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Conservatives should champion the free-market system of the peer-production economy, R Street study finds

September 22, 2014, 8:45 AM

WASHINGTON (September 22, 2014) – Regulation of the “peer production” or “sharing” economy can be a good political issue for both the left and the right, argue R Street President Eli Lehrer and R Street Executive Director Andrew Moylan in a new paper.

Published in the Fall 2014 edition of National Affairs, the authors discuss the emergence of the economy using examples from companies like Fiverr, eBay, Etsy, Lyft, Sidecar, Uber and Airbnb, arguing that barriers to future growth of these and similar companies stem primarily from archaic laws, professional licensure, torts and taxes.

“In the abstract, the best way forward in many of these markets would be comprehensive reform that makes it easier for small businesses to operate across the board, not just in the peer-production economy,” write the authors. “Where reasonable, lawmakers should try to model peer-production regulations on the existing rules for comparable services.”

The authors write that the legislative and regulatory issues raised by the peer-production economy could be a godsend to the political right, as eliminating the barriers to the market all figure highly on the agenda of many free-market advocates.

“To date, however, the peer-production sector has not engaged the political right, and many of its strongest proponents have come from the political left,” say the authors, while noting that the organizations themselves tend to lean left as well. This is primarily because peer-production companies cultivate a young, hip, urban vibe that clashes with much of the Republican Party’s older, overwhelmingly white, largely suburban and rural base.

The authors note that the cultural distance between some conservatives and the peer-production economy should not be seen as a huge problem. Almost none of it results from any fundamental difference with regard to public policy. More importantly, political liberals will not be keen to pursue anti-regulatory, free-market policies against which their core constituencies rail.

“While both sides face significant political challenges and both have much to lose, their free-market economics and hands-off approach to regulation make conservatives the natural champions of the new peer-production economy, and they should capitalize on the opportunity,” write the authors.

The study can be found in its entirety at: http://www.rstreet.org/wp-content/uploads/2014/09/20140918_Lehrer.Moylan.pdf


Tesla takes Massachusetts

September 22, 2014, 8:30 AM

High-end electric car consumers rejoice! If you want to buy one of the famous Tesla cars and you live in Massachusetts, you can now do exactly that. This past week, Massachusetts’ Supreme Judicial Court decided to lift the ban on Tesla sales within the state, following a lawsuit brought by some of the state’s auto dealers. As you may have guessed, the dealers lost

At first glance, it’s easy to see where the dealers got the idea for their lawsuit. Current Massachusetts law prohibits car manufacturers from also operating dealerships in the state. Given that Tesla never bothered with the whole “dealership” business model, it would seem that Tesla’s “direct sales” would be illegal.


Or at least, that’s how you might think about it if you’re a rent-seeking group of middlemen trying to protect your business model against innovation. Fortunately, the Supreme Judicial Court wasn’t persuaded, pointing out that the law as written was clearly designed to prevent auto companies that already partnered with dealerships from competing abusively with their own dealers. Because Tesla never employed dealers in the first place, the law never applied to them. Transport Evolved quotes the unanimous decision:

Chapter 93B is aimed primarily at protecting motor vehicle dealers from injury caused by the unfair business practices of manufacturers and distributors with which they are associated, generally in a franchise relationship…We therefore affirm the judgment of the Superior Court dismissing the plaintiffs’ action on the basis of lack of standing.

This should be self-evident if you imagine pretty much any other good. Safeway could not sue to a child’s lemonade even if there were a hypothetical law that prevented juice manufacturers from selling their own products outside supermarkets. Just as the lemonade stand isn’t actually in competition with the supermarket, Tesla wasn’t in competition with the car dealers. So one has to wonder why the dealerships cared in the first place.

The most likely answer is that they cared because they feared that Tesla’s business model – one without dealerships – would actually work. And not just work, but make Tesla a higher profit margin than the very auto companies whose products these dealers bring to market. What this would mean in practice is that many other companies might decide to phase out dealerships altogether, cutting out the middlemen. When the value proposition you bring to the table is so weak that it requires laws to prevent cutting you out of the distribution chain, you have good reason to fear for your job.

However we might empathize with the dealers’ fear of their industry vanishing with time, it’s important to remember that vanishing industries do not represent harms for the government to correct. The French economist Frederic Bastiat outlined the absurdity of arguments like the dealers’ in a satirical letter from a candle-maker to the French government asking the government to blot out the sun because it was unfairly competing with his candles. Of course, the candle-maker’s misery notwithstanding, we all understand that candles are inferior to the sun and are presumably grateful that we don’t need artificial light 24 hours a day.

This is not to suggest that Tesla’s cars are as vastly superior to cars sold by traditional dealerships as the sun is to candles. So far, the jury’s out on Tesla, though the demand for them is apparently strong enough that they’re a viable product. What’s more, Tesla caters to a fairly upscale market, so it is unlikely to drive the Fords or Chevrolets out of business unless it starts producing dramatically cheaper cars.

But one thing is for certain: If Tesla’s cars do outclass their competitors in the same way that the sun outclasses candles, then the law should not be allowed to keep them from American buyers simply because of the persistent inefficiency of one particular special interest group. As Justice Louis Brandeis said, sunlight is the best disinfectant. If Tesla is the sun in Bastiat’s metaphor, it may be about to disinfect armies of inefficient candle-makers.

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

Embracing the peer-production economy

September 22, 2014, 8:00 AM



(The attached paper, co-authored by R Street Executive Director Andrew Moylan, appear in the Fall 2014 edition of National Affairs.)

Enthusiasts of the growing “peer-production” or “sharing” economy are convinced that the new decentralized, technology-based approach to connecting consumers and providers of services is going to revolutionize commerce and transform modern life. The true promise of this emerging sector  —  which has taken the form of ride-sharing apps like Uber, space-sharing platforms like Airbnb, work-sharing businesses like TaskRabbit, and a host of other emerging digital services — remains to be seen. But it is already becoming apparent that the sharing economy could have some significant political implications.

The key political questions are to what extent peer-production services should be regulated and how. These are particularly challenging questions for the left. Taking an accommodating, hands-off approach to such regulation would appeal to the educated, young, urban consumers of such services who tend to be liberals, but it would run the risk of alienating core liberal constituencies like unions, trade guilds, and trial lawyers — not to mention undercutting the default progressive faith in the wisdom of the regulatory state. For the right, there is more opportunity than risk, but making the most of it would require finding a way to shape a free-market message that would appeal to the largely young, wealthy city-dwellers who use sharing services and for whom the broader conservative agenda is largely anathema.

Managing the peer-production economy in a prudent fashion and standing up for its interests has the potential to pay huge political dividends for the party that does it best, but it will not be easy. To see why will require a grasp of how the peer-production economy evolved, why it is important (and how it has been oversold), and the challenges that our legal and regulatory systems present to its future growth.

Do these videos show VP Biden making mistakes or are they signs of a bigger problem?

September 19, 2014, 10:46 AM

In modern American politics, each and every slip, gaffe and poor choice of words is judged and scrutinized hundreds of times over. In some instances, honest mistakes are blown out of context simply to push the media cycle. President George W. Bush was routinely targeted for his rhetorical miscues, but Vice President Joe Biden continues to commit interesting verbal stumbles.

Most recently, Biden referred to bankers who exploit soldiers as “Shylocks.”

His infamous remark that Republicans will put black Americans “back in chains” made headlines around the nation.

Biden claimed that one could not go to a convenience store in Delaware unless he or she had a “slight Indian accent.”

On the campaign trail in South Carolina, Biden argued that he could effectively debate southern politicians because Delaware “was a slave state.”

During his 1988 presidential bid, Biden aggressively defended his academic record and invited a reporter to an IQ comparison.

When asked about Obama in 2008, Biden referred to then-candidate Obama as a “sort of mainstream African-American who is articulate and bright and clean….”

Biden asked state Sen. Chuck Graham, who is confined to a wheelchair, to stand up.

Discussing economic plans, Biden highlighted the importance of the three letter word “J-O-B-S.”

In the stimulus debate, Biden asserted that spending money was necessary to avoid bankruptcy.

Biden noted that even if the president and vice president do everything right, there is still a 30 percent chance they get it wrong.

Vice President Biden also commented on self defense with a firearm.

Everyone makes mistakes, and politicians are no exception. The only difference is that they commit errors on a much larger stage. Should Biden be held harmless for his stumbles or are they evidence of troubling personal perspectives and abject carelessness?

Up in smoke

September 19, 2014, 10:28 AM

Undoubtedly much to the chagrin of the former mayor, more New Yorkers are smoking these days. According to the latest data from the city’s Department of Health and Mental Hygiene, adult smoking rates in New York City have risen to 16 percent, from an all-time low of 14 percent in 2010.

That this is happening in a city where nanny-statist extraordinaire Michael Bloomberg spent a dozen years doing everything he could to limit cigarettes should serve as a wakeup call for those still committed to doubling down on the current antismoking campaign.

New York banned smoking in nearly all indoor public places more than a decade ago. The city spends lavishly on advertising to encourage quitting and imposes so many taxes that a pack of name-brand cigarettes can cost $15. More recently, the city banned most e-cigarette use in public and raised the age to purchase tobacco from 18 to 21. And yet, all of these efforts correlate with increases in an activity that poses dozens of serious health risks.

It is becoming clear that the kinds of tactics that once were hugely successful in reducing smoking rates—which are half the levels seen when the first stern health warnings were issued in the 1960s—have reached the point of diminishing, if not negative, returns. Smoking rates nationally have been stuck at around 20 percent for roughly a decade, even as overbearing Bloomberg-style tactics have spread.

Rather than resort to ever-more coercive measures, public health -officials should consider the news out of New York as an impetus to explore new approaches. For people who just can’t quit—likely a sizable portion of those who persist in smoking—it’s time to consider a more tolerant and even welcoming approach to encourage switching to lower-risk products like chewing tobacco, nicotine lozenges, snus, and e-cigarettes. It’s important to note that none of these things are perfectly safe and all are quite addictive. But an impressive amount of data strongly suggests they are as much as 98 percent less dangerous than tobacco cigarettes. Allowing and, in some settings, even encouraging their use could do a tremendous amount of good.

Islamic State responds to Obama’s measured approach with Flames of War video

September 19, 2014, 10:05 AM

On Sept. 10, 2014, President Barack Obama stated that the United States will “degrade and ultimately destroy” the Islamic State.

He outlined a four-part strategic plan to accomplish that goal. First, the president promised “a systemic campaign of airstrikes” against the Islamic State. Then, he detailed plans to support forces fighting against the Islamic State in Iraq and Syria. Next, President Obama stated that the United States will “continue to draw on our substantial counter-terrorism capabilities” to prevent attacks. He concluded his plan by pledging “humanitarian assistance to innocent civilians.”

Most importantly, President Obama unequivocally stated the United States’ fight against the Islamic State “will not involve American combat troops fighting on foreign soil.”

The move seems to have emboldened the Islamic State, which released a brief video that feels more like a video game trailer than terrorist propaganda. The video, about a minute long, shows Islamic State soldiers fighting and creates the perception that they are killing and maiming American troops. A shaky video image of the White House is included, effectively marking it as a target for the Islamic State.

The video itself highlights the difference between the Islamic State and its terrorist predecessors. The high-quality images and impressive editing techniques look modern, hip and targeted to the Islamic State’s audience. While it may seem like a juvenile trailer to a violent video game, it likely resonates with the young male audience that the Islamic State needs to expand and continue to fight.

The new propaganda video is shockingly brash. If the public execution clips were not enough of a provocation to the United States and its allies, the newest video demonstrates that the Islamic State has little fear of America or its allies.

President Obama has maintained a calm, measured voice through the entirety of his remarks on the Islamic State. His almost-clinical demeanor may demonstrate a tactical unwillingness to be baited into a more aggressive military response than necessary. At the same time, perception matters heavily in international relations. If executions, direct threats and the depiction of American soldiers coming to harm result in nothing more than a stepped-up version of the airstrikes and opposition forces the Islamic State is already experiencing, what incentive do they have to stop their brutal quest for power?

Already, American military leaders have suggested that if the president’s initial approach fails, they may indeed recommend that he reverse his position regarding American troops on the ground in Iraq and Syria.

Only time will tell whether the president’s attitude towards the Islamic State is prudent. If his four-part plan is effective and the Islamic State is destroyed, he may be seen as a wise leader who saved American lives by refusing to be baited into an emotional response. On the other hand, if destroying the Islamic State ultimately requires sending American troops into battle, he may be remembered as an academic president who enabled the Islamic State to gain strength when it could have been stamped out with an earlier overwhelming show of force.

Benton woman dropped from insurance because of old, vacant home

September 19, 2014, 9:17 AM

From ArkansasMatters:

According to  Lars Powell, UALR Professor of Insurance, this isn’t common, but it can happen depending on the insurance company’s policy. Powell said living next to an abandoned home can increase your chances of break-ins and fires, but he said there are hundreds of other home insurance companies to chose from. “Anytime I’ve seen an issue like this where someone can’t get coverage for what seems like ordinary exposure, they’re with the wrong company and if they look around they’ll find a better deal than what they had in the first place,” said Powell.

TNC battle ends with Gov. Brown’s signature

September 18, 2014, 3:23 PM

Gov. Jerry Brown has lent his signature to compromise legislation that clarifies how and when transportation network companies are commercially insured.

Sponsored by Assemblywoman Susan Bonilla, D-Concord, A.B. 2293, was one of the session’s highest-profile pieces of legislation. In its final incarnation, the bill does three things:

  • It places in statute the definition of TNC promulgated by the industry’s primary regulator, the California Public Utilities Commission;
  • It introduces a requirement that TNCs notify their drivers about the scope of their insurance coverage; and,
  • It codifies the distinction between the points at which personal and commercial insurance coverages are in-force during the course of a ride.

The controversy surrounding AB 2293 morphed from a closely kept inter-industry contest into a public confrontation over the way in which the state and well-established interests interact with new and powerful market participants. Both sides energetically lobbied legislative offices and, as a result, many amendments later, a compromise was reached.

As is often the case in Sacramento, industries that could otherwise be natural allies in the effort to reduce overall regulatory burdens were pitted against one another as a result of a maladapted regulatory framework.

Unfortunately, this will not prove the last time that such a conflict transpires. Other industries should look to the A.B. 2293 episode as a roadmap for future action — for instance, in the coming debate on regulation of space-sharing services like Airbnb. That way, aware of the pitfalls of late engagement and sometimes tone-deaf tactics, the parties will be able to forgo open confrontation.

The first step to avoiding controversy is to simply talk.

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

Fraud costs Michigan drivers $220M a year

September 18, 2014, 1:11 PM

Auto insurance fraud costs Michigan drivers more than $220 million a year, Secretary of State Ruth Johnson announced while unveiling a set of 17 legislative and regulatory anti-fraud recommendations offered by the Fighting Auto Insurance Rip-offs (FAIR) Task.

Johnson convened the task force a year ago, following a one-day sting operation that found more than 16 percent of paper proof-of-insurance certificates submitted statewide on July 31, 2013 were fraudulent, including more than 45 percent in Van Buren, Chippewa and Sanilac counties. (See chart below.) As reporter Emily Lawler of MLive.com put it:

It came about after instances of people using white out to change the years on their auto insurance certificates, selling replica insurance documents and, in one case, a fake insurance document that included a QR code linking to a website stating that “llamas are soo cool.”

Topping the task force’s recommendations is a proposal to create a state auto insurance fraud agency, similar to an idea proposed by R Street President Eli Lehrer in a November 2011 report published by the Heartland Institute. Though the task force didn’t any specific details on how the anti-fraud agency should be structured, the Insurance Institute of Michigan has proposed a five-year pilot project to expand the existing Automobile Theft Prevention Authority, currently funded by a $1 fee on auto insurance policies, with an additional $2-per-vehicle fee to fund anti-fraud efforts. The new agency would collect data on fraud trends, consolidate insurance fraud investigations and offer training to police and prosecutors.

IIM Director Pete Kuhnmuench cited the high-cost of auto insurance in Michigan as a primary driver of the fraud, as drivers who can’t afford coverage obtain fake certificates to comply with registration requirements. The latest report from Bankrate Insurance showed Detroit with the most expensive auto insurance of any metropolitan area in the country, with rates 165 percent higher than the national average. The Michigan Assigned Claims Facility, which offers covers for the uninsured and underinsured, grew by 47 percent between 2007 and 2012, according to Johnson’s office.

Members of the task force included representatives from the Secretary of State’s office, the Michigan State Police, the Prosecuting Attorneys Association of Michigan, the Insurance Institute of Michigan, the Michigan Insurance Coalition, Property Casualty Insurers Association of America and the Michigan Association of Insurance Agents.

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

If Hillary does not run, Martin O’Malley will be the next Democratic nominee

September 18, 2014, 10:25 AM

Despite some wishful thinking (“she’s sick/she doesn’t want to run”) from my fellow conservatives, every credible source indicates that Hillary Clinton will run for the presidency and, in all likelihood, win the Democratic nomination. It’s also, at this point, more likely than not that she will become the 45th president.

But in the off-chance that she does decide not to run or stumbles badly in the Democratic primaries, it’s not outlandish to think Maryland Gov. Martin O’Malley could be the next Democratic nominee. Hillary may overshadow the governor right now, but he has a very good chance of emerging as a frontrunner if she isn’t in the race. Here are four reasons why:

Executives have a distinct advantage in presidential elections: Experience running a big operation—being an incumbent president, running a state government or commanding an army—serves candidates well on the campaign trail. Since the Civil War, only one candidate without executive experience has beaten a rival who had it. That was in 1920, when then-Sen. Warren Harding beat then-Gov. James Cox. Right now, O’Malley is one of only two governors considered among the likely Democratic candidates.

He has big-city street cred: As the only former big-city mayor among the serious potential candidates on either side, O’Malley has urban-center clout that nobody—not even Hillary—can match. Democrats’ ability to win swing states like Pennsylvania and Ohio largely depends on their ability to turn out voters in urban centers. O’Malley can do that. Such voters are also important in primaries. Other Democratic candidates, including Hillary, are largely untested in this regard.

He’s friendly with the Democratic Party’s kingmakers: To a large extent, success in the Democratic Party’s primary process is determined by one’s relationship with the major groups that make up the party’s base: organized labor, women’s groups, big-city political bosses, environmental activists, government contractors, public employees, Hollywood liberals and trial lawyers. O’Malley has been friendly with all of these groups while governor of Maryland. Many of the other potential candidates have said and done things that could ruffle the feathers of various liberal groups. Former Sen. James Webb, for example, is still haunted by comments he made in 1979 about women in the military, while among Massachusetts Gov. Deval Patrick’s accomplishments in office are deregulating auto insurance rates and professional licensing, hardly popular notions on the left. While O’Malley hasn’t thrilled all of these groups all the time, he hasn’t seriously offended any of them either.

He won’t scare anyone: While O’Malley holds a variety of standard-issue liberal positions that put him a bit to the port side of the median voter, he’s not cut from the same cloth as potential candidates Sens. Elizabeth Warren, D-Mass., and Bernie Sanders, I-Vt., whose broad-based attacks on free markets will alienate many. O’Malley could even draw fundraising support from hedge-fund billionaires, corporate executives and gay conservatives turned off by GOP homophobia. His efforts to restore the Chesapeake Bay and reforms the state’s commercial fishing industry might also appeal to environmentalists.

O’Malley certainly has some disadvantages going into the race. He’s not proven as a national fundraiser, has faced less scrutiny than some other candidates and lacks national name recognition. Nonetheless, in Hillary’s absence, Martin O’Malley could be considered a favorite for the nomination in 2016.

Oral cancer scaremongering by public health officials

September 18, 2014, 9:34 AM

A range of public health leaders, who should know better, have rushed to repeat (and, with their stature, endorse) the apparently unfounded claim by baseball great Curt Schilling that his mouth cancer was caused by smokeless tobacco.

Claims about cancer causation can significantly influence national health policy; when made by recognized authorities, they should be based on scientific and medical facts.

While I fully sympathize with Mr. Shilling, his claim of causation has no on-the-record support from his medical team. That has not stopped the anti-tobacco establishment from rushing to the media.

In remarks trashing smokeless tobacco, Schilling’s oncologist, Dr. Robert Haddad of the Dana-Farber Cancer Institute, made no comments specifically connecting his patient’s cancer to use of smokeless products.

Regardless, in short order, the FDA Center for Tobacco Products repeated Schilling’s causation claim on Twitter, and the presidents of the Massachusetts Medical and Dental Societies and the director of the Arizona Department of Health Services gave it further credence.

I don’t question Schilling’s belief that smokeless tobacco caused his cancer. However, before endorsing his statements, public health officials should address several points:

  1.  Where, specifically, was the “mouth cancer”? According to this National Cancer Institute monograph, almost all cases of mouth cancer attributable to smokeless tobacco occur in the location where it is used. That is also my experience in 30 years as an oral pathologist. In addition, the cases of mouth cancer that I have seen are almost always in users of dry powdered snuff, and they occur in the gum-cheek area. Schilling hasn’t disclosed the location of his cancer, which he blames on moist snuff. Users of that product are not protected from mouth cancer, but epidemiologic studies show that they are not at higher risk than nonusers.
  2. Other risk behaviors. It can be uncomfortable, but doctors need to know about all risk factors for oral cancer. Those at higher risk are individuals who smoke and drink, a combination that tends to be associated with cancers in the throat as well as the mouth. Human papillomavirus infection is an emerging risk factor, especially for throat cancer. Schilling disclosed that his cancer was discovered as a “lump” in his neck; this presentation is more common with a throat cancer than a mouth cancer. Schilling hasn’t disclosed information on his other risk factors.

It is inappropriate for the FDA, presidents of medical societies and other public-health authorities to blindly endorse unvalidated medical claims. Hundreds of thousands of former smokers in the U.S. use smokeless tobacco. Dreading the prospect of getting mouth cancer, they might be motivated by these authorities’ pronouncements to start smoking again, not knowing that the latter significantly increases their mouth, throat and lung cancer risks. Public health advocates should stick to the facts, not engage in scaremongering.

Publish the Constitution Annotated as data

September 18, 2014, 4:06 AM

Dear Library of Congress and Government Printing Office,

For decades, you have jointly published a handy compendium that explains the U.S. Constitution as it has been interpreted by the U.S. Supreme Court. It took a couple of letters from the Senate (and repeated nudging from the public interest community—20092010,201120122013) to move you to publish the Constitution Annotated online more than once a decade, but you still do not regularly publish it online in a structured-data format. Instead, the Constitution Annotated is published as a PDF, which has not been updated in 15 months.

The entire point of the document is to educate the public and Congress about the Constitution. As a technical matter, the Constitution Annotated is prepared as an XML file, published internally to congressional staff as a series of webpages and updated regularly. You could simply make those pages available to the public and we would all be happy. Instead, the public interest community must keep pestering you, year after year.

Why do we care? Publishing the Constitution Annotated in a structured-data format means that the public can easily reuse the information, so that more people can benefit from the knowledge it contains. Structured data makes it easier to embed the information in Wikipedia or create better websites on the Constitution, and so on. It also means we can do neat things with the contents, such as automatically classifying Supreme Court cases by topic simply by drawing upon the document’s structure.

Publishing the Constitution Annotated in structured-data format is also within your mission. As the respective repository and publisher of government-generated information, providing public access to an authoritative explanation of our nation’s founding document, as interpreted over the years, is the kind of thing you do.

So I ask you, on Constitution Day 2014, let’s get this fixed before next year. We’re happy to help.

Constitution Day message to members of Congress

September 17, 2014, 4:14 PM



Dear Congressional Leaders,

We write to urge you to bring to the floor S. 607 and H.R. 1852, the bipartisan Leahy-Lee and Yoder-Polis bills updating the Electronic Communications Privacy Act (ECPA).

Updating ECPA would respond to the deeply held concerns of Americans about their privacy. S. 607 and H.R. 1852 would make it clear that the warrant standard of the U.S. Constitution applies to private digital information just as it applies to physical property.

The bills would aid American companies seeking to innovate and compete globally. It would eliminate outdated discrepancies between the legal process for government access to data stored locally in one’s home or office and the process for the same data stored with third parties in the Internet “cloud.”

Consumers and businesses large and small are increasingly taking advantage of the efficiencies offered by web-based services. American companies have been leaders in this field. Yet ECPA, written in 1986, says that data stored in the cloud should be afforded less protection than data stored locally. Removing uncertainty about the standards for government access to data stored online will encourage consumers and companies, including those outside the U.S., to utilize these services.

The bills would not impede law enforcement. The U.S. Department of Justice already follows the warrant-for-content rule. The only resistance to reform comes from civil regulatory agencies that want an exception allowing them to obtain the content of customer documents and communications directly from third party service providers. That would expand government power; government regulators currently cannot compel service providers to disclose their customers’ communications. It would prejudice the innovative services that we want to support, creating one procedure for data stored locally and a different one for data stored in the cloud. For these reasons, we oppose a carve-out for regulatory agencies or other rules that would treat private data differently depending on the type of technology used to store it.

S. 607 was approved by the Judiciary Committee last year, and H.R. 1852 is co-sponsored by over 260 Members, including a majority of the majority. We urge you to bring them to the floor. We believe they would pass overwhelmingly, proving to Americans and the rest of the world that the U.S. legal system values privacy in the digital age.


ACT | The App Association • Adobe • American Civil Liberties Union • American Library Association • Americans for Tax Reform • AOL • Association of Research Libraries • Automattic • Autonet Mobile • Blacknight • Brennan Center for Justice at NYU Law School • BSA | The Software Alliance • Center for Democracy & Technology • Center for Financial Privacy and Human Rights • Chamber of Digital Commerce • Cheval Capital • CloudTech1 • CodeGuard • Competitive Enterprise Institute • Computer & Communications Industry Association (CCIA) • The Constitution Project • Coughlin Associates • Council for Citizens Against Government Waste • Data Foundry • Digital Liberty • Direct Marketing Association (DMA) • Distributed Computing Industry Association (DCIA) • Dropbox • Electronic Frontier Foundation • Endurance International Group • Engine Advocacy • Evernote • Facebook • Federation of Genealogical Societies • Foursquare • FreedomWorks • Future of Privacy Forum • Gandi.net • Giganews • Golden Frog • Google • Heritage Action for America • Hewlett-Packard • Information Technology Industry Council (ITI) • The Internet Association • Internet Infrastructure Coalition (i2Coalition) • Intuit • Kwaai Oak • Less Government • LinkedIn • Media Science International (MSI) • Microsoft • NetChoice • New America’s Open Technology Institute • Newspaper Association of America • Oracle • Peer 1 Hosting • Personal • reddit • R Street Institute • ScreenPlay • ServInt • A Small Orange • Software & Information Industry Association (SIIA) • SpiderOak • Taxpayers Protection Alliance • TechFreedom • TechNet • Tucows • Tumblr • Twitter • U.S. Chamber of Commerce • Yahoo! Inc.

Think back to 2004

September 17, 2014, 11:34 AM

A record four major hurricanes struck Florida in late 2004, meaning we are in the midst of commemorating the 10-year anniversaries of their landfalls. Former Gov. Jeb Bush visited Punta Gorda on Saturday to mark Hurricane Charley’s anniversary, and residents of Martin and St. Lucie counties recalled Hurricane Frances’ landfall on Sept. 4, while residents of Pensacola remember Hurricane Ivan striking on Sept. 16. Still to come is Sept. 26, when Hurricane Jeanne struck in almost exactly the same place Frances had hit.

More than eight years have passed since Florida was last struck by a hurricane, the longest period of calm in the state’s recorded history. But instead of using this providential streak to better prepare for the next big one, the changes our politicians enacted in 2007 to the state’s property insurance system would actually make a physical and economic recovery more arduous.

Once the lucky streak ends and Florida again faces a single bad storm or series of storms, state taxpayers will be saddled with years of debt to pay the bills incurred by the state-run Citizens Property Insurance Corp. and Florida Hurricane Catastrophe Fund, both of which were made much bigger by the ill-conceived 2007 “reforms.”

Fortunately, new leadership in the Legislature and a governor with the foresight and courage to undo some of those bad 2007 policies have made positive progress.

Citizens held 1.48 million policies at its peak, but it has shed more than a half-million policies to stand at 933,000 policies today. This 37-percent reduction has lowered the possible assessments Citizens could lay on policies that cover homeowners, renters, automobiles, boats, businesses, churches and even charities, from a high of nearly $12 billion to less than $4 billion.

The Cat Fund, Florida’s state-run reinsurer from which every property insurer is required to buy coverage, also has the ability to impose assessments on virtually every policy sold in the state above and beyond those levied by Citizens if it runs out of cash. During five of the past seven years, the Cat Fund’s own actuaries predicted it would face a shortfall if it were asked to cover its full obligations, which currently stand at $17 billion. A 2012 letter from the state’s Office of Insurance Regulation estimated that just a 25-percent shortfall by the Cat Fund would result in the insolvency or near-insolvency of almost half of the state’s top 50 property insurance companies.

The Legislature has scaled back the size of the Cat Fund, and eight hurricane-free years have allowed it to collect almost $10 billion, meaning it currently would be able to fund its obligations for one very bad year, although it likely would be flat broke in the following year.

One solution, which Citizens has already implemented, is for the Florida Cabinet to authorize the Cat Fund to negotiate the purchase of private reinsurance. This would minimize the need to issue debt, decrease the likelihood or severity of post-hurricane taxes and leave the Cat Fund better prepared for a second event.

The Legislature could also right-size the Cat Fund by reducing the amount the law requires it to sell. A practical way would be a gradual reduction of $1 billion per year over three years from the current $17 billion to $14 billion, which experts believe is an amount of coverage the Cat Fund could realistically cover and sustain year after year. The current “buyers’ market” in global reinsurance could easily and affordably assume the $3 billion. The Legislature could also establish a “circuit breaker” that authorizes the Cabinet to increase the Cat Fund’s size up to the current $17 billion on a year-to-year basis in case there is ever a spike or disruption in private reinsurance markets.

These are common-sense reforms that would cause little or no impact on insurance rates, while shielding Floridians from a crisis down the road. If the anniversaries Florida is commemorating this year and next teach us anything, it is that the state is not immune to back-to-back intense hurricane seasons. More can and should be done to prepare, including making Florida’s insurance system sustainable beyond one storm.

Airbnb helps, not hurts, SF housing shortage

September 17, 2014, 9:49 AM

San Francisco is in the midst of a housing shortage, fueled by huge demand and exacerbated by decades of wrongheaded regulatory intervention and, more recently, by professional troglodytes.

Firms such as Airbnb, a peer-to-peer lodge-sharing service, could mark a step toward a market-driven solution to San Francisco’s housing problems by allowing individuals to participate in previously unavailable markets. In response, existing power structures are seeking to place their incumbent interests ahead of ordinary San Franciscans.

The genesis of San Francisco’s housing shortage can be laid squarely at the feet of The City’s political administrators. San Francisco long has demonstrated a preference for strict control of its housing market. As a result, perverse regulatory incentives have chilled the market for property owners who operate long-term rentals.

For instance, effective June 1 this year, property owners who wish to rent their property on a long-term basis are subject to a schedule of steep charges, more than $100,000 in some cases, should they ever choose to cease renting their property. Characterized as a “relocation payment” to the tenant, including any subtenants, these funds also can be used for purposes other than resettlement.

Small-time renters have few options if they wish to avoid the charge. They can continue to rent against their will or they can wait out their tenant and then leave the unit vacant. Neither of these options furthers The City’s goal of providing available and affordable housing.

By erecting such formidable barriers to prevent long-term renters from leaving the market, San Francisco is effectively discouraging property owners from entering the market in the first place. Lodge-sharing arrangements may provide an alternative for small-property owners who would otherwise have strong incentive not to contribute to the supply of available rental properties.

Missteps aside, threats to disruptive enterprise can, and will, come from anywhere. Last week, plaintiffs attorneys filed a class-action lawsuit against Airbnb alleging the firm “participates in, facilitates and enables the illegal short-term rentals (sic) for rooms and apartments in the City and County of San Francisco.”

This approach is interesting, in that it shifts opposition from politics to litigation. Removing a live public-policy dispute to the courts may temporarily grant some legal clarity. Regrettably, that clarity comes at the expense of disenfranchising voters from an opportunity to express their will.

Allegations of individual harm have a questionable nexus with lodge-sharing activity. Enterprising plaintiffs attorneys have shown they are willing to fill their wallet at the expense of innovation. If anything, San Francisco should intervene on behalf of Airbnb, since its model encourages small-property owners to make their units available for public use.

While there is no panacea for San Francisco’s housing shortage, market-oriented reforms that accommodate lodge sharing are an essential first-step toward a long-term fix. Neither a maladapted state regulatory apparatus nor a phalanx of greedy troglodytes should have the last say on innovation.

Alabama’s leaders can reform prisons now or lose control waiting for political cover

September 17, 2014, 9:45 AM

This past week, I had the privilege of serving on a panel discussing Alabama’s prison woes at the Faulkner Law Review’s Annual Symposium in Montgomery. The discussion highlighted capacity issues within the prison system, length of sentences, problems with Alabama’s habitual offender law, health care and mental health issues.

While the panelists engaged in a robust discussion of the critical issues surrounding Alabama’s prisons, there was little disagreement that the state has a problem in need of an immediate solution.

The facts seem to back that conclusion. According to the latest report from the Alabama Department of Corrections, Alabama’s prison system currently holds almost 190 percent of its designed capacity. Combined with prison-staffing issues, Alabama’s prison problems are clear.

Unfortunately, the most difficult problem to solve may be the politics of prison reform.

The immediate solutions to Alabama’s prison problems are relatively limited: Spend money to improve prison conditions and expand capacity, reduce the number of inmates in prison or choose some combination of both.

With cash-strapped state budgets, spending more money on prisons means finding more revenue. The last thing any Alabama politician wants to do is raise taxes or cut state programs to pay for better inmate conditions. In that respect, spending more money on prisons seems like a political non-starter.

The second option is to reduce the current inmate population quickly. That conversation involves discussions about parole, sentencing modifications and alternatives to incarceration. Even if the discussion is limited to non-violent offenders, political advocates of the changes will likely find themselves the targets of allegations that they are “soft on crime.”

A combination of the two approaches does not seem to provide a much more palatable result.

What would happen if Alabama politicians were required to make similar tough decisions by a federal judicial decree resulting from a lawsuit initiated by the likes of the Southern Poverty Law Center or even the Department of Justice under Eric Holder’s guidance?

Under that scenario, Alabama’s politicians would be able to blame an “activist judge,” a “liberal special interest group,” or even “President Obama’s Justice Department” for forcing them to make any politically unpopular reforms. For many politicians in Alabama, that situation is a much more favorable political dynamic.

Other politicians like state Sen. Cam Ward have repeatedly called on their colleagues to enact solutions before a lawsuit requires state action. Ward raises an alternative outcome where voters fault politicians for letting a federal judge dictate state policy.

Either way, the politics of prison reform are just as important as the facts in developing actual solutions to Alabama’s prison challenges. Unless we are willing to give state legislators and the Governor a political pass for making the tough policy decisions now, we may be forced to wait until they are operating under the confines of a federal judicial mandate to see the problems addressed.


September 16, 2014, 3:17 PM

Self-driving cars could require overhaul of insurance regulation

September 16, 2014, 11:11 AM

What is an autonomous vehicle? As demonstrated in a Sept. 15 California Department of Insurance informational hearing, that’s a misleadingly simple question.

Regulators’ attempt to stay in front of the curve, by delving into how autonomous vehicles will interact with insurance, is sensible in light of the regulatory obstacles presented by Prop 103. The emergence of this new suite of technologies actually belies a complicated narrative.

In truth, the era of semi-autonomous vehicles is not waiting to arrive; it is here now. For instance, collision avoidance systems, such as those warning of unintentional lane departure, while seemingly minor in their interference, place a vehicle on the autonomous vehicle spectrum.

The National Highway Traffic Safety Administration categorizes levels of vehicle autonomy into five tiers, from zero to four. Level zero envisions no automation whatsoever. “I think of it as a ’55 Chevy,” Princeton University professor Alan Kornhauser told the CDI. On the other end of the spectrum, at level four, is a vehicle that neither requires nor accepts driver input for critical driving functions. A level four vehicle would have no steering wheel or pedals. Today’s new vehicles largely function at level one.

Where it gets interesting for questions of insurance coverage is at the intersection of levels two and three. At level two, a vehicle may have control over a number of major functions, but still require constant driver attention. Level three sees the need for driver attention reduced to the extent that drivers can focus on other activities. Between these two levels, delineating fault and liability in the event of a collision moves from difficult to, perhaps, impossible.

Since driver input at levels two and three is not constant, evaluating a collision to determine when a driver is in control – or in the process of continually regaining and relinquishing control, and thus responsible for driving – is a labor-intensive proposition. Another layer of complexity is introduced by the prospect of level two and three vehicles communicating with one another to coordinate their activities. In that case, determining which vehicle was the genesis of a causal, collision-inducing action may prove impossible.

Loss scenarios that complicate insurance considerations should not forestall rapid autonomous vehicle development; instead they should inform early discussions about rating autonomous vehicles. The CDI requires insurers to base their rates on actuarially sound data. This is, of course, impossible when there is no data, but instead, only the prospect of favorable outcomes. Insurers are left in a bind.

Since nothing ever works perfectly, not all autonomous safety augmentations will achieve all of the risk reduction for which they are designed. One manufacturer’s system might outperform another, while another manufacturer’s system might promote or augment operator behavior in a dangerous way.

Without loss data, the ability of actuaries to promulgate an accurate picture of the relative risks of level two and three autonomous vehicles will be hamstrung. Insurers would not be able to immediately offer rates that reflect the promised risk-reduction of autonomous-vehicle technology. Here, the CDI can play a positive role by embracing rating flexibility.

It is indeed encouraging to see the CDI hold a meeting to anticipate the new world of automobile insurance in a robotic age. The hearing solicited testimony from academics, stakeholders and the public. Participants drew attention to an array of pitfalls that the state could encounter or foster if it is indelicate in its approach.

Hopefully, continuing efforts will be focused directly on solving the inevitable problems posed by today’s gradually less-relevant, and increasingly burdensome, insurance laws. Perhaps the CDI could induce insurers to take the lead in laying bare anticipated problems and providing timely solutions. The CDI has the power to stimulate insurers’ problem-solving prowess, and it should, since it has neither the profit motives nor practical expertise to do the job itself. It will need to assist insurers by advocating, in legislation and regulation, changes to modernize insurance law appropriately before relentless change overtakes both it and California drivers.

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

Alabama slightly above national average for annual car insurance premiums

September 16, 2014, 10:00 AM

From the Birmingham Business Journal:

“There is definitely correlation between population density — and thus traffic density — and insurance rates,” said Eli Lehrer, president of the nonprofit research group The R Street Institute. “When you have more cars on the road, you have a greater likelihood of accidents and insurance claims.”

Does America need Thomas Jefferson’s limited government progressivism?

September 16, 2014, 9:54 AM

In a letter to Samuel Kercheval dated July 12, 1816, Thomas Jefferson wrote, “I am certainly not an advocate for frequent and untried changes in laws and constitutions.”

Since 1816, there have been more than a few changes to both America’s’ federal laws and even the Constitution itself. In all likelihood, Jefferson and the other founders of the United States would scarcely recognize the nation they sacrificed to establish.

The states, intended by America’s founders to enjoy governing primacy in all but a few enumerated areas of political power, now find themselves as both dependents of the federal government’s financial largess and frequent subordinates to its authority.

At America’s founding, the federal government had few meaningful resources, very little infrastructure and was, by all accounts, the very definition of limited government. It was created by states that saw mutual benefit in ceding some of their autonomy and authority in well-defined areas for their common good.

Many Americans view a return to the founders’ model of public governance as a proven formula for American success and prosperity. Unfortunately, that affinity for America’s founding is easily characterized and confused with a desire to literally return to the social and cultural norms of a much earlier period in American history.

A federalist form of government under which states enjoy a high degree of self-governance is not the enemy of progress. In fact, America’s federalist design is far more innovative than the emerging one-size-fits-all big government approach, because it gives citizens the choice to both reward and penalize state governments for the public policy choices they make.

The emergence of a powerful federal government has mitigated the consequences of many state policy decisions and removed some choices from the states entirely. At the same time, federal action creates a convenient political excuse for state laws and regulations that seem to produce poor results.

Many Americans might be surprised to find that Jefferson, an ardent critic of consolidated federal power, understood the need for American governments to change over time.

In the same letter in which Jefferson expressed his reluctance to frequently modify laws, he nevertheless noted the importance of accepting and embracing change.

“[L]aws and institutions must go hand-in-hand with the progress of the human mind,” wrote Jefferson. “As that becomes more developed, more enlightened, as new discoveries are made, new truths disclosed, and manners and opinions change with the change of circumstances, institutions must advance also, and keep pace with the times.”

Jefferson appreciated the need for institutional flexibility that accommodates change, but he rejected the idea that a strong federal government was best situated to achieve that goal. His unique perspective may have been lost in the annals of history, but America needs to again understand that restoring the intended role of the states in our government is the right recipe for progress.