Category Archives: Monopolies

Joe The Plumber And Professional Licensing Laws

After Joe Wurzelbacher became the star of the Wednesday night’s debate, the media started looking in to his background and it didn’t take long for someone to discovery that Joe the Plumber doesn’t have a plumber’s license.

Now, Wurzelbacher admits that and say that, because he works for someone who has a license, he isn’t required to be licensed under Ohio law.

Whether that’s true or not, though, Matthew Yglesias notes it raises another question entirely:

[Wurzelbacher] raises the issue of whether or not it really serves the public interest to have so many occupational licensing rules. Like most people, if I needed to hire a plumber, I’d probably look for a recommendation. I don’t have any real confidence that these licensing schemes are tracking quality in any meaningful way, just preventing a certain number of people from earning a living and raising the general cost of plumbing services for everyone else.

Yglesias has a point, and it applies to more than just plumbers. Depending on the jurisdiction you live in you have to get a license from the state to be a plumber, carpenter, landscaper, electrician, beautician, dog groomer, dog walker, and probably a whole host of other occupations that I can’t even think of right now.

But what purpose does the licensing really serve ? Does anyone really believe that the mere fact that one of these professionals has a piece of paper from the state or local government means that they are competent to do their job, or that they’ve never cheated someone on a job ?

Of course not. That’s why you don’t just rely on whether or not someone is licensed before hiring them to, say, remodel your basement, build a deck, or fix your water heater. You do what Yglesias would do, you’d look for recommendations from friends, family or neighbors.

So if it’s not guaranteeing good or even competent service, what purpose is the licensing serving ?

Well, one of Yglesias’s commentors, probably inadvertently, stated it pretty clearly:

The problem is that when you don’t have any licensing for skilled positions you have a glut of weekend warriors who drive the price down and put professionals out of business– and that eventually lowers quality. I knew a guy who had his own landscaping business but gave it up because there were too many people with a John Deere who would do stuff for absurdly low rates because it was only a hobby for them. When it came to doing actually skilled work, of course, they sucked at it– but people want to believe they can get quality work without paying for it. So they go with an unskilled cheap guy and the actual professional suffers.

In other words, the purpose of professional licensing, more often than not, is not to “protect the public,” it’s to protect incumbent businesses by creating barriers to entry, restricting the supply of skilled labor, and making the cost of that labor more expensive to the public.


But I thought Medical Marijuana Was a Hoax?

The left hand says

Existing Legal Drugs Provide Superior Treatment for Serious Medical Conditions
The FDA has approved safe and effective medication for the treatment of glaucoma, nausea, wasting syndrome, cancer, and multiple sclerosis.
Marinol, the synthetic form of THC (the psychoactive ingredient contained in marijuana), is already legally available for prescription by physicians whose patients suffer from pain and chronic illness.

The right hand said (in a 2003 Patent application!):

Cannabinoids have been found to have antioxidant properties, unrelated to NMDA receptor antagonism. This new found property makes cannabinoids useful in the treatment and prophylaxis of wide variety of oxidation
associated diseases, such as ischemic, age-related, inflammatory and autoimmune diseases. The cannabinoids are found to have particular application as neuroprotectants, for example in limiting neurological damage following ischemic insults, such as stroke and trauma, or in the treatment of neurodegenerative diseases, such as Alzheimer’s disease,

Setting aside the immorality of the United States government granting itself a patent on something – I find myself reminded of something asked of Senator McCarthy:

“You’ve done enough. Have you no sense of decency, sir? At long last, have you left no sense of decency?”

I think even Kafka would consider the U.S. government’s behavior with respect to marijuana too outlandish to write a story about.

I am an anarcho-capitalist living just west of Boston Massachussetts. I am married, have two children, and am trying to start my own computer consulting company.

Do Government Regulators Protect Investors?

In a thread at Reason’s hit and Run, during a discussion where Enron was cited as an example of what happens when governments fail to regulate private behavior, frequent commenter fluffy wrote an insightful comment which is well worth reading in full. The second half of her comment read:

It is customary in the US for the Wall Street markets to be seen as the embodiment of unbridled capitalism, and they really aren’t. What they are is a complex system of federal regulation designed to foster “confidence” in publicly-traded companies, to facilitate the growth of those companies via debt and capital aggregation and intermediation. Their existence is a deliberate policy choice of the state, to attempt to use regulation to make it possible for small investors to trust people they have never met and of whom they have no knowledge – in order to allow corporations to grow larger, or to grow more quickly, than they would have in the days when trust was based on the personal or family qualities of the entrepreneur behind the corporation or the bank doing the underwriting for the corporation’s stock. The complex rules regarding accounting, corporate reporting, transparency, etc., are designed to allow corporations and investors to trust each other without actually having to do anything to establish trust beyond participating in the regulated system.

This has two unintended consequences. First, it allows corporations to be much larger and more powerful than they would otherwise be. The social and economic effects of this are open to debate. Second, it creates a situation where the “incentive problem” MNG talks about looms pretty large. As long as a corporation can do the bare minimum necessary to keep the SEC from shutting them down, they are in a position to command broad respect from investors that they may not deserve. The highly technical nature of the regulations in question also creates a milieu where a company like Arthur Andersen can begin to see its task as ensuring technical compliance and nothing else; the exotic techniques their consultants were using to build earnings or smooth earnings in that context begin to look not like “frauds” but simply “innovation”. By trying to facilitate the operation of the market, the state has in a sense corrupted it, or at least created an environment where corruption can hide behind the wall of paper the SEC requires.

But why has this corruption occurred? Why wouldn’t it happen in a private stock market? Well, a thought experiment will explain why the government intervention is corrupting. Imagine two stock markets. One, the Boston Stock Exchange is interested in attracting investors with assurances that their money will be safe. The other, the new York Stock Exchange does not care. The owners of the Boston Stock Exchange publish a set of accounting standards and demand that any company that trades on their stock exchange must follow those rules and publish those reports. The New York Stock exchange does not have that requirement.

Some investors choose only to invest money in companies trading on the Boston Stock exchange. They eschew the New York exchange. In the meantime investors who are less choosy (or more foolish) continue to invest in companies on the NY exchange. As a result, the companies that invest in meeting the requirements of the Boston exchange have access to additional capital that they couldn’t get if they were limited only to getting it from the NY Stock exchange. If the additional capital is worth the expenses involved in meeting the Boston standards, a company will rationally choose to adopt the Boston standards. Companies that find the additional cost not to provide sufficient benefit will not adopt the standards. Those companies will forego being traded on the Boston exchange and will make do with the capital available in New York.

In this scenario, the cost of adopting accounting rules is an investment in the business, much like the cost of marketing or the cost of insurance. Companies that choose to spend the money will attempt to ensure that it is well spent, that they are necessary for investor protection. There will be a negotiation between investors, the Boston Stock exchange, accountants and the companies being audited to arrive at meaningful standards that satisfy everybody. In the commercial insurance industry there instances of fraud tend to be aberrations rather than systematic because this very process is in place.

Now let us assume that for a variety of reasons the U.S. government passes a law mandating that all companies meet the Boston standards. Immediately all the companies trading exclusively on the New York exchange are slapped with an additional cost that they don’t want. The benefit of compliance will be reduced since the capital funds available in Boston will now be spread over many more companies. These companies, having been saddled with an unwanted cost will attempt to reduce the cost. They will seek out corrupt auditors who will rubber stamp their records. In the meantime the auditors who specialized in Boston accounting rules, now assured of a captive market, have to expend less effort pleasing their customers, the stock exchanges. In fact, they merely have to satisfy government regulators to keep their licenses, so they will pay less attention to the officers of the stock exchange. Since the government regulators, unlike the Boston Stock exchange, face no losses should they certify a corrupt regulator, they have a much lower incentive to ensure that the auditors are doing a good job.

At this point the accounting industry will not only become corrupt, it will also stagnate. The process that causes the stagnation is quite straightforward:

Let us assume that a couple of investors think that the Boston system is flawed. So they come up with a new system, and establish a stock exchange in Chicago which insists upon these alternate standards. Let us further assume that they convince a number of investors to agree with them, to the point where a few companies are interested in adopting the new standards. Whereas before the companies would merely have to switch to the Chicago system and to abandon the Boston system, they are not allowed to do this. They must continue to spending the money required to comply with the Boston system. If they want to meet the Chicago rules, they must purchase this as an additional cost. And, if the Chicago sytem contradicts the Boston system they cannot adopt the system at all.

This sets up a nearly insurmountable hurdle for anyone to adopt the Chicago system. And there is little chance of the Chicago system being mandated, because there will be many people with a vested interest in keeping the Boston system in place. Only in a time of crisis will the adoption of the Chicago system be considered by the legislature. And, if they should mandate it, they will be mandating an untested system. Should the system not work out as advertised, they could set back the industry dramatically as is happening as a result of the Sarbanes Oxley law.

If people truly wish to protect investors, they would lobby for the immediate dissolution of the SEC and allow stock markets to compete again on the quality of auditing. We would see a dramatic improvement in investor satisfaction as Stock Exchanges were not limited to competing for customers using price.

I am an anarcho-capitalist living just west of Boston Massachussetts. I am married, have two children, and am trying to start my own computer consulting company.

Menino’s Homeopathic Solution to Gun Violence

This week Boston’s Mayor Menino testified before the Congressional Task Force on Illegal Guns. He had this to say:

We share a common disdain for what we have seen happen in our cities, to our residents and to our police officers as a result of illegal guns. So, we signed a statement of principles and agreed to work together to take illegal guns out of our cities.


Fighting crime is a top priority for all mayors – and fighting crime means fighting illegal guns. The stakes could not be higher. Fatal shootings of police officers increased 33 percent last year. I know that every mayor in this country will do whatever it takes to protect the men and women who put their lives on the line to keep our cities safe.

So now, the voices of mayors are echoed by elected leaders and law enforcement officials from every part of America – and we’re making progress. Our numbers are growing, our mission could not be more timely and our message couldn’t be more clear: We need to stem the flow of illegal guns in our cities now.
Together, we will continue to work for common sense measures to fight illegal gun trafficking

His testimony was awfully short on the specifics on what problems “illegal guns” pose, other than claiming that they are behind an increase in shootings of police officers. Instead he lovingly details the growing number of government officials who are in favor of making the population increasingly dependent on them for protection.

In fact, the main complaint contained within his testimony seems to be that the work of the police is made more difficult by the prevalence of black marketeers importing guns illegally from areas where they can be legally manufactured and sold to ones where they cannot be legally imported and sold. But, his conclusions, that a Fugitive-Slave-Law style crackdown by the federal Government would somehow make the city of Boston safer is unbelievably wrong headed.

Assumption 1: A police monopoly on guns will make people safer:

This is, of course ridiculous. The police can take minutes or hours to respond to an attack in progress. The police are also under no legal obligation to respond at all. Restricting the supply of firearms makes defense of property increasingly expensive. While the wealthy can afford to hire security guards licensed by the state, or can convince political leaders to assign them special police details, those who are too poor, or lack political connections are left increasingly vulnerable.

Assumption 2: A reduction in the availability of guns will make criminals significantly less dangerous:

This is, again, ridiculous. The bank robbers who unsuccessfully attempted to rob a bank in California using AK-47’s are very rare exceptions to the rule that most crimes can be as easily committed with a knife as with a gun. A criminal carrying out an attack has the initiative; he chooses when and where he attacks and who his victim is. He is quite capable of altering his plans should the tools he has to work with be limited only to knives or base-ball bats. The ban makes the criminal more dangerous; firearms historically have favored defenders over attackers. There is a great deal of truth behind the saying God may have created men equal, but it was Samuel Colt who made ‘em equal.

Assumption 3: A meaningful reduction in the availability of guns is even possible:

Total bans on any good in wide demand, such as alcohol or cocaine or salt will result in smuggling. Nothing save setting up checkpoints on every road into Massachusetts and searching every car carefully will keep guns from flowing into the state. Unlike cocaine or whiskey, a gun gives off no chemical traces of its presence. Tape it to the underside of a car, and you can get it through any checkpoint.

Furthermore, any clever person can build simple yet effective weapons given a rudimentary machine shop. Even if a total ban on imports was possible, the measures required to prevent machine shops from producing firearms in quantities sufficient for a crime wave would be unenforceable.

Mayor Menino cited a figure of ~<500 illegal guns being associated by police with various crimes. 7 smuggling rings, smuggling in 15 guns a month each could easily supply this sort of demand. Hell 20 machine shops could easily make 10 guns a month to produce over 2000 guns a year if need be.

Nor will Mayor Menino ever be able to get rid of gun manufacture all-together. The demand for legal guns for his police force is sufficient to ensure that factories will be churning out a large quantity of fire-arms. Some of these will be diverted into the black market as surely as nuclear missile guidance systems ending up in Taiwan.

“What is not seen”

Mayor Menino does not want to outlaw guns. Rather what he wants to do is outlaw anyone but the police from having them. He views the guns as making violence in the city worse and as a hazard to the police. But by focusing on the firearms he is avoiding the questions he really should be asking:

Why are people resolving disputes by shooting at each other? Why are the police being threatened?

The answer to these questions is not a pleasant one to the politicians of Boston or Massachusetts, so they avoid asking them.

The short answer is that by writing and enforcing draconian economic and moral laws such as onerous labor laws, blue laws and drug laws, the politicians of Massachusetts are making it difficult for people to live their lives legally. The police are not seen as benefactors but as yet another street gang preying on the weak. The lack of legal business opportunities drive people to seek illegal occupations. While some of these illegal occupations are honorable (drug dealing, prostitution), many are dishonorable (burglary, mugging).

When people view the police as an enemy, and the courts as a predatory system, they naturally ignore them for resolving disputes. When business ventures are illegal, the participants are much more likely to settle disputes violently than via a system of arbitration.

What Mayor Menino seeks to do is to isolate the people of Boston from alternatives to dealing with the police. In effect he is behaving like an abusive boy-friend who tries to isolate his girlfriend from other people. Rather than improving the relationship between the citizenry and the government, these attempts will only increase the gulf between them. Any crackdown on the illegal gun trade will inevitably harm innocent people who are either in the wrong place at the wrong time, or who are deprived of a means to defend themselves. It will empower criminals to more brazen acts of thievery and mayhem. It will, in effect worsen most of the engines that drive criminality.

Until he recognizes that the political policies he and his circle support which are the root cause of the violence directed by the people subject to his rule towards each other and towards the police, nothing good will come of his advocacy and his actions.

It is time for the political classes of Massachusetts to stop treating the citizenry as children at best and as beasts to be exploited at worst. If they were serious about reducing the level of violence and the misery in Boston they would stop wasting time on trying to shore up a monopoly on defensive services on behalf of the police, give up their expensive hoplohobia-mongering propaganda campaigns, and would instead focus their attention to eliminating the laws purposed for economic and social engineering.

I am an anarcho-capitalist living just west of Boston Massachussetts. I am married, have two children, and am trying to start my own computer consulting company.

Should The Feds Mandate a Do-Not-Mail List?

On Reason’s website, Radley Balko has a great takedown of the Post Office’s hostility to the so-called ‘Do-Not-Mail-List’, which would prohibit the U.S. Postal Service from sending junk-mail to people who register themselves as not wanting junk-mail.

The U.S. Postal Service is opposing a “do not mail” list for junk mail because . . . well, I’ll just let them explain it:

Postal Service spokesman Al DeSarro said half of the mail his agency handles is direct marketing mail, and reducing its volume could cost thousands of Postal Service jobs.

This is terrific logic. Americans should be bothered with useless, unsolicited junk mail so that the USPS can continue to pay otherwise unneeded postal workers to deliver it. Makes sense to me.

I thus propose a federal “Agency for Digging Holes in Americans’ Front Yards.” Then, because of the holes-in-people’s-front-yards problem that will inevitably result, I propose a second “Agency for Filling In Yard Holes.”

These two agencies will create thousands of new federal jobs. And as we all know, new jobs are good for the economy.

This prompted an interesting rejoinder from a commenter martin who asked:

If companies want to pay the USPS to deliver their ads what’s wrong with that? Free market in action, no? Presumably those “unneeded” workers are being paid by those same companies’ mail payments.
You don’t like getting it, so instead of taking a sec to toss it, you call for a no-send list, government enforced, of course. What gives?

martin is bringing up a point that must be considered: does this list, which prohibits unsolicited mailings infringe on the rights of people to advertise their wares? Doesn’t that contradict the idea that when unwanted mail placed on your property, it is a form of tresspass?

To answer this question, we first should look at what would happen in a free market for mail delivery. In a free market, a person owning a chunk of land would be under no obligation to receive any mail. Nor would there be any organization that was obligated to deliver the mail to him either. However, most property owners would like to receive and send mail, so naturally there would be mail delivery companies that would offer mail delivery services. In all likelihood, this delivery system would take the form of people subscribing to mail service providers (MSP’s) much like people subscribe to ISP’s for access to the internet.

Of course, if one person subscribed to ‘Planet Express’ for their mail delivery needs, and they wanted to send a letter to a client of a competing MSP named ‘Awesome Express’, in all likelihood, Planet Express would deliver the mail to a transhipment point shared with Awesome Express and Awesome Express would handle the actual delivery. These transhipments would be governed by agreements that covered the terms and conditions under which mail would be accepted for delivery, and payments between the firms.

Just as people can sign up to have the ISP filter out Spam on the server, some MSP’s would offer no-junk mail services. Presumably, the early adopters would create standards that the later adopters would honor, and there would be industry-wide methods for people to signal whether or not they wanted unsolicited mail or not, and which senders were ‘trusted’ senders. Since the customers do not have to accept any mail at all, it is clear that these arrangements would in no way infringe on anyone’s rights.

Furthermore, the no-junk-mail services would probably be nuanced. For example, people could ask for no junk-mail to be delivered with the exception of mailers about local grocery specials.

Currently, we do not live in a free market. The U.S. Postal Service has been granted a monopoly by the U.S. government for mail delivery, a monopoly that has held up through the years despite the efforts of many heroic Americans such as Lysander Spooner and Fred Smith, for over 2 centuries Congress has succesfully prevented competitors from competing head to head with the Postal Service, typically by forbidding competitors from charging competitive rates or advertising their performance.

The U.S. Postal Service is a creation of the government. The laws passed by Congress define it, direct it and shield it. When Congress passes a law mandating that it provide some service, it is as if a board of directors ordered the officers of a company to provide a service. Thus, if there is nothing inherently illiberal about a laws mandating that the USPS honor a do-not-mail list. The laws that grant it a monopoly on the other hand …

I am an anarcho-capitalist living just west of Boston Massachussetts. I am married, have two children, and am trying to start my own computer consulting company.

America: Land Of The free Licensed

From the Economist, a nice little story about government regulation and all the benefits costs to society.

In the wild, horses eat tough grass that naturally wears down their teeth. In captivity, they are fed softer food they can eat more quickly, so their teeth grow unchecked. Unless filed down—a process known as “floating”—they can grow too long and cut the horse’s cheeks. Floating is hard work. Carl Mitz has been doing it for 22 years. He calms each horse before holding its mouth open and vigorously filing its teeth by hand until they are just so. A third-generation horseman, he says he has handled 100,000 horses. His customers are satisfied, judging by the sheaf of testimonials on his desk. But the Texas State Board of Veterinary Medical Examiners wants to shut him down.

Mr Mitz may be a skilled artisan, but he is not a vet. And the board says that only vets may float horses’ teeth. If Mr Mitz persists in doing his job, he will be practising veterinary medicine without a licence. The penalty could include steep fines and even prison. Mr Mitz is miffed. Even if he could get into vets’ school, which he doubts, he could not possibly afford the fees. And he does not see why he should take years off work and pay tens of thousands of dollars to pursue studies that may not help him in his work. Vets’ schools typically teach little about equine dentistry. “It’s ludicrous,” he says.

Coming up next, the Texas State Board of Veterinary Medical Examiners plans to outlaw tough grass, as it allows unlicensed horses to float their own teeth.

This is something that has come up many times on this blog and elsewhere. A group of professionals, in an effort to secure their own jobs through protectionism, institute licensing schemes for the good of the horses public. And in the process, they hurt consumers and hurt potential fellow producers, enriching themselves using the police power of the state.

There’s nothing remarkable about this story that would cause me to include it here, except the sheer insanity of the case. Much like the woman stopped from engaging in a hair-braiding business because she hadn’t completed a full 1500 hours of cosmetology school, this is a case of someone who excels at a very specialized task being forced into licensure for a much, much wider field. And the task they excel in isn’t rocket surgery, and won’t cause anyone harm (except maybe a sore scalp for one of the braidees, or a little toothache for a horse).

This is simply another absurd example of a basic libertarian principle: regulation in theory may be good, but regulation in practice is usually counterproductive, costly, and hurts consumers (the very people it is intended to help).

From Taxicab Freedom In Minneapolis To Central Planning In NYC

Earlier, Doug posted a story about an expansion of freedom in the taxicab market in Minneapolis. It seems that someone finally asked why it was necessary to set an arbitrary limit on the number of cabs operating in the city, and that someone was able to muster enough power to end the restriction.

Perhaps NYC might take it as a suggestion. NYC, of course, is one of the most restrictive taxi markets in the country. Virtually every portion of the taxicab business is regulated. The number of taxi “medallions” is limited to roughly 13,000, generating a competitive market where the cost of said medallion on the secondary market is into six figures. Of course, artificial scarcity is known to rise prices, so fares are also tightly regulated, to ensure that drivers cannot take advantage of the limit by raising rates. And on top of that, there are a host of other regulations on their operation, to the extent that taxi drivers in New York have very little control over how they execute their job. As with most regulations, it doesn’t really benefit the consumer, and often does not benefit the drivers, but is a big boon to the regulators and to the taxi companies who own the medallions.

So is NYC looking at reducing the restrictions, like Minneapolis? No! In fact, they recently decided to add another little wrinkle. Each cab will need to be outfitted with an information terminal with such features as GPS, credit-card services, and perhaps other services such as news, video, advertisement, and information on local attractions.

I can tell you, as someone who is familiar with these terminals, they’re not cheap. Even outside of the normal cost of installing the terminals, there are maintenance and replacement costs. The terminals have an LCD with touchscreen, and I’m sure the number of drunk and/or unruly passengers who put a fist or foot through the screen will make the total cost of ownership quite high on the cab owners. On top of those concerns, each transaction using a credit card will include a service charge to the company handling the transaction. Who will pick up all these costs? Well, the cabs cannot raise their rates, so the passengers won’t cover it. And the city certainly isn’t footing the bill. So who gets it? The cabbies themselves, of course! And let me tell you, they’re understandably not happy about it:

Taxi drivers angry about a new rule requiring the installation of global positioning systems and credit card machines in cabs are planning a second one-day strike in six weeks on Monday.

The city was preparing for the strike by the Taxi Workers Alliance by instituting a contingency plan that lets drivers pick up multiple passengers and charge zone-based fares.

The touch-screen monitors, which are being phased in as yellow cabs come up for inspection, let passengers pay by credit card, check on news stories, map their taxi’s current location and look up restaurant and entertainment information.

The alliance, which claims to represent about a fifth of the city’s 44,000 licensed cab drivers, opposes the technology, saying the 5 percent surcharge on each credit card transaction amounts to a wage cut and the GPS device allows cab companies to track drivers.

Furthermore, the alliance claims the technology doesn’t work properly.

As a consumer and a technology buff, I love the idea of information terminals in these cabs. But as an advocate of freedom, I am most certainly not in favor of forcing cabs to take the technology, and not in favor of them being unable to adjust their pricing to cover the additional level of service they’re offering.

But in NYC, what I want as a consumer doesn’t matter. What level of service cabbies want to offer doesn’t matter. The market has been replaced by the wishes, desires, and mandates of the New York Taxi & Limousine Commission. Freedom has no place in this brave new world.

A Victory For Economic Liberty In Minnesota

The guys at the Institute for Justice are among the unsung heroes in the fight for liberty.

Here are a bunch of lawyers dedicated to little more than fighting laws and regulations that restrict the ability of people to run their business, or even to go into business. They’ve been on the winning side and the losing side of more than a few legal battles where liberty was at stake, including representing the homeowners in the infamous Kelo v. City of New London case.

This time, they helped break up a taxicab cartel in Minneapolis, Minnesota:

Minneapolis, Minn,—Can an entrenched cartel of Minneapolis taxi drivers violate the civil rights of entrepreneurs and consumers?

No, according to U.S. Magistrate Judge Franklin L. Noel. In an opinion released today, the judge recommended that a lawsuit brought by members of the taxi cartel to overturn the city’s free-market reforms be dismissed.

“This is a victory for both aspiring taxi entrepreneurs and for Minneapolis consumers,” said Scott Bullock, a senior attorney at the Institute for Justice who argued the case. “Established businesses should not be able to use the law to quash competition and close the marketplace. Today’s ruling ensures that does not happen.”


The Institute for Justice Minnesota Chapter (IJ-MN) intervened in the case on the side of the city of Minneapolis to defend its free-market reforms that removed a cap on the number of taxis allowed to operate within city limits. The reforms, finalized on March 30, 2007, will open the market to entrepreneurs who are fit, willing and able to serve the public, increase the number of cabs by 180 in the coming years, and eliminate completely the cap on the number of cabs in Minneapolis by 2010.

In response to the free-market and consumer-friendly reforms, the established taxicab cartel sued the city, demanding the reversal of reforms and proclaiming its owners should be able to keep the spoils of the old law that excluded new competitors from the taxi market in Minneapolis for more than 10 years.

The Institute represents taxi entrepreneur Luis Paucar, who had tried for nearly four years to provide service in Minneapolis. He has received 22 licenses under the new law.

“I am thrilled!” said Paucar. “All I ever asked for was the ability to enter the market and to compete.”
“The cartel violated the civil rights of entrepreneurs like Luis,” said Nick Dranias, an IJ-MN staff attorney. “We got involved in this case to defend the city’s free-market reforms because taxicab entrepreneurs have the right to earn an honest living in the occupation of their choice free from the anti-competitive barriers to entry that the taxi cartel wants to preserve.”

In his opinion, Judge Noel determined: “The [established] taxi vehicle license holders do not have a constitutionally protected freedom from competition.”

Good work guys.

Free Speech in the Free Market

Tim Rutten, writing for the LA Times made several interesting observations regarding talk radio,, and the way congress has responded to commentary coming from each.

[T]he House and Senate censured the liberal activist group for taking out a newspaper advertisement that characterized Gen. David H. Petraeus, the U.S. military commander in Iraq, as “General Betray Us.” Now congressional Democrats are seeking a similar expression of disapproval for radio talk-show host Rush Limbaugh, who they allege insulted servicemen and women opposed to the Iraq war by calling them “phony soldiers.” (Limbaugh has a baroque explanation of what he actually meant by those words, but you probably have to be a regular listener to his show to follow it.)

There’s a temptation to dismiss all this as hollow foolishness — like most of the things Congress does with ease. Beyond all this preposterous posturing, though, there are a couple of things worth considering because both really do involve free speech and your right to hear it.

Now, the ad was patently offensive, a particularly unconscionable slur on any honorable American in uniform, let alone a guy who commanded the 101st Airborne. It was, however, rejected out of hand as an expression of loony narrow-mindedness by most Americans who oppose the war. Nobody, in other words, needed a congressional coalition — not even a bipartisan one — to instruct them on how to think. Similarly, it’s possible that the Democratic leadership is sufficiently clueless not to have noticed until now that Limbaugh regularly goes on the air and says cruel and offensive things about people of all sorts. Most Americans with a pulse, however, are abundantly clear on the fact that Rush talks a pretty mean game.

To this point, I agree with Mr. Rutten. It should be beneath congress to spend time passing useless resolutions condemning private citizens or groups for expressing opinions that some congressmen disagree with. Outrageous and crazy things are printed, spoken, and blogged on a daily basis. Should congress pass resolutions for each and every one of these statements? Of course not. They work for us and they have a job to do.

But unfortunately for those of us who value our First Amendment rights, there are certain politicians who wish to do more than pass resolutions condemning speech they disagree with by bringing back the so-called “fairness doctrine.”

ASK most Americans what the Fairness Doctrine is and they’ll correctly tell you it’s a regulation that requires broadcasters to air both sides of an issue. Tell them that it hasn’t been enforced since 1987, when the Federal Communications Commission essentially deregulated broadcasting and abolished the doctrine, and they’ll look at you like you’re nuts. That is, however, the situation, and much that is of current consequence flows from it — including the existence of contemporary talk radio of which Limbaugh is the avatar.

In America today, talk radio is a wholly owned subsidiary of the Republican Party’s conservative wing. GOP partisans will argue that’s because deregulation subjected radio to the discipline of the marketplace, and, when that market expressed itself through ratings, it stated an overwhelming preference for conservative talk-show hosts. That’s a good, Reagan Era argument, but Democrats and their allies see different forces at work. They point to the fact that deregulation freed big corporations to acquire hundreds of radio stations at about the same time that satellite transmission made syndicated radio programming decisively cheaper than locally produced shows. It was an easy call for the corporate station managers, who quickly filled their airtime with cheap, syndicated programming. Most of the first wave of syndicated programming was talk by conservative commentators, who’d long been shut out — or felt they were shut out — of mainstream media.

Talk radio is “owned” by the G.O.P.? Ridiculous! Yes, it’s true that the vast majority of talk show hosts are conservative but so what? The reason why conservative talk has been successful is because there is a market for conservative views. The prevailing theory seems to be that conservative talk is successful because it is one of the few places where the alternative views (alternative to the left wing MSM) are expressed. This could explain why conservative talk has succeeded where progressive talk has failed. The fact that a few large media corporations own most of the radio stations is irrelevant (clearly, Rutten also believes that antitrust laws are legitimate). If there was a stronger market for progressive views, these large media corporations would not hesitate to drop the conservatives in favor of progressives. The radio industry’s master is the bottom line, not the G.O.P. or anyone else for that matter.

If the FCC were to reimpose the Fairness Doctrine, talk radio would no longer be a part of the GOP base. That’s why Democratic senators like California’s Dianne Feinstein and Illinois’ Richard J. Durbin have been talking about prodding the agency into doing that since last spring. It’s also why, late Monday, 200 Republican representatives notified the House Rules Committee that they intended to seek a “petition of discharge” for the “Broadcaster Freedom Act.” That bill, written by Rep. Mike Pence (R-Ind.), a former radio talk-show host, would prohibit the FCC from ever reimposing the Fairness Doctrine. Under the House rules, if Pence can get 218 signatories to the petition, the Democratic leadership must let it come to the floor for a vote.

That’s what’s really at stake in all the posturing over MoveOn .org and Rush Limbaugh. In the minds of both parties, it’s not so much a fight over speech as it is over the right kind of speech. The sad irony is that the only voice that isn’t being heard in all this talk over talk is that of the public, which, after all, owns the airwaves over which this struggle is being waged.

For the sake of argument, let’s say that Rutten is right: talk radio is “owned” by the G.O.P. base. Again, I have to say: so what? Rutten major common error in this piece is this notion that the public “owns the airwaves” (except for the illegitimate use of taxpayer money to fund both NPR and PBS). The entire argument for government imposed regulations on broadcasting rests on this notion that the airwaves are owned by everyone. If the airwaves are owned by everyone, then that also means that the airwaves are owned by no one. If the airwaves are owned by no one, then the government assumes that the government rightly fills that vacuum to own the airwaves.

But the public does not own the airwaves; the people who pay the money to transmit their programming do. The way I see ownership of the airwaves should be similar to ownership of any other kind of property: a radio station owner determines the frequency s/he wants to use and s/he registers the frequency with the county so no other station can use his or her frequency.

In the real world, it’s a little more complicated than that but the fact remains that radio station owners pay for their programming from advertisers and donations (donations are more common for religious programming) NOT public funds. If the G.O.P. base truly has spent the money to keep these shows on the air, I say more power to them. What would stop the DNC from doing the same?

If we buy into this myth of the public airwaves, we do so at our own peril. If the FCC can demand that talk shows give equal time for all issues (assuming that is even possible), what is to stop congress from setting up similar unelected bodies to impose similar regulations on newspapers, magazines, and blogs? Newspapers are delivered on public roads, magazines are delivered through the U.S. mail, and the internet is transmitted over utility lines which are often also regulated by the government!

I agree with Mr. Rutten that the voice of the public is not well represented on the radio but what are we willing to sacrifice in the name of fairness? Despite my frustration with the MSM and talk radio, we live in a time where we have so many other options to express our views and listen to unconventional views of others. We now have the internet which gives us access to videos, podcasts, and blogs. The government should be the last place for us to deem the ultimate arbiter of fairness.

When corporations fight proxy wars using governments

It is always depressing to see a political battle erupt where you know, no matter who wins, the average citizen will be screwed. One such slow motion train wreck is taking place in Massachusetts as we speak. I became aware of it when one of the groups put an ad on TV that was so offensively anti-consumer that I knew some bait and switch had to be taking place. What I found was quite an interesting battle.

In Massachusetts, most roads are owned and operated by local governments. Among the many decisions these owners have to make are ones concerned with services run under or over these roads. One set of services are television cables. Generally, and perhaps universally, these towns select a single cable provider and give them a monopoly on television service, allow them to run lines along the roads, and grant them exclusive access to the market composed of the town’s residents.

The towns also made similar arrangements with telephone providers.

These monopolies are starting to break down due to technical advances. A thin fiber-optic line can carry the same amount of data that a thick cable would be used for 20 years ago. The technologies have converged to the point that the cable infrastructure can provide telephone service, and the telephone infrastructure can provide television service.

The two types of companies went from indifference to each other to competing with each other. Since they are used to having governments kneecap competition, they each tried to use local governments against their competitors. In the case of my home town, Comcast very effectively lobbied town authorities to prohibit Verizon from offering television, even though the infrastructure was in place. Apparently Verizon got tired of this, and decided that they would have an advantage if these legislative battles were fought in the statehouse rather than in town council meetings. And so, they drafted this law:


The law basically shifts control of the monopolies (which they call franchises) to the state-house. Once the state approves of a monopoly, the towns must make their roads available for whatever cabling is required.

They then set up what looks to me like an astroturf group called Consumers For Tech Choice, which appears to be sponsored by Verizon.

The New England Cable & Telecommunications Association, which appears to me to be dominated by Comcast, didn’t like this, and they set up a competing organization: Keep IT Local MA which tries to look non corporationy by only listing members of local governments as members. They were the ones who produced the execrable ad.

I spent an hour or so noodling around the two astroturf sites, and noticed some really amusing parallels:
1) Neither site provides a link to the legislation.
2) Neither site is actually providing a forum for the citizenry to actually communicate with each other.

In other words both groups have utter contempt for us citizens. They want to treat us like mushrooms. They also seem to have studied the same textbook.

While I am sympathetic to Verizon because of the disgusting way in which local towns governments have screwed the citizenry by trying to keep them out, in the end, I think the NECTA has the stronger case. If one accepts that towns must “own” the roads then the towns should control who or what travels on them. But given the way that town councils mismanage the road system and abuse their monopolies, I don’t for a minute think they are fighting this battle on principle. They are fighting Verizon merely because they wish to keep their little empires, either because of the graft they collect or the psychic pleasure they derive from pushing their neighbors around. It’s just a shame that there is no actual grass-roots group fighting to end government control of telecommunications in the first place.

I am an anarcho-capitalist living just west of Boston Massachussetts. I am married, have two children, and am trying to start my own computer consulting company.

Review: The Production of Security – Part 1

The seminal work of free-market anarchism is commonly held to be Gustave di Molinari’s The Production of Security. This document was one of the many great analyses of free-market economics to come out of France during the first half of the 19th century, and questioned the truth of the fundamental belief that

… to secure [their rights], Governments are instituted among Men, deriving their just Powers from the consent of the governed (1)

The essay is broken into the following segments:

I – The Natural Order of Society
II – Competition in Security
III – Security an Exception?
IV – The Alternatives
V – Monopoly and Communism
VI – The Monopolization and Collectivization of the Security Industry
VII – Government and Society
VIII – The Divine Right of Kings and Majorities
IX – The Regime of Terror
X The Free Market for Security

This is a fairly long essay, written in a different era, in a different language. Thus even the best translations can require a great deal of effort to read. However, I think it is a useful essay to walk through. Since it is so long and so radical, I thought I would break the document into little chunks and provide commentaries on one chunk at a time. This post will be a commentary on the first two sections, “The Natural Order of Society” and “Competition in Security” » Read more

I am an anarcho-capitalist living just west of Boston Massachussetts. I am married, have two children, and am trying to start my own computer consulting company.

Is Google Getting Too Big ?

In the Washington Post, Steven Pearlstein writes about Google’s continued expansion:

Google is the quintessential business success story. Two bright young guys started with an idea, built a company around it and grew it into a $150 billion juggernaut that now dominates the Internet. It nudged aside rival Yahoo, challenged traditional media giants and frustrated the Web strategy of the once-invincible Microsoft. And it did it all fair and square.

First-quarter reports show how much Google has pulled ahead of the pack: a 69 percent increase in profit on a 63 percent increase in sales. The news came just days after Yahoo acknowledged that its profit had fallen 11 percent, sending its already-lagging stock down 12 percent. Reports from big newspaper chains were even more dismal.

Good news for Google, it’s shareholders, and those of us who make daily use of the content that it provides, right ? Not according to Pearlstein:

But now, precisely because of its success, it’s fair to ask if Google should be barred from furthering its dominance through acquisitions or collaborations. At issue are the recent purchases of YouTube, the leader in online video sharing, and DoubleClick, the leading broker of online advertising; in both instances Google used its gusher of profits to outbid rivals. There are also new joint ventures with Clear Channel, the giant radio broadcaster, and EchoStar, the satellite television operator.

There’s no assertion by Pearlstein that Google has obtained any thing approaching monopoly power, and there’s no evidence to support it. So why is it that Pearstein is advocating the idea of putting controls on how big Google can grow ? What is it precisely that Google has done wrong that warrants limiting it’s growth ? And, more importantly, just how does Pearstein aim to fathom the point at which Google, or any company, becomes “too big” ?

As I’ve noted before, the only type of monopoly that is harmful to consumers is a legal monopoly, one that is created by the state and whose position is protected by the state. The best example o this today is the United States Postal Service. If if you wanted to use another provider to deliver regular first-class mail, you can’t do it because the law forbids it. Google, on the other hand, is simply providing a product. You don’t have to use it if you don’t want to, and many people choose not to.

The day that Google becomes a problem isn’t the day it becomes “too big” it’s the day that it uses the power of the state to restrain competition.

Influence Peddling And The XM-Sirius Merger

Timothy Carney at the Washington Examiner reports that the National Association of Broadcasters is engaging in a high-profile campaign to block the proposed merger of satellite radio companies XM and Sirius:

While engaging in this high-priced lobbying campaign to inflict a possibly mortal wound to their competitor, the broadcasters accuse the satellite companies of “seek[ing] a government bail-out to avoid competing in the marketplace.”

The National Association of Broadcasters, an influential organization with a $20 million building in downtown Washington, D.C., and an $7 million annual lobbying budget, is leading the charge to block the proposed the merger, either through the Federal Communications Commission or the Department of Justice.

To make their case to DOJ that Sirius and XM should not be allowed to join, the broadcasters have hired the guy who used to run DOJ — former attorney general John Ashcroft. He was a Republican senator from Missouri before his appointment by President Bush as the nation’s top legal official.

As Carney reports, Ashcroft and the NAB are arguing that allowing the merger to go through would create a monopoly that would threaten their industry, but the numbers just don’t support that assertion:

Sirius and XM hardly look like the 900-pound gorilla in this fight. Compared to the $1.49 billion in combined annual revenues of Sirius and XM, Clear Channel Communications, the largest member of NAB, pulled in $1.97 billion in revenues last quarter. Clear Channel boasts of 110 million listeners, while XM and Sirius combined have 12 million subscribers.

One member of the NAB earned more money than the entire satellite radio industry combined. It has ten times as many listeners as XM and Sirius combined. And yet, according the NAB and it’s hired gun, merging the two companies would harm the broadcast industry.

There is, of course, no small degree of self-interest on the part of the NAB and it’s members in the fate of XM and Sirius. If the merger is blocked, one or perhaps both companies will be forced into bankruptcy protection where, potentially, their assets could be acquired at fire sale prices. Conceivably, one or both of these companies could go out of busines entirely. Thus, blocking the merger could mean eliminating potential competitors and acquiring an entire satellite radio network at bargain prices.

H/T: James Joyner

Satellite Radio, Monopolies, And Legislative Stupidity

Doug’s been doing a good job of keeping up with the news on the proposed XM/Sirius merger. As he’s pointed out, having one monopoly satellite radio is better than having two that go out of business. But something has been left out of the equation.

What’s wrong with a monopoly in satellite radio? After all, look back a mere 6 years, when there was no such thing as satellite radio. At the time, people functioned. The world wasn’t falling apart because there were no blues stations in BFE. People lived without satellite radio, and yet people didn’t even know they were missing it.

So what happens if XM and Sirius merge, and they change their rates to $30/month because they’ve become a monopoly? It’s simple. Only people who think that satellite radio is worth $30/month will subscribe. For example, I am an XM subscriber. Yet I live in Atlanta, one of the major radio markets in the United States. At $13/month, the current price, I find XM to be worthwhile. After all, XM gives me access to Big Ten football games that aren’t televised down here, and considering how much I hate local radio, I’ll gladly pay for commercial-free tunes and the wider programming allowed. In addition, when I’m making a long drive, it’s nice to have the knowledge that I’ll always get crystal-clear reception, without having to search for new stations every 50 miles.

But at $30/month, I most certainly would cancel my subscription. After all, I have an iPod and a car setup, so I can load it up with songs and podcasts for long drives. On the weekends when Purdue football isn’t televised, I have free internet streams I can access if necessary. And here in Atlanta, I can go back to the old habit of listening to local radio. All in all, it’s my choice to change my behavior due to a rise in price. Yet if XM and Sirius both go out of business because of government regulation, I no longer have that choice.

The problem, then, gets tougher for some people, who do value the services more highly. For example, truckers and other long-distance drivers absolutely love satellite radio, because they have access to clear reception and consistent stations all over the country. People in non-major markets, like my sister in rural Missouri and my brother in Corpus Christi, have access to a much wider range of programming than they could ever have on local radio. For truckers and people outside the major markets, a $30/month bill just might be worth it. But again, if XM and Sirius both go out of business due to government regulation, they no longer have that choice.

Now, often the argument for breaking up monopolies carries weight when it refers to necessities. After all, if you are talking about something like oil, or you’re talking about food, or you’re talking about public education, there is always a worry that people will have consumers over the barrel because they legitimately need these items. In these cases, monopoly power leads to a lack of innovation and rise in costs. But in the entertainment market, this is not an easy thing to prove, as satellite radio is not a necessity to anyone.

Thus, for a satellite radio provider, they cannot be a true monopoly. First, they’re offering a product that didn’t even exist 6 years ago, and currently has such a tiny number of subscribers that it’s not in any way a necessity. Second, they’re competing not only against other satellite radio companies, but against terrestrial radio, internet radio, CD’s, and portable music players. If they don’t offer a product worth paying for, people won’t pay for it.

Monopolies can be a problem, particularly when (as is the case with satellite radio, or phone companies, or cable companies) they are granted monopoly power by government. However, I don’t think those rules apply in this case. Satellite radio is a luxury item which competes with entirely free alternatives. It’s a nice item, to be sure, but it’s something that we lived just fine without until 6 years ago. I simply don’t see the harm in allowing this merger, and as a paying customer of XM, I have a vested interest in the future cost and quality of this service.
» Read more

XM And Sirius vs. The FCC: The Battle Is Joined

With yesterday’s announcement of the proposed merger between XM Satellite Radio and Sirius Satellite Radio, and the announcement last month by the Chairman of the FCC that he would oppose such a merger, the battle that will determine whether this merger will go forward has begun, and it will revolve around the question of whether the FCC takes an expansive or restrictive view of what the relevant market is:

Winning approval for a proposed merger of the nation’s two satellite-radio companies turns on whether regulators buy their argument that iPods, Internet radio and other new technologies have expanded so dramatically that a monopoly would not harm consumers’ choices or purses.

It may be a difficult argument to win, but XM Satellite Holdings and Sirius Satellite Radio‘s officers say it’s worth the gamble and have assembled an expensive and experienced team of lobbyists to aid them in the fight. Alone, the companies have suffered heavy losses and spent heavily on recruiting personalities such as Howard Stern and Oprah Winfrey and on marketing to compete against each other.

Now, New York-based Sirius and XM of the District are lining up some of the best-known and highest-paid lawyers and lobbyists, while competitors and consumer groups vow to fight back. The biggest potential roadblock for the merger is a 1997 Federal Communications Commission declaration that a single owner may not control the subscriber-only satellite radio business.

But the advance of technologies such as iPods and other MP3 players, music-playing cellphones and land-based radio stations with digital broadcasts offer so much music, news and talk that the competitive climate is radically different and the FCC should waive the 1997 rule, Sirius chief executive Mel Karmazin said in a conference call yesterday. “Consumers today have a significantly broader range of audio entertainment options from which to choose,” he said.

As I argued last month, it is clear that limiting an analysis of the economic impact of an XM-Sirius merger to only the market for satellite radio is incredibly short sided. It would be like limiting an analysis of a proposed merger between a two pizza restaurant chains to just the market for pizza. There are competitors to satellite radio and they include not only traditional broadcast radio, but also the expanding technology of “high definition” radio, along with other methods of music, talk, and news delivery such as those cited by Karmazin.

More importantly, though, are the economic realities that XM and Sirius are presented with. Neither company is making money right now, and the prospects of either one of them being able to turn a profit as an independent company given the immense operating costs that they have to deal with is pretty slim. Satellite radio is still, and will likely remain for a long time, a niche technology. Most of the people who subscribe to it do so thanks to the receiver that came with the new car they bought, but not everybody wants a car with XM or Sirius capability, and not everyone can afford it.

If these are not permitted to merge, then the prospect of either or both companies ending up in Bankruptcy Court seems a likely outcome and then we could be faced with the death of satellite radio as a business.

Virginia Virtucon has it exactly right:

It would be a grave mistake to take the narrow view that the only competition that XM and Sirius face comes from one another.  Consumers have a multitude of options — traditional free FM and AM stations, iPods/MP3 players, Internet radio, etc.  XM and Sirius are looking to merge in order to survive in this competitive environment.  Would the government rather have only one satellite radio company because one went bankrupt or only have one because the two existing ones merged to form an even better combined service?  Would they rather have NO satellite radio because XM and Sirius drove each other into the ground trying to compete?

Frankly, I don’t think the FCC should be involved in this matter at all, but since they are they need to do the right thing. Let the market decide and approve the merger.

Memo: The Earth Doesn’t Move

Cross posted here at Fearless Philosophy for Free Minds

Kansas’ government school science curriculum is no longer the laughing stock of the nation and the world; the dubious honor may next be bestowed on Georgia. Georgia state representative Ben Bridges has circulated a memo to other state lawmakers around the country encouraging his colleagues to challenge the teaching of evolution (while promoting of I.D. creation “science”) in court by stating that evolution is not science but part of another religion thus violating the separation of church and state. This in itself is nothing too unusual; those who promote I.D. have made that argument before. Bridges memo goes even further: evolution is part of an ancient Jewish conspiracy! Obviously, this did not sit well with the Anti-defamation League.

Just when I thought this story couldn’t get nuttier, the memo has links to a site called as its authority. not only takes on well-established scientific theories of evolution and the big bang (what the site calls “big bangism”) but the very fact that…the earth revolves around the sun! According to the site the earth DOES NOT MOVE and the sun REVOLVES AROUND THE EARTH. No shit.

Marshall Hall, the sites creator and former government school teacher (scary), believes that the idea that the earth revolves around the sun is also a giant conspiracy to discredit the bible. Hall references two bible verses “The world is established and cannot move” (Psalm 93:1) and “He hangeth the Earth upon nothing” (Job 26:7). Following these verses, Hall goes on to say:

The Bible and all real evidence confirms that this is precisely what He did, and indeed:

The Earth is not rotating…nor is it going around the sun.

The universe is not one ten trillionth the size we are told.

Today’s cosmology fulfills an anti-Bible religious plan disguised as “science”.

The whole scheme from Copernicanism to Big Bangism is a factless lie.

Those lies have planted the Truth-killing virus of evolutionism in every aspect of man’s “knowledge” about the Universe, the Earth, and Himself.

I can’t say that I am all that surprised that there are such people out there who have not left the dark ages. What is a little surprising and very disturbing is the idea that a U.S. lawmaker on any level would listen to moon bats such as Marshall Hall to put forward an agenda in government schools. Had I stumbled across this site myself, I would have thought it to be a spoof to mock creationists because I know that most creationists would never question the idea that the earth revolves around the sun. Most creationists would not take Psalm 93:1 and Job 26:7 literally and would say that the descriptions made in these verses were based on the understanding people had of the universe at that time (which is a lame explanation if you ask me seeing that they were supposedly authored by the creator of the universe). In a previous post, I wrote the following statement:

Since we don’t want to offend the fragile faith of the fundies, why not allow them to substitute their own version of reality in all the other sciences? Clearly the astronomers don’t know what they are talking about either because the Bible clearly stated that the earth was flat and that the sun revolves around the earth. We ought to burn all books written which contradict the Bible. This will be no small task: we pretty much have to rid ourselves of everything we have learned about biology, geology, astronomy, anthropology, psychiatry, history, mathematics, medicine, and more.

Little did I know at the time I wrote that statement that there were fundies with influence setting out to do just that. Could there ever be a better argument for school privatization and school choice than this?

Hat tip: Nealz Nuze

Related Posts:
Sunday School Science Lesson
The End of Faith (Book Review)
Can Mysticism Co-Exist with Reason and Liberty?
The Battle for Young Minds

Freelance Hookers Rebuffed In Oz

There are few times one can talk about the economics and politics of cartels and licensing requirements, and still make it this fun:

Brothel owners accuse backpackers of selling sex in Australia

Foreign backpackers funding their Australian travels through illegal sex work are robbing the legitimate industry of profits and threatening clients’ health, a brothel lobbyist has warned.

Many young tourists to sun-soaked northeastern Queensland state were making a quick buck as black market prostitutes, undermining registered operators’ attempts to uphold health and safety standards, the Queensland Adult Business Association’s Nick Inskip claimed.

“Especially when you go up to northern Queensland, it’s not unusual for them to be working in the illegal escort industry,” Inskip said.

Having fewer overheads, they could often undercut the legal sex industry on price, making it harder for the state’s 23 legal brothels to make a profit, he said.

It sounds absurd when you hear it this way. But here in this country, pundits regularly rail against the “illegal invaders from the south taking our jobs”, and it seems perfectly acceptable to require that workers such as beauticians should be required to seek a state license.

I support relatively free immigration, and fight against government trade licensing requirements. For that reason, in the interest of ideological consistency, I also support (although don’t patronize) the rights of freelance hookers.

FCC Chairman: We Won’t Approve An XM-Sirius Merger

For the moment, any discussion of a merger between satellite radio providers XM and Sirius is just that, talk. Nonetheless, the advantages of such a merger to both companies are apparent.

The Chairman of the FCC, who you will remember is a Republican appointed by a Republican President and approved by a Republican Congress, though, has already announced that the FCC will not approve a merger of the two companies if it is ever proposed:

NEW YORK ( — XM and Sirius satellite radio’s proposed merger hit a roadblock yesterday when Federal Communications Commission Chairman Kevin Martin suggested at a press conference in Washington that their licenses would cause a monopoly.

“There’s a prohibition on one entity owning both of those licenses,” Mr. Martin told reporters.

The problem, as the Adage article goes on to explain, is that the FCC has historically viewed satellite radio (and television) as its own market, and refused to look at the broadcast industry as a whole, even though it’s clear that traditional radio broadcasters consider satellite radio to be a serious competitor for listeners:

“Clearly, traditional broadcasters view satellite radio as a competitor, but FCC is viewing it as a separate entity. So [FCC’s] concern would be you have one satellite radio company that can dictate prices or whatever they want. But the question is, if they jack the prices up, can the consumer in that case say. ‘I’m going to local digital radio stations or internet radio or various other sustainable products.'”

Clearly, the answer is yes. That new car you bought may come with the capability to receive either XM or Sirius, but you don’t have to buy the subscription plan, and you don’t have to renew it when it expires. More importantly, and I think this will become more a important consideration as XM and Sirius are forced into the position of running commercials on some channels (already a fact on most non-music stations on XM), you don’t have to listen at all.

Of course, the FCC shouldn’t be involved in this process at all. But, if it is going to evaluate the potential market impact of an XM-Sirius merger, it needs to have a more logical definition of the relevant market.

H/T: Outside The Beltway

Ron Paul Votes For Price Fixing Prescription Drugs

Today, the U.S. House of Representatives voted today to allow the government to “negotiate” the price of prescription drugs bought for Medicare Part D. Ron Paul voted for it. There is a precedent for the government “negotiating” prescription drug prices, that is the VA drug plan. However, a piece in the Weekly Standard by Robert M. Goldberg describes the reality of VA “negotiating”.

Far from negotiating drug prices, the VA imposes them. Federal law requires companies to sell to the VA at 24 percent below wholesale price. If they won’t, they are banned from selling medicines to Medicaid, Medicare, and the public health service. The VA demands even deeper discounts by creating a national formulary–a restrictive list of approved drugs for its patients. Companies that don’t meet that additional discount don’t make the list. Patients must get drugs from VA pharmacies instead of retail outlets. Patients who endure side effects from a formulary medicine–or who fail to respond to one–must submit themselves to an arduous and time-consuming bureaucratic process to gain access to any pharmaceuticals not on the list.

In opposing the Medicare Part D reform in 2003, Democratic senator Patty Murray stated that she “was unhappy at the prospect that this plan could tell patients with MS, Parkinson’s disease, and ALS that they can’t get the drugs they need because their plan will not cover them.” Yet Azilect, the newest drug to treat the symptoms of Parkinson’s disease, approved in 2006, is not on the VA drug list, though every Medicare Part D plan has adopted it. In delaying access to new medicines, the VA is no different from the national health services of Canada and Great Britain. Tysabri, a new drug for multiple sclerosis, is available under every Medicare plan. It is not on the VA drug plan.

So in other words, price controls. These government imposed price controls have effects on both availability of drugs and the quality of the drugs. Since the drug companies will not give the drugs away to the VA, VA patients cannot buy the drugs. However, Medicare Part D is privately administered so newer and better and more drugs are available to patients under Part D. There are no price controls since private companies actually negotiate, not threaten, the drug companies to give them the best possible deal and the private companies pass them on accordingly.

In addition, as Goldberg points out, this could have a chilling effect on biotech research.

If making the lives of seniors shorter and sicker isn’t bad enough, the Democrats’ price control plan threatens to devastate pharmaceutical and biotechnology innovation just as the failed Clinton drug- pricing scheme of 1993 would have. Back then, a federal Breakthrough Drugs Committee was envisioned that would evaluate a drug’s cost effectiveness. In response, venture capital investment in biotech dropped drastically and the market valuation of the biotech industry plunged 40 percent.

Today, drug companies have over 1,000 partnerships with biotech firms. So among the first victims of the Democratic drug price-control scheme would be investors in the research Michael J. Fox also supports. That includes Merck, which just invested over $1 billion in a company run by Nobel Prize winners that developed a technique to suppress tumor growth common to stem cell therapy, and Eli Lilly, which is investing in a company called Suven that focuses on Alzheimer’s, schizophrenia, depression, vascular dementia, and Parkinson’s disease.

Speculative biotech research will be unsustainable under Democratic price pressure. Genzyme, whose drugs are always a target of Democratic anti-pharmaceutical show trials, just bought the rights to a Parkinson’s clinical trial program of Avigen. Celegene, which is likely to be bashed for the annual $61,000 price of Revlimid (a treatment for multiple myeloma and other cancers of the blood system), is investing heavily in a promising source of adult stem cells that have been used to replace dopamine neurons in people with Parkinson’s. It is hard to imagine how such research could be sustained in a system that would cut drug companies’ revenues and sales in half.

Of course to correct all these problems with HR 4, the Democrats will propose to make it better, with HillaryCare.

Now let me turn my attention to Ron Paul, aka Dr. No. He’s being billed as the “Taxpayer’s Best Friend”. Surely as a man who believes in the free market and in limited government, he knows better than to support price fixing. Unless of course a free market can be made for price fixing now. Things like this, his xenophobic streak, and his questionable stance on foreign policy will temper my enthusiasm for a Ron Paul candidacy.

Note: I’m not defending Medicare Part D, which should be repealed, or I’m not opposing Ron Paul’s bid for president, yet. I’m raising some questions.

I’m one of the original co-founders of The Liberty Papers all the way back in 2005. Since then, I wound up doing this blogging thing professionally. Now I’m running the site now. You can find my other work at IJ and Rare. You can also find me over at the R Street Institute.

A Regulator Admits That Regulation Is Unnecessary

Lawrence Lessig, who was at the forefront of the anti-Microsoft movement in the 1990s and an advocate of government action to breakup the company’s alleged monopoly power, admits that he was wrong:

I was one of those reluctant regulators. As the evidence of Microsoft’s practices became clear, I remember well thinking, “Of course the government needs to do something.” And I remember very well the universal impatience with the notion that the market would solve the problem. How could it, when any other company was likely to behave just as Microsoft did?

We pro-regulators were making an assumption that history has shown to be completely false: That something as complex as an OS has to be built by a commercial entity. Only crazies imagined that volunteers outside the control of a corporation could successfully create a system over which no one had exclusive command. We knew those crazies. They worked on something called Linux.

I wanted to believe that Linux would prevail. But I’m a lawyer, and lawyers aren’t programmed to see how profitable innovation might happen without commercial control. I didn’t like the idea of regulation; I just didn’t see any alternative. The suits would always beat the rebels. Isn’t that why they were so rich?

Lessig acknowledges, though, that the rise of Linux as an alternative to Windows and Firefox as an alternative to Internet Explorer, all of which came about without government intervention, shows that the instinct to regulate is often wrong.

Unfortunately, it looks as though Lessig doesn’t apply what he learned to the net neutrality debates, where he once again favors government intervention.

H/T: Hit & Run

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