percent) reduction in the probability of an accident. The evidence suggests that modest decreases in the amount and nature of flying were largely responsible. After GARA, for example, aircraft owners and pilots retired older aircraft, took fewer night flights, and invested more in a variety of safety procedures and precautions, such as wearing seat belts and filing flight plans. Minor and major accidents not involving mechanical failure—those more likely to be under the control of the pilot—declined notably.

When it cames to safety regulation, more is not always better. Sometimes it's just more. People are more likely to be cautious if they believe that they bear risk themselves rather than believing that someone else bears all of the risk.

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Americans in urban areas think of dental services as a kind of regular maintenance. It's little different than changing the oil in your car and occurs about as often. But that's not true for everyone.

According to the Pew Center on the States, more than 40 million Americans reside in areas with a shortage of dentists. And individuals without dental health access often end up in the emergency room, which is more expensive for everyone.

Advocacy groups and some state legislators think an alternative type of dental provider, often called a dental therapist, can fill the void. Dental therapists don’t receive as much training as a dentist. But they can perform some of the same basic services — such as pulling teeth and filling cavities — under the supervision of a dentist.

In Minnesota and Alaska, the two states that have practicing dental therapists so far, some of the therapists are able to take their work on the road, traveling to rural areas to treat those who have little or no access to dentists — or who have limited dental coverage. The dental therapists charge less than dentists and are able to take all types of insurance, including Medicaid and Medicare.

“The bottom line is that it will cost a state significantly less to hire dental therapists to provide basic restorative care to the underserved,” said Julie Stitzel, manager for the Pew Children’s Dental Campaign.

How are America's dentists responding to this? Not well.

“The No. 1 obstacle has been organized dentistry,” Pew’s Stitzel said.

“What we’re opposed to is the delegation of surgical procedures,” Faiella said. “Everyone deserves the treatment of a dentist and the care of a dentist.”

He says ADA is developing a range of programs to address the gap — pushing prevention measures such as fluoride and dental sealants, emergency room diversion programs in which dentists partner with community health clinics to ensure people needing dental care don’t end up in the emergency department — and an ad campaign to encourage parents to make sure their kids brush twice a day.

An ad campaign. That'll certainly take care of the dental problems of America's rural population. After all, they deserve a dentist not a less personage. And if they can't have a dentist? They're better off having nothing.

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John Cochrane recently wrote about healthcare reform. This is the direction we need to go in, not Obamacare.

First, he talked about the insurance side of health care.

To summarize briefly, health insurance should and can be individual, portable, life-long, guaranteed-renewable, transferrable, competitive, and lightly regulated, mostly to ensure that companies keep their contractual promises. “Guaranteed renewable” means that your premiums do not increase and you can’t be dropped if you get sick. “Transferable” gives you the right to change insurance companies, increasing competition.

Insurance should be insurance, not a payment plan for routine expenses. It should protect overall wealth from large shocks, leaving as many marginal decisions unaltered as possible.

Preexisting conditions, lack of insurance by the young and healthy, and spiraling insurance costs– the main problems motivating the ACA -- are neatly addressed by this alternative. Why do we not have a system? Because law and regulation prevent it from emerging. Before ACA, the elephant in the room was the tax deduction and regulatory pressure for employer-based group plans. This distortion killed the long-term individual market and thus directly caused the pre-existing conditions mess. Anyone who might get a job in the future will not buy long-term insurance. Mandated coverage, tax deductibility of regular expenses if cloaked as “insurance,” prohibition of full rating, barriers to insurance across state lines – why buy long term insurance if you might move? – and a string of other regulations did the rest. Now, the ACA is the whale in the room: The kind of private health insurance I described is simply and explicitly illegal.

He finished by writing about the supply of health care and why we have expensive, low quality options.

So, where are the Walmarts and Southwest Airlines of health care? They are missing, and for a rather obvious reason: regulation and legal impediments.

A small example: In Illinois as in 35 other states7, every new hospital, or even major purchase, requires a “certificate of need.” This certificate is issued by our “hospital equalization board,” appointed by the governor (insert joke here) and regularly in the newspapers for various scandals. The board has an explicit mandate to defend the profitability of existing hospitals. It holds hearings at which they can complain that a new entrant would hurt their bottom line.

Specialized practices that deliver single kinds of service or targeted groups of customers cheaply face additional hurdles, as they undermine the cross-subsidization provided by “full service” hospitals. For example, the Institute for Justice is bringing a major suit8 by a specialty colonoscopy practice in Virginia, which local “full service” hospitals managed to ban.

... The increasing spread of medical tourism to cash-only offshore hospitals is a revealing trend. Why does this have to occur offshore? What’s different about the hospital location? Answer: the regulatory regime.

So, what’s the biggest thing we could do to “bend the cost curve,” as well as finally tackle the ridiculous inefficiency and consequent low quality of health-care delivery? Look for every limit on supply of health care services, especially entry by new companies, and get rid of it.

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The Department of Justice is interested in racial quotas. It doesn't really care if meeting those quotas requires banks to blow up the economy.

In a complaint filed Wednesday and settled the same day, Justice claimed that California-based Luther Burbank Savings violated the 1968 Fair Housing Act and 1974 Equal Credit Opportunity Act by setting a policy that had a "disparate impact" on minorities. Between 2006 and mid-2011, 5.2% of Luther's single-family residential mortgage loans went to African-Americans and Hispanics, compared to an average of 41.7% for other lenders in the area. The complaint doesn't cite evidence of intentional discrimination because there wasn't any.

Luther Burbank wasn't a fly-by-night operator that marketed those loans to any and all. The bank insisted on a minimum $400,000 loan amount and made loans with an average 680 FICO score and 67% loan-to-value. Over the period that Justice examined, Luther Burbank foreclosed on a mere 11 borrowers out of 629 loans outstanding—a loss ratio of 1.75%. In a normal world, Luther Burbank would get a medal from regulators for its risk management, having chosen borrowers even at the height of the housing mania who could meet their monthly payments.

But Assistant Attorney General for Civil Rights Thomas Perez has a different priority: He wants banks to meet lending quotas to minorities—regardless of whether those borrowers can afford the loans. Many minority borrowers have low incomes that make them riskier lending bets. Is that a bank's fault?

To be fair, Congress passed the laws that the DoJ is enforcing. Is there any chance, at all, that we can repeal those laws without having the entirety of the liberal and progressive world scream "racist!"?

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A new paper from Georgetown University researchers suggests a third possible outcome: Absolutely nothing at all will happen. They looked at the three states – Maine, Georgia and Wyoming – that have passed laws allowing insurers from other states to participate in their markets. All have done so within the past two years.

So far, none of the three have seen out-of-state carriers come into their market or express interest in doing so. It seems to have nothing to do with state benefit mandates, and everything to do with the big challenge of setting up a network of providers that new subscribers could see.

Interesting. This is another argument in favor of spending out of pocket instead of purchasing healthcare through health insurance. You can negotiate and shop around immediately. You don't have to wait for an insurance company to set up a network and then pay them.

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Suppose—just suppose—that there were a tested energy technology out there that

• produces electricity cheaper than coal, because of lower capital and fuel costs,
• uses a fuel that is in almost inexhaustible supply, both in the U.S. and elsewhere,
• operates continuously, in baseload or peaking mode, for up to 30 years,
• operates at an efficient high temperature but at atmospheric pressure, *can be factory-built and deployed in compact 100-megawatt modules close to the end use of the power,
• contributes nothing to air or water pollution and needs no water for operation,
• safely consumes long-lived transuranic waste products from current nuclear fission reactors,
• produces high-temperature process heat that can make hydrogen fuel for vehicles, and
• is walkaway safe.

Science journalist Richard Martin's book SuperFuel makes the case that such a technology exists. It's thorium, and particularly the LFTR—the liquid fluoride thorium reactor.

The Federal government's regulatory apparatus has been well and truly captured by the companies that make conventional nuclear reactors. As long as they hold sway, it will be very, very difficult for anyone to build an LFTR power plant. The government should give innovative energy companies a chance to see whether thorium reactors really can be the green energy source of the future.

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John Goodman writes about something that will be a big problem, as medical knowledge increases. We're increasingly finding out that different people respond differently to the same treatment, depending on their genetics and the DNA of whatever is attacking them. As our knowledge about these differences increases, we will increasingly have individualized treatments.

Everything about ObamaCare — from its emphasis on pilot programs and demonstration projects to its faith in “evidence-based care” — is all about standardization. It’s about treating all patients with the same condition the same way. It’s about herd medicine. It’s about cookbook medicine. It’s about assembly line medicine. It’s as different from personalized care as different can be.

Unless we make large scale reforms to our existing regulations, we will increasingly end up knowing how to treat someone's condition yet it will illegal for the doctor to deviate from the standardized treatment in order to apply the personalized care that the patient needs.

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The Federal Reserve Bank’s recent QE3 announcement that they will be buying $40 billion in mortgage-backed securities a month for an indefinite period of time is an excellent example of regulatory capture. Under Chairman Bernanke, the Fed has successfully pushed to increase its regulatory role over the financial industry, and Stigler’s capture theory would predict that the Fed, as a financial regulator, would act to benefit the financial industry it regulates.

In recent posts on The Beacon I have argued that the Fed’s purchases of these securities is unprecedented, that it is an example of crony capitalism, and now am arguing that it is an example of the regulatory capture that Stigler described. Just like the government’s purchase of Chevy Volts, the Fed is creating demand for a product (morgtage-backed securities) that is in weak demand, for the benefit of the industry it regulates.

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Personalized medicine is the future. It is where the science is going. It is where the technology is going. It is where doctors and patients will want to go.  Yet unfortunately for many of us, this is not where the Obama administration wants to go.

John Goodman gives several examples of how personalized medicine has saved lives and improved health. This truly is exciting, cutting edge stuff. But it's not where the government wants to steer the healthcare industry.

ObamaCare's premise rests on the idea that everyone can be given the exact same treatments and medicine can be standardized in order to cut costs. So, it has no provisions for personalized medicine.

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The invaluable Eric Lipton over at the New York Times has another excellent article pointing out to the many ways that well-connected companies benefit from government favors. This time, he looks at the case of an Illinois-based energy producer, Exelon Corporation.

The company’s ties with senior officials in the Obama administration are important and extensive: Board member John W. Rogers is a friend of the president, Obama adviser David Axelrod worked at Exelon as a consultant, and Rahm Emanuel helped create the company. Exelon executives and administration officials held a large number of meetings at the White House, and ultimately, the executive branch enacted a number of policies and regulations that favored the company at the expense of its competitors.

Veronique de Rugy points provides extra background and details how the Obama administration is using the power of government to reward big businesses.

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For decades the environmental movement has used NEPA, and its CEQA-like state equivalents, to block key energy development and infrastructure projects. Seeing Obama’s signature transportation initiative killed by this same tactic is some sweet poetic justice.

Ha ha.

Maybe the reason that America doesn't do anything great anymore is that we have too many regulations and too many ways to stop projects from getting started?

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Small government and free-market capitalism are about to get put to the test in Honduras, where the government has agreed to let an investment group build an experimental city with no taxes on income, capital gains or sales.

The laws in the city will be separate from those in the rest of Honduras. Strong said that the default law that will be enforced in the city will actually be based on Texas state law, which has relatively few regulations.

“It will be Texas law with more freedom of contract. Texas scores well on state economic freedom rankings,” he explained.

This will be an interesting experiment to watch. Hong Kong 2.0?

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I read this in Jonah Goldberg's emailed newsletter, the "Goldberg File", last week. I thought it was really good.

The other day Mary Katharine Hamm tweeted a link to one of those utterly predictable stories about how corporations with more lobbyists pay lower taxes or some such. She also remarked "complexity is a subsidy" -- and that really stuck with me. In many respects those four words distill vast swaths of scholarship from everyone from Friedrich Hayek to Charles Murray.

Again, it's not a new idea, but I think it's an extremely useful and pithy description of a very complex argument. The more that financial success depends on high IQ; the more demand there is for lawyers, lobbyists, and accountants; the more onerous regulations become for men-with-strong-backs to find work or for entrepreneurs to start businesses -- then the more we move towards a society where the government rewards people based on their ability to navigate paperwork or fulfill quotas on a political to-do list. Complexity benefits statists because increasing complexity allows statists to claim we need more government to help people navigate through these complex times. In the process of helping, they make the government more complicated, creating new services for "fixers" of all stripes to solve problems the statists created in the first place.

The more you look around at spots where society and government intersect, the more you can see how pervasive and pernicious this dynamic is. The more rules you have, the more power you bequeath to the people well-suited to make or manipulate the rules.

L.A. Chinatown residents want a Wal-Mart. L.A. won't let Wal-Mart in to serve them.

While Rep. Judy Chu (D-Calif.) has decried Wal-Mart’s “ability to…drive all other competitors away” with rock-bottom prices, many Chinatown residents, suffering for years from gouging by the local markets, would probably say “good riddance.” In what must frustrate the unions most, the typical argument that products “Made in China” are inherently inferior doesn’t work in Chinatown. “I come from China, too!” one of the old Chinese ladies protesting in favor of Wal-Mart said. “We Chinese are cheap!” another pro-Wal-Mart elderly lady told me.

I've said it before and I'll keep saying it. Wal-Mart does more to help poor people than anything of the anti-Wal-Mart crowd could ever dream of doing.

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Veronique de Rugy:

First, agencies often fail to follow basic decision-making principles and assume that more regulation is always necessary. Back in March, my colleague Jerry Ellig testified before the House Judiciary Committee and made the point that the regulatory system suffers from systemic institutional problems. For example, there is a broad-based consensus on what regulatory analysis should involve and what its role in agency decision-making should be (as I described in my prior post), yet academic research shows that, more often than not, agencies do not produce or use thorough regulatory analyses. This is true regardless of what party is in charge of the executive branch.

The second core problem with the current system is that the more regulation agencies generate, the harder it is for individuals and businesses to comply. In many cases, no one knows for sure how many of the regulations we have on the books are really necessary or effective.

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John Goodman starts to explain one of the the major problems with American healthcare.

Every lawyer, every accountant, every architect, every engineer — indeed, every professional in every other field — is able to do something doctors cannot do. They can repackage and reprice their services. If demand changes or if they discover a way of meeting their clients’ needs more efficiently, they are free to offer a different bundle of services for a different price. Doctors, by contrast, are trapped.

… Medicare has a list of some 7,500 separate tasks it pays physicians to perform. For each task there is a price that varies according to location and other factors. Of the 800,000 practicing physicians in this country, not all are in Medicare and no doctor is going to perform every task on Medicare’s list.

Yet Medicare is potentially setting about 6 billion prices across the country at any one time.

Is there any chance that Medicare can get all those prices right? Not likely.

… In addition, Medicare has strict rules about how tasks can be combined. For example, “special needs” patients typically have five or more comorbidities — a fancy way of saying that a lot of things are going wrong at once. These patients are costing Medicare about $60,000 a year and they consume a large share of Medicare’s entire budget. Ideally, when one of these patients sees a doctor, the doctor will deal with all five problems sequentially. That would economize on the patient’s time and ensure that the treatment regime for each malady is integrated and consistent with all the others.

Under Medicare’s payment system, however, a specialist can only bill Medicare the full fee for treating one of the five conditions during a single visit. If she treats the other four, she can only bill half price for those services. It’s even worse for primary care physicians. They cannot bill anything for treating the additional four conditions.

Since doctors don’t like to work for free or see their income cut in half, most have a one-visit-one-morbidity-treatment policy. Patients with five morbidities are asked to schedule additional visits for the remaining four problems with the same doctor or with other doctors. The type of medicine that would be best for the patient and that would probably save the taxpayers money in the long run is the type of medicine that is penalized under Medicare’s payment system.

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I mentioned last week that the recent rise in gasoline prices was most likely linked to the recent sanctions on Iran. Apparently, the sanctions were expressly designed to avoid an increase in gas prices.

U.S. sanctions, set out in Section 1245 of the National Defense Authorisation Act for Fiscal 2012 (HR 1540), apply only if the president determines “the price and supply of petroleum and petroleum products produced in countries other than Iran is sufficient to permit purchasers . . . to reduce significantly in volume their purchases from Iran”.

Sanctions do not apply if the president determines an importer has “significantly reduced” its volume of crude purchases from Iran, and the president can waive them altogether if it is in the national interest.

The law mandates experts at the Energy Information Administration (EIA), in conjunction with the departments of Treasury and State and the head of the intelligence community, to review the availability of alternative supplies every 60 days. [Emphasis added.]

So, what went wrong? Here's Sheldon Richman, with two of my favorite economics quotes.

The “experts” don’t know what they’re doing. They may think they do. They surely want us to think that. But they’ve got a problem: The matter they are grappling with does not permit the kind of knowledge they would need to design a plan calibrated to produce the results they seek. They’re up to their eyebrows in data, but what they need more than data they haven’t got, and there’s no way to get it.

The Problem Is People

Rube Goldberg had it easy. He had only to arrange a series of inanimate objects and an occasional parrot to create his problem-solving devices. The expert who tries to calibrate sanctions to harm only Iran, but not oil consumers, have to deal with people. He seems, Adam Smith wrote in The Theory of Moral Sentiments,

to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might chose to impress upon it.

F. A. Hayek had something similar in mind in his 1974 Nobel lecture, [“The Pretence of Knowledge”][4]: “[I]n the study of such complex phenomena as the market, which depend on the actions of many individuals, all the circumstances which will determine the outcome of a process . . . will hardly ever be fully known or measurable.”

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