Category: Regulations

Government Land Use Regulations Increase Income Inequality

(p. A1) . . . a growing body of economic literature suggests that anti-growth sentiment, when multiplied across countless unheralded local development battles, is a major factor in creating a stagnant and less equal American economy.
It has even to some extent changed how Americans of different incomes view opportunity. Unlike past decades, when people of different socioeconomic backgrounds tended to move to similar areas, today, less-skilled workers often go where jobs are scarcer but housing is cheap, instead of heading to places with the most promising job opportunities, according to research by Daniel Shoag, a professor of public policy at Harvard, and Peter Ganong, (p. B2 [sic]) also of Harvard.
. . .
“To most people, zoning and land-use regulations might conjure up little more than images of late-night City Council meetings full of gadflies and minutiae. But these laws go a long way toward determining some fundamental aspects of life: what American neighborhoods look like, who gets to live where and what schools their children attend.
And when zoning laws get out of hand, economists say, the damage to the American economy and society can be profound. Studies have shown that laws aimed at things like “maintaining neighborhood character” or limiting how many unrelated people can live together in the same house contribute to racial segregation and deeper class disparities. They also exacerbate inequality by restricting the housing supply in places where demand is greatest.
The lost opportunities for development may theoretically reduce the output of the United States economy by as much as $1.5 trillion a year, according to estimates in a recent paper by the economists Chang-Tai Hsieh and Enrico Moretti. Regardless of the actual gains in dollars that could be achieved if zoning laws were significantly cut back, the research on land-use restrictions highlights some of the consequences of giving local communities too much control over who is allowed to live there.
“You don’t want rules made entirely for people that have something, at the expense of people who don’t,” said Jason Furman, chairman of the White House Council of Economic Advisers.

For the full story, see:
CONOR DOUGHERTY. “When Cities Spurn Growth, Equality Suffers.” The New York Times (Mon., July 4, 2016): A1 & B2 [sic].
(Note: the online version of the story has the date July 3, 2016, and has the title “How Anti-Growth Sentiment, Reflected in Zoning Laws, Thwarts Equality.”)

The paper mentioned above by Ganong and Shoag, is:
Ganong, Peter, and Daniel Shoag. “Why Has Regional Income Convergence in the U.S. Declined?” Working Paper, Jan. 2015.

The paper mentioned above by Hsieh and Moretti, is:
Hsieh, Chang-Tai, and Enrico Moretti. “Why Do Cities Matter? Local Growth and Aggregate Growth.” National Bureau of Economic Research (NBER) Working Paper # 21154, May 2015.

Tribe Uses Autonomy to Fight American Dental Association (A.D.A.) Credentialism

(p. A10) Mr. Kennedy, 56, a soft-spoken Tlingit Native Alaskan, is a dental therapist, the rough equivalent of a physician assistant. He is trained to perform the most common procedures that dentists do, from fillings to extractions. Since January, when he started at the Swinomish Dental Clinic, over 50 miles north of Seattle, he has been the only dental therapist on tribal land anywhere in the lower 48 states. He studied in Alaska, which has the nation’s only program — patterned after one in New Zealand — aimed at training therapists specifically to work in underserved tribal areas.
Laws here in Washington and most other states bar dental therapists, who have long been opposed by the American Dental Association, so the tribe created its own licensing system. The federal Indian Health Service, which pays for medical care on Indian lands, cannot compensate therapists unless authorized by the state, so the Swinomish (pronounced SWIN-o-mish) needed private foundation support and meticulous accounting so that no law was violated.
“We had to take matters into our own hands,” said Brian Cladoosby, the chairman of the Swinomish Senate and president of the National Congress of American Indians. The breaking point came in 2015, after Washington’s Legislature — pressured by the dental lobby, Mr. Cladoosby said — declined for the fifth year in a row to pass a bill allowing a therapist program. Asserting tribal sovereignty, the tribe forged ahead anyway.
“The American Dental Association is no friend to American Indian tribes,” Mr. Cladoosby said in an interview.
. . .
(p. A11) Dr. Rachael R. Hogan, a dentist who works at the Swinomish Clinic, supervises Mr. Kennedy’s work. At first she did not think the arrangement would work. The A.D.A.’s safety concerns made sense, she said.
“I was leery,” she said. But after watching Mr. Kennedy for the past four months and visiting the training school in Alaska, she has changed her mind. By practicing procedures over and over — more than most dental school graduates, who must also study a broad range of diagnostic and disease issues — therapists can hone procedures, she said, to an art.
“Their fillings are better,” she said. “Are we providing substandard care by providing a therapist? Actually, I would say it’s the opposite.”

For the full story, see:
KIRK JOHNSON. “Asserting Tribal Sovereignty to Improve Indian’s Dental Care.” The New York Times (Mon., MAY 23, 2016): A10-A11.
(Note: ellipsis added.)
(Note: the online version of the story has the date MAY 22, 2016, and has the title “Where Dentists Are Scarce, American Indians Forge a Path to Better Care.”)

David Sokol Worries that in Over-Regulated America, Free Enterprise Is Under Attack

(p. C1) David Sokol, once widely expected to succeed Mr. Buffett as chief executive of Berkshire Hathaway Inc., has kept a fairly low profile since leaving the conglomerate amid a stock-trading controversy five years ago.
. . .
In addition to becoming a more-vocal investor, Mr. Sokol, 59 years old, is becoming increasingly vocal about politics. He is an avowed fan of “Atlas Shrugged,” the 1957 novel by Ayn Rand that made a moral case for capitalism and self interest. In public speeches and columns, Mr. Sokol has drawn comparisons between the dystopian, over-regulated America portrayed in the book and the present day, saying (p. C2) that free enterprise is increasingly under attack.

For the full story, see:
SERENA NG and ANUPREETA DAS. “From Buffett Protege to Activist.” The Wall Street Journal (Mon., April 25, 2016): C1-C2.
(Note: ellipsis added.)
(Note: the online version of the story has the date April 24, 2016, and has the title “Warren Buffett’s Former Heir-Apparent Resurfaces as Activist Investor.”)

The Ayn Rand novel that Sokol admires, is:
Rand, Ayn. Atlas Shrugged. New York: Random House, 1957.

Perfect Reliability Is Not Worth the Cost

(p. B4) Say what you will about Plain Old Telephone Service, but it worked. The functionality of POTS, as it was known, was limited to making calls, and they were expensive. But many traditional phone companies offered 99.999% reliability, which allowed for about five minutes of downtime a year.
Today’s networks are far less expensive, infinitely more capable and nowhere near as reliable as the wired-to-the-wall phone, . . .
. . .
To some extent, contemporary networks suffer from inattention. The old phone system worked so well because regulators in certain countries like the U.S. said it had to, and enough money was set aside to fund an army of technicians and engineers to oversee it. That generally isn’t the case with modern, digital networks and IT infrastructure, and companies often neglect this nuts-and-bolts technology.
. . .
Underneath it all, the economics of falling prices carry a trade-off. Consumers get more for their money in the mobile, digital era, but that often leaves margin-stretched companies with fewer resources to invest in robustness and maintenance. Reliability is as much a function of business and risk management as it is about tech.
“I don’t know if people are sweating that detail as much as they used to,” said Mr. Bayer, previously CIO of the Securities and Exchange Commission.
. . .
Former NYSE Euronext Chief Operating Officer Lawrence Leibowitz told the Journal in 2013 the public shouldn’t expect market technology to function perfectly, a goal that would be too expensive to implement even if it were technically feasible.

For the full story, see:
STEVE ROSENBUSH and STEVEN NORTON. “Network Reliability, a Relic of Business?” The Wall Street Journal (Fri., July 10, 2015): B4.
(Note: ellipses added.)
(Note: the online version of the story has the date July 9, 2015 and has the title “What We Learned From the NYSE, United Airlines Tech Outages.”)

Uber to Politicians: “Catch-Me-If-You-Can”

(p. B1) Last week, the home-sharing service Airbnb had more than 40,000 listings in Paris, making the French capital the company’s most popular destination for travelers looking to rent a room or an entire apartment. Paris officials applaud it for bringing innovation to the city’s hotel industry.
The ride-hailing company Uber had a much more difficult week.
Thousands of Parisian taxi drivers took to the streets to protest UberPop, the company’s low-cost service that’s similar to UberX in the United States. French politicians denounced the company for defying the country’s transport laws. And two of Uber’s top executives in France were detained by the police and accused of operating an illegal taxi business. By Friday [July 3, 2015], the company had suspended UberPop across the country.
Uber and Airbnb are similar in many ways. Both born in San Francisco, the companies are now two of the largest entrants in the so-called on-demand economy, in which services are available at the touch of a smartphone button. They are both flush with investor money — with valuations in the tens of billions of dollars — and are using the cash to expand rapidly around the world.
But the starkly different paths in France for these companies lay bare contrasting strategies as they encounter the world of global regulators. Since it began in 2009, Uber has entered city after city, in Europe and elsewhere, with a largely catch-me-if-you-can attitude. Airbnb, which offers more rooms than traditional hotel groups like Hilton and InterContinental, has instead tilted toward courting local politicians in many of its most popular markets.
So far, Uber’s approach has not significantly slowed it down. The company operates in more than 300 cities in almost 60 countries and is valued by investors at more than $40 billion.

For the full story, see:
MARK SCOTT. “The Bumps in Uber’s Fast Lane.” The New York Times (Weds., JULY 8, 2015): B1-B2.
(Note: bracketed date added.)
(Note: the online version of the story has the date JULY 7, 2015, and has the title “What Uber Can Learn From Airbnb’s Global Expansion.”)

Regulations and Bureaucratic Inefficiency May Kill Restaurant

(p. A22) To begin with, although the B&H Dairy Restaurant on Second Avenue in Manhattan now hangs by a thread, no one was hurt there on March 26 [, 2015], the day that three buildings on the same block were leveled by a gas explosion.
. . .
“On the third day after the explosion, people from the building department and Con Edison came together,” Mr. Abdelwahed said. “They inspected the place, upstairs, downstairs, the pipes, the basement. They told me, ‘You are O.K., you should be fine, no problem.’ ”
That changed, he said, in the charged days that followed, as it emerged that apparently illegal alterations to the gas lines had been made in one of the buildings down the street.
The original inspector returned, he said, and told him that another inspection was going to happen in a couple of days. “He said, ‘You’re not going to pass that inspection. Because of what happened next door, I don’t want to be responsible for the future,’ ” Mr. Abdelwahed said.
All of the gas piping in the building has to be replaced, a job the landlord has taken on, though it is not clear what deficiencies it had. The Buildings Department file for 127 Second Avenue shows that there were no open violations on the premises in March, and none now.
After questions were put four times to the city on Thursday about the nature of the problems with B&H’s operation, a spokesman for the mayor said the administration was trying to help small businesses affected by the explosion, including the restaurant.
In B&H, Mr. Abdelwahed said, the inspector noted that his stove had five burners, but the plans on file showed only four. “He required me to correct it on the plan,” Mr. Abdelwahed said. “Originally it was four. I don’t know how it came to be five. It’s not an issue. Where was an inspector before all this? You’re trying to show you’re working?”
. . .
“He told me, ‘You have to change the fire system,’ ” Mr. Abdelwahed said of the inspector. “Of course, I had a fire suppression system all the time, inspected. I told him, ‘I am going to go out of business.’ He said: ‘I’m sorry, I can’t help you.’ They don’t want to be responsible for anything.”
Because the fire suppression system was going to jut into the backyard, Mr. Abdelwahed had to apply for permission from the city’s Landmarks Commission as the block is part of a historic landmark district. Only after that approval was granted could his contractor apply for a building permit.
“What’s killing them is the lag time,” said Mr. Reynolds, who is organizing crowdfunding support for the restaurant. Bernadette Nation, an official with the city’s Department of Small Business Services, has cut red tape in getting permits issued, and their story has been covered on New York 1 and by many blogs.

For the full story, see:
JIM DWYER. “About New York; Unharmed by a Gas Explosion, but Choked by the Red Tape That Followed.” The New York Times (Fri., JULY 10, 2015): A22.
(Note: ellipses, and bracketed year, added. The quote from Mr. Reynolds in the last passage above, appears in the print version of the article, but not in the online version of the article.)
(Note: the online version of the story has the date JULY 9, 2015.)

A Rooftop Farm Is “a Foolish Endeavor” Due to High Costs and Government Regulations

(p. B1) BrightFarms Inc. last year pulled the plug on a planned greenhouse in Washington, D.C., 10 months into the process of getting permits, and earlier exited an effort to develop a rooftop farm in Brooklyn, New York. FarmedHere LLC, which operates a farm in a former box factory outside Chicago, shut down for six months last August to revamp its strategy.
Building farms on city rooftops is “a foolish endeavor” because of the higher costs and the additional time for permitting, said Paul Lightfoot, chief executive of BrightFarms.

For the full story, see:
Ruth Simon. “Farming Startups Have Tough Row to Hoe.” The Wall Street Journal (Thurs., April 14, 2016): B1 & B6.
(Note: ellipses added.)
(Note: the online version of the story has the date April 13, 2016, and has the title “Farming Gets High Tech in Bid to Offer Locally Grown Produce.”)

Tesla Direct Sales Thwarted by Laws that Protect Dealers Instead of Consumers

(p. B3) Tesla Motors Inc. hopes to capture mainstream auto buyers with its Model 3, an electric car it plans to unveil this week at a price about the same as the average gasoline-powered vehicle, but it may need a federal court ruling to succeed.
The Palo Alto, Calif., auto maker’s direct-to-consumer sales are prohibited by law in six states that represent about 18% of the U.S. new-car market. Barring a change of heart by those states, Tesla is preparing to make a federal case out of the direct-sales bans.
The auto maker’s legal staff has been studying a 2013 federal appeals court ruling in New Orleans that determined St. Joseph Abbey could sell monk-made coffins to customers without having a funeral director’s license. The case emerged amid a casket shortage after Hurricane Katrina. The abbey had tried to sell coffins, only to find state laws restricted such sales to those licensed by the Louisiana Board of Funeral Directors.
For now, Tesla is banking on a combination of new legislation, pending dealer applications and other factors to open doors to selling directly in Arizona, Michigan, Texas, Connecticut, Utah and West Virginia. But the company said it is ready to argue in federal court using the coffin case if necessary.
“It is widely accepted that laws that have a protectionist motivation or effect are not proper,” Todd Maron, the auto maker’s chief counsel, said in an interview. “Tesla is committed to not being foreclosed from operating in the states it desires to operate in, and all options are on the table.”
. . .
“There is no legitimate competitive interest in having consumers purchase cars through an independent dealership,” Greg Reed, an attorney with Washington D.C.-based Institute for Justice, a libertarian-leaning law firm, said. He calls Michigan’s laws “anti-competitive protectionism.”

For the full story, see:
MIKE RAMSEY. “Tesla Weighs Legal Fight.” The Wall Street Journal (Tues., March 29, 2016): B3.
(Note: ellipsis added.)
(Note: the online version of the story has the date March 28, 2016, and has the title “Tesla Weighs New Challenge to State Direct-Sales Bans.”)

Retail Clinics Provide Convenient Care

(p. A3) My wife and I both work. When one of our children wakes up complaining of a sore throat, we could begin a ritual stare-down to determine which of us is going to have to wait for the doctor’s office to open, make the phone call, wait on hold, schedule an appointment (which will inevitably be in the middle of the day), take off work, pick up the child from school, sit in the waiting room (surrounded by other sick children), get the rapid strep test, find out if the child is infected and then go to the pharmacy or back to school, before returning to work.
Or, one of us could just take the child to a retail clinic on the way to work and be done in 30 minutes. Strep throat is incredibly easy to treat (Penicillin still works great!). There’s a simple and very fast test for it. Moreover, physicians are really bad at diagnosing some of these common illnesses clinically; a study found that a doctor’s guess as to whether a respiratory infection is bacterial or viral is right about 50 percent of the time — no better than flipping a coin. The point is, you need to get the rapid strep test every time regardless, whether at your doctor’s office or at a clinic.
Aimee and I choose the retail clinic every time.
Why? Convenience is the biggest reason. Many doctors’ offices are open only on weekdays and during business hours. This also happens to be when most adults work and when children attend school. A 2010 survey of 11 countries found that Americans seek out after-hours care or care in a hospital’s emergency room more often than citizens of almost any other industrialized nation. More than two-thirds of Americans with a below-average income did so. But this isn’t just a problem for the poor. About 55 percent of those with an above-average income did so as well.
We complain all the time that people use the emergency room for primary care. But that’s not always about lack of insurance. It’s about access. The emergency room is open when people can actually go. Emergency room use has gone up, not down, since the passage of the Affordable Care Act. More people have insurance, and now can afford care when they need it.
That care is also coming from retail clinics, usually found either in stand-alone storefronts or inside pharmacies. Between 2007 and 2009, retail clinic use increased 10-fold. It turns out that my wife and I represent America pretty well. About 35 percent of retail visits for children are for pharyngitis — sore throats. Add in ear infections and upper respiratory infections, and you’ve accounted for more than three-quarters of visits for children. Parents bring their children to retail clinics to take care of quick, acute problems. Swap ear infections for immunizations, and you’ve got the main reasons adults use retail clinics, too.
Researchers for a study published in the American Journal of Medical Quality talked to patients who sought out care at retail clinics. Patients who had a primary care physician, but still went to a retail clinic, did so because their primary care doctors were not available in a timely manner. A quarter of them said that if the retail clinic weren’t available, they’d go to the emergency room.

For the full commentary, see:
Aaron E. Carroll. “The Hidden Cost of Retail Health Clinics.” The New York Times (Thurs., APRIL 14, 2016): A3.
(Note: the online version of the commentary has the date APRIL 12, 2016, and has the title “The Undeniable Convenience and Reliability of Retail Health Clinics.” Where the two versions differ, the quoted passages above follow the online version.)

The research on patient motivation for using retail clinics, is:
Wang, Margaret C., Gery Ryan, Elizabeth A. McGlynn, and Ateev Mehrotra. “Why Do Patients Seek Care at Retail Clinics, and What Alternatives Did They Consider?” American Journal of Medical Quality 25, no. 2 (March/April 2010): 128-34.

Info Tech Boomed Because It Was Least Regulated Sector

(p. A9) “The regulatory environment has become so onerous in America that it is now easier to start a business in England than in the U.S.,” Mr. Hill says–and he would know.
. . .
In 1973 and only 27 years old, Mr. Hill founded Commerce Bank with one branch in Marlton, N.J. The fledgling company focused on customer service and called itself “America’s most convenient bank.” By the time Mr. Hill left Commerce Bancorp 34 years later, only months before the company announced it would be bought by TD Bank for $8.5 billion, he had grown the business to some 460 branches, with 14,000 employees and combined deposits of about $40 billion.
Now he’s replicating that model in the United Kingdom with Metro Bank, which he founded in 2010. And Mr. Hill says there’s an ocean of difference between doing business in the overregulated U.S. and in the U.K. “When I went to Britain I thought the regulatory environment would be much worse,” he says. “It’s infinitely better there.”
The problem in the U.S. starts with towering federal regulations, such as the voluminous reporting and compliance rules in Dodd-Frank, the financial reform act that recently celebrated its fifth birthday. “Regulators are making it impossible for the medium and small banks to comply with the rules,” he says. “The burdens get so intense that it is destroying the small and medium-size banks in America.”
The result is that Dodd-Frank, a law intended to take on the systemic risk of “too-big-to-fail” banks, is multiplying the problem. “The big banks that are too big to fail are bigger now than ever, but the regulations have trickled down to the smaller banks that didn’t cause the financial crisis” Mr. Hill says. As a result, community banks are disappearing. “When I started my first bank in the 1970s there were 24,000 banks in America,” he says. “There are now 7,000 banks. It may soon be 500 or even fewer.”
But it’s more than Dodd-Frank that leaves him frustrated. “The feds have taken anti-money-laundering rules to the extreme,” Mr. Hill says. “We have to monitor every deposit account every 24 hours. Somebody’s monitoring your account every day.” That’s invasive and expensive.
He laments that the Community Reinvestment Act, a catalyst of the 2008 subprime mortgage crisis, still hasn’t been repealed. “We are literally required to make loans that we know are going to fail,” he says.
Then there’s the tangle of local regulations that every American small business must cut through. “You don’t need a building permit in Britain. Here [the U.S.] you have to get permits and you have to get inspections,” he says. All that can eat up months and months. “I can build 100 branch banks in Britain before I can get one built in the U.S., thanks to regulators.”
Policy makers and economists in Washington fret about what’s slowing the rate of business startups and entrepreneurial ventures. But Mr. Hill says it’s no wonder, with all this red tape, and it’s no accident that the industry that is really booming, technology, is the one least regulated by government–though the assault against Uber suggests that Silicon Valley might not be immune for long.
. . .
And how much should we be worried about overregulation–or competition from abroad? “Here’s my story in a nutshell and I hope Washington is paying close attention,” Mr. Hill says. “A very successful American business model has been transferred to Britain, where it’s even more successful because it doesn’t have to deal with the same burdens of government.”
He continues: “The politicians keep talking about fairness and helping the little guy. But it’s the little startup businesses that get hurt the most from the heavy hand of excessive government regulation. How is that fair?”

For the full interview, see:
STEPHEN MOORE. “THE WEEKEND INTERVIEW; The Demise of the Small American Bank; The man who put the customer first in retail banking says Dodd-Frank is crushing community banks and Britain is now a better bet.” The Wall Street Journal (Sat., Aug. 1, 2015): A9.
(Note: ellipses added.)
(Note: the online version of the interview has the date July 31, 2015.)