Out of the Storm News

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Updated: 30 min 47 sec ago

R Street applauds reinsurance package from Citizens Property Insurance Corp.

3 hours 15 min ago

TALLAHASSEE, Fla. (April 24, 2014) – The R Street institute applauded today’s announcement from Citizens Property Insurance Corp. of a $3.1 billion risk transfer program for the 2014 hurricane season.

The program capitalizes on favorable market conditions to increase reinsurance coverage at a lower price.

“The Citizens board deserves credit for taking advantage of historically-low global reinsurance rates to transfer some of its enormous hurricane risk to the private market, thereby reducing the likelihood or severity of post-hurricane assessments,” said Christian Cámara, R Street Florida director.

The new risk transfer transactions will leave Citizens with approximately $3.1 billion in reinsurance available in the event of a major storm or series of storms this hurricane season. The package also includes a $1.5 billion catastrophe bond offering from Everglades Re. The offering is twice the size of the previous Everglades Re issuance, and is believed to be the largest cat bond in history.

This package and similar programs further reduce the burden on all Florida policyholders who may be assessed if Citizens exhausts its ability to pay claims.

“The Florida Hurricane Catastrophe Fund would do well in following Citizens’ example to further protect Florida taxpayers,” said Cámara.

R Street comments on FDA proposed regulations on e-cigarettes

4 hours 38 min ago

WASHINGTON (April 24, 2014) – The proposed regulations on e-cigarettes by the Food and Drug Administration released today will not require that existing products be removed from the marketplace while they are being reviewed and before they are approved. Additionally, the regulations will ban the sale of e-cigarettes to minors. Both of these developments represent positive steps forward on the ongoing education to the public about vaping said the R Street Institute today.

Keeping products in the marketplace in particular is important, as evidence has shown that e-cigarettes have proven to be far more effective in helping smokers to stop smoking tobacco products than any other cessation product, such as nicotine gum, patches or lozenges.

However, it is concerning that the regulations call for restrictions that would prevent e-cigarette makers from advertising that smokers can reduce their risk of tobacco-attributable diseases by switching. Available evidence suggests such risks may be reduced by as much as 98 percent.

“It is important for people to know that e-cigarettes are an effective tool in tobacco harm reduction,” said Professor Brad Rodu, endowed chair in tobacco harm reduction research at the University of Louisville and R Street associate fellow. “While we are in favor of e-cigarette regulation by the FDA, it should not come at the cost of educating the public about less harmful alternatives to tobacco cigarettes.”

Rodu also counseled the FDA to give more guidance on what health warnings will be required on e-cigarette packaging.

“There is ample medical evidence that shows that nicotine is addictive and should not be used by pregnant women, making those warnings appropriate. However, there is insufficient medical evidence of other negative health consequences of e-cigarettes. The FDA should set clear standards on the warnings that would be required under the regulations.”

R Street will express these concerns during the current public comment period.

Internships are an important rung on the ladder of opportunity

9 hours 36 min ago

Prohibiting unpaid internships is an effective way to withhold economic opportunity from young and ambitious men and women, particularly those from modest backgrounds.

That, of course, is not the stated goal of those who seek to require that all interns collect a paycheck. Nor is it their goal to further concentrate opportunities in the hands of the powerful and connected. But for better or worse, these would be the likely consequences of such a policy.

Our economy has a credential fetish. Virtually all white-collar jobs require a bachelor’s degree – and increasingly, master’s degrees – even when such credentials have at most tangential relevance to a job. In economists’ jargon, much of the economic value of post-secondary education is about “signaling,” or conveying information that can otherwise be hard to attain. And the signaling value of higher education is a major reason that Americans now have around $1 trillion dollars in outstanding student loans.

Internships are also a form of signaling. Successfully completing an internship signals to future employers that you can show up for work, follow instructions and get along with your colleagues – the “soft skills” of the workplace. And unlike college, you don’t leave an internship potentially tens of thousands of dollars in debt.

Critics of unpaid internships usually argue that interns are just free labor for the organizations that sponsor them, but this ignores that most interns are actually quite costly to their sponsoring organizations. No matter how bright and well educated an intern may be, supervising him or her takes time and effort, and by nature of their lack of experience and their short-term stints, interns typically cannot produce much of value. Mentorship, instruction and education are all expensive investments relative to the value most interns provide.

It’s also hard to tell whether an internship primarily benefits the intern or the employing organization. This is a decision best made by interns and their sponsoring organizations, not by Department of Labor bureaucrats. If an intern feels her experience will add to her employability later on, who are we to prohibit her from taking an unpaid internship?

Eliminating unpaid internships won’t cause employers to just start paying their interns. Some no doubt will, but many more internships will likely be lost altogether. Those that remain will become still more competitive and more likely to go to the sons and daughters of the wealthy and connected. That is, internships will become more and not less elitist.

Shut out of the internship marketplace, many potential interns will simply take on more debt to get more and better credentials to make them look attractive to future employers. And in a credentialed society, what choice do they have?

At a minimum, internships should be treated the same across the board – that means that internships with for-profit firms, non-profits and government should be treated equally with respect to pay requirements. Currently, different pay rules apply to for-profit and non-profit interns. But if we are ostensibly trying to protect interns, surely the same rules should apply to all internships, regardless of the internship sponsor.

If we ban all unpaid internships, we must also prohibit volunteering on political campaigns as well, since this is the usual means of beginning a career in political staffing and could even be considered an unrecorded campaign donation.

Internships are an important rung on the ladder of opportunity for many, and we should be looking for more options to create economic opportunity. Shutting the door on unpaid internships would have many unintended consequences that would further restrict opportunity, not further social justice.

Federal e-cigarette data AWOL

10 hours 6 min ago

Americans are familiar with the census, taken every 10 years by the U.S. Census Bureau, but few are aware the bureau regularly collects information on a range of demographic, social and economic characteristics through Current Population Survey supplements, which are sponsored by various government agencies.

The National Cancer Institute regularly sponsors the CPS Tobacco Use Supplement, which was conducted most recently in May and August 2010, and January 2011. These datasets and accompanying technical documentation are available for download and analysis by tobacco researchers.

Surprisingly, another TUS, conducted in May 2011 and described in a technical document as a follow-up survey that includes information on e-cigarettes, has never been released. This conflicts with Census Bureau guidance that supplements “are available anywhere from 6 to 18 months after data collection.”

The 36-month-and-counting delay is troubling.

High-ranking government officials have been campaigning against e-cigarettes for some time, creating demand for FDA regulation. The NCI, sponsor of this TUS, has been a powerful opponent of anything related to tobacco harm reduction. Is it possible that NCI officials are not releasing e-cigarette data until FDA regulations are issued?

The NCI has suppressed positive positive data in the past. An NCI-sponsored supplement to the 2000 National Health Interview Survey asked current and former smokers the method they had used to try to quit smoking. One response was “switch to smokeless tobacco.” Carl Phillips and I published analysis of this survey, noting that it provided the first population-level evidence that American men have quit smoking by switching to smokeless tobacco.

Five years later, despite the fact that tobacco harm reduction had gained increased visibility and more American smokers were likely making the switch, the NCI struck the switch-to-smokeless query from the survey, denying the public information about this cessation option.

Public health requires public access to taxpayer-funded survey data. NCI should be an ally in this regard, not an obstacle.

TNCs need to go on the offensive…nicely

April 23, 2014, 2:00 PM

In the past year, so-called “transportation network companies” like Uber and Lyft have gone from fighting for explosive growth to fighting for survival. They won their first fight in San Francisco, but now are waging battles across the globe, from Houston to Berlin. Brussels banned Uber last week; there have been police stings to arrest drivers in Washington; and the Seattle City Council just passed an ordinance capping the number of active drivers at any given time to 150.

The same progression of events plays out time and time again: A TNC opens up shop in a new city. The taxi industry or the city government starts making noise. Then, the TNC fights against whatever is proposed, often by pouring staggering amounts of money into advertising to fight the measure and relying on their massive public support. In Seattle alone, Uber and Lyft put $400,000 into getting 36,000 signatures to suspend the caps and send the decision to a referendum vote.

It appears the industry’s strategy is:

  1. Expand to as many new cities as rapidly as possible.
  2. Build public support in each new city as rapidly as possible.
  3. Insist they aren’t taxis, shouldn’t be regulated as taxis and that city governments can’t fight the future.

Simply put, this strategy isn’t working.

As soon as the first TNC regulation started to gain traction, it encouraged the taxi industry in every other city to start fighting. City councils started looking to previous legislation as precedent. To compound the TNC industry’s relative disadvantage, the taxi industry has a long history of working with city governments, while the TNCs are actively fighting against, disregarding and disrespecting them. This pattern doesn’t exactly win over city councils to support something new.

The one thing TNCs have on their side in these fights is public opinion. But given that several street protests and thousands of phone calls and emails in Seattle had no effect on passage of legislation capping active TNC drivers, public opinion may not be much of a trump card. One could argue that going against such fierce public opinion is a dangerous move for an elected official, but rarely will those elections be timely enough to save TNC service in the area in question.

If the TNCs want to survive, they have to change their strategy. They need to stop taking a reactive and combative approach, and start taking a proactive, collaborative one.

When moving into a new city, they should meet with city council members, explaining who they are, how they work and the safety systems they have in place. They should demonstrate they have appropriate insurance coverage. They should take the initiative to come forward with a proposal that shows how they’ll work with the city to maximize transparency, including a data-driven approach to safety and consumer happiness (something the taxi industry can’t do) and explain how the city will make money from the TNCs.

Car2Go is another car-sharing service that has executed this strategy beautifully. In Seattle, they approached the city council with a detailed proposal explaining how everything was going to work and requesting approval to deploy 330 cars. They got full authorization from the council to launch and, four months later, they were happily granted an increase to 500 cars, making Seattle the biggest Car2Go city in the United States.

It’s worth noting that Car2Go is owned by German car manufacturer Daimler AG, previously DaimlerChrysler. Car2Go’s parent company clearly has experience working with governments in regulated industries, and it shows.

If Lyft, Uber and Sidecar want to survive, they need to take a lesson from Car2Go. They need to:

  • Slow down expansion and focus on strengthening government relations in their new and existing cities.
  • Build a positive, collaborative relationship with the local government and city councils first.
  • Proactively propose regulation themselves, rather than fighting any regulation tooth and nail.

The TNCs are going to have to work with local government one way or another. They can either continue to deny the reality of the situation, or they can take a proactive approach and get ahead of the problems.

This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.

USPTO strikes down sippy cup design patent

April 23, 2014, 11:49 AM

The U.S. Patent and Trademark Office has, for the first time, invalidated a design patent under a post-grant review process created by the America Invents Act.

The patent in question was assigned to children’s goods manufacturer Luv N’ Care Ltd. (who last July reached a $900,000 settlement, plus future royalties, in a separate lawsuit it filed against a Thai company it claimed had copied 16 of its designs) and covered the ornamental design of a particular sippy cup. The patent was challenged as “obvious” by Munchkin Inc. and Toys “R” Us Inc.

The ruling came in the first inter partes review initiated by USPTO for a design patent. The AIA created the inter partes review process as a replacement for inter partes reexamination. Since the creation of the inter partes reexamination process in 1999, there were only 13 re-exams filed for design patents (the first coming in 2004) representing only about 1 percent of total filings. But of those 13 re-exams, a somewhat shockingly high 47 percent of the challenged patents were ultimately canceled by an examiner from USPTO’s Design Patent Technology Center (the branch of USPTO that grants design patents.)

In place of the scrapped re-exam process, the AIA created a new Patent Trial and Appeal Board, a three-judge which conducts, as Elizabeth Ferrill and Anthony Tridico put it in a September 2013 article in CIPA Journal, “short, intense mini-trials” on two new types of challenges: post-grant reviews, which can be used to broadly challenge patents granted within the prior nine months and that were filed after March 16, 2013, and the aforementioned inter partes review, which can be used to challenge any existing patent, but only on grounds that prior art demonstrates the patent wasn’t novel.

The upside of the PTAB process, for all parties involved, is that it resolves disputes quickly and should significantly tamp down litigation costs for both petitioners and patent holders. There also remain some serious concerns, not the least being that PTAB judges won’t generally be expert in – and, indeed, may have very limited experience with – design patents. What’s more, the fact that design patents must be reviewed one claim at a time means the costs of review filings could really add up. Meanwhile, if a petitioner fails, he will be permanently barred from arguing in any future legal context that the patent wasn’t novel, even from using new arguments or evidence that were not introduced in the review process.

All of that really puts the pressure on any potential challenger to ensure they have an absolute airtight case before filing for inter partes. This ruling, at least, provides some hope that the process may work efficiently to strike down bad design patents that ought not to have been granted in the first place.

Images from the Love N’ Care filing can be found below:


This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.

Bucking the ‘mother, may I?’ mentality

April 23, 2014, 8:00 AM

“Permissionless innovation” is what we call the unconstrained tinkering and continuous exploration that takes place at multiple levels across the digital economy today, from professional creators to amateur coders. Perhaps not fully appreciated in the past, it is the secret sauce that gave us the Internet and the modern digital revolution.

And it is now at risk.

As I note in a new book on the topic, new innovations such as the so-called “Internet of Things” and wearable technologies, 3-D printing, autonomous vehicles and private drones are being threatened by a cabal of turf-conscious special interests, over-eager bureaucrats and regulatory-minded policy activists and academics. If those forces succeed in burdening these exciting new innovations with layers of red tape, it will mean fewer services, higher prices, diminished economic growth and a decline in our overall standard of living. We should, therefore, continue to embrace and defend the permissionless innovation norm that makes America’s information technology sector the envy of the world.

Permissionless innovation is about the creativity of the human mind to run wild in its inherent curiosity and inventiveness, even when it disrupts certain cultural norms or economic business models. It is that unhindered freedom to experiment that ushered in many of the remarkable technological advances of modern times. In particular, all the digital devices, systems and networks that we now take for granted came about because innovators were at liberty to let their minds run wild.

Steve Jobs and Apple didn’t need a permit to produce the first iPhone. Jeff Bezos and Amazon didn’t need to ask anyone for the right to create a massive online marketplace. When Sergey Brin and Larry Page wanted to release Google’s innovative search engine into the wild, they didn’t need to get a license first. And Mark Zuckerberg never had to get anyone’s blessing to launch Facebook or let people freely create their own profile pages.

All of these digital tools and services were creatively disruptive technologies that altered the fortunes of existing companies and challenged various social norms. Luckily, however, nothing preemptively stopped that innovation from happening. Today, the world is better off because of it, with more and better information choices than ever before.

If you’re old enough to recall the state of the world before the rise of the Internet and digital technologies, you remember how much less innovation of this sort existed in the analog era. The reason was simple: Older information technologies—the telephone and broadcast television and radio, for example—depended on an explicit system of regulatory permissioning. Very little innovation could happen back then without someone—be they government officials, some affected interests or cranky academics—demanding that the process be meticulously micro-managed and planned in a top-down fashion.

They argued that innovation should be curtailed or disallowed until developers can prove that their innovation will not cause harm to individuals, groups, laws, cultural norms or traditions. This is known as “precautionary principle” reasoning, and it is the antithesis of the permissionless innovation norm that has, luckily, dominated the past two decades.

Despite the remarkable advances that permissionless innovation brought to us with the digital revolution, the struggle between these two worldviews is not over. Precautionary principle thinking is increasingly threatening, not just for the Internet, but also for all new classes of networked technologies and platforms.

Over the past year, for example, taxicab commissions across the nation tried to stop Uber, Lyft and Hailo from offering better transportation options to consumers. Similarly, the State of New York threatened the home rental company Airbnb, demanding data from all users who rented out their apartments or homes in New York City. Meanwhile, the Food and Drug Administration ordered 23andMe to stop marketing its at-home $99 genetic analysis kit.

Many other new innovations are at risk, too. Federal and state officials are already exploring how to regulate “Internet of Things,” smart cars, commercial drones, 3D printing, and many other new technologies thatare just starting to emerge. In each case, as with those mentioned above, policymakers, pundits, and special interests will claim that safety, security, or even privacy concerns necessitate preemptive regulatory action.

But unless a compelling case can be made that a new invention will bring serious harm to society, innovation should continue unabated. To the maximum extent possible, the default position toward new forms of technological innovation should be “innovation allowed.” The burden of proof rests on those who favor precautionary regulation to explain why government should prevent ongoing experimentation with new ways of doing things.

If and when problems develop, there are many less burdensome ways to address them than through preemptive technological controls. Education and empowerment, social pressure, societal norms, voluntary self-regulation and targeted enforcement of existing legal norms (especially through the common law) are almost always superior to top-down, command-and-control regulatory edits and bureaucratic schemes of a “mother, may I?” (i.e., permissioned) nature.

Importantly, more often than not, citizens find ways to adapt to technological change by employing a variety of coping mechanisms, new norms, or creative fixes. Wisdom and resilience are born of experience, including experiences that involve risk and the possibility of occasional mistakes and failures.

Preserving permissionless innovation and the general freedom to experiment and innovate is essential for powering the next great wave of industrial innovation and rejuvenating our dynamic, high-growth economy. Even more profoundly, permissionless innovation is worth defending to enhance social and economic freedom more generally, expand the choices we have our disposal and raise our standard of living over the long haul.

— Adam Thierer is a senior research fellow at the Mercatus Center at George Mason University and the author of “Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom.”

This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.

The Supreme Court case that will decide the future of television

April 22, 2014, 2:27 PM

In the past decade, home-media consumption of television content has changed significantly. Millions of people, particularly among younger generations, are becoming cord-cutters and converting to Netflix or Hulu. Smart TVs and add-ons like Chromecast, Roku, Fire TV and Apple TV are changing the way we consume content, changing how we pay for content and changing the content we are able to consume – as the quality of programming has continued to get much higher.

Today, the Supreme Court will hear a case involving a start-up named Aereo that could help define the future of television.

Aereo was created by engineer and entrepreneur Chet Kanojia, and is designed to help individuals consume broadcast television on their own schedule. When a user signs up with Aereo, for $8 a month, they are given an antenna to receive broadcast television and DVR functionality. Consumers can use Aereo to record content, like a TiVo, and watch broadcast television programs on their TV, iPod or other device – either while it is being broadcast or later at their convenience. Essentially it’s the same as having an antenna on your TV with a DVR, except it costs a lot less and has much more significant functionality (being able to access your content anywhere, set it remotely, record more content, etc.).

Frankly, the ability to cloud DVR content you can already access is functionality that the cable industry should have been providing to consumers a long time ago – if there was more serious competition.

Innovation makes the content industry angry

But Aereo has made the broadcasters extremely angry, because they believe they won’t be able to make as much money in a market with this type of technology. From a public-policy perspective, the fear that an incumbent industry won’t make as much money is irrelevant; in fact, incumbent industries having to adapt to change is evidence of innovation. It’s evidence of the system working.

We should not be particularly surprised by their fear, as these actors do not like users to have any level of control over their own content. The content industry was vehemently against the first VCR when it appeared in the United States, allowing individuals to have any control of their own media. The content industry went to war to kill the idea of individuals recording live television, and argued that an individual recording live television for home consumption was copyright infringement – even though the broadcasters put their content on the airwaves for free. They argued that time-shifting over-the-airwaves content was copyright infringement, and that average citizens could be liable for $150,000 per recording.

Then-MPAA President Jack Valenti testified before Congress and argued: “I say to you that the VCR is to the American film producer and the American public as the Boston strangler is to the woman home alone.” Jack Valenti even threatened that if Congress didn’t regulate the VCR, movie producers might have to cut their movie production in half.

The content industry sued to ban the VCR and to bankrupt Sony for selling the technology. But the Supreme Court ultimately upheld the VCR by one vote in 1984.Within two years of this ruling, far from Valenti’s fears of doom and gloom, the content industry actually made more money from home video sales than from in-theater sales.

Luckily, Mr. Rogers was there to testify that he supported consumers being able to record his content, “I have always felt that with the advent of all of this new technology that allows people to tape the ‘Neighborhood’ off-the-air…Very frankly, I am opposed to people being programmed by others.”

Unfortunately when we need Mr. Rogers most, he’s not here to stand up to us “being programmed by others.” And today we are hearing the same threats from the broadcasters that Valenti made in the 1980s.

Broadcasters’ threats

CBS CEO Les Moonves has threatened to take his network to cable-only if Aereo is upheld. “We will go after them in the courts and, if that doesn’t work, there are other remedies. There are financial remedies; there are congressional remedies,” Moonves said. The NFL and MLB are threatening to ditch broadcast if Aereo wins, and News Corp. has threatened to take the Fox network to cable.

Good, let them eat cake – I mean, go to cable

The broadcasters’ threat that they will go to cable, or online, if Aereo wins, is not a threat at all. It would be incredible news! If only we could be so lucky – this could be one of the best things to happen in years for the industry. Many analysts believe that this is an empty threat and that the broadcasters will not give up on broadcasting, since they make 90 percent of their revenue from advertising (and could receive perhaps even more with Aereo). But let’s take them at their word, even given the history of the content industry of manipulating data and making up things — like comparing the VCR to the Boston Strangler and saying it would kill their industry.

Perhaps the most valuable commodity in the United States is our spectrum. Broadcasters are wasting this incredible resource, and now are even threatening to not use the spectrum.

There is only a limited amount of spectrum to go around. And nearly every growth industry, even the federal government, needs much more spectrum. According to the FCC:

Detailed analysis by commission staff and industry experts reveals that, despite significant investment in networks and advances in wireless efficiency, demand for mobile broadband service is likely to outstrip spectrum capacity in the near term. Without action to address this spectrum crunch, service quality is likely to suffer and prices are likely to rise.

Broadcasters are sitting on a gold mine, in their monopoly of a large amount of prime spectrum real estate. It’s perhaps the most valuable resource of the United States. If Aereo wins and they make good on their threats and switch to cable, an enormous amount of spectrum will be made available. What will this mean for consumers? A whole lot.

Expansion of 4G LTE technology is dependent upon more spectrum availability. Transitioning to 5G wireless technology will require more spectrum and new ideas, like super wi-fi, will require yet more spectrum availability. Cheaper data rates, faster Internet, less dropped calls etc. Today, while millions of Americans can receive fast Internet on their phones, it is rarely a direct competitor to cable internet, because it’s not quite fast enough. But if more spectrum was available and phone Internet speeds continued to increase, many Americans could have a new viable competitor to cable Internet.

These are all good things, but they would only result if broadcasters followed through on their threat. If only the public could be so lucky as to have them pull this trigger, and really follow through.

What’s the legal argument here – and what are the legal implications?

The broadcasters claiming that by providing an antenna for you at their facility and streaming the content directly to the consumer on a very long wire, Aereo’s service constitutes a public performance. Therefore, they argue, it is legally different from using a DVR with an antenna on your roof.

When cable television rebroadcasts content on live television, they have to pay for “re-transmission” fees, which can be quite high. But Aereo does not pay for these fees, because they are essentially just offering the consumers rental space for an antenna at their location and a long cable to their house.

There have actually been Supreme Court cases on similar arguments, where the court has previously said essentially, as long as there is a one-to-one transmission, then it’s a private performance/transmission. This means it would be legal if 100 consumers all recorded “The Good Wife,” or if a cloud DVR kept 100 different copies with each person’s name on it.

But if they combined it to one copy and provided it to 100 customers — thereby saving 99 percent in hard-drive space — that would be illegal. Some groups, like the Computer & Communications Industry Association, fear that if Aereo loses then this precedent could stifle innovation in the cloud computing market. The broadcasters are asking that Aereo be banned, and that the court precedent allowing for this, the Cablevision case, be struck down, thereby threatening significant innovation in the cloud market.

The case for judicial restraint

The best course of action here is judicial restraint. Federal statute does not make it clear that Aereo’s action is a public performance. A transmission from a consumer-made copy by, and to that consumer, is not “public,” regardless if they use their own TiVo, or if they use a cloud-based version of TiVo.

Congress has the option to go back and rewrite the statute, and decide that they don’t want an Aereo-type market model to exist. And surely, broadcasters have enormous lobbying influence to accomplish that goal. But the court should defer to Congress when the statute is unclear or silent on the matter.

In fact, deferring to Congress is exactly what the court did in a case that is somewhat similar to Aereo, involving patent law.

In Deepsouth Packing Co. v. Laitram Corp. the court dealt with a problem of how far patent protection should cover. Clearly, patent law bans selling the exact same invention on the open market. But what if, instead, someone merely exported all the components of an invention in a box – would that be illegal? If it was illegal, would exporting even the screws and other basic equipment therefore be illegal too? It was a somewhat thorny legal question. The plaintiff had a patent on a shrimp deveiner, a centrifuge-like device that cleaned raw shrimp and made it sellable (by removing the head etc.). Another company started selling a kit with all the basic building blocks of that exact centrifuge device, but not put together.

The court looked at the statute, and said that while this felt like infringement, and that this could be very bad for the inventor, the statute simply didn’t say that you couldn’t sell the components. The patent statute said one couldn’t copy the invention itself, but the components weren’t a direct copy. Essentially the court recognized that this was a loophole, but deferred to Congress because the statute was silent on the matter, and the implications of this line-drawing were significant.

Congress responded by analyzing the problem and deciding that they didn’t want this “loophole” to exist, and then passed a law to close it based upon their analysis of public policy considerations. The court has followed that law to this day.

Deepsouth teaches us that when a law is unclear, particularly in the context of intellectual property, we are best suited by having the judicial branch defer to Congress on which market models to effectively ban, because those are the stakes of the decision. That’s a big decision with enormous repercussions, so if the law is unclear, then let the branch closest to the people make the decision. When the Supreme Court upheld the VCR in 1984, the court also was deferring to Congress to ultimately decide what to do with this technology.

Here, if what Aereo provides is a private performance/transmission, then that is legal. There is one antenna, one data file, being sent over a long wire, to one user. When the underlying statute was written, the idea of Aereo wasn’t even on the map, as it wasn’t even possible. If Congress thinks a user initiating at his request to have a file recorded on the cloud, and streamed directly to the user, should be a public performance, then Congress can change the statute – but as written that’s not in the statute.


In the case at hand, Aereo is either a billion dollar company, or a billion dollar liability. But it should be up to Congress to decide, not the court. If broadcasters make good on their threats and shift to cable, far from being a disaster, it could prove to be a momentously positive change resulting in massive increases in technology and innovation. In short, let them switch to cable.

Peer production enters the kitchen

April 22, 2014, 8:55 AM

There’s another peer production platform for regulators, taxmen, and assorted other busybodies to get the vapors about: Feastly, the “Airbnb of dinner.”

Feastly follows a pretty typical peer-to-peer model: People who are passionate cooks — whether they be professional, semi-professional, or amateur chefs — can list food that they plan to cook and invite eaters to buy a seat at their table during the meal. The goal is to lower the barrier of entry for cooks to enter the marketplace while also making dining more social.

Launched in private beta in January, the platform has seen three-quarters of all cooks host multiple meals. The cost of meals has ranged from free to $150, but the average price tends to be about $35, according to co-founder Noah Karesh. Some chefs have already made thousands of dollars using the platform, even in private beta mode.

Like hotels, restaurants in many cities are subject to exorbitant taxes — in Washington, restaurant meals are taxed at 10 percent – so it’s only a matter of time before local tax authorities turn their attention to figuring out how to extract lucre from Feastly. D.C.’s food truck wars of the last five years were mostly about restaurateurs objecting to competition, but they did have legitimate complaints about taxes.

Additionally, since Feastly’s meals are served in private homes, health inspectors will likely be champing at the bit to get a piece of the action. (And much like with Airbnb in San Francisco, these objections won’t be to the act in question — having guests into your home for a meal — but to the fact that it has been sullied by commerce).

And that’s to say nothing of the food police and sundry other noodgers who are increasingly worming their way into our private culinary decisions.

I wish Feastly nothing but the best. It’s an interesting model and a great example of how the peer production economy is evolving and growing.

But I’m not sure it can survive the progressive regulatory state.

(H/T @adamgurri)

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Homesick: How housing tax breaks benefit the wealthy and create McMansions

April 22, 2014, 8:00 AM

Since its inception a century ago, the individual income tax code has been exceedingly generous to homeowners.  Homeowners may deduct the interest paid on up to $1 million in mortgage loan debt; an additional $100,000 in debt backed by home equity; and state and local property taxes. The tax code also exempts nearly all capital gains from the sale of a primary residence from tax payments.

This paper examines the tax breaks for housing and has four central findings:

  1. The value of the most noticeable and popular of these tax breaks, the mortgage interest deduction (MID), differs vastly across income groups and metropolitan areas.  For example, among Chicago taxpayers who earn less than $100,000, less than 25 percent take the mortgage interest deduction and they save an average of $1,900 in taxes. Among taxpayers who earn more than $100,000, 78 percent take the MID and, on average, their tax savings are 2.5 times as large as those earning less than $100,000
  2. The benefits from the MID are heavily skewed toward suburban areas of major metropolitan areas, with the typical suburb having between 1.5 and 2 times the share of taxpayers claiming the deduction.
  3. The total package of housing tax breaks greatly reduces the cost of consuming housing, but does so unevenly across metropolitan areas.  Tax breaks reduce the annual cost of owning a home by more than $10,000 in places like Los Angeles, but by less than $2,000 in Atlanta.
  4. The cost reduction caused by housing tax breaks does little to induce homeownership, but instead contributes to the building of larger, McMansion-style homes. We estimate that houses today are between 250 and 1,000 square feet larger than they otherwise would be, owing to the package of tax breaks. This is because the deductions are claimed overwhelming by upper-income tax filers, who are not on the margin between owning and renting a home. Instead, the size of the tax breaks help them decide how much extra space to purchase or build.

Proponents of housing tax breaks liken homeownership to apple pie and the American flag, arguing that homeownership leads to greater community engagement and a plethora of other socially desirable behaviors. Without the tax breaks, proponents argue, millions of Americans who currently are homeowners would otherwise be unable to purchase a home.

This argument has two flaws. The notion that homeownership induces salutary behaviors – rather than it simply being the case that such habits are correlated with having the wherewithal to buy a house – is a dubious proposition, more wishful thinking than accepted wisdom.  An even bigger problem facing apologists for the current system is that the existing tax breaks do almost nothing to increase homeownership. Instead, they mostly serve to encourage people who already have the financial means to buy a house to purchase larger homes and take on more debt. The ability to deduct mortgage interest and property taxes, in fact, gives very little to a middle-class family who would otherwise be on the margin of affording to buy a home.

A major flaw in the design of existing homeownership incentives is that most are tax deductions, which by definition are more valuable to those who face higher marginal tax rates.  A progressive tax code like our current system, where marginal rates on income range from 10 percent to nearly 40 percent, means that people who pay only the lowest marginal tax rates receive relatively modest savings from any deductions. High-income households who pay on income earned in the top tax brackets receive a much bigger break.

It isn’t just the tax code’s progressivity that skews housing tax breaks’ benefits toward the wealthy; the fact that households can deduct interest on a mortgage as large as $1 million means that nearly all homeowners are able to deduct every dime of the mortgage interest they pay from their taxable income, even the very wealthy.

The high deductibility limit and the tax code’s progressivity result in the benefits from the mortgage interest deduction being widely skewed across the country, both geographically and across income groups.  Homeowners in wealthy communities with high housing costs—mainly in the suburbs of major metropolitan areas on the East and West coasts—receive tax benefits much larger than those living in less expensive inner-city neighborhoods or in smaller communities in the middle of the country, where housing prices are more modest.

To give just one example of the discrepancy in tax benefits, the average homeowner in the San Francisco area receives an annual reduction in the cost of home ownership of more than $12,000 a year from the package of tax benefits available in the federal tax code. By contrast, the average savings to a home-owning family in Flint, Mich. is barely more than $500.

This policy study was co-authored by Ike Brannon and Zackary Hawley. To download the authors’ detailed spreadsheets on the impact of housing tax preferences in each metropolitan statistical area,  please click here.

R Street paper encourages re-examination of housing tax breaks

April 22, 2014, 8:00 AM

Panel discussion to take place on Thursday on Capitol Hill

WASHINGTON (April 22, 2014) – Housing tax breaks in the current tax code disproportionately benefit the wealthy and should be reformed or eliminated, argue three economists in a paper titled “Homesick: How Housing Tax Breaks Benefit the Wealthy and Create McMansions” released by the R Street Institute today.

The three economists, Andrew Hanson, associate professor of economics at Marquette University and associate fellow at R Street; Ike Brannon, president of consulting firm Capital Policy Analytics and head of the Savings and Retirement Foundation and a growth fellow at the George W. Bush Institute; and Zackary Hawley, assistant professor of economics at Texas Christian University, examined how tax breaks benefit homeowners in different areas and at different income levels.

“These cost savings do not result in higher home ownership rates, but instead in the purchase of larger, more expensive homes,” write the authors. “There is no reason for the government to provide financial encouragement for people to buy bigger and better homes.”

The authors draw four concrete conclusions from their findings. First, the value of the mortgage interest deduction (MID) differs vastly across income groups and metropolitan areas. Second, the benefits of the MID are heavily skewed toward suburban areas of major cities. Third, the total package of housing tax breaks greatly reduces the cost of consuming housing, but does so unevenly across metropolitan areas. Finally, the cost reduction caused by housing tax breaks does little to induce homeownership, but instead contributes to the building of larger, “McMansion”-style homes. Detailed spreadsheets of the authors’ research across local markets can be found here.

In addition to not achieving their stated purpose, the authors write that the tax breaks represent millions of dollars that could be taken in by the U.S. Treasury.

“The cost of the tax benefits for owner-occupied housing sum to $175 billion per annum,” the authors write. “The mortgage interest deduction alone is costing the U.S. Treasury roughly $100 billion each year.”

The authors recommend common sense reforms that have been endorsed by both Republicans and Democrats to the tax breaks. These recommendations include capping the size of mortgages that qualify for subsidy, eliminating the deductibility of mortgage interest in favor of a tax credit and eliminating tax breaks on anything but a primary residence.

The R Street Institute is hosting an event to discuss the paper and its findings on Thursday, April 24 in the Canon House Office Building on Capitol Hill at 12:00 p.m. The event is open to the public and will feature remarks by co-author Andrew Hanson, Alan Viard from the American Enterprise Institute and Benjamin Harris from the Brookings Institution. To find more information or RSVP to attend the event, please click here.

Florida’s RESTORE Act funding decisions requires transparency

April 22, 2014, 7:15 AM

The following op-ed was co-authored by Jay Liles, policy consultant for the Florida Wildlife Federation.

Later this month, Florida and the rest of the Gulf Coast will mark the fourth anniversary of the Deepwater Horizon oil rig explosion, which killed 11 men and spilled millions of barrels of oil into the Gulf of Mexico. It was the worst offshore oil disaster in American history, and our state’s economy and environment are still feeling its effects. They likely will be for years.

There is some good news on the horizon, however. This summer, funds will likely start flowing to Florida’s counties from the trust fund established by the 2012 RESTORE Act, which places the majority of the civil fines paid by BP and Transocean in the hands of the Gulf Coast states. Litigation is currently determining just how much will be available, but it could easily total more than a billion dollars for Florida.

In order to ensure that funds are spent in the best possible way — and in order to maximize the environmental and economic benefits to Florida’s coastal communities — it is critical that decisions about spending these funds be made in a transparent and thoughtful way. That is why it is so important that Florida’s Gulf Coast counties pledge to invest their RESTORE Act funds in a transparent and open fashion.

Florida faces a unique set of challenges compared to our neighbors. Whereas in the other four Gulf states, all or the majority of the funds go through state government; in Florida the funds go directly to the 23 counties along the Gulf Coast, from Pensacola to the Keys. That places a great deal of responsibility on county governments.

Ensuring that counties give citizens ample time to review and comment on proposed spending decisions is critical to ensuring that Florida maximizes the benefits from the RESTORE Act and stays true to Congress’ intent, which is to allow state and local governments to fund projects with both environmental and economic benefits.

Florida’s coastal environment and economy are deeply interconnected, which makes it possible to invest in ways that yield both kinds of benefits. Commercial and saltwater fishing in Florida support almost a quarter-million jobs. Wildlife tourism brings more than 7 million tourists to the state annually. Our hospitality industry, which a recent Georgetown University study finds will be the second-fastest growing segment of our state’s economy in the coming years, requires a clean and healthy coast.

Robust public discussion enabled by transparency will also help counties avoid potentially catastrophic unintended consequences of the funds. For instance, counties need to know the long-term costs of the projects they choose to undertake, as they will be on the hook for maintenance and upkeep costs going forward.

Additionally, the environmental impact statements that most projects require will provide important information about trade-offs and alternatives. Public discussion about the liabilities that taxpayers are taking on is critical.

Ideally, counties will take the time to explore in depth the benefits of every project they consider in order to maximize them relative to the costs. RESTORE Act funding is a windfall that the state is unlikely to see again anytime soon, so it’s imperative that we take the time to make sound decisions that generate the greatest benefit for the state.

Transparency need not be cumbersome or costly. Simply placing details about proposed uses of RESTORE Act funding on county websites for 30 or 60 days before county boards vote on how to spend the funds would be a great start. Ideally, this would include analyses of the expected costs and benefits to the economy and the environment, as well as an assessment of long-term upkeep and maintenance costs to the county or the state going forward.

While the Deepwater Horizon spill was one of the most significant calamities to befall Florida’s coast for years, we have the opportunity through the RESTORE Act to make a positive impact on our coast that can last for decades. Transparency by Florida’s counties will help ensure that we do the most good with the resources coming our way.

Pritzker’s pro-patent reform push should include designs

April 21, 2014, 4:24 PM

Commerce Secretary Penny Pritzker believes reforms are needed to rein in costly litigation in the U.S. patent system, adding in recent public remarks that “the president gets it,” as well:

He recently announced new executive actions which will increase transparency in patent ownership, provide more training to patent examiners, and help inventors and small business owners who unexpectedly find themselves facing litigation.

We can’t stop there.  The administration supports legislation to build on the success of the Leahy-Smith America Invents Act of 2011.  Specifically, we are calling for Congress to pass reforms that will enhance competition and tech transfer, reduce abusive tactics by shadowy shell companies, help ensure that courtroom cases do not unfairly hurt main street and put downward pressure on litigation costs.

Unfortunately, even though Pritzker’s comments came in the context of a ceremony to honor the U.S. Patent and Trademark Office issuing its 700,000th design patent, she didn’t take much notice of the fact that the design patent system is in need of some serious reforms of its own.

Long considered the backwater of the intellectual property field, design patents differ from utility patents in that they cover the non-functional appearance — shape, color, texture, ornamentation, etc. — of various consumer and industrial products. They are notable for having a speedy time from filing to approval (typically less than one year) but they remain in effect for a shorter 14-year term.

In part because of the role they have played in some recent high-profile legal disputes, design patents are now the subject of renewed attention. And for good reason, as both design patent filings and grants have spiked in the past decade. According to the Intellectual Property Owners Association’s 2013 IP Record, there were 658 more design patents filed in 2012 than in 2011.

One side effect of design patents having subsisted so long in the hinterlands of intellectual property law is that, on those occasions when Congress has moved to update and reform patents, it has tended to neglect addressing design patent law. Among the most notable oversights is that, while utility patents are now subject to a fairly transparent process of publication and review (generally taking place 18 months after they are filed) design patents do not have a parallel system. Instead, we have a system that works much as Pritzker described it in her talk on the USPTO’s 700,000th design patent:

About two years ago, a new patent application was assigned to Barbara from a company called Leapfrog, based in Emeryville, Calif…This particular design patent application was to protect the unique look, feel, and appearance of a product called Leapster Explorer , which contains 40 learning and playing experiences for 4-to-9-year-olds…Barbara researched to make sure the design was truly unique. She also ensured that the application was high-quality, and then she approved the patent.  As a result, this patent will help protect and strengthen the visual and physical identity that Leapfrog has worked so hard to build.

You can see a photo of the specific design that earned Leapfrog this landmark patent at the top of this post. I’d leave to individual judgment — or rather, in the terminology of design patents, to the view of the “ordinary observer” — the degree to which this represents a unique and non-obvious design, as opposed to one that is “substantially similar” to a variety of portable electronic gaming consoles from the early 1990s.

Indeed, that is precisely the problem. Whereas the utility patent application process allows for public input and vetting of patent filings, design patent applications are held as confidential until the point when the USPTO issues them. This requires Barbara the patent inspector to do a ton of research that could otherwise be be accomplished (or at least, significantly supplemented) through public input. It also raises the odds that USPTO will get it wrong, approving design patents that are overly broad, that cover trivial elements or that are filed for obscure purposes.

That the White House has taken an interest in patent reform is certainly a major step forward. But getting lawmakers in both the executive and legislative branches to take design patent reform seriously is the big leap that still needs to be made.

This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.

Molly Schwartz

April 21, 2014, 9:50 AM

Molly Schwartz is an associate fellow at R Street Institute focusing on open data, government transparency and the politics of information.

A junior analyst at the U.S. Department of State, Molly performs data analytics to measure the resonance and influence of public diplomacy. She was previously a Library of Congress National Digital Stewardship Resident at the Association of Research Libraries, where she completed a project on web accessibility and usability in research libraries. Molly will be a Fulbright scholar in Finland from 2014-2015, conducting research at the Aalto University of Art, Architecture and Design and experimenting with user-centered design concepts at the National Library of Finland.

Molly holds a master’s in library science from the University of Maryland at College Park and both a master’s and a bachelor’s in history from Johns Hopkins University. She was the Council on Library and Information Resource’s 2012 Rovelstad Scholar and is the co-convener of the International Federation of Library Associations New Professionals Special Interest Group. She lives in Washington, D.C.

Email: mollycait@gmail.com

Twitter: @mollyfication

The Cliven Bundy in all of us

April 18, 2014, 9:00 AM

At first glance, Cliven Bundy, the Nevada cattle-rancher who has been fighting the Bureau of Land Management tooth and nail for more than 20 years, might strike you as an anti-government radical. He has, after all, led an armed rebellion against federal land managers, who contend that he owes more than $1 million in back fees, penalties and other costs for grazing his cattle on federal land.

But the truth is that Bundy’s underlying beliefs are quite common, and not just among self-styled scourges of federal overreach. Once we understand what Bundy is really trying to pull off, we can understand why our country is plagued by sky-high rents and crumbling roads, and why our streets are choked by congestion.

First, it is worth recalling that Bundy has deep roots in Nevada. His family homesteaded the ranch that he owns and operates in 1877. Bundy’s ancestors were quite happy to work with the federal government when it was offering settlers the opportunity to claim federal land as their own, provided they were willing to work the land. Homesteading was an ingenious idea, as the federal government didn’t have the manpower to do the hard work of settling these vast expanses. Tempting young families westward had the added effect of making America a more dynamic, ambitious, upwardly mobile society.

Yet in their wisdom, the lawmakers behind the Homestead Acts limited the size of the claims a family could make under its rubric. At first, families were granted no more than a one-quarter-section, or 160 acres — the exact size, as it happens, of Bundy’s ranch.

For years, Bundy has behaved as though the public lands bordering his property are an extension of his property. While other cattle-ranchers pay for grazing privileges on these lands, Bundy has decided that he is under no obligation to do so. This is despite the fact that, if everyone chose to act as Bundy has, these lands would soon become a grass-less wasteland.

As Travis Kavulla observes in National Review, what Bundy is really trying to do is unilaterally annex a vast new swathe of federal land to the property his family lawfully claimed from the federal government way back in 1877. Indeed, Kavulla goes so far as to describe Bundy as a squatter, who is no different from a “dreadlocked freegan who sets up living quarters in an abandoned building in Brooklyn.”

There is another comparison that is just as apt, if not more so. Cliven Bundy is a lot like the wealthy homeowners in San Francisco and New York City who fight new construction in their sought-after urban neighborhoods just as tenaciously as Bundy and his cohorts have been fighting the Bureau of Land Management. These women and men, whom I’m sure vote differently from Bundy and who tend not to brandish firearms, are treating a commons — the cities in which they live — as though it is their private property.

The whole point of a city is to bring people closer together to lower the transaction costs associated with economic activity. When we make it harder to develop new homes and new offices in the most desirable cities, we force people, particularly poorer people, to live further and further away from the economic action, and this leads to longer commutes, lower incomes and lower productivity, as Ryan Avent argued in The Gated City.

Of course, wealthy homeowners could just buy all of the land around their homes so that no one else can develop it. Yet that would be appallingly expensive. So instead they use their political muscle to create historic preservation districts, or to press for zoning restrictions that make it all but impossible for the non-rich to afford homes within easy reach of their jobs. Just as Cliven Bundy refuses to pay for grazing privileges on other people’s land, these homeowners refuse to pay full price for their spectacular views, and for not sharing their sidewalks with the great unwashed.

Or consider our hatred for toll roads and congestion charges. We tend to think of roads as the kind of thing you pay for just once, when you first build them. In reality, roads are a depreciating asset. Over time, as cars and trucks drive over them, and as the elements take their toll, they deteriorate. The most obvious way to pay for roads would be to, well, charge for grazing privileges, or rather to charge a user fee. Those of us who actually use roads the most — by driving many miles in extremely heavy vehicles, like big rigs, let’s say — would pay more than those of us who drive a small number of miles in light vehicles.

Ideally, we’d also charge people on the basis of when roads are at their busiest, as doing so would nudge people toward driving when traffic isn’t quite so heavy. Gas taxes have long functioned as a kind of user fee, but as gas mileage has improved, we’ve seen a disconnect between the wear-and-tear vehicles cause on the road and the gas these vehicles consume. Many ideas have been floated to address this disconnect, like taxes on vehicle-miles traveled, but our refusal to acknowledge that roads need to be maintained and maintenance isn’t free keeps getting in the way.

In a way, all of us who grouse about paying for the services we use are Cliven Bundys. We just don’t have the guts to have a standoff with the federal government, or the chutzpah to claim that we’re fighting for freedom. Before we judge Bundy too harshly, we ought to first consider our own sense of entitlement.

UCSF redefines youth smoking; Journal’s peer-review fails

April 18, 2014, 8:30 AM

The National Youth Tobacco Survey has been abused on an unprecedented scale by anti-tobacco forces.  First, the Centers for Disease Control and Prevention released cherry-picked data, fabricating an epidemic of childhood e-cigarette use (discussed here and here).  Then the New England Journal of Medicine refused to correct an inaccurate and misleading portrayal of e-cigarette and cigarette usage.

Now we have the work of the University of California San Francisco’s Lauren Dutra and Stanton Glantz, who a use a dizzying array of statistical analyses of the NYTS to argue that e-cigarettes are a gateway to cigarettes for youth. The Dutra-Glantz study has been criticized by tobacco research and policy experts Clive Bates, Michael Siegel and Carl Phillips. The fabrication was even called out by the American Cancer Society and the American Legacy Foundation.

After additional analysis, I have discovered major flaws in the Dutra-Glantz study that further undermine its credibility.

First, it is difficult to accept their finding on smoking and e-cigarette use when, by all conventional standards, Dutra and Glantz have grossly underestimated youth smokers. They report that current smoking prevalence was 5.0 percent in 2011 and 4.0 percent in 2012.  This is less than half the prevalence reported by the CDC and other authorities (see chart).  How could this have happened?

It turns out that Dutra and Glantz invented a new definition of current smoking for youth: one who has smoked 100 cigarettes in her lifetime AND smoked on at least one day in the past 30. The standard definition for a youth smoker used by the CDC and all other authorities is anyone who smoked a cigarette on at least one of the past 30 days.  Dutra and Glantz’s definition of current smoking for youth is also completely different from the definition they use for e-cigarette use (one day in the past 30).

Dr. Glantz knows the standard definition for current youth smoking, because he used it last year in his report on e-cigarette use among Korean youth.

Valuable information in the NYTS surveys was obscured or ignored by Dutra-Glantz.  While providing incomprehensible tables of odds ratios to inappropriately link e-cigarettes use and smoking, they omitted basic information related to e-cigarette use.

The CDC data show that about 76 percent of current e-cigarette users are also current smokers, but the surveys contained additional information that help interpret this e-cigarette and cigarette link.  The surveys provide insightful data on students’ use of other combusted products (pipes, cigars and hookah).  The following table places current e-cigarette users in four categories:

  1. Those who smoked only cigarettes
  2. Those who smoked cigarettes and one of the other products
  3. Those who smoked only the other products
  4. Those who didn’t smoke
Percentage of Current E-cigarette Users Also Currently Using Other Tobacco Products in the 2012 NYTS Product Percentage Cigarettes Only 21 Cigarettes and Pipes, Cigars or Hookah 55 Pipes, Cigars or Hookah Only 10 No Other Products 13

It is clear that the majority of e-cigarette users were users of multiple products. This is not surprising, as some youth tend to be risk-takers and experimenters. The table also shows that only a tiny number of students (13  percent) used e-cigarettes but no other smoked product in the past 30 days.

That the significantly-flawed Dutra-Glantz study was published in the Journal of the American Medical Association Pediatrics is an indictment of the medical publishing industry’s peer review process.  Unfortunately, journals generally under-scrutinize anti-tobacco submissions.  After publication, journals tend to reject corrections, absent a glaring key error.  But even that situation does not guarantee correction, as the New England Journal story shows.

Uber and Lyft prepare for Houston showdown

April 18, 2014, 8:00 AM

When Uber entered the Houston market in February it provoked the same outcry from the city’s only two cab companies. The city code does prohibit drivers without livery licenses from collecting payment from passengers, but to its credit, the city council observed that the immediate success of Uber and the subsequent quick entry of Lyft and Summons means there was a level of demand unmet by the status quo.

Yet, there seems to be a fear of pulling the trigger on taxi reform. A report to the city council released last week advised against deregulation and competition, despite the results of its own survey of Houston cab users which found:

  • 24 percent of customers said their taxi drivers did not know the way to their destination.
  • 28 percent said taxi drivers talked on the phone or texted during their trip.
  • 17 percent said they did not feel safe during their taxi ride.
  • Compared to other cities, users of taxi stands at hotels, restaurants and airports rated the quality of taxi cars and drivers low.

Yet the author of the study, Ray Mundy, head of the Tennessee Transportation & Logistics Foundation, said these service problems easily could be fixed without the need to introduce competition from Uber and Lyft. In something of a stretch, the report concluded there was general customer satisfaction by noting that one-third of Houston cab riders surveyed found that a 30-minute wait from cab call to pick-up was “reasonable.” This reflects either diminished expectations or Panglossian logic (“Since this is the only possible world, this is the best of possible worlds!”)

By going ahead with its commercial service, Uber adds to its reputation of fighting city hall aggressively. It may pay off. The local media and most Houstonians are behind the service. Meanwhile, the city must deal with the public relations fallout of pulling cops off the streets to conduct time-consuming undercover stings against drivers whose only offense has been to irritate a poorly performing but politically connected taxi duopoly.

Lyft has been more subtle. Ride-sharing is nominally free, but passengers are encouraged to “make a donation” to the driver. However, when the law can be defeated with semantics, it’s time to change the law.

Update: On April 21, Houston’s Department of Administrative and Regulatory Affairs proposed an ordinance that would permit Uber, Lyft and other online ride-sharing services to operate as long as drivers meet the same permitting and safety requirements as taxicab and limousine drivers already regulated by the city.

Full story here.

This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.

Poor little rich man

April 17, 2014, 5:27 PM

From the Wall Street Journal:

Krugman himself, in an email to Chase Robinson, interim president of the Graduate Center, acknowledges that the offer is “remarkably generous.” But not everybody agrees. The New Republic’s Marc Tracy (who finds Krugman’s ideological worldview congenial) and Slate’s Reihan Salam (who doesn’t) have both weighed in with articles denying that Krugman is a hypocrite and claiming that $225,000 isn’t really all that much money.

Public access vs. open access

April 17, 2014, 4:06 PM

“Doesn’t Congress already make its information publicly accessible?”

That’s the question I hear most frequently when I tell people about the Congressional Data Coalition’s mission to get Congress to provide open access to its data. “Open access” is a complicated and loaded term in the digital information world, but at its core it involves three main components:

  1. The ability to find the data.
  2. The ability to use the data.
  3. The ability to re-purpose the data.

Truly achieving open access to congressional data will require more than just posting the information online: the information has to be in the correct format. Presenting data as gobs of text is seriously problematic, because machines cannot read it.

In today’s information ecosystem, information that cannot be parsed and read by machines is like building an all-terrain vehicle that can only drive straight forward. It might be able to get you where you need to go, but only if your destination lies straight ahead. And it completely defeats the purpose of being able to drive off-road.

So what can congressional data that is machine-readable do that facilitates open access?

  1. Finding the data: Search engines can search for the content stored within documents.
  2. Using the data: A variety of programs can access and display the data. Mobile apps can provide to-the-minute updates, APIs can scrape it and immediately display it on another website, programs can download it into spreadsheets, etc.
  3. Repurposing the data: Data can be run through programs that display it in charts, graphs, or elegant visualizations. Journalists and engaged citizens can also get timely access to the data that informs their output and ideas.

Plus there is a multitude of extra benefits. Machine-readable data is more accessible to people with disabilities, because screen readers can interpret it. It is also easier to preserve, because the data is not dependent on the software we use to access it, which will most likely become obsolete within the next 10 years (remember floppy disks? Word Perfect?). Because laws passed by Congress can remain in effect for decades, we have to keep the data that allows us to put those laws in context.

Kochs’ flood insurance opposition becomes campaign issue

April 17, 2014, 3:28 PM

From Bloomberg:

The R Street Institute, a Washington-based group that supports limited government, also opposed the bill. Andrew Moylan, a senior fellow, said the new law “re-breaks the flood insurance program.”