Today’s announcement from Google that the company will appeal a French agency’s order to abide by France’s version of the so-called “right to be forgotten” all over the world doesn’t just represent Google’s principled commitment to support the rule of law. It also signals to the world served by Google’s search and other products that the company supports the rights of ordinary users to read lawful content and know lawful facts.
What’s the “right to be forgotten”? Sometimes called “the right to delisting,” it’s a right articulated by the European Court of Justice in a 2014 case called Google Spain SL, Google Inc. v Agencia Española de Protección de Datos, Mario Costeja González (we can call it “the Costeja decision” for short). In that case, the European court found a Spanish attorney had the right to demand that Google remove links to a newspaper account of a government-forced sale of his property to pay debts. His argument was not that the newspaper story was false; instead, Costeja’s complaint was that search results including that newspaper story, “appear to be inadequate, irrelevant or no longer relevant or excessive in the light of the time that had elapsed.”
In effect, the decision created an obligation for Google and other search engines to suppress access to factually accurate newspaper stories, at least within the European Union. That obligation also has been codified in the updated General Data Protection Directive passed by the European Parliament last month.
Despite disagreeing with the Costeja decision, Google has since 2014 taken steps to bring its Europe-facing services into compliance with the “right to be forgotten,” as it’s being applied in Europe. The company developed a straightforward method for complainants seeking “delisting” of webpages, and it has taken pains to respond to those demands thoughtfully, rather than reflexively, by evaluating whether a demand is consistent with European law. As a first step, Google complied with requests for its services with EU Country Code Top Level Domains (e.g., google.fr, but not google.com). This year, it has done even more, as Google General Counsel Kent Walker describes in an op-ed printed today in the French newspaper Le Monde:
Following feedback from European regulators, we recently expanded our approach, restricting access to delisted links on all Google Search services viewed from the country of the person making the request. (We also remove the link from results on other EU country domains.) That means that if we detect you’re in France, and you search for someone who had a link delisted under the right to be forgotten, you won’t see that link anywhere on Google Search – regardless of which domain you use. Anyone outside the EU will continue see the link appear on non-European domains in response to the same search query.
This means that if you’re in Paris or Berlin and using Google.com to search, you won’t see websites that have been delisted by Google under French law, as interpreted by CNIL.
Unsurprisingly, however, the French privacy regulator, CNIL Commission Nationale de l’Informatique_et_des_Libertés, has decided that Google’s painstaking efforts to comply with lawful invocations of the “right to be forgotten” are not enough. As I wrote last year in Slate, CNIL’s ambitions are global. The French agency wants to compel “delisting” of content a French resident has demanded be removed in any country in which that content might appear.
The Costeja decision itself did not find that an EU citizen could demand delisting of true material everywhere it might lawfully appear in the world. And it wouldn’t make sense to do so. The internet may connect us globally, but we still have nation-states. It’s generally (although not quite universally) understood that there are still limits on what the government of any nation can demand from the rest of the world.
Google’s argument in its appeal focuses partly on the precise language of the Costeja decision—that only a listing whose “processing” is “inextricably linked” to an EU member state (by being associated with advertising and/or search results displayed within the member state) can be subject to a demand like CNIL’s. It also relies on a generally accepted interpretation of France’s data-protection law; if the search results and the display results take place outside of France, the French data-protection law should not apply.
I’m grateful that Google is committed to challenging CNIL’s global (one is tempted to say “imperialistic” assertion of authority). If France’s privacy regulator has its way, this French regulatory agency will have unilateral authority to limit content that is lawful in the Philippines or Chile or the United States from being seen in those countries. As Google’s Walker puts it:
The CNIL’s latest order, however, requires us to go even further, applying the CNIL’s interpretation of French law to every version of Google Search globally. This would mean removing links to content – which may be perfectly legal locally – from Australia (google.com.au) to Zambia (google.co.zm) and everywhere in between, including google.com.
Walker goes on to make the same argument that every thoughtful observer has made with regard to any country’s assertion of extraterritorial authority to remove content:
But if French law applies globally, how long will it be until other countries – perhaps less open and democratic – start demanding that their laws regulating information likewise have global reach? This order could lead to a global race to the bottom, harming access to information that is perfectly lawful to view in one’s own country. For example, this could prevent French citizens from seeing content that is perfectly legal in France. This is not just a hypothetical concern. We have received demands from governments to remove content globally on various grounds — and we have resisted, even if that has sometimes led to the blocking of our services.
This is the argument every democratically oriented citizen and government must make. Even as we are increasingly globally interconnected through the internet, we still live in a world of nation-states that reasonably expect to have their national sovereignty respected and protected. As a nation, we may choose, through our governments and representatives, to agree to be bound by international treaties. But the rest of the world has not yet agreed to the expansive, grandiose assertions of authority from France’s officially officious privacy regulator.This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.
From Houston Chronicle“Other groups, including Friends of the Earth, called on Moniz to suspend all clean-coal projects. The Department of Energy would do better to concentrate on funding basic research, said Catrina Rorke, director of energy policy at the R Street Institute, a conservative think tank.
“This administration has prioritized an elusive breakthrough in developing carbon capture and sequestration over their commitment to the taxpayer,” she said.”
Shortly after the Bipartisan Budget Act of 2015 was unveiled, text of the legislation, which promised to raise the nation’s debt limit and set spending levels through September 2017, prompted mayday sirens from both the House and Senate Agriculture committees. Much to the committees’ chagrin, the bill’s negotiators targeted changes in the U.S. Department of Agriculture’s Standard Reinsurance Agreement for federally supported crop insurance as a potential source of budget savings.
The SRA sets the target rate-of-return for insurance companies that participate in the federal crop insurance program, as well as payments to the companies for administrative and operating costs, such as agent commissions. It previously was exempt from being touched by congressional appropriators thanks to a provision in the 2014 farm bill. The Bipartisan Budget Act ordered USDA’s Risk Management Agency to renegotiate the agreement with participating insurers and find $3 billion in savings, an order members with agricultural constituencies found far too tall.
The House and Senate Agriculture committees almost immediately issued a harshly worded joint release. According to Senate Agriculture Committee Chairman Pat Roberts, R-Kan.: “Farmers and ranchers have done more than their fair share to reduce government spending.” Ranking Member Debbie Stabenow, D-Mich., further chimed in:
I oppose any efforts to cut or reopen Farm Bill programs… The Farm Bill made meaningful reforms to help reduce the deficit. Any attempts to reopen any part of the Farm Bill to more cuts would be a major set-back for rural America and our efforts to create jobs.
In the words of House Agriculture Committee Ranking Member Collin Peterson, D-Minn.: “We made major cuts when we wrote the Farm Bill. It is not appropriate to cut agriculture again. The Farm Bill should not be raided. I oppose any cuts.” For House Agriculture Committee Chairman Mike Conaway, R-Texas, the prognosis was even direr: “Make no mistake, this is not about saving money. It is about eliminating Federal Crop Insurance.”
Unfortunately, these overblown warnings were too powerful for Congress to resist; the directive to negotiate more taxpayer-friendly reinsurance deals with private crop insurers was reversed in the highway bill passed in November 2015. But in fact, the arguments made by crop-insurance-subsidy proponents are misleading. Giving in to the committee leaders’ line of thinking sets a dangerous precedent, not just for those dedicated to ensuring farm programs are accountable to taxpayers, but also for those dedicated to transparency and accountable spending in all programs.
Beyond the question of whether the federal government should support any large, established industry, or the more specific question of whether that industry could withstand having its taxpayer-supported rate of return lowered from 14.5 percent to 8.9 percent, it’s just simply not true that “farmers and ranchers have done more than their fair share to reduce government spending,” or that “it is not appropriate to cut agriculture again” (emphasis added).
Part of the disagreement stems from discrepancies between the spending that was projected at the time the 2014 farm bill was passed and the actual spending by the USDA over the past two years. While it’s true that lawmakers passed legislation that was projected to achieve savings, spending todate has far exceeded those projections, erasing much of the promised progress. If Congress wants to ensure the nation’s agriculture programs don’t become unwieldy, ever-growing budget items, understanding the current state of these programs is an important first step.
Last year, Margarete Kulik and Stanton Glantz proclaimed in Tobacco Control that there is no public-health basis for telling smokers about smokeless tobacco and e-cigarettes as safer cigarette alternatives, because the smoking population in the U.S. was “softening,” i.e., becoming more likely to quit.
Kulik and Glantz based their conclusion, in part, on an analysis of public survey data from the Tobacco Use Supplements of the Current Population Survey. They had information on the percentage of smokers (prevalence); the percentage of smokers who made a quit attempt in the past 12 months; the proportion of former smokers among ever smokers (also called the quit ratio); and daily cigarette consumption (cigarettes per day, or CPD) for each state and for several survey years from 1992 to 2011. Using linear regression, they found that a 1 percent decline in smoking prevalence is associated with a 0.6 percent increase in quit attempts, a 1.1 percent increase in the quit ratio, and a reduction in consumption of 0.3 cigarettes per day.
The analysis was seriously flawed, as the authors failed to consider other factors that may significantly affect smoking. For example, Kulik and Glantz should have considered data on the percentage of smokers who faced workplace or home smoking bans – information that was available in the survey datasets. The effect of state cigarette excise taxes should have been weighed. Additional factors, such as differences in smoking norms and anti-smoking sentiments in the various states, are commonly analyzed through the use of a standard fixed effects variable. They did none of this.
My research group has recreated the Kulik and Glantz analysis and taken into account the missing variables. Our results have now been published in the journal Addiction. We found that the “results are not robust…The inclusion of state fixed effects and state-level policies led to a large drop in the coefficients…and became statistically non-significant…the omitted state-level characteristics are most likely responsible for…[Kulik and Glantz]’s results.”
We also note:
One further point needs to be made. [Kulik and Glantz] claim that their study bears on the question of whether smoke-free tobacco products have a contribution to make to tobacco control. They claim that much of the argument for smokeless tobacco and e-cigarettes is dependent on the assumption that the smoking population is hardening. This is not the case. The argument for these considerably safer products e-cigarettes is simply that they may be short-term aids to cessation or permanent substitutes for tobacco cigarettes. In a population such as that in the US, that argument is relevant as long as there are substantial numbers of smokers who will use them.
For the 39 million smokers in the United States, there is no public-health basis to withhold either safer cigarette substitutes or the potentially life-saving facts about such products.
Heartland Part of Full-Page Ad in New York Times Standing Up For Free Speech on Climate, Against Abuse of Power
Our friends at the Competitive Enterprise Institute (CEI) ran a full-page ad in the New York Times today that stands up for the right of individuals and organizations to speak their mind — on the climate, or any other issue. This is, naturally, in response to 18 state attorneys general taking legal action against CEI and other climate realist groups, demanding they hand over all correspondence related to their communication on the issue to ExxonMobil. Click here to see The Heartland Institute’s continually updated web page dedicated to this issue.
Heartland Institute President Joseph Bast was proud to add his name to those of 42 others who stand together against this egregioius abuse of power, as well as the right to speak out publicly against the state ideology of catastrophic man-caused climate change. You can view the ad in its full-color glory, and also read the text below.ABUSE OF POWER
All Americans have the right to support causes they believe in.
The right to speak out is among the most fundamental principles of American democracy. It should never be taken away.
Yet, around the country, a group of state attorneys general have launched a misguided effort to silence the views and voices of those who disagree with them.
Recently, New York Attorney General Eric Schneiderman, U.S. Virgin Islands Attorney General Claude Walker, and a coalition of other “AGs United for Clean Power” announced an investigation of more than 100 businesses, nonprofits, and private individuals who question their positions on climate change.
This abuse of power is unacceptable. It is unlawful. And it is un-American.
Regardless of one’s views on climate change, every American should reject the use of government power to harass or silence those who hold differing opinions. This intimidation campaign sets a dangerous precedent and threatens the rights of anyone who disagrees with the government’s position—whether it’s vaccines, GMOs, or any other politically charged issue. Law enforcement officials should never use their powers to silence participants in political debates.
We are standing up for every American’s First Amendment right to speak freely. We hope you will join us. This is a critical battle, and it will determine whether our society encourages spirited debate or tolerates only government-approved opinions.
President & CEO, Competitive Enterprise Institute
C. Boyden Gray
Former White House Counsel
Andrew C. McCarthy
Former Chief Assistant United States Attorney, Southern District of New York
Michael B. Mukasey
U.S. Attorney General, 2007-2009; U.S. District Judge, 1988-2006
Professor of Economics, University of Guelph
Ronald D. Rotunda
Distinguished Professor of Jurisprudence, Chapman University
Richard S. Lindzen
Professor Emeritus of Atmospheric Sciences, MIT
Emeritus Professor of Physics, Princeton University
President, The Heritage Foundation
James H. Amos, Jr.
President & CEO, National Center for Policy Analysis
John A. Baden
Chairman, Foundation for Research on Economics & the Environment
Lisa B. Nelson
CEO, American Legislative Exchange Council
Author & Energy Policy Analyst
Thomas J. Pyle
President, Institute for Energy Research
Steven J. Allen
Vice President & Chief Investigative Officer, Capital Research Center
President, National Center for Public Policy Research
Steven J. Milloy
President & CEO, Texas Public Policy Foundation
President, Rio Grande Foundation
Researcher & Author
William Perry Pendley
President, Mountain States Legal Foundation
President & CEO, FreedomWorks
President, American Council on Science and Health
Executive Director, Committee for a Constructive Tomorrow
CEO, Freedom Foundation
Richard B. Belzer
Heather R. Higgins
President & CEO, Independent Women’s Voice
Joseph G. Lehman
President, Mackinac Center for Public Policy
Executive Director, Independent Women’s Forum
President, The Heartland Institute
John C. Eastman
Founding Director, The Claremont Institute’s Center for Constitutional Jurisprudence
President & CEO, The Buckeye Institute
President & CEO, The Claremont Institute
Assistant Professor, South Texas College of Law
President, Tertium Quids
President, Committee for a Constructive Tomorrow
President & CEO, State Policy Network
President, Science and Environmental Policy Project
President, Americans for Prosperity
Director of the Center for Energy & Environment, Competitive Enterprise Institute
President, Frontiers of Freedom
CEO, Illinois Policy Institute
Craig D. Idso
Chairman, Center for the Study of Carbon Dioxide and Global Change
The world is threatened with a renewed wave of anti-capitalism and anti-business sentiments and policies. Many who cheered the demise of Soviet communism in the early 1990s, presumed that this meant that, by default, the case for free markets and competitive enterprise had won in the battle of ideas. Over the last twenty-five years it has become clear that the same misguided arguments against free market capitalism constantly reemerge, like an ideological vampire waiting to rise from the intellectual grave and drain market freedom of its lifeblood by more government regulations and controls.
One of the most persistent of these misguided ideas is the belief that left on its own, competitive markets tend to bring about concentration of wealth, inequality of income, and “market power” to exploit workers and consumers of what justly should be theirs.
The most recent example of this is an article on, “Monopoly’s New Era,” by Joseph E. Stiglitz, the 2001 Nobel Prize winner in economics, which appeared on Project Syndicate website on May 13, 2016. Professor Stiglitz is one of those thinkers who seem to see a “market failure” at every turn and apparently has rarely found a government intervention he did not like.
Two Ways of Looking at the Market Process
He contrasts two differing views of the market economy. One view, an outgrowth of Adam Smith and those who followed in his intellectual footsteps over the last 250 years, argue that freedom, prosperity, and income equity are generally assured wherever the market is kept open and competitive, with minimal government impediments.
The other “school of thought” that he interestingly identifies with no one particular thinker of the past “takes as its starting point ‘power,’ including the ability to exercise monopoly control or, in labor markets, to assert authority over workers,” Stiglitz explains. “Scholars in this area have focused on what gives rise to power, how it is maintained and strengthened, and other features that may prevent markets from being competitive. Work on exploitation arising from asymmetries of information is an important example.”
Professor Stiglitz insists that this second approach has shown its insight and efficacy in the clear evidence of concentration of market control and income inequality in such sectors of the market such as finance and banking, cable television, health care, pharmaceuticals, agro-business, and a variety of others.
The truth and reality of this concentration of power and wealth conception of capitalism, Stiglitz argues, is also shown, historically, in labor markets, to the disadvantage of many “minority” groups. “Of course, historically, the oppression of large groups – slaves, women, and minorities of various types – are obvious instances where inequalities are the result of [market] power relationships,” he states.
His conclusion, therefore, should not be surprising. If competitive capitalism leads to it’s opposite – concentrated, monopoly capitalism – then government regulation and control is essential to preserve a free, prosperous, and “socially just” society. Or in the words with which Professor Stiglitz concludes his article: “But if markets are based on exploitation, the rationale for laissez‐faire disappears. Indeed, in that case, the battle against entrenched power is not only a battle for democracy; it is also a battle for efficiency and shared prosperity.”
Karl Marx’s Theory of Worker Exploitation
The nineteenth century economist most famous for insisting that capitalism leads to concentration, monopoly and exploitation was, of course, Karl Marx. He is the leading thinker that Stiglitz avoids mentioning by name. Marx claimed to have unearthed “the laws of historical evolution” that by a necessity as irresistible as the physical laws of nature, place human history on a trajectory that transformed society from feudalism to capitalism and would have to culminate in the triumph of socialism and a post-scarcity world of communism.
Marx was insistent that businessmen are driven in the pursuit of profits to invest in laborsaving industrial machinery. This results in two consequences. First, in this competitive race for profits through industrialization, some private enterprisers would be driven to the wall and pushed out of business, with their companies bought up by those capitalists who had better weathered the market storm. As this process repeated itself, there would be fewer and fewer private enterprisers left standing, with the result of the private ownership of businesses remaining in fewer and fewer hands. Hence, market competition leads to the concentration of ownership and wealth in the hands of a diminishing number of enterprise owners, according to Marx.
Second, as machines replace workers, there are fewer and fewer jobs for all those needing employment to feed themselves and their families. The non-property owning workers – “the proletariat,” in Marxian jargon – are joined by the businessmen driven out of business due to that concentration of ownership and wealth.
Workers competing for a decreasing number of jobs bring about a lowering of wages and decreased living standards for the vast majority of the population. Thus, a growing material inequality emerges between most working members of society and the handful of property-owning wealthy capitalists, or as it has become fashionable to describe them nowadays, the “one percent.”
Finally, in the Marxian version of this theory, the workers rise up and overthrow the remaining handful of exploiting capitalists, and the new dawn of historical progressivism arrives: socialism, with the State owning, managing and centrally planning the resources and enterprises of the society in the name of “the people.”
Marx’s Errors and the Benefits from Classical Liberal Capitalism
Both economic theory and the actual events of economic history have shown the errors and absurdities in this and related theories over the last two hundred years. Rather than a bi-polar social world of a handful of “the rich” versus a human mass of “the poor,” industrial and financial capitalism saw the emergence of what has become known as “the middle class,” whose numbers came from the ranks of the poverty-ridden poor of the pre-capitalist era.
The political philosophy of classical liberalism that gained intellectual ground in the eighteenth and nineteenth centuries called for the end to absolute monarchy and the establishment of representative, but constitutionally limited government. It espoused the cause of ending the governmental privileges and favors bestowed on a narrow group of special interest groups surrounding and serving the king, including legal monopolies that prevented market competition.
Classical liberalism called for the end to slavery, the emancipation of women, and an equality of individual rights for all in society to life, liberty, and honestly acquired property before an unbiased and impartial rule of law.
Domestic and international trade barriers were reduced or abolished, opening the field to virtually unrestricted free market competition. A smaller and far less intrusive government brought about a lowered tax burden on all in the society, leaving more of the earned wealth by all in the hands of the private individuals whose efforts and energies had produced it.
Respect and enforcement of private property rights; competitive markets open to all those with entrepreneurial visions of how to manufacture and sell more, better and less expensive goods and services to consumers as the peaceful and honest means of pursuing the earning of profits; freed labor markets giving all the opportunity to search out gainful employment wherever the most attractive terms of earning a living seemed to offer itself; and a growing financial sector provided the means for making possible the expensive industrial investments that created jobs and expanded the productive capabilities of society.
Capitalism Created a Prosperous Middle Class from the Poor
The last point is, perhaps, worth emphasizing. Through most of human history, the vast majority of people who found themselves able to somehow save anything out of their meager earnings were fortunate if they could hide away a few gold or silver coins as a form of accumulated wealth.
But the development of modern banking now made it possible for even those of meager material means to put aside their modest savings in a financial institution offering an interest return on their deposits. These financial institutions could now pool together large amounts of savings from many modest savers. They funneled these people’s savings out to entrepreneurs who could never have funded their dreams of industrial enterprises out of their own incomes.
Out of the profits earned by the successful entrepreneurial borrowers came the monetary means to pay back what had been borrowed plus the interest payments agreed to, to start up or to expand their private enterprises. This interest income earned by the banks both paid the interest owed to the depositors and increased the capital of the banks to develop their ability to lend to a growing number of enterprising borrowers.
The increasing field of created and expanded private enterprises was made possible through the savings of “the workers,” themselves, and who thereby earned interest on their individual savings accounts, and through the plowing back of retained earnings into those enterprises by successful businessmen widened the number of businesses looking for workers to fill the growing number of jobs in the marketplace.
At the same time, investment in more and better machines, tools and equipment in those industrial enterprises were increasing the productivity of each worker employment, helped to increase the wages worth paying each worker hired in conjunction with the increased demand of more employers competing for workers in their businesses.
Of course, wages for all types of labor did not all rise at the same time and to the same degree. But looking over the decades of the nineteenth and twentieth centuries, competitive and relatively free markets demonstrated the lie to all the naysayers like Karl Marx who claimed that “the workers” were doomed to poverty, destitution, and despair. Competitive capitalism did and has been raising increasing portions of mankind from wretched subsistence and starvation to unimaginable ease, comfort and convenience that even the richest and most successfully plundering kings and conquerors of the past could never have conceived.
Joseph Stiglitz and Asymmetric Information
Joseph Stiglitz, needless to say, is not a Marxist or a socialist, and it would be unfair to in anyway suggest that he is. His own variation on the injustice of capitalism and its potential for exploitation is partly based on his theory of “asymmetric information” and how it enables private enterprisers to take advantage of consumers and workers in society. Indeed, this theory helped earn him the Nobel Prize in Economics in 2001.
A core element in his theory is that individuals in the marketplace do not all possess the same type or degree of knowledge. Some people know things that others do not. And this “privileged” information can enable some to “exploit” others. For instance, the producer and marketer is likely to know far more about that product’s qualities, features and characteristics that he is offering on the market than most of the buyers possibly interested in purchasing it.
By withholding or not fully informing the potential buyer about all of the qualities, features and characteristics of his good, he may succeed in creating a false impression that makes the consumer have a greater demand for it and be willing to pay a higher price for it than would be the case if that consumer knew as much about the good as the seller knows.
Markets Integrate and Coordinate Decentralized Knowledge
There is no doubt that in a system of division of labor there is an accompanying division of knowledge, but this is a theme in theories of the market process long ago explained by economists in the “Austrian” tradition, especially Friedrich A. Hayek, who also received a Nobel Prize in Economics in 1974.
The Austrians have long emphasized that competition is a “discovery procedure” through which individuals find out things never known or imagined before. The peaceful rivalry of the marketplace creates the incentives for entrepreneurs to be unceasingly alert to profit opportunities to see possibilities that either others have missed or not thought of before. The unknown or barely perceived become seen and understood, and then taken advantage of in the form of new, better, and less expensive products offered to the consuming public.
The purpose of competitive markets and price systems is precisely to provide a way to integrate and coordinate the dispersed and decentralized knowledge in any society possessing a degree of complexity.
This same competitive market has also found ways to reduce and overcome the asymmetry of consumer versus seller knowledge concerning the qualities, features and characteristics of goods, as well, and thereby to reduce the potential and possibility of “exploiting” what the seller may know at the expense of the market buyers.
The Meaning of Search Goods and Judging the Quality of Products
In explaining how markets do this, economists sometimes distinguish between two types of goods offered and sold on the market: search goods and experience goods.
Search goods are those that can be examined and judged by the potential buyer before a purchase is made. For instance, suppose that a supermarket advertises that perfectly ripened bananas are available and on sale in their store. A consumer can enter the supermarket and fairly reasonably judge whether the quality of the good matches what has been promised in the advertising before buying it.
If examination shows that the bananas are either non-eatable green or over-ripened brown, the consumer can walk away without spending a penny on a product that has not met what was promised. By falsely or incorrectly advertising, or even unreasonably exaggerating in its advertising, the business runs the risk of not only losing that sale but the loss of its brand name reputation, threatening to see that consumer never return to that establishment again. Plus, that person can tell others what his “search” of the good came up with, potentially leading to those others not trusting that businesses advertising word without inspecting the good themselves.
This creates a self-interested incentive on the part of such sellers to practice “true in advertising,” or suffer the loss of some their regular customers upon whose repeat business their long-term profitability is dependent.
The Meaning of Experience Goods and Market Safeguards
Experience goods are those goods whose qualities, features and characteristics cannot really be fully known and appreciated without using the product in question for a period of time. Think of an automobile; you can go for a test drive, but your own best judgment of its safety, reliability and handling cannot be really known without driving the car in various weather and traffic conditions over a period of time. Or think of a bed mattress; you sit down and bounce on it, or stretch out and lay down on it in the furniture showroom, but you cannot really know if it will give you a comfortable and restful sleep every night until you’ve gone to bed on it for a period of time.
The same applies to many goods, such as household appliances, for instance. The competitive market’s response to this uncertain and imperfect knowledge on the part of potential buyers has been the seller and manufacture’s system of product warranties that enable the buyer to return the product over a period of time for his or her money back, or a replacement at no extra cost to the buyer.
It is, again, in the seller’s own self-interest to make sure that the product is what has been promised and is reliable in its working order and performance. Once more, the seller and manufacturer run the risk of losing their brand name reputation concerning quality and trustworthiness. Plus, if a warranty has to be fulfilled it is the manufacturer or seller who is forced to eat the cost of replacing the unit returned due to malfunction or failure to match buyer expectation, thus cutting into his own profit margin.
Market Uncertainty and Franchise Businesses
But what about those situations in which concern about repeat business or brand name reputation do not seem to be as present? For instance, suppose you are traveling on business or vacation and are passing through some town you are highly unlikely ever to see again.
You’re hungry for a meal or a place to stay for the night. How can you know about the quality of the meal in the local “Joe’s Greasy Spoon,” or the bedbug-free mattress in any of the rooms in the local “Bates Motel”?
The market has provided consumer information about the qualities, features and characteristics of such products and services to overcome this inescapable imperfect knowledge in the form of chain stores and franchises. You may never eat or sleep again in that particular town, but you will likely eat and sleep away from home somewhere at sometime again in the future.
The sight of the MacDonald’s “Golden Arches” or the sign for an IHOP (International House of Pancakes) anywhere, any place tells you the quality and variety of foods that you can have in any of their establishments, regardless of where its location in the United States or even the world. The same applies to seeing the sign for a Motel 6, or a Holiday Inn Express or an Embassy Suites, or a Hilton-family hotel.
You may never again go to that particular MacDonald’s or Holiday Inn, but if you travel you may very well eat or spend the night at some other chain franchise of that company. And that is the repeat business and brand name reputation that is important to the “mother company.” Thus, each chain store and franchise is required to meet standards of quality and variety that enables the consumer to have a high degree of confidence and reduced knowledge uncertainty of what he or she is getting when they enter any of these establishments regardless of where it may be located.
What makes this practice in the market consistently happen and successfully relied upon? Market competition and the self-interested profit motive.
“Perfect Competition” versus the Competitive Process
Professor Stiglitz sets up the straw man of what in economics is known as the “perfect competition” model. The presumption is that a market is only and truly “competitive” when it is filled with such a large number of sellers that each one is too small to influence the market price and in which each seller offers a product the quality of which is exactly the same ones sold by his competitors; and in which every buyer already knows all the same perfectly correct information as is known by all the sellers in those same markets.
Friedrich Hayek demonstrated the essential fallacies in this argument exacting 70 years ago when he delivered a lecture on “The Meaning of Competition” on May 20, 1946 at Princeton University. He explained that the very nature of a truly competitive market is precisely one in which rivals are attempting to improve the qualities of the products they offer to consumers and try to devise ways to make their products at lower costs precisely to be able to afford to offer them at lower prices to buyers to attract business way from their competitors. That is what makes market competition a dynamic, never-ending process of improved and less expensive goods and services available for the members of any society.
For economists like Joseph Stiglitz, trying to offer goods at prices different than your rivals or with qualities and characteristics differentiated from those sold by your competitors is a sign of “market failure,” of “imperfect” or “monopolistic” market practices. But for economists like Friedrich Hayek, such price and product rivalry and competition is the essential indication of the vibrancy of the competitive process at work.
Market competition in Hayek’s sense of the concept does not need a large number of rivals to be “truly” competitive. What is required are no political or legal barriers that stand in the way of potential competitors either at home or from abroad. From the economic point-of-view the market encompasses the world, regardless of where those who runs governments may have drawn lines on a political map.
Stiglitz’s “Market Failures” are Really Forms of Crony Capitalism
And this gets to the crucial and essential error in Professor Stiglitz’s argument concerning the concentration of “monopoly” power in the marketplace, and any resulting “unjust” inequality of wealth.
Every one of the examples that he lists as instances of such concentration of “market power” – finance and banking, cable television, health care, pharmaceuticals, agro-business – are all instances in which the competitive, free market has been interfered with by the paternalistic and regulatory hand of the government. It is not the market that has “failed” in these corners of the economy, but rather it is the presence and pervasiveness of the interventionist state.
But this, too, is typical of market critics such as Professor Stiglitz. They deceptively call “market failures” instances not of competitive free markets but of “crony capitalism” under which special interests have successfully interacted with politicians and bureaucrats to rig the market for their own benefit at the expense of both consumers and potential competitors who are legally prevented or hindered from entering sectors of the economy where they would like to try to gain market share and earn profits by offering better and lower priced goods than their privileged rivals are offering to those consumers.
Con Men Are Always with Us, Free Markets Constrain Them
Are there con men, hucksters and cheats? Of course there are. They existed in ancient Athens just as they exist today. There are always people who will try to dishonestly get what others have, when doing it that way seems easier and less costly than through honest production and trade.
The question is not whether human nature can be transformed to eliminate this aspect of human conduct. The question is, are their market institutions and incentives that can systemically reduce this type of behavior and, instead, generate more honest and properly informed human interactions?
And the answer is, yes. In fact, most of these positive incentive mechanisms have emerged and evolved out of the competitive market process, itself. These “market solutions” to the “social problem” of asymmetric information were discovered by market participants themselves to be profitable ways of gaining consumer trust and confidence and business, without any government command or imposition. Plus, their discovery and practiced institutional forms could never have been fully anticipated or imagined in their detail before and separate from the competitive market processes that generated them.
Once again, the “let-alone” principle of peaceful competitive market association has demonstrated itself to be superior to the presumption and arrogance of the governmental social engineer.
Worker Exploitation has Its Source in Government Intervention
Furthermore, if workers have been exploited in the past or present, and do not receive the full and proper value for the labor services they may render, this, too, has been the result of politically-sponsored or allowed “power” inside the market. Compulsory labor unions have manipulated and rigged labor markets, giving wage and work privileges and favors to some workers, but at the expense of other workers locked out of employment and income opportunities due to the “closed shop.”
Government imposed minimum wage laws have priced some low and unskilled workers out of jobs leaving them unemployed and possibly permanent wards of the government’s welfare state programs. Anti-competition regulations and related market restrictions (including burdensome taxes on business) have reduced the private sector’s ability and incentives to create jobs and invest in ways that raise the value of workers’ output over time.
If workers are “exploited” in the modern world, Professor Stiglitz should look at the very interventionist policies that he proposes and defends. They are the primary cause of the very conditions and injustices that he deplores, including the greater degrees of material inequality than would or need exist, if only the regulating and paternalistic state they he so much desires and admires were to get out of the way of the free market competitive process.
Heartland Daily Podcast – Dr. Mike Koriwchak: “Meaningful Use” Regulations Killed Health Record Innovation
So you want electronic medical records (EMR) and electronic health records (EHR)–and so you should. Doctors in private practice were innovating to provide top-flight electronic records long before the federal government encumbered EMR and EHR with fruitless reporting requirements under the guise of “meaningful use,” which distract physicians from providing patients with the highest quality care.
In today’s Health Care News Podcast, Dr. Mike Koriwchak, vice president of Docs4PatientCare Foundation and co-host of The Doctor’s Lounge joined Heartland research fellow and Health Care News Managing Editor Michael Hamilton to share why the day the feds rolled out “meaningful use” was the day innovation died in the realm of EMR and EHR, and how lawmakers and CMS can help revive it.
A silver lining to the withdrawal of Sen. Ted Cruz, R-Texas, from the presidential race is that we will be spared a battle over whether he met the Constitution’s requirement the president be a “natural born citizen.”
The evidence is not all one way, but on balance there is a good case Cruz did not meet the constitutional requirement.
As a general rule, the Constitution uses legal terms such as “natural born” in their 18th-century English legal sense. Under the law of the time, a foreign-born person did not qualify unless he had a citizen father not then engaged in treasonous or felonious activities.
Cruz was born in Canada of an American mother and a Cuban father.
Cruz, who in other respects is a strict constitutionalist, blew off the question, claiming it already had been decided in his favor.
This was demonstrably untrue. Although Cruz was born a citizen by virtue of federal law, federal law cannot, of course, alter constitutional definitions.
As Harvard law professor Lawrence Tribe has pointed out, the Supreme Court has never determined authoritatively the constitutional definition of “natural born.”
Several conservative commentators wishing to back up Cruz’s claim pointed to a 1790 congressional statute that can be read as recognizing as “natural born” children born abroad of citizen mothers.
But the statute was problematic for several reasons: (1) It can be read in other ways, (2) prevailing contemporaneous law rendered the Cruz-favored reading unlikely, (3) the statute probably had purposes unrelated to the presidency, and (4) it was soon repealed.
Liberal commentators appeared to be split on the issue.
Some upheld Cruz’s position, while others were not willing to be seen applying a doctrine as politically incorrect as patrilineality — the doctrine that one’s citizenship status comes through the status of a child’s father.
Some claimed founding-era law disqualified anyone not born in the U.S. Others claimed a child born abroad was “natural born” only if the citizen-parent was in active government service at the time.
Both of these positions are demonstrably false as well. Founding-era law did recognize as natural born those children born abroad whose fathers were citizens, and those fathers frequently were merchants or others not involved in government service at the time.
On top of everything else, several courts, when ruling in Cruz’s favor, cited an article authored by two former U.S. solicitors general.
The article relied heavily on a citation from 18th-century legal commentator William Blackstone.
As it happened, the authors’ report of what Blackstone had written was diametrically opposed to what Blackstone actually had said.
If the case had gone to the Supreme Court, you can bet the justices would not have been so sloppy.
Cruz’s withdrawal gives us some more time to think about the issue.
In the wider context of founding-era jurisprudence, the citizenship patrilineality rule was not particularly “sexist,” because it was balanced by matrilineal rules in certain other areas. However, these rules —matrilineal or patrilineal — make little sense today.
Perhaps a constitutional amendment is in order, recognizing as “natural born” the foreign-born child of either an American mother or American father.
This is a good illustration of why the Constitution has an amendment process.
It’s planting season, and farmers are taking to the fields to put food on our tables. Even though Ted Cruz has withdrawn from the presidential race, his victory in the Iowa Caucuses caused political pundits of all stripes to speculate about the future of the Renewable Fuels Standard (RFS) and the corn ethanol mandate, largely because someone, Cruz, had finally campaigned against the ethanol mandate and managed to win in Iowa. While some wonks in Washington, DC may talk about a political end for the ethanol mandate, for the nation’s farmers, the biofuel bubble has already burst.
Many of the agriculture-related policy discussions taking place in the nation’s capital focus on how corn farmers will be hurt by the biofuel mandate because RFS requires traditional forms of biofuel, such as corn, to be replaced by “advanced biofuels” in the future. This assessment is correct. If advanced biofuels ever become viable—thus far they have not— it would eat into the share of biofuel derived from corn. However, this view ignores the damage that has already been done to farmers as a result of the ethanol mandate distorting crop prices.
For every action, there is a reaction, and for every boom, there is a bust. The ethanol mandate created a boom in the price of corn by driving up demand, because it resulted in approximately 40 percent of the nation’s corn crop being converted into fuel. The mandate had the dual effect of tying the price of corn—as well as other farm commodities—more closely to the price of oil. As a result, corn prices surged from approximately $2.50 per bushel before the ethanol mandate, to more than $8 just a few years after it was enacted. As corn prices surged, farmers devoted more acreage to growing corn, which in turn drove up the price of other crops, such as soybeans and barely.
Crop prices weren’t the only the thing to skyrocket. The price of farming inputs, including farmland, seed, and farm machinery, has skyrocketed over the past 10 years due to years of corn prices being $6 or $7 per bushel. In 2005, the average cost of land rent in central Illinois was $147 per acre, but within seven years, that price nearly doubled to $270 per acre. The rise in the cost of inputs made it harder for smaller, family farmers and young people interested in becoming farmers to buy or rent land and machinery.
Things boomed for a while, but because corn prices have fallen 60 percent from their highs—and below the cost of production for many farmers—farmers who took on debt in order to purchase equipment or land are finding these assets may not be worth what they were during the boom.
For example, 2014 marked the first year farmland values dropped since the Reagan administration. Although the declines were fairly modest, about 3 percent, the trend does not bode well for the next few years, when rising yields per acre, slowing economic growth in China, and low oil prices are likely to keep a damper on a recovery in grain prices.
Defenders of the ethanol mandate often argue higher biofuel mandates are needed in order to prop up crop prices above the cost of production. These pleas are often couched in phrases such as, “No policy in history has brought more wealth back to rural America than the ethanol mandate,” and for a time, this was true. But all bubbles eventually burst, and the aftermath is often messy.
The problem with government intervention in markets of any kind is eventually the market adapts, and more and more distortion is needed to maintain prices. The old adage “the cure for high gas prices is high gas prices” applies to all commodities. As high corn prices increased, the incentive for farmers to convert land for growing more corn increased along with them. The price has come down accordingly, but the malinvestment brought on by artificially inflating the demand for corn remains. In the end, policies such as these end up hurting the very people they were supposed to help, which is why Congress should act to phase out the ethanol mandate.
Global 2000, a report published by the Carter administration in 1980, offered a bleak forecast for the human race. It predicted “the world in 2000 will be more crowded, more polluted, less stable ecologically, and more vulnerable to disruption than the world we live in now … Barring revolutionary advances in technology, life for most people on earth will be more precarious in 2000 than it is now—unless the nations of the world act decisively to alter current trends.”
The report spawned neo-Malthusian policy prescriptions to restrict consumption, shrink the birth rate, and bring mankind into balance with the natural world. YetGlobal 2000’s dire projections proved woefully incorrect. Even with rising global levels of population and economic activity, our relationship with the environment has only improved. Consider that U.S. energy needs have grown dramatically since 1970, but our production of dangerous pollutants—including particulate matter, carbon monoxide, nitrogen oxides, sulfur dioxide, and lead—has fallen. A growing population, after all, also yields more of the most important resource at our disposal: human ingenuity.
This has not put a stop to Malthusian speculation. There’s no shortage of voices still suggesting that economic growth necessarily harms the natural environment, that it’s time to start considering an economy centered around economic or ecological justice, or that we need policies to adjust to a zero-growth future. Doomsayers find support for their pessimism in the current locus of ecological concern: a changing climate. Global agreements to reduce emissions start with the assumption that every nation, even the poorest, must untether its economic future from fossil fuels.
These theories are as threatening as they are ill-founded: structuring policies around a low- or zero-growth future will stop global development in its tracks and trap a growing segment of the world’s population in poverty. But rejecting doom-and-gloom forecasts of impending environmental and economic catastrophe is not tantamount to denying the problem of global climate change. The best solution to that problem is in fact more growth and global development—much of which can be fostered with energy sources that do not add to emissions.
The globe is indeed warming, and we are largely responsible. Of the 16 warmest years on record, 15 occurred in the last century. Atmospheric concentrations of greenhouse gases are increasing thanks to human activity; current concentrations of carbon dioxide, methane, and nitrous oxide are higher than at any time since before humans evolved. Models, though notoriously imperfect, suggest these trends will continue.
With enough warming, we may reach a tipping point beyond which irreversible changes are possible. Abrupt shifts in ocean circulation patterns could upend the marine ecosystem. Hydrologic alterations could cause persistent droughts and food and water shortages. The worst consequences of climate change, however unlikely, could create conditions in which the environment would be transformed rapidly and unpredictably.
But climate change, even with these high-risk scenarios, is not the most pressing threat facing global humanity. The near- and medium-term risks of climate change largely just make existing problems worse. Nearly one-fifth of the developing world’s population is undernourished, 13 percent lack access to clean water, and 32.5 percent have inadequate sanitation. World Health Organization data suggest that 8.4 million deaths each year are attributable to the avoidable hazards of malaria, malnutrition, unsafe water, and indoor and outdoor air pollution.
Poverty is a better predictor for mortality risks than climate change. Higher carbon dioxide emissions have even been associated with fewer deaths from extreme weather as nations develop. In the advanced world, our lives are undoubtedly more improved by the economic development that fossil fuels enable than harmed by the threat of climate change.
For some, the conclusion to be drawn from this is that government-led efforts to reduce greenhouse-gas emissions should be abandoned. Under each scenario modeled by the United Nations’ Intergovernmental Panel on Climate Change, people in the future, even in the developing world, will be so much better off with unbridled economic development that it will counteract any negative effects of a warmer and more unpredictable climate.
Fossil fuels are certainly terrific at their job: they’re widely distributed, cheap to produce and refine, easily scaled, and yield power on demand. Technologies to harness these fuels are well-understood, widely available, inexpensive, safe, efficient, and reliable. Coal, oil, and natural gas prices have been dropping, making them more affordable than ever. Yet they do not answer all of the developing world’s needs.
Some 2.8 billion people still don’t have access to safe cooking facilities, and 1.3 billion don’t have access to electricity. At a minimum, households need energy for lighting, cooking, heating and cooling, and communications. Insufficient access makes everything more difficult: food spoils, lamps and stoves demand costlier or foraged fuel, and people are exposed to indoor air pollution, unsanitary conditions, poor nutrition, and avoidable illnesses.
Building sufficient traditional-energy infrastructure to satisfy demand will be a slow process, even under optimistic scenarios, and such infrastructure isn’t necessarily suited to the most immediate needs. Reliance on fossil fuels is a risky proposition for much of the world: many communities with traditional electricity connections grapple with brownouts, rationing, and bills that far exceed a household’s ability to pay. Fuels remain expensive, and supply chains to make them readily available are often underdeveloped.
Energy access is more important than access to any one particular fuel. In this respect, the needs of the developing world and the West’s priority on limiting emissions coincide, up to a point: access can be reliably provided in some places by other forms of energy.
Telecommunications history offers a telling analogy. Landline phones were a democratizing innovation, enabling instantaneous person-to-person communication. But the network infrastructure was limiting. Until the 1980s, having access to a telephone meant being in a service territory with a phone utility and having a wire to your home.
Mobile technology is wholly different. Enabled by distributed infrastructure, entire communities can gain access to phone communication at once. Untethering communications from the old infrastructure has expanded access in places previously untouched by such services. In 1990, there was no access to mobile technology in sub-Saharan Africa; by 2014, 78 percent of people held mobile-phone service.
A fossil-based energy future is dependent on the same type of network infrastructure that quickly grew outdated in the telecom industry. That’s why many developing communities are choosing other ways forward. Solar-energy systems and battery-enabled LED technologies don’t require any new infrastructure. Passive solar heating can generate enough hot water for washing. In some cases, greater efficiency is the answer. Development organizations are working to improve cook stoves so they release less indoor air pollution. Safe perishable food storage can be managed with changes that don’t require access to electricity or refrigeration.
There are similar opportunities in commercial activity and community services. Mechanical wind and hydroelectric technologies offer opportunities for irrigation, agriculture, and small industry. Remote health centers have turned to solar-power systems with battery storage for much of the last decade. With promising price curves, as well as capacity and efficiency improvements, these off-the-grid solutions may work well to power distant communities and encourage more rapid economic development.
Trends favor these investments. Prices for photovoltaic solar, wind, and battery-stored power are coming down quickly, reflecting advances in manufacturing, materials, and installation. If the experience of smaller lithium-ion batteries is any example, prices for large-format battery technology may drop by an order of magnitude in the next decade. Human ingenuity is making renewable energy cheaper to harvest, mobilize, and store for use when needed.
International aid should respond appropriately. In 2013, 97 percent of the $13.1 billion in capital investments for energy access in the developing world went to the electricity sector. Yet established World Bank policy permits financing for coal-power generation only where there are no feasible alternatives, and the U.S. Overseas Private Investment Corp. uses a greenhouse-gas emissions cap to weigh its investments. The West has adopted incoherent policies that respond poorly to the developing world’s needs, putting too much or too little emphasis on fossil fuels. And the resurrection of Malthusian tendencies at the highest echelons of the international policy community is dangerous.
But we do not face a choice between improving the lives of billions now and an apocalyptic climate future. Rather, we have an opportunity simultaneously to improve the lives of billions and to make our future world safer. That starts with accepting a few things. There is no morally correct level of atmospheric carbon dioxide. Global prosperity is a necessary precondition for dealing with climate risk. Human ingenuity is an incredible and limitless resource. And our new target as a global community should be to alleviate the threats of climate change by eradicating poverty and building energy access.
For now, that means access to any source of energy. Distributed renewables present great opportunities for rapid availability in areas presently without reliable sources. And to be sure, strengthening fossil-energy infrastructure and supply chains will open access to the most reliable forms of energy in the long run. Policies that distort choices between the two are counter-productive. If we shift away from a focus on aggressive climate-mitigation efforts, we can refocus international cooperation on reducing health and environmental risks, building wealth, and developing innovative solutions. In that wealthier, safer, more adaptable future, reducing carbon emissions will not just be easier, it will be business as usual.
In this episode of the weekly Budget & Tax News podcast, managing editor and research fellow Jesse Hathaway talks about the U.S. Food and Drug Administration new “deeming regulations” for electronic cigarettes, which require e-cigarette manufacturers to submit their products through an arduous federal approval process.
Cynthia Cabrera, president of the Smoke-Free Alternatives Trade Association, the largest e-cigarette and smoke-free alternative trade association representing the interests of manufacturers, online retailers, small businesses, distributors, importers and wholesalers, and someone who the people in Big Tobacco probably find really annoying, joins Hathaway to talk about the new regulations, and how they will affect consumers, both non-smoking and smoking alike.
According to Cabrera, the new regulations effectively promote smoking traditional cigarettes, and how e-cigarettes do serve a purpose in the fight against preventable diseases like those caused by tobacco use.
Any comprehensive review of green energy and its politics and policies has to include the name of wealthy liberal Tom Steyer—who has been called the environmental movement’s new “Daddy Warbucks.” Having made his billions from his tenure atop Farallon Capital Management—much of it from coal projects around the world—Steyer apparently had an environmental epiphany and now wants to atone for his past sins by trying to save the planet from manmade climate change.
He is using his wallet to try to elect candidates who will promote policies and energy plans that agree with him. And that plan is “green.” As I’ve previously reported, he spent nearly $75 million in the 2014 midterms and intends to top that for the 2016 election cycle. Steyer–– a long-time donor to Democratic causes––was a 2008 Hillary Clinton supporter. After her campaign failed, he emerged as a bundler for Obama in 2008 and again in 2012. Additionally, Steyer is a Clinton Foundation donor, and last year, at his San Francisco home, he held an expensive fundraiser for Clinton’s 2016 presidential run.
Along with researcher Christine Lakatos, whose Green Corruption File was recently praised on the Michael Savage Show, I’ve repeatedly addressed Steyer’s involvement through our work on President Obama’s Green-Energy Crony-Corruption Scandal. Anytime there is a pot of government money available for green energy, as Lakatos found, Steyer’s name seems to be attached to it. Some of the most noteworthy include: Sungevity, ElectraTherm, and Project Frog—all funded by Greener Capital (now EFW Capital), which is a venture firm that invests in renewable energy, with Steyer as a known financial backer.
Steyer claims to have “no self-interest” in his political activism. The Los Angeles Times quotes him as saying: “We’re doing something we think is good for everyone.” Yet, as Forbes columnist Loren Steffy points out, he is spending his fortune lobbying for “short term political gains” rather than into research and development “aimed at making renewables economically viable.”
While he may say what he is doing is good for everyone, the policies he’s pushing are good for him—not for “everyone.” The Washington Post called him: “The man who has Obama’s ear when it comes to energy and climate change.” In California, where he has been a generous supporter of green energy policies, he helped pass Senate Bill 350 that calls for 50 percent renewable energy by 2030. California’s current mandate is 33 percent by 2020—which California’s three investor-owned utilities are, reportedly, “already well on their way to meeting.” It is no surprise that California already has some of the highest electricity rates in the country. Analysis released last week found that states with policies supporting green energy have much higher power prices. In October, Steyer spent six figures for an ad campaign calling for the next president to adopt a national energy policy similar to California’s: “50 percent clean energy mix in the U.S. by 2030” —which will raise everyone’s rates.
With Steyer’s various green-energy investments, these rate-increasing plans are good for him but bad for everyone else—especially those who can least afford it. And, it is the less affluent, I recently learned, he’s targeting with predatory loans for solar panels through Kilowatt Financial, LLC, (KWF)—a company that listed him as “manager” on corporate documents. KWF recently merged with Clean Power Finance and became “Spruce.” The financing structure used, according to the Wall Street Journal (WSJ), allows “homeowners to get solar systems at no upfront cost and then to pay monthly for the use of the power generated. Homeowners end up saving on their total electricity use, while financing companies get steady revenue over 20 years.” WSJ, points out, the KWF financing can be offered to “people who wouldn’t be approved otherwise.”
In the KWF model, contracted payments come from homeowners and “create a steady and reliable income stream, part of which is owned by its venture investors, including Kleiner Perkins.” About the arrangement, KWF chairman and Chief Executive Daniel Pillmer said: “Kleiner Perkins will make a lot of money.” Apparently, the money to be made is from selling the loans that are then securitized on Wall Street—much like the “sub-prime” mortgage crisis that offered loans to people who couldn’t qualify with “traditional lenders.” KWF’s website brags: “We support financing terms for almost every customer and provide ways for dealers to participate in the pricing process to generate even more approvals and create even lower consumer rates.” KWF offers “Instant Approvals, even for customers with lower credit scores” and “Same-as-Cash and Deferred Payment Offers.” In these types of payment plans, a low rate is usually offered in the beginning and increases retroactively if all the terms of the loan are not met.
In this model, the homeowners don’t actually own the solar systems—which means KWF receives the benefit of the federal tax incentives, such as the 30 percent federal “Investment Tax Credit,” designed to benefit the owner of the solar system.
It is practices like this that have drawn the ire of Congress. Several congressional Democrats sent a letter to the Consumer Financial Protection Bureau that warned about the similarities between the solar industry and what led to the subprime mortgage crisis: “easy initial financial terms, increased demand and a rapidly expanding industry.” These factors create a high risk potential that could, ultimately, be harmful to consumers. Similarly, Republicans sent a letter to the Federal Trade Commission that noted pressure from Wall Street is reportedly leading companies who use “potentially deceptive sales tactics”—which doesn’t sound like it is something that is “good for everyone.”
Yet, it is these very types of finance products, promoted by Steyer’s Kilowatt Financial that Greentech Media reports are “doing well.”
While Steyer claims to want to give everyone a “fair shake,” his pet policies increase costs for everyone, and offer a hand-shake for Wall Street. Steyer and his billionaire buddies win, “everyone” else loses—and that is a big part of the green-energy crony-corruption scandal.
The author of Energy Freedom, Marita Noon serves as the executive director for Energy Makes America Great Inc., and the companion educational organization, the Citizens’ Alliance for Responsible Energy (CARE). She hosts a weekly radio program: America’s Voice for Energy—which expands on the content of her weekly column. Follow her @EnergyRabbit.
A recurring headline in the Age of President Barack Obama begins with things like “Obama Administration Issues New Rules…” and “Administration Targets…” and various variations on this theme. To wit:
The rolling tally – and the damage done – is devastating:
- The federal regulatory cost reached $1.885 trillion in 2015.
- Federal regulation is a hidden tax that amounts to nearly $15,000 per U.S. household each year.
- Many Americans complain about taxes, but regulatory compliance costs exceed the $1.82 trillion that the IRS is expected to collect in both individual and corporate income taxes from 2015.
And it is inordinately difficult to argue that Obama’s isn’t the Regulation Administration:
- Some 60 federal departments, agencies, and commissions have 3,297 regulations in development at various stages in the pipeline.
- The 2015 Federal Register contains 80,260 pages, the third highest page count in its history.
- Of the seven all-time-highest Federal Register total page counts, six occurred under President Obama.
- …(T)he Obama administration has averaged 81 major regulations annually over seven years.
- In 2015, 114 laws were enacted by Congress during the calendar year, while 3,410 rules were issued by agencies. Thus, 30 rules were issued for every law enacted last year.
That last point is vitally important. Many (most) of these new regulations – are unlawful and unconstitutional. The Obama Administration is the Executive Branch. It executes laws – it does not write them. That’s Congress’ (the Legislative Branch)’s job. Issuing regulations untethered to preceding legislation – is violating the rules. As per usual, the Republican-led Congress is doing far too little to defend its Constitutional turf and rein in the Administration. And far, far too infrequently, this happens:
Far, far too frequently – Obama’s myriad fiats stand. The rolling tally – and the damage done – is devastating.
Productivity Growth of U.S. Economy Collapses to Record Low: “U.S. productivity growth, the greatest determinant of living standards, has been lower for the past five years than any five-year period on record. New data from the U.S. Bureau of Labor Statistics shows that productivity growth has averaged 0.4% per year over the past half-decade. This is 82% below the average of the prior six decades, which is as far back as this data extends.”
Obama is First President Ever to Not See Single Year of 3% GDP Growth: “The rate of real economic growth is the single greatest determinate of both America’s strength as a nation and the well-being of the American people….Ronald Reagan brought forth an annual real GDP growth of 3.5%. Barack Obama will be lucky to average a 1.55% GDP growth rate.”
Ingrained decades of over-regulation lead to things like this:
Sounds great, right? Except:
“The euro zone’s dominant economy grew 0.7 percent, its strongest quarterly rate since an identical reading in the first quarter of 2014….”
Wow. 0.7% growth. Dominating all of the Euro Zone. Let us please not be (even) more like Europe, eh?
So when our domestic Sauron turns its Eye on the Technology Sector – we get worried. The guilty over-extended arm of the Leviathan here – is the Federal Communications Commission (FCC).
As per usual, the Republican-led Congress is doing far too little to defend its Constitutional turf and rein in the FCC. So that means the conga-line-to-the-courthouse will get even longer.
And what’s happening to the economics of the Tech Sector?
Capital Expenditures Declined Under FCC’s Network Neutrality Rules: “A casual reader of the Federal Communications Commission’s many documents on network neutrality would reasonably conclude that the network neutrality rules are necessary for robust investment in the broader information sector. The linkage between FCC rules and investments animates the FCC’s recent court brief in which the agency defends its latest rules in the D.C. Circuit Court.
“The empirical economics, however, are the opposite of the FCC storyline. Capital expenditures grew less rapidly when network neutrality rules were in place.”
So the government claimed their new regulations would help the economy. They then imposed them – and Reality rudely intervened. I believe this has happened before.
Reality is a harsh mistress – when you’re wedded to big government.
As we see in every other sector of our economy (and everyone else’s) – more government means less private sector economy. The former crowds out the latter. Each and every time it’s tried.
The Tech Sector has been Obama’s anemic economy’s one saving grace. So his Administration has in its last years dramatically ramped up its Tech Sector assault.
Because no inkling of positive economic activity can be allowed to stand. It makes everyone and everything else look bad.
With all of human history as a guide – sadly, big government will be just as squashing-ly successful here as it has been everywhere else.