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Updated: 29 min 33 sec ago

Do e-cigarette ads promote vaping?

March 20, 2015, 12:00 PM

The National Cancer Institute is wasting taxpayer dollars on slanted e-cigarette research that didn’t ask or answer an obvious and important question.

Consider the recent NCI-funded study by Drs. Erin Maloney and Joseph Cappella at the University of Pennsylvania Annenberg School of Communication. Maloney and Cappella recruited daily smokers, intermittent smokers and former smokers (there were no significant results in the middle group so I won’t discuss them). They divided smokers into three subgroups: controls who didn’t see an ad, those who saw e-cig ads with vaping (called a cue) and those who viewed ads with no vaping.

Participants answered questions about their inclination to smoke a cigarette, to quit smoking or to continue to abstain. Maloney and Cappella developed a scoring system to measure responses. The results they pitched to the media are in the table below.

All groups had lower urges to smoke after the experiment, but smokers who saw the cue had less of a lower urge, which was significant in the authors’ scoring. Similarly, all former smokers had high scores for continuing to abstain, but those who saw the cue had a lower high score.

E-Cigarette Ads and Urges in Daily Smokers and Former Smokers Daily Smokers Former Smokers Cue No Cue No Ad Cue No Cue No Ad Urge to Smoke Pre-test 3.99 3.83 3.84 1.86 1.69 1.76 Post-test 3.63* 3.14 3.25 1.42 1.34 1.32 Intention to: Quit 2.14 2.15 2.06 — — — Abstain — — — 12.39* 13.10 13.14

*Significantly different than No Cue or No Ad.

The authors acknowledged that “effect sizes reported in this manuscript were not large.” In fact, the differences are so small that they may not be meaningful for actual behavior.  Take 12.39 versus 13.14 in the table as an example.  The authors reported that higher numbers are better, and both numbers look “high” when compared with a previous study by Cappella that used the score.  He showed former smokers anti-smoking ads in that study and got scores around 3.0 to 3.5.  This looks like e-cigarette ads are far better for former smokers than anti-smoking ads.

There is a glaring defect in the report. The researchers collected a lot of basic information (e.g., education, quitting history and time since last cigarette) that could affect how participants responded to questions, but the results weren’t adjusted for these important characteristics. It is possible that the cue, no-cue and no-ad groups had important differences in basic information that affected their scores.

The study’s biggest weakness is that no data was collected on urges and intentions to “vape.” After all, that is the most important goal of e-cigarette ads, and it is an obvious outcome to measure.

Who owns the U.S. Post Office?

March 20, 2015, 10:53 AM

From Angry Bear:

Initially the Act provided for some public support of the Postal Service through appropriations to support the universal service obligation and preferential rates for periodicals and non-profits. (Kevin Kosar, formerly of the Congressional Research Service, wrote a couple of reports that are quite useful: here and here.)  But those subsidies were intended to be phased out.

Obama champions mandatory voting

March 20, 2015, 10:41 AM

Apparently, not enough people vote in this country for President Barack Obama’s taste, and he knows just how to make voting both more palatable and more appealing to the 60 percent or so of Americans with the right to vote, but who seem to lack the ability.

Make it mandatory. Because if there’s anything that Americans respond to positively, it’s being told what to do.

Obama floated the idea of mandatory voting in the U.S. while speaking to a civic group in Cleveland on Wednesday. Asked about the corrosive influence of money in U.S. elections, Obama digressed into the related topic of voting rights and said the U.S. should be making it easier — not harder— for people to vote.

Just ask Australia, where citizens have no choice but to vote, the president said.

“If everybody voted, then it would completely change the political map in this country,” Obama said, calling it potentially transformative. Not only that, Obama said, but universal voting would “counteract money more than anything.”

Disproportionately, Americans who skip the polls on Election Day are younger, lower-income and more likely to be immigrants or minorities, Obama said. “There’s a reason why some folks try to keep them away from the polls,” he said in a veiled reference to efforts in a number of Republican-led states to make it harder for people to vote.

There are a few reasons why mandatory voting won’t work, aside from the fact that it still only produces about a 66 percent to 70 percent turnout, depending on country (though, that’s an improvement over our current system, I suppose). One, it would embroil people who already fear authority and are often the subject of abuse at its hands, into yet another system that penalizes them in a disproportionate way to the crime they’ve committed: simply not caring about elections. Two, holding mandatory elections assumes a fallacy that is at the heart of almost everything Obama proposes: that people will automatically avoid something just because they hear it’s illegal. Three, encouraging more people to vote doesn’t necessarily mean that less money would be spent on politicking, just that the direction and flow of money would change.

And lastly, he’s vastly underestimating the power of stupid people in large groups. While urban centers can and do vote reliably Democratic, there’s a lot of flyover country to contend with.

Testimony to Texas Senate Committee on Natural Resources

March 19, 2015, 3:54 PM

Chairman Fraser, members, my name is Josiah Neeley and I am the Texas director of the R Street Institute. R Street is a non-profit, free-market think tank headquartered in Washington, D.C., though I am based out of Texas. I’m here today to speak in favor of S.B. 931.

The wind industry has received substantial favors and subsidies in recent decades from both the state and federal governments. More than $7 billion has been spent building transmission lines under the competitive renewable energy zone system, and renewable energy credits under the state’s renewable portfolio standard have cost another $500 million. All of these costs, by law, will be passed on to Texas power consumers.

The effect of these programs on renewable electricity capacity has been minimal. The CREZ lines are only now coming online, and Texas currently has double the installed capacity for renewable electricity required by 2025, which suggests the increase is being driven by other factors. It is worth noting, in this regard, that the subsidies Texas wind producers have received from the federal production tax credit for renewable energy dwarfs anything the state has provided.

In any event, wind electricity is a mature technology, and should stand or fall on its own, without continued government support. Texas is blessed with plenty of wind, and wind electricity will undoubtedly continue to be a part of Texas’ energy mix. But the amount and location of wind generation should be determined by market forces, not by government fiat. S.B. 931 rightly recognizes this by sunsetting the RPS and CREZ programs.

I would be happy to answer any questions.

Letter to Minnesota House Commerce and Regulatory Reform Committee

March 19, 2015, 9:28 AM

Rep. Joe Hoppe, Chair
Rep. Tim O’Driscoll, Vice Chair
Rep. Joe Atkins, DFL Lead
Commerce and Regulatory Reform Committee
Minnesota House of Representatives
100 Rev. Dr. Martin Luther King Jr. Blvd.
Saint Paul, MN 55155

RE: H.F. 1783 – Auto insurance requirements for transportation network companies

Dear Members of the Committee,

My name is R.J. Lehmann and I am co-founder, editor-in-chief and senior fellow of the R Street Institute. R Street is a D.C.-headquartered free-market think tank devoted to developing pragmatic solutions to public-policy challenges. Since our founding, we have been recognized as perhaps the leading independent source of policy research concerning property/casualty insurance. More recently, we also have distinguished ourselves with some of the first in-depth reports looking at challenges facing the burgeoning market for transportation network companies.

I write you regarding H.F. 1783, legislation dealing with the financial responsibilities and auto insurance requirements of TNCs like Uber, Lyft and Sidecar. We have grave concerns that this bill would have significant negative consequences both for the development of TNC services and for the insurance market that is developing to serve this emerging sector.

Minnesota traditionally performs well in our surveys of efficient, effective regulation at the state and local level. The state earned an “A” or “B” grade in each of the three years that we have published our Insurance Regulation Report Card. More directly relevant, the City of Minneapolis ranked second only to Washington, D.C. in our inaugural survey of vehicle-for-hire regulations in the 50 largest U.S. cities, published in November 2014. Passage of H.F. 1783 likely would have negative consequences for both of those scores in next year’s reports.

Among the most significant concerns with this piece of legislation are:

  1. The bill would require TNCs to provide primary commercial insurance during the so-called “Period 1,” when a driver is logged in to the TNC application but has not matched with a potential rider. In addition to the reasonable debate that exists over whether this period should truly be considered “commercial” in nature, the requirement creates an obvious opportunity for fraud, by providing incentive for a driver to remain logged in even when he or she has no intention to accept a fare. Moreover, this requirement would preempt existing rules already in place in Minneapolis and St. Paul, Minnesota’s largest ride-sharing markets. Finally, and most crucially from a free-market perspective, it would effectively crowd out the new, innovative personal auto insurance products designed and priced to cover drivers who provide TNC services that already have been brought to market in several states by such major insurers as GEICO, Progressive, Farmers and USAA.
  2. The bill requires comprehensive and collision coverage during all three phases of the ride-sharing process. Comp and collision ordinarily are optional coverages that are not required of either personal or commercial drivers in any state. That includes taxis and limousines, which are not required to carry comp and collision in Minnesota or anywhere else. There is no possible public policy rationale for this requirement.
  3. The requirement that TNCs provide $1.5 million of uninsured and underinsured motorist coverage during all three periods is excessive and significantly exceeds the requirements set in leading jurisdictions like California, Colorado, the District of Columbia and nearby Illinois. This requirement is particularly problematic in Period 1, when one considers that Minnesota’s state minimums for UM and UIM are ordinarily $25,000 and $50,000, respectively.
  4. The bill makes no provision for coverage sold by surplus lines carriers to be eligible as qualifying insurance. The surplus lines market exists to provide coverage for unusual or difficult-to-insure risks. As a new market that has not yet produced troves of data, transportation network companies offer a textbook example of the kind of risk that surplus lines is intended to cover. Indeed, all of the current major TNCs have commercial liability coverage procured in the surplus lines market. It is imperative that the bill be amended to clarify that surplus lines carriers are eligible to provide qualifying coverage.

We commend the committee for exploring ways to provide a baseline framework that will allow TNCs to operate safely and effectively. However, as currently drafted, H.F. 1783 could crush the market by imposing draconian requirements far beyond those currently required of taxis and limousines. This would not serve the interests of either consumers or the market at large.


R.J. Lehmann
R Street Institute

The EPA wants to watch you shower

March 19, 2015, 9:00 AM

If you’re like me, a night away at a hotel means one thing: a long, hot shower. It’s not that I want to deliberately drain a Holiday Inn’s water heater of its supply. It’s just that it’s rare, when you live in an urban area and pay out the nose for your own water, to want to spend time cleaning yourself in it. And there’s the added benefit, at hotels, of not being stared at awkwardly by a group of cats who don’t understand the concept of bathroom doors, or why you would willingly subject yourself to water.

But the luxury of the long, hot hotel shower may be yet another thing lost to the prying eye of Uncle Sam. Thanks to a new proposal from the Environmental Protection Agency, a couple of fascinated felines may be the least of your worries. In an effort to get Americans to adjust their shower behavior, the government wants to cut you off and, in service of that goal, they’ll be watching you shower.

The Environmental Protection Agency (EPA) wants hotels to monitor how much time its guests spend in the shower.

The agency is spending $15,000 to create a wireless system that will track how much water a hotel guest uses to get them to “modify their behavior.”

“Hotels consume a significant amount of water in the U.S. and around the world,” an EPA grant to the University of Tulsa reads. “Most hotels do not monitor individual guest water usage and as a result, millions of gallons of potable water are wasted every year by hotel guests.”

“The proposed work aims to develop a novel low cost wireless device for monitoring water use from hotel guest room showers,” it said. “This device will be designed to fit most new and existing hotel shower fixtures and will wirelessly transmit hotel guest water usage data to a central hotel accounting system.”

The key phrase here is “EPA grant to the University of Tulsa,” which, of course, means that you, the person who just wants to take a hot shower in peace, will be paying for someone to come up with a way to put an end to your ability to take a hot shower in peace. Congratulations! Thankfully, it’s only a $15,000 grant. If a project like this had been spearheaded by the NIH, for example, like the famous “Origami Condom” concept, it could cost in the millions (though even origami condoms were too absurd for the NIH). As it stands, you’re only paying five figures for the government to modify your shower behavior, though I suspect you’ll make that up in the “room fee” you’ll now pay when you overuse.

There are, of course, ways to address the topic of water conservation that don’t immediately involve “behavior modification” but I suppose that’s not the point, is it?

Are casinos the solution to TWIA’s woes?

March 18, 2015, 1:44 PM

When it comes to hurricane insurance, Texas is in trouble. The state-run Texas Windstorm Insurance Association has more than $77 billion in potential liabilities, but only a few hundred million in its catastrophe relief fund. The last time a big storm hit, the agency was driven to the brink of bankruptcy, and even with Texas’ recent hurricane dry spell, TWIA remains one big storm away from ruin.

There have been a number of solutions proposed to fix TWIA’s fiscal woes, but perhaps none are more inventive than legislation recently filed by state Rep. Joe Deshotel, D-Port Arthur:

The plan is fairly simple. Full Las Vegas-style casinos will be permitted within a first-tier coastal county or second-tier county or in a county where its county seat is within 100 miles from a first- or second-tier county.

Jefferson County is a first-tier, or coastal, county. Hardin County is a second tier county. Huntsville, for example, in Walker County, could be within 100 miles of Jefferson County.

Resulting net tax revenues would be earmarked for the Catastrophe Reserve Trust Fund in TWIA to keep it out of deficit. Funds in excess of the amount needed to erase the deficit would go to general revenue.

While this approach is certainly creative, it’s worth noting that Texas’ current plan for dealing with TWIA also involves gambling. The state is betting that it won’t face a serious storm in the near future, so that TWIA’s underfunding won’t matter. The main difference is that, with the current approach, it’s ratepayers and taxpayers throughout the state who may end up footing the bill.

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

Repeal law that forces expensive burdens on retailers selling adult beverages

March 18, 2015, 12:58 PM

In Florida, you can buy beer and wine at your local supermarket. Some even sell it straight out of the tap and allow you to taste it before you buy it. But if you want to take home any other type of alcoholic beverage, you’ll have to visit a different store.

Florida is one of only 16 states that require just about every type of alcohol other than beer and wine to be sold in a separate, dedicated location. Grocery stores and other retailers that wish to sell such beverages are forced to either erect a wall within their stores with a dedicated entrance, or establish a completely separate store altogether to comply with Florida law.

However, lawmakers in Tallahassee are considering a repeal of the 1935 statute requiring this separation. Senate Bill 468 and House Bill 107 would allow supermarkets, big-box stores and other retailers that already sell beer and wine to also sell distilled beverages.

A repeal of this law, passed just after the end of the Prohibition Era, makes sense. Rather than suppress business activity, government should explore ways to reduce barriers to competition and make it easier for willing consumers to transact business safely and legally.

Opponents of the proposal cite public safety concerns, claiming it would increase underage drinking. The facts do not support this claim.

The protocols already employed by stores that sell beer and wine are essentially the same as those that sell other kinds of liquor. Their policies and procedures ensure they do not sell to minors, while there are also loss-prevention safeguards to impede shoplifting.

In fact, research shows that convenience stores, supermarkets and other retailers that sell alcohol are marginally better than liquor stores at preventing sales to minors. This is especially true among large retailers, which devote millions to their loss-prevention programs and have a lot more at stake if they are caught breaking the law. If you’re a minor, it’s not any easier to buy beer at a supermarket than it is to buy liquor at a liquor store.

Others claim the proposal would put liquor stores out of business. On the contrary, it would encourage that industry to innovate by allowing them to sell other goods and products the law bans. Consumers likewise would benefit, because they would have more options and reap the benefit of lower prices brought on by competition.

Industry protectionism is not the proper role of government. The state has a duty to ensure public safety, and that includes preserving safeguards that prevent minors from accessing alcohol. Businesses that sell alcoholic beverages and already abide these safeguards should not be required to incur needless major expenses just to sell other kinds of alcoholic beverages.

Hydrazine speculation can end: It’s not in snus, snuff or chewing tobacco

March 18, 2015, 9:24 AM

From Science 2.0:

Because anything could be connected to tobacco without question, it has been unchallenged since 1974 but a new study actually decided to find out. Professor Brad Rodu of the University of Louisville and colleagues from British American Tobacco did a comprehensive survey of toxicants in smokeless tobacco products developed a method for determining levels of hydrazine in them.

R Street applauds introduction of Preserving American Privacy Act

March 17, 2015, 4:05 PM

WASHINGTON (March 17, 2015) – The R Street Institute praised Reps. Ted Poe, R‐Tex., and Zoe Lofgren, D-CA,  for reintroducing the Preserving American Privacy Act today.
This important legislation will bring constitutional privacy protections into the 21st century by addressing new and emerging technologies – specifically unmanned aircraft systems ‐ and their effects on privacy. Among other regulations, the bill clarifies that law enforcement must get a warrant to use a drone for targeted surveillance of an individual’s person or property.

“Laws that focus on drones must strike the right balances between promoting technological advance and maintaining our legal and Constitutional protections,” said Mike Godwin, general counsel and director of innovation policy at R Street. “The Preserving American Privacy Act doesn’t just aim right for that balance – it also answers the questions that need to be asked whenever our government embraces any new technology that can impact citizens’ privacy, lives and liberty.”

The bill is an important step towards ensuring that Americans are subject to the civil liberties enumerated in the Bill of Rights.

“We believe that protection from warrantless drone surveillance should already be understood to exist in our law,” said Godwin. “Regrettably, our courts have not always drawn those lines.”

“Reps. Poe and Lofgren have made this bill an excellent example of thoughtfulness and farsightedness when it comes to regulating drone technology and protecting Americans,” he said.


Sens Lee, Durbin and Booker participate in colloquy on the Smarter Sentencing Act

March 17, 2015, 10:15 AM

From Sen. Mike Lee, R-Utah:

It is supported by advocacy groups across the political spectrum and has been endorsed by conservative leaders such as Grover Norquist and Americans for Tax Reform, Eli Lehrer and R Street Institute, Pat Nolan, Former President of Justice Fellowship, Marc Levin of the Texas Public Policy Institute, and Freedom Works.

Hydrazine speculation can end: It’s not in snus, snuff or chewing tobacco

March 17, 2015, 9:02 AM

From Science 2.0:

Because anything could be connected to tobacco without question, it has been unchallenged since 1974 but a new study actually decided to find out. Professor Brad Rodu of the University of Louisville and colleagues from British American Tobacco did a comprehensive survey of toxicants in smokeless tobacco products developed a method for determining levels of hydrazine in them.

It’s time for insurance reform in Louisiana

March 17, 2015, 8:00 AM

Louisiana is vulnerable to extreme weather and natural catastrophes in ways only a few other states experience. By all indications, that exposure will only grow worse, as a combination of sea rise, erosion and subsidence causes Louisiana to lose a football field’s worth of land each hour.

But thanks to government suppression of price signals, the dangers posed to coastal Louisiana have been purposely rendered invisible to those most vulnerable.

Regulation of Louisiana’s insurance market keeps companies from charging rates that reflect the actual risk of catastrophe. The result is that insurers understate natural disaster risks, ostensibly to make coverage more affordable. While maintaining affordability is important, state policymakers must adopt a long-term view, which is tough, given the short-term nature of the campaign cycle.

Underpricing risk pushes more and more of the cost of recovery onto the backs of government and, ultimately, the taxpayers. It also misaligns the incentives for where and how to build. Coastal residents are well aware that they are confronted by a special type of risk. But without accurate prices, it is difficult for those residents to judge just how vulnerable they really are.

Risk-based pricing goes a long way to determine how consumers will pay for their risky choices. By not allowing prices to communicate risk accurately, policymakers build foundation of economic sand that will wash away in a catastrophe.

It is past time for policymakers to apply free-market principles to disaster planning and preparation. A big step would be to scrap a requirement that compels insurers to maintain premium-distorting homeowners’ insurance policies. Today, insurers may not cancel or non-renew a policy that has been in force for three years, even if it’s certain that the insurer will lose money on the continuing coverage. Such rules inevitably and unfairly inflate the cost of insurance for those who choose to live in less risky parts of the state.

This well-meaning requirement was motivated by the belief that insurers rush to leave markets after a catastrophe. While it is true that some companies may pare back their book of business following an extreme hurricane, this has more to do with an insurer’s solvency and ability to pay claims than it does an insurer’s uncertainty about their underwriting performance.

The great irony of the three-year rule is that, if insurers are unable to limit their exposure to risk in the future, they’re much more likely to limit how much coverage they offer today, or never start offering it in the first place. Clearly, it’s hard to measure how many companies aren’t competing in the Louisiana market today due to the three-year rule, but the results can be felt not only in the homeowners insurance market, but in the lending, real estate and building industries, as well.

Last session, the state Legislature signaled it fully supports the three-year rule by updating a number of its provisions. To the extent they did so under the impression their actions would improve the long-term viability of the state’s insurance market, they acted against the interest of Louisianans.

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

Anne McCormick Hocine

March 16, 2015, 4:46 PM

Anne McCormick Hocine is executive assistant and office assistant for the R Street Institute.

Anne previously spent 10 years with World Learning, most recently as a program officer, before taking a break to spend more time with her family.

A native of Atlanta, Ga., she graduated from the University of Oregon with a bachelor’s degree in political science. Anne also studied abroad in Scotland, where she discovered the joys of hard cider.

After college, Anne’s existential crisis led her to Vail, Colo., where she earned a living planting flowers for the Town of Vail and entertained herself by attempting to master the art of snowboarding.

After her stint in the mountains, Anne moved to Washington for graduate school at American University, where she earned a master’s degree in international communications.

Anne lives in Washington, D.C. with her husband, Aghilas, and their two children, Annabelle and Abdellah. She is fluent in French and a voracious reader.

Email: annemh@rstreet.org

Other policy interests today at SXSW

March 16, 2015, 3:03 PM

From Politico:

House Oversight Chairman Jason Chaffetz will talk about music licensing reform with lobbyists from Pandora, the Digital Music Association and TwinLogic Strategies. DHS Undersecretary for Science and Technology Reginald Brothers will deliver a TED talk about wearable technology and public safety. Data.gov policy analyst Rebecca Williams will join Cato Institute’s Molly Bohmer, R Street Institute’s Molly Schwartz and CREW’s Daniel Schuman in a conversation about how public data improves accountability and empowers advocates. State Department senior adviser Krishanti Vignarajah will address investments in entrepreneurs around the world

Cancer-causing compound not prevalent in smokeless tobacco

March 16, 2015, 9:12 AM

From Z News:

Scientists at British American Tobacco in collaboration with professor Brad Rodu of the University of Louisville, undertook a comprehensive survey of toxicants in STPs.

New Orleans takes step in right direction on ridesharing

March 16, 2015, 9:00 AM

New Orleans has traditionally been hostile to the sharing economy. Airbnb and other room-sharing services are still effectively outlawed in the Crescent City. Ridesharing companies have not had it any better, which is why the city got a D+ on R Street Institute’s inaugural Ridescore.

UberX and Lyft are still essentially outlawed, but New Orleans could be looking to change that. Following in the footsteps of nearby Jefferson Parish, the New Orleans City Council is considering a bill to legalize and regulate ride-sharing.The Hayride reports that the council’s transportation committee approved an ordinance to allow ride-sharing companies to operate.

Uber Black, marketed as the solution to bad taxi services, is already operating in New Orleans after the City Council legalized the use of digital dispatching for car services back in September of 2014.

However, since Uber Black was legalized last year, the City Council proposed an ordinance back in January which would basically legalize Uber entirely.

Uber’s ‘ride-sharing’ service would allow for individuals to use their own vehicles to transport Uber customers around the city.

Though debate has sparked about how Uber would be allowed to offer ‘ride-sharing’ while bypassing city regulations that taxi cab drivers are mandated to follow, the City Council could be looking to roll back regulations for a change.

Interestingly, the city is also thankfully taking this opportunity to look at reducing the regulations on taxi cab companies. City councilmen and officials seem to agree the taxi industry was overregulated.

Among the requirements the city is considering to mandate for ridesharing companies is not permitting vehicles older than seven years to be used, requiring background checks be conducted by the ridesharing companies, requiring the vehicles be marked with the ridesharing company’s logo when it’s in service and commercial liability insurance would be required. Most ridesharing companies such as Lyft and Uber already would meet most of these requirements, particularly in the areas of background checks and insurance.

It seems that New Orleans is working on a way to create a win-win situation for travelers in the Crescent City. The city is going to allow choice between traditional taxicabs and more modern ridesharing services. This will improve rates and service for both locals and tourists alike through free-market competition.

The City Council should also follow through on its inclination to deregulate the taxicab industry. New Orleans has already proven it become a leader in innovative ideas, as demonstrated with its leadership on school choice. New Orleans needs to take this opportunity to become a leader in transportation choice.

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

Virginia legalizes ridesharing services

March 16, 2015, 8:45 AM

From the Heartlander:

R Street Executive Director Andrew Moylan says government regulators are struggling to adapt to new sharing-economy businesses like Lyft and Uber.

“Uber and Lyft have been facing aggressive regulators and special interests trying to shut down their businesses in cities and states across the country,” he said. “Rather than modernize rules to recognize technological advancement, many governments have taken a ‘ban first, ask questions later’ mentality to the services.”

Learning from Virginia’s Example

Moylan says Virginia regulators’ struggle to deal with the issue can be educational for government officials elsewhere.

“Virginia is an instructive example because it showed both the worst and best regulators have to offer in response to this important debate,” he said. “The state’s Department of Motor Vehicles sent out a cease-and-desist order to Uber and Lyft in an attempt to shut down the businesses as they were just getting off the ground.”

Moylan says consumer demand for ridesharing services forced regulators to open the market to Lyft and Uber. 

“The public backlash to that move forced the legislature and governor to respond, by passing a commonsense bill that contains only a few regulations in areas where government has a legitimate role: requiring insurance coverage, criminal background checks, and appropriate licensure for drivers,” he said.

Marx, Smith, Amplifyd and Nestle: social investing in 2015

March 16, 2015, 8:00 AM

One of the more interesting signs that the economy is picking up again is the new focus on social responsibility emanating from the C-suites of major corporations. The signs are everywhere, from McDonald’s executives announcing the company won’t buy chicken raised with antibiotics to the Ringling Brothers circus retiring all of its elephants to such conservative investors as Vanguard announcing activist campaigns.

Start-ups are getting into the act, too, for profit. Last month, I received a press release for a company called Amplifyd Pledges, which asks people to pledge money to cover the cost of companies making various “socially conscious” changes. Its first project is asking Peet’s and Starbucks to use organic milk. The effort is unlikely to pay off, but Amplifyd has one advantage over petitions posts on Change.org or on Facebook. It is asking signatories to its campaigns to commit real dollars and reports $15,000 pledged so far.

In a perfect world, companies would maximize value for shareholders and consumers alike. In the real world. companies cut corners, consumers want rock-bottom prices and investors want steady growth in earnings-per-share every quarter. No one really wants companies to destroy the environment or to take behave in a way that damages society, but making more “socially responsible” decisions often has a price tag, and it’s one few are willing to pay.

Maybe the secret to more socially responsible corporations isn’t in finding market inefficiencies that need to be corrected by regulation, but simply having a better, more prosperous economy. Perhaps social responsibility is, ultimately, a luxury good. The wealthier a society is, the more its consumers can afford organic milk, if that’s what they want. Companies like Nestle can afford to experiment with natural ingredients, and shareholders can ask companies to be better positioned to take advantage of an improved market. The story is no longer “Lumber Liquidators can hold on in a down housing cycle, hurray!” but rather “Lumber Liquidators needs to stop cutting corners to serve consumers who don’t want illegal, toxic materials in their houses!”

It isn’t that only the wealthy make socially responsible decisions. At the very low end of the income spectrum, there are common consumer choices that are exceptionally responsible from an environmental perspective, even if that concern wasn’t what motivated them. Think of clothes from thrift stores or reusing grocery bags for trash. Many of these efforts are inferior goods; as income increases, Goodwill shopping and frugal living are cast aside. At the high end of the consumer market, interest in sustainability is a sign of prestige. People value such luxury items as Teslas and farm-to-table, snout-to-tail, organic restaurants in part because they are expensive. They signal wealth in a way that reused lunch bags do not.

The vast middle of the market views environmental, social, and governance issues as nice-to-have features, as long as they don’t cost more or impede function. Hence, the environmental and the social are normal goods, where demand changes proportionally to income.

Here is the synthesis between Karl Marx and Adam Smith. No, I’m not kidding.

Marx was a student of business cycles. He then developed his political theories as a way to eliminate the business cycle, and we all know how that worked out. But his concept of capital accumulation as the economy expands – holds.

Smith, on the other hand, talked about how the “invisible hand” managed production based on supply and demand. In a weak economy, people want basic goods for as low a price as possible. As the economy expands, customers demand more, and the industry is able to improve itself. We often think of that improvement coming in the form of new and better technology, but it does not have to be. Finding ways to raise healthy chickens without the use of antibiotics meets the test.

Social, environmental and governance factors may be distractions from profit-making activities in some market cycles, but they are not frivolous in all cycles. If customers are willing to pay more for social features, and if investors pay as much attention to risk as to return, then these concerns are no longer luxuries. They are necessary parts of doing business, at least until the next recession.

Consumers will vote with their pocketbooks, just as Smith explained. And they’ll wring some concessions out of capitalists in the process, living up to a Marxist ideal.

In a free market for ideas, we can find a way for these two opposing theorists to get along.

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

R Street / CDT Happy Hour at SXSW

March 14, 2015, 12:00 PM

Sorry, this event is by invitation only.