COMPETITIVE ENTERPRISE INSTITUTE
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Washington, DC 20036
202-331-1010, fax 202-331-0640
Mr. Kazman outlined three steps for effective regulatory reform:
1) Recognize institutional incentives and take advantage of them,
by expanding judicial review and OMB oversight.
2) Impose an across-the-board requirement that the benefits of
any rule be shown to exceed its risks.
3) Put an end to "regulation by hypothecation". Rules based on
hypothetical threats to human health and safety should be
supported by a preponderance of evidence.
JUDGE BREYER'S CLEAR-HEADED VIEWS ON REGULATION
Jonathan Tolman, CEI environmental policy analyst and adjunct scholar
with the Alexis de Tocqueville Institution
"The challenge of creating a government institution that acts wisely has been with us since Plato," said Judge Stephen Breyer in an interview with the de Tocqueville Institution, from his office in Boston a few months ago. It is unusual for a sitting judge to delve into the intricate policy issue of reinventing government, especially when he is the Chief Judge for the First Circuit Court of Appeals and now President Clinton's choice for the U.S. Supreme Court. But in his recent book, Breaking the Vicious Circle, Judge Stephen Breyer does just that, and in the process indicts the current regulatory system. He accuses the regulatory process of wasting both government and private resources, as well as diverting attention away from true health and environmental risks. While it is replete with failures, Judge Breyer identifies three basic problems endemic to the current regulatory system, which he calls tunnel vision, random priority setting, and inconsistency. As an example of tunnel vision, Judge Breyer points to a Superfund dispute which came before his court, United States v. Ottati & Gross. The toxic waste dump in dispute had already been mostly cleaned up. In fact, the site was clean enough so that any children who happened to be playing there could eat small amounts of dirt for 70 days annually, without suffering any adverse health effects.
Americans have been barraged in recent months by prophecies of an emerging "information superhighway," a national telecommunications grid that promises everything from instant visual communication to long-distance sex. But there is little awareness yet of the burgeoning *electricity* superhighway, a sprawling network of power lines that links most Americans to hundreds of electricity producers.
Growing demands for consumer access to the electricity superhighway could soon revolutionize the power business, replacing the old system of regulated monopoly utilities with a competitive electricity market. In such a market, customers could shop around for the best deal. A factory in Michigan, for example, could buy power from a plant in South Carolina, which would transmit the electricity over the national network and through the local utility.
If tax-subsidized BPA can't compete, then just let it sink
Paul Georgia, Research and Development Analyst at CEI, 1995 April 19.
In seeking ways to reduce the federal deficit, both Congress and the Clinton administration have taken a look at privatizing the federally-owned power marketing administrations. PMAs sell subsidized electricity produced at the 129 federally- owned power plants. The Clinton administration, for its part has proposed privatizing four of the five PMAs -- but not the Bonneville Power Administration.
The BPA subsidy, which benefits both residential and industrial power users, costs taxpayers approximately $1 billion per year. In 1993, aluminum smelters bought 25 percent of BPA's output, paying 2 cents per kilowatt hour, one-third of the national average for industrial users. Residential electricity rates are only about 55 percent of the national average. These electricity consumers have fought hard to protect their government handout. p>
The Basel Convention, an international environmental trade treaty ratified by the U.S. Senate during the Bush Administration but not yet in effect because the U.S. Congress has yet to pass the necessary implementing legislation. Under the terms of the Basel Convention the population of the world is divided into two classes (those who are citizens of Organization for Economic Cooperation and Development countries and those who are not, the latter group being the great majority of the world's population), and trade in a large range of materials is banned between those two groups. The Basel Convention Treaty would, quoting from the treaty preamble, make certain that "hazardous wastes and other wastes... be disposed of in the state in which they were generated."
CLEAN AIR ACT
by Jonathan H. Adler, CEI associate director of environmental studies, 9/94.
Ready to car pool to work? Pay more for reformulated gasoline? Wait for hours to pass a vehicle emissions inspection program? Drive an electric car? If you live in a federally-designated Clear Air Act nonattainment area, the Environmental Protection Agency sure hopes so.
Some of these proposals are already in place, or are about to be. The rest are to be implemented in the next several years as states struggle to meet the requirements created by the Clean Air Act Amendments of 1990, part of the environmental legacy of George Bush.
Consider the example of vehicle inspection and maintenance programs,
which EPA considers "an integral part of the effort to rescue mobile
source air pollution." Inspection and Maintenance programs are designed
to identify the heaviest pollution vehicles on the road and require that
they be repaired. Typically this is done by administering a mandatory
annual or biennial emissions test at a service station or centralized
government facility.
Hundreds of people representing non-governmental organizations will come together, as they do every two years at CITES, to debate new regulatory proposals. But the rural people of developing countries and the wildlife they live alongside are effectively without voice, and they are the ones who stand to lose the most ground at CITES. Proposals to reclassify over 100 different species of plants and animals from all over the world will be debated. In a broader sense, the character of the relationship between Man and Nature will be on the table, as will the future of CITES itself.
One problem with CITES is that dozens if not hundreds of species have been listed on Appendix I that were not and are not "threatened with extinction." Most prominent among them is the African elephant, which did not satisfy the listing criteria in 1989 when it was put on Appendix I. There are over 600,000 elephants across Africa today. Similarly, the Minke whale was placed on Appendix I in 1986, even though experts widely recognized at the time that the whale did not warrant listing. Today there are over 100,000 Minke whales in the North Atlantic alone. Ironically, neither was the black rhino endangered when it was listed in 1975. But after spending nearly 10 years on Appendix I, the black rhino now stands precariously close to extinction.
That non-endangered species have been listed under CITES as if they were endangered should not come as a surprise to those who have witnessed the corruption of science under U.S. environmental laws. Creatures of politics are apt to be captured by the special interests that created them. The new twist to CITES is that an increasing number of conservationists are becoming aware that something is wrong with the notion that commerce should be criminalized if a species is "or may be affected by trade." Some conservationists, like Rowan Martin of Zimbabwe's Department of National Parks and Wild Life Management, believe that commerce in species that have floundered under strict government regulation should not only be allowed, but encouraged.
Last week the government released a massive five-year study showing that the U.S. is losing only 66,000 acres of wetlands a year. This may come as a surprise to EPA Administrator Carol Browner, who claimed before Congress in May that the figure was 300,000 acres. The EPA and its enforcers have been treating wetland regulation as an environmental crisis. Maybe someone should tell them the crisis is over -- before they do any more damage.
Wetlands are technically defined as swamps, bogs, marshes or "similar areas." Mr. Piazza's wetlands supposedly fit into the last category. They were in three small sections and totaled less than an acre. In any case, Mr. Piazza designed his facility so that its construction would affect only 0.18 of an acre of wetlands, small enough for him to apply for one of the corps' exemptions, known as a "nationwide permit."
CEI has been involved in this issue since 1987. Our basic proposal
is as follows:
FDA's current veto power over new drugs and devices
should be changed to one of certification. FDA's
safety and efficacy standards would remain as they are;
however, rather than being banned outright, drugs and
devices which did not meet FDA's standards would be
available under professional supervision, with clear
warning of their unapproved status. Physicians and
patients could thus choose to continue using only
agency-approved drugs; however, a new option would be
created for those individuals who, in conjunction with
their doctors, found it medically necessary to look
elsewhere.
Imagine that you've had a heart attack. Amid the wails of sirens and
the flash of red lights, paramedics are rushing to help you. Skilled in
the art of CPR, they remove your shirt and prepare to revive you. But
much to their surprise -- and yours -- a sign about your neck reads, "Do
not resuscitate."
The real shocker is that, unbeknownst to you, this sign was placed
there by the Food and Drug Administration. In April 1993, the FDA blocked
testing of the cardiopump, a new cardiopulmonary resuscitation device for
heart-attack victims. As a result of FDA policy, thousands of people with
heart disease are literally being protected to death.
The cardiopump, manufactured by Ambu International of Denmark, is a
modest device. It weighs a mere pound and a half and looks like a
modified toilet plunger, with a pliable cup that fits onto the
heart-attack victim's chest and a combination hand- grip/pressure gauge
instead of the wooden handle. Manual CPR exerts downward pressure on the
chest, but the chest has to re- expand naturally. The cardiopump can
apply pressure in both directions. Says Dr. Jeffrey Shultz of the
University of Minnesota: "It turns the chest into a bellows. It allows
you to pull blood back into the heart and air back into the lungs."
Microsoft founder Bill Gates is the richest man in America because his company manufactures great products at cheap prices. Predictably, his less successful rivals persuaded the government to badger Microsoft with a four-year-long antitrust investigation. Why is the Clinton administration, a big promoter of the "information superhighway," helping to lynch one of America's most successful and entrepreneurial information-age companies?
After wasting countless hours kowtowing to Washington dandies, Microsoft executives last summer agreed to amend some of its business practices. Judge Stanley Sporkin's recent rejection of the consent decree reopened the door to continued heckling of Microsoft. Amazingly, Judge Sporkin insists the decree doesn't hamper Microsoft enough. This insane persecution of a great American success story bolsters an opinion held by many economists: Antitrust law is a menace to consumers as well as to firms who prefer to compete in the marketplace rather than in the courtroom.
As with all true competitors, Microsoft's practices are aggressive yet healthy for consumers. Consider "vaporware" -- so scorned by Judge Sporkin. Microsoft "pre-announces" today the software it plans to market tomorrow. Such pre-announcements, of course, help computer users better plan for the future. Nevertheless, some of Microsoft's rivals argue that these announcements unfairly dissuade computer users from purchasing software produced by Microsoft's competitors.
Nonsense. Nothing stops other software producers from pre- announcing their wares -- indeed, most do. It's difficult to see how pre-announcements by Microsoft give it an unfair advantage when its rivals regularly pre-announce. If Microsoft has an advantage, this edge comes from Microsoft's reputation for producing and delivering excellent software. Other firms producing software of comparable value and timeliness will be at no competitive disadvantage in the face of pre-announcements by Microsoft. Don't think Microsoft has incentives to pre-announce when it takes a bite out of a firm's reputation and future sales, which in turn is reflected in lower share prices. In short, markets punish firms for being excessively optimistic or for being excessively optimistic or for otherwise misleading customers. High-tech firms are not immune to market discipline. Microsoft pre-announced its Windows 95's arrival would be delayed until August 1995. This delay caused its share prices to fall by nearly 4.5 percent. In dollars terms, Microsoft lost $72 million as a result of its ill-considered pre-announcement. You can bet Microsoft will be more careful in the future; illegitimate vaporware vaporizes profit.
First, though, let me say that I don't know Bill Gates or any other Microsoft (MS) official. Many folks seem to dislike Mr. Gates passionately. Well, for all I know, he may or may not personally be an SOB. I don't care. American antitrust law is not a tool for forcing business people to behave in a neighborly or avuncular fashion. What matters is how well a business person and his firm satisfies the demands of consumers. And, incidentally, nor is it a sign of illegal or even improper behavior that Mr. Gates is aggressive in his talk and action. Aggressiveness is part and parcel of the competitive process. The standard for assessing the social utility of any firm's aggressiveness is the effect such aggressivness has on the well- being of consumers. The well-being of rivals of aggressive firms is of no relevance per se.
MS's position in the software industry is the product not only of MS's being a pioneer in operating-system software (that is, a pioneer not only in producing software, but in the important task of marketing it as well). Whatever security MS now enjoys is more properly attributable to what economists call "network economies." Because standardization across lots of users and lots of hardware is beneficial, only one or a few firms can at any time "dominate" the software market. As many of you argue, this domination allows MS to charge prices higher than it could otherwise charge and/or to sell products of a lower quality than it could otherwise sell.
html by David W. Crawford