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The insurance implications of Google’s self-driving car

May 28, 2014, 5:44 PM

Google has announced a truly “driverless” car that lacks a steering wheel, brakes or anything else that allows a driver to control its movements. This actually strikes me as a much bigger deal for the insurance industry than the optionally self-driving cars that have received so much attention and seem likely to come to market within the next few years. And, while the short-term insurance implications of the type of self-driving cars that are coming to market soon seem pretty modest, the new truly driverless models seem a lot more likely to have big effects.

Let’s start with what’s going to happen soon. Self-driving cars that require a “pilot” in a driver’s seat and have a steering wheel, accelerator and brakes are really just an evolutionary change in vehicles that progressively have become more automated over the last decade.  As such, the changes in auto insurance are also going to be evolutionary. All major automakers already sell models with traction control, self-parking, collision avoidance and adaptive cruise control features. Together, these features make a car “half self-driving” already.

The “self-driving car” that will probably be on the market within a few years just adds a steering and navigation functions to this already widely deployed suite of features. Since drivers will still be able to control these cars, they will still need liability insurance. Some claims will become product liability claims—some types of accident claims already are—but most accidents would still result from human error of various kinds. There isn’t going to be a huge change. The insurance business will continue in much the same way for most insurers and most consumers.

There’s one exception: self-driving cars, even in the early generation, will be nigh-impossible for street criminals to steal. Any self-driving car is almost certainly going to be traceable via its GPS system and have a “kill switch.” Protection against theft isn’t a huge part of auto insurance premiums in most places but, in the long term, self-driving cars seem likely to more-or-less eliminate an entire category of crime. (Computer hackers might still steal cars from time-to-time but I’d suspect this is going to be about as difficult as raiding a bank account, which is hard.)

However, the kinds of fully self-driving cars that Google is now testing could represent a much bigger change. If a driver can’t manipulate a car in any way (except maybe to press a “stop” button) most crashes will probably result in product liability claims. Although such product-liability auto insurance could, in principle, be purchased as “master policies” by automakers, the mere fact that we have a longstanding cultural habit of buying auto insurance makes it quite possible that consumers will still buy polices. And, most likely, automakers as well as some insurance and consumer groups will argue for offering these policies on a no-fault basis. This, in turn, could lead to a real resurgence in no-fault coverage that’s fading elsewhere.

Second, under a full-self-driving model a significant fraction of people may well move towards a fractional ownership or “car-sharing subscription” service. Car sharing, of course, is already reasonably widespread in dense urban areas but remains a niche market because it’s not economically efficient to use car-sharing to commute to work, go on a road-trip or, really, do much of anything besides run a brief errand. By contrast, a service that lets you summon cars without drivers to wherever you are and have them take you where you want to go could replace automobiles for many people. One would think these services would probably bundle in some sort of policy in just the same way that existing car-sharing services do.

The near future of self-driving cars probably isn’t a big deal for insurers. The more distant future of fully autonomous cars, however, may well result in big, big changes.

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

Forget everything you know about six-pack organizers

May 28, 2014, 2:57 PM

Picture a six-pack of bottles or cans. Now, imagine you want to transport or organize those bottles and/or cans. How are you going to do it?

Perhaps you might be thinking of a “tray” — say, one six six recessed wells designed to hold a cylindrical fluid container. That’s a pretty good idea. But would you think of something that looked like THIS?

Ok, maybe you would. In fact, you almost certainly would, because this is literally the most obvious design one could imagine. But that didn’t stop the U.S. Patent and Trademark Office from issuing design patent D705618 S1 this week, covering an “organizer for bottles and cans.”

In case you were unclear about how such an imaginative and breakthrough design might work in practice, the grant application included this helpful illustration:

The patent was granted to “inventor” James D. Reid, Jr., who previously was awarded a patent for the following bit of innovation. You can’t say he doesn’t have a genre.


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New York Times prison problems

May 28, 2014, 9:07 AM

A new study from the National Academies strongly suggests that we should reduce the number of people in prison and jail and make it easier for them to re-enter society. This is all good. As the report says, things have “gone past the point where the numbers of people in prison can be justified by social benefits.” But, in endorsing the study, the New York Times editorial board, now almost sure to set the tone for the left wing’s agenda on criminal justice, ignores the history that lead to such high rates of incarceration, understates the crimes committed by people now in prison and is far too optimistic about the possibility that efforts at “rehabilitation inside prison” coupled with measures that remove “barriers that keep people from rejoining society” can actually solve the same social problems prison did.

History first: We have a lot of people locked up because circumstances demanded it. Quite simply, crime ranked among America’s most pressing political issues between roughly the mid-1950s and mid-1990s. As crime declined—coincident with building more prisons—the problem disappeared from the public imagination. Today, only 2 percent of people tell Gallup pollsters that crime is the nation’s most important problem and, in 2012, neither presidential candidate mentioned it in any of the debates or his acceptance speech. More than a third of Americans considered crime a vital problem as recently as the early 1990s. Today, overall crime rates in the United States (a measure dominated by assaults and thefts) are lower than those in Europe and Canada. Judged by its intended results, mass incarceration has “worked.” We can’t forget that if we want to make good policy.

Second, contrary to the implications flowing from the NYT, others on the left and a few on the libertarian right, there are very, very few “innocents” being locked up. Most non-violent offenders have done very bad things. The Bureau of Justice Statistics finds that such “non-violent offenders” have long prior records — an average of almost ten arrests and four convictions — and a third all have violent offenses on their records and nearly 10 percent actually used a weapon to commit the “non-violent” crime for which they’re serving time (e.g. a drug dealer who shoots a competitor and then pleads guilty to a narcotics offense). While plenty of sentences are excessive, nobody goes to jail for life for “stealing a pair of socks” as the NYT claims: No state punishes non-violent petty theft as a felony under a “three strikes law.”

Third, although a lot of people (me included) would favor a lot more efforts to help both prisoners within jailhouse walls and after they get out, decades of social science have produced few certain ways of doing this. Many programs that sound good – vocational training, in-prison counseling, literacy classes, even most drug treatment – actually show mixed or negative results. The best evidence suggests that particularly intensive community monitoring of released offenders coupled with “swift and certain” sanctions (usually a brief return to prison or jail) can reduce recidivism a bit but, even under the best of these programs, recidivism remains very, very high. The reality is that changing individual behavior is very, very hard for anyone – just ask anyone who has tried to diet or undergone psychotherapy – and, if anything, people who transgress social norms strongly enough to end up in prison are going to be even harder to change than law-abiding citizens. This means we should tread carefully in changing a policy that, for all of its very real flaws, has worked more-or-less as advertised.

America can—and should—reduce mass incarceration. But we have to recognize where current policies come from, with whom we’re dealing, and the difficulties implicit in getting anybody to change.

Alcohol taxes should be tripled

May 28, 2014, 8:59 AM

America is rushing headlong toward legalizing the recreational use of marijuana. A growing majority—54 percent as of a Pew survey released just last month—favor legalization, and an even larger majority of millennials (69 percent) feels the same way. Colorado and Washington are the first states to move decisively in this direction, but they won’t be the last. I basically think this is an ok development. Like Mark Kleiman, a public policy professor at UCLA who is my guru on the regulation of controlled substances, I see full commercial legalization as a truly terrible idea, while I think noncommercial legalization, ideally via monopolies owned and operated by state governments, would be an improvement over the status quo. Regardless, marijuana legalization is coming, one way or another.

One thing that is really striking about the new Pew data is that 69 percent of Americans believe, correctly, that alcohol is more harmful to society than marijuana. When asked if alcohol would still be more harmful to society than marijuana if marijuana were just as easy to get a hold of as alcohol is now, 63 percent said that yes, it would be. Most people see marijuana’s relative harmlessness as a reason for us to regulate marijuana as lightly as we regulate alcohol. I see things differently. The fact that alcohol is more harmful to society than marijuana is a reason to regulate alcohol more stringently than we regulate marijuana. In other words, let’s ease up on marijuana prohibition and ramp up good old-fashioned alcohol prohibition. More precisely I favor something like what the libertarian journalist Greg Beato calls, and not in a nice way, “prohibition lite.”

Though it is true that I was raised in a Muslim household, it is not my intention to impose sharia law on you and yours. As someone who came to drinking late in life, I still marvel at its disinhibiting effects and I genuinely appreciate the good it can do by, essentially, helping awkward people have fun. I also think there is much to be said for psychoactive substances like MDMA, or “Molly,” which have enormous therapeutic potential.

But alcohol is crazily dangerous, and it needs to be more tightly controlled. Everyone knows that Prohibition was a disaster. What most of us forget is that the movement for Prohibition arose because alcohol abuse actually was destroying American society in the first decades of the 20th century, and the strictly regulated post-Prohibition alcohol market was shaped by still-fresh memories of the pre-Prohibition era.

For a nightmare vision of where heavy drinking can lead a society, consider Russia, where the pervasiveness of binge drinking contributes to an epidemic of cardiovascular disease and a death rate from fatal injuries that you’d normally see in wartime. Political economist Nicholas Eberstadt has gone so far as to suggest that drunkenness is a key reason why Russia, a country with universal literacy and a level of educational attainment that is (technically) in the same ballpark as countries like Australia and Sweden, has roughly the same living standards as Ecuador.

Closer to home, Great Britain has seen a staggering increase in alcohol consumption since the 1990s, much of it among teenagers. Tim Heffernan, writing in the Washington Monthly, has attributed Britain’s binge-drinking crisis to its laissez-faire alcohol market, which has allowed for the vertical integration of the liquor business. America has been shielded from U.K.–style liquor conglomerates by those post-Prohibition regulations that inflate the cost of making, moving and selling booze, but that’s now changing thanks to big multinationals like Anheuser-Busch InBev and MillerCoors, which are working hand in glove with national retail chains like Costco to make alcohol as cheap and accessible as they can.

Why would I, a great lover of the free-enterprise system, want the alcohol market to be more heavily regulated? Precisely because I’m a believer in the power of the profit motive, I understand how deadly it can be when the product being sold is intoxication. For-profit businesses exist to increase sales. The most straightforward way to do that is not to encourage everyone to drink moderately, but to focus on the small minority of people who drink the most. That is exactly what liquor companies do, and they’ll do more of it if we let Big Liquor have its way. In Marijuana Legalization: What Everyone Needs to Know, the authors estimate that at current beer prices, it costs about $5 to $10 to get drunk, or a dollar or two per drunken hour. To get a sense of what the world would look like if that price fell significantly, go to a typical town square in England on a weekend night, where alcohol-fueled violence is rampant, or to Russia, where the ruling class has used cheap vodka as a tool to keep the population drunk, passive and stupid for generations.

We shouldn’t be satisfied with keeping the per-dollar cost of getting drunk where it is today. We should make it higher. Much higher. Kleiman and his colleagues Jonathan P. Caulkins and Angela Hawken have suggested tripling the federal alcohol tax from 10 cents a drink to 30 cents a drink, an increase that they estimate would prevent 6 percent of homicides and 6 percent of motor vehicle deaths, thus sparing 3,000 lives (1,000 from the drop in homicides, 2,000 from safer highways) every year. Charging two-drink-per-day drinkers an extra $12 per month seems like a laughably small price to pay to deter binge drinking. Then, of course, there is the fact that a higher alcohol tax would also raise revenue. If you’re going to tax tanning beds and sugary soft drinks, why on earth wouldn’t you raise alcohol taxes too? If anything, 30 cents a drink isn’t high enough. Let’s raise the alcohol tax to a point just shy of where large numbers of people will start making illegal moonshine in their bathtubs.

Kleiman et al. have also suggested creating separate “drinking licenses.” Bars wouldn’t just check the IDs of the young looking. They’d check everyone’s drinking licenses, and those who’ve had them revoked for some reason (drunk driving, let’s say) would be bounced. A related reform would actually lower the drinking age, to get underage drinking out of the shadows and to socialize older teenagers into drinking responsibly.

I would go further. Libertarians like Beato can’t stand former New York City Mayor Michael Bloomberg for his constant efforts to reduce the smoking rate, which have succeeded in reducing smoking while dramatically raising the costs borne by poor smokers. For example, Beato reports that smokers earning less than $30,000 a year now spend almost a quarter of their income on cigarettes, or twice as much as they did a decade ago. Yet even Bloomberg’s harshest critics acknowledge that smoking rates have declined. Rather remarkably, New York City’s adult smoking rate is 14 percent, well below the nationwide rate of 19.3 percent. This is despite the fact that the five boroughs are chock full of immigrants from countries where smoking is all the rage. And it’s not just because of higher cigarette taxes. Apart from banning smoking in restaurants, bars and public parks, Bloomberg used a series of social marketing campaigns to sell people, and particularly young people, on the dangers of smoking.

Recently, Derek Thompson of the Atlantic riffed on new research from the marketing professors Caleb Warren and Margaret C. Thompson, who argue that “coolness” is “a measured violation of malign expectations.” Instead of simply warning young people of the dangers of drunkenness, we need to make binge drinking seem mainstream and thus lame. This will be extremely difficult because, as I’ve learned to my detriment, being drunk can be quite fun—until you wet the bed or start murdering people.


Endow R Street’s office supplies of freedom

May 27, 2014, 2:00 PM


After two years of serious work and a lot of fun, we at the R Street Institute feel like we’ve finally joined the big leagues. We’ve produced widely-circulated papers, hosted conversation-starting events and increased our footprint in DC and in the states.

To celebrate our motley crew becoming a going concern, we’ve decided to do what grown-up think tanks do and create some endowed chairs, and we’d like you to endow them! But don’t worry – like everything else with R Street, this isn’t your typical endowment opportunity. While we do plan to grow in the coming year, these chairs won’t cost you $1,000,000 over the next two years. Rather, we’d like you to make your mark on R Street by simply endowing our actual office chairs. And just about everything else in our office.

So now’s your chance! We’ve listed many items from our office, and the winner for each item can name it whatever he wants. Yes, you read that correctly – if you want Andrew to come in each day and sit in the “I love the Marketplace Fairness Act Chair for the Study of Internet Taxation,” you can do that! There’s something for every budget – from all of our chairs, to our coffee maker to office “decor” – a term we use lightly. We expect the strongest bidding war to be over R Street’s liquor cabinet.

The auction will last one week, after which the names of our items and their benefactors will be announced. Don’t let someone outbid you in this once in a lifetime opportunity! After all, most of you live in one of America’s most expensive cities and work for nonprofits – when are you going to get the chance to endow a chair again?

To visit the online auction, please click here.

*R Street reserves the right to have final approval over naming of endowed items.



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Meet the men fighting to keep minor drug criminals in jail

May 27, 2014, 10:22 AM

From BuzzFeed:

“The American system is built to be deliberative,” said Eli Lehrer, president of the R Street Institute, a libertarian-skewing think tank that supports a reexamination of the drug war, said. “I’m not that different from a lot of these people and obviously I hope that the Smarter Sentencing Act would become law. I support it. But I don’t think the conservatives oppose it — or the liberals opposing it — are doing so out of bad motives.”

Lehrer believes the Republican Party won’t change until some of the fervent tough-on-crime types have left politics.

“The generational divide is enormously important,” he said. “If somebody was originally elected at a time when many of their constituents’ number one complaint was crime, that’s going to shape their political ideology for life, as it should.”

Rate Bureau protects vested interests, not consumers

May 27, 2014, 9:57 AM

A recent Star News editorial on auto insurance reform in North Carolina (“Don’t let companies wreck state’s auto insurance system,” May 24) argues that allowing companies to opt out of the North Carolina Rate Bureau “would eventually tear apart the system that has kept rates and the market competitive.”

In truth, the rate bureau is the opposite of competition — a legally mandated, but privately run cartel through which insurers collectively set both rates and the terms and conditions of coverage for insurance products. That’s why every other state in the union abandoned rate bureaus a long time ago.

It bears noting that the companies fighting to reform the system – State Farm, Geico, Allstate and Progressive – are also the four largest auto insurers in the United States. They rose to the top by offering the most attractive products at the most attractive prices in every state in the union.

By contrast, reform opponents Nationwide, N.C. Farm Bureau and GMAC control 34.1 percent of North Carolina’s market, but just 4.9 percent of the national market. They benefit from the status quo, which bars new products, grants enormous pricing freedom to companies with a large number of “consent to rate” policyholders and guarantees by law that the industry must earn a profit.

It is entrenched interests, not consumers, who benefit from the rate bureau system.

Prop 103′s troublesome legacy

May 23, 2014, 12:58 PM

It’s been more than a quarter-century since California voters passed Proposition 103. Spurred on by questionable analysis of the causes of high auto insurance premiums, five competing insurance-regulation referenda were placed on 1988′s general election ballot. Prop 103, with 51.13 percent approval, was the only one of the five to be ratified by the voters.

The initiative has served as the basis of a wave of new laws that have proven as problematic in practice as they are philosophically. Thus, decades later, some provisions of Prop 103 remain flashpoints of conflict between insurers, plaintiffs’ attorneys, “rate intervenors” and the state Department of Insurance. Today, there are four cardinal infirmities that continue to impact California deleteriously.

Infirmity number one is the election, rather than the appointment, of the state’s insurance commissioner. Though perhaps not apparent to many voters, the regulatory good and the public good do not always coincide. This is even more true when the regulator is a politician, primarily concerned with personal political survival and ambition. The public good arguably pales in comparison to a politician’s selfish interest in personal survival and power.

Even worse, the politician-commissioner often will demonize the insurance industry and ignore insurance realities in order to create the illusion of himself or herself as the aggressive savior of the public. Given the essential, esoteric and complex realities of insurance, one can hardly imagine a worse scenario for efficient and sensible regulation. Expertise is required to regulate coherently. While not every appointed expert is perfect, it’s hard to imagine a worse system than the one brought about by Prop 103. Voters and insurers alike would do well to work to see the commissioner’s office again filled by appointment.

Infirmity number two is the requirement that insurers submit rate-filings to the Department of Insurance for approval prior to their use. This system, known as “prior approval,” has proven slow, costly and cumbersome. Part of the problem with regulatory vetting of insurance rates in California is that the process is subjective and political. The language of Prop 103 and other insurance-rating laws is artfully vague about what constitutes an “appropriate” rate. Could there be a better lever for a meddlesome politician or social engineer than to have the power to determine whether a rate is “inadequate, excessive or unfairly discriminatory”? In the immediate aftermath of Prop 103, to turn the referendum into something workable, insurers filed lawsuit after lawsuit to clarify how they should operate in this new rating environment.

Yet, the struggle to resolve what those five words mean is ongoing. In April this year, a coalition of insurers petitioned a Sacramento court to intervene in a case brought by Mercury Insurance in which the insurance commissioner transformed a filing for a rate increase of 7.3 percent into a rate decrease of 8.2 percent. The unmistakable message from the regulator to the industry is that, if you have the gall to request a rate increase, you will be punished…and severely. Presumably, the hope of the intervening insurers is to regain some control over the pricing of their products. If that hope is dashed by the court, the department will continue to revel in rate-approval ambiguity.

Infirmity number three is the bureaucratic bloat needed to accommodate the rate-filing process. In a bureaucratic dream come true, the department has more than doubled its workforce, from 600 to 1,300 employees, and has seen its budget increase by $130 million, to $237 million. Slyly, the department touts that little of its budget comes from the state’s general fund. This is true, but only because its budget comes from the state’s “Insurance Fund,” financed almost entirely by fees and assessments on insurance companies. This is a bizarre brag, since those costs are necessarily passed along to insurance-buying Californians.

Infirmity number four, and perhaps the worst from a personal greed standpoint, has been Prop 103′s creation of a private right to intervene in the rate-making process. Suffice it to say that, in California, it pays to get in the way. Intervenors are individuals or groups allowed to participate in the rate-making process who are entitled to recover the cost of their activities from the filing insurer. (Would you be shocked to discover that the drafter of Prop 103 is a frequent intervenor?) Intervenor costs borne by insurers in the rate-making process are passed on to their policyholders. In addition, while consumers, insurance companies and the department benefit from an efficient and quick rate consideration process, intervenors do not, since they are able to bill more hours and make more money by dragging out the process.

An intervenor-driven delay would be understandable if it was necessary, but it is not. Given the department’s politically driven obsession with rates, the participation of intervenors is redundant. Heroically, unnecessary intervenors usurp the department’s unnecessary role. Clearly, insurers and the department should actively seek to curtail the damage caused by the inevitable “for-profit” intervenors by reevaluating the administrative processes and standards to which intervenors are subject.

In short: Proposition 103 has frustrated its stated purpose, which was to save Californians money. It has led to explosive growth in both regulatory bureaucracy and associated costs of doing business in California, while doing nothing to impact such cost drivers as insurance fraud or other fundamental factors that determine insurance rates. Just as troubling, as a result of affordability problems caused by the higher costs it has driven, Prop 103 may have led to an increase in uninsured drivers on California roads.

It would be of great benefit for California to eliminate election as the method of selecting the insurance commissioner, to return to an open rating system and to dump intervenors. The effort required would be Herculean, but it would be worth it.

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

Ian Adams

May 23, 2014, 11:09 AM

Ian Adams is an attorney in Sacramento, Calif. and an associate policy analyst of the R Street Institute.

Africa can tap global reinsurance markets; why not Florida?

May 23, 2014, 10:32 AM

In what can only be taken as an exceedingly encouraging sign for emerging markets around the world, an African Union-created agency has established the continent’s first-ever catastrophe insurance pool, offering coverage to the nations of Kenya, Mauritania, Mozambique, Niger and Senegal to protect against extreme weather and threats to the food supply.

Capitalized with contributions from Germany and the United Kingdom, the agency’s newly created Bermuda-based specialist hybrid mutual Africa Risk Capacity Insurance Co. Ltd. is offering $135 million of coverage to the participating countries. The pool also has secured $55 million of index-based reinsurance, brokered by Willis Re and Willis’ Global Weather Risks Practice. Reinsurance claims will be calculated using satellite rainfall data and parametric triggers designed to account for each country’s specific mix of staple crops.

As the agency itself put it in announcing the deal:

The aim of the ARC catastrophe insurance pool is to reduce African governments’ reliance on external emergency aid. Currently international assistance is secured through an appeals system and then allocated on a largely ad hoc basis once a disaster strikes. Consequently, African governments affected by disasters can be forced to reallocate funds from essential development projects to crisis responses, exacerbating problems in other areas of their economies.

That’s sound planning, particularly as it comes at a time when a massive influx of third-party capital from hedge funds, pension funds and other institutional investors has forced reinsurance pricing to grow so soft, and terms and conditions so generous, that both credit and equity analysts are warning the sector is heading into “dangerous” territory. As reported by the ILS-focused blog Artemis.bm, the investment bank Keefe, Bruyette & Woods recently warned that:

On property catastrophe reinsurance specifically, KBW’s analysts note the growing concern that the influx of third-party reinsurance capital has significantly shifted property catastrophe reinsurance market dynamics, with softening now also emerging on other lines of reinsurance business.

In KBW’s view, attempts by some reinsurers to ward off pricing pressure by loosening reinsurance terms, conditions and coverages are a dangerous and under-appreciated side effect of the pricing pressure in the market.

Of course, until such point that the market softness actually pushes over into solvency-threatening territory – not currently a risk with such an over-capitalized industry – then what is a source of distress for bondholders and shareholders is a major boon for policyholders.

Which makes it all the more disheartening that one of the largest government-backed catastrophe insurance entities in the United States – the Florida Hurricane Catastrophe Fund – is not taking this opportunity to shift some of its $17 billion in potential 2014 obligations off the backs of taxpayers and onto a private market that is clamoring for more risk.

Coming into the year, we had hopes the time was ripe for risk transfer by the Cat Fund, with Chief Operating Officer Jack Nicholson presenting a plan buy up to $1.5 billion in private reinsurance for the 2014 hurricane season. Alas, the Florida Legislature closed out its 2014 session earlier this month with no action on that front.

Certain partisans will point out that, given a historically lucky streak of good weather, the Cat Fund is in the best shape it’s faced in years. According to the twice-yearly assessment released last week by Raymond James & Assoc., the fund’s financial adviser, it goes into the 2014 hurricane season (which starts next weekend) with an estimated bonding capacity of approximately $8.3 billion and total claims-paying capacity of $21.25 billion. That’s certainly a major improvement from the reports in the not-distant past projecting the fund would face a shortfall if a major storm were to hit the state.

But bear in mind that baked in to this apparently rosy outlook are a few major assumptions. One is that, if faced with a capacity-draining event or series of events in 2014, the fund would need to borrow up to $4 billion to meet all of its needs — bonds that would be financed by post-storm “hurricane taxes” on nearly every insurance policy in the state.

This would represent an extremely large bond issuance by municipal market standards. Since 2009, there have been only three municipal issues that were this large: two (one taxable and one tax-exempt) by the State of California that were each more than $6.5 billion, and a $4.1 billion tax-exempt issuance by the Puerto Rico Sales Tax Finance Corp.

The broker-dealers consulted by Raymond James expressed confidence that the Cat Fund would be able to raise the needed funds, although it is notable that Goldman Sachs, which traditionally had been the most bearish about the fund’s bonding capacity, has been dropped from the rotation of polled firms. Raymond James itself felt compelled to offer the caveat that, just because the Cat Fund would likely to be able to raise the money, doesn’t mean it necessarily will be on attractive terms:

As a less-frequent issuer with relatively less debt outstanding and primarily at the shorter end of the yield curve, the FHCF may not be as well-covered by investor credit analysts in the primary or secondary markets, even though it has strong credit ratings. This relative lack of exposure and investor familiarity could serve as a limiting factor in determining the FHCF’s potential market access in the short run.

What’s more, it is important to keep in mind that the report shows only that the fund would be able to cover its obligations for ONE bad hurricane season. If it faced back-to-back storm years that drain its capacity, such as Florida experienced in 2004 and 2005, the Raymond James report shows it would go into that subsequent season facing a potential $5.1 billion shortfall in its ability to meet all of its obligations.

All of which is to say that Florida lawmakers are once again foolishly rolling the dice on the weather, when far more stable, affordable and fiscally prudent forms of risk transfer are readily available (and, indeed, are being smartly exploited by the Cat Fund’s sister entity, Florida’s Citizens Property Insurance Corp.) This is one case where the First World clearly has a thing or two to learn from the Third World.

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Patent trolls rejoice! Reform bill likely dead as sponsoring Sen. Patrick Leahy takes it off agenda

May 23, 2014, 9:07 AM

From Reason:

“Very disappointing that patent reform efforts came to a halt with @SenatorLeahy‘s decision today,” the R Street Institute, a D.C.-based think tank that has been following patent reform efforts, tweeted this afternoon.

Letter to Chairman Leahy: Don’t kill prospects for real patent reform

May 23, 2014, 8:00 AM

May 22, 2014

The Hon. Patrick Leahy
Committee on the Judiciary
United States Senate
Washington, D.C. 20510

Dear Chairman Leahy:

On behalf of the R Street Institute, we urge you to reconsider your recent decision to table the committee’s current patent reform legislation. The committee’s efforts to curb frivolous litigation have offered an important step toward providing security to American innovation. The panel should continue to work toward compromise on provisions requiring fee shifting to losers of spurious lawsuits, increased transparency in demand letters, heightened pleading standards requiring the identification of alleged infringements and protections for end users.

In your statement explaining the decision to shelve the bill, you claim that “competing companies” couldn’t come to agreement on the best way to achieve the goal of patent reform. But no particular company or industry should be guaranteed favorable treatment for their particular business model. The job of the committee is to bolster our patent system in a way that encourages innovation and protects against egregious abuses, not to satisfy the competing interests of prominent businesses.

It’s disheartening that important bipartisan reform efforts have stalled since, in our view, they represent the beginning of fundamental reform of the patent system, not the end. Beyond litigation reform, the system still needs significant overhaul to ensure more consistent patent quality.

America’s inventors deserve better and this current Congress owes them more. Patent reform has passed the House by a wide margin and enjoys the support of the president, as well. The last piece of the puzzle is for the Senate to act upon broad bipartisan support for patent reform and produce a consensus bill that advances this important cause. We look forward to working with you to make that a reality.


Zach Graves & Lori Sanders
R Street Institute

Coalition urges sensible spending reforms for NDAA

May 22, 2014, 5:24 PM

May 21, 2014

The undersigned organizations may not agree on many things, but we all agree on this: The United States must curb wasteful and ineffective spending at the Pentagon. Doing so will save billions of valuable tax dollars as well as help to make America safer with the hard decisions our national security requires.

As you prepare to consider H.R. 4435, the National Defense Authorization Act for Fiscal Year 2015, we hope you will keep in mind ways to eliminate wasteful and unnecessary spending, implement smart reforms that enhance national security, reduce obsolete and antiquated weapons systems and policies and increase oversight of precious tax dollars. There is a growing consensus—among members of Congress from both sides of the aisle, policy experts of various stripes and even defense industry CEOs—that you can, and should, find areas for substantial savings in the Pentagon’s bloated budget.

We believe there are smart ways to achieve this savings, and urge you to vote in favor of a handful of amendments that have broad, bipartisan support. We urge you to use this opportunity to set a stronger, better and more sustainable path for our national security. In a time of fiscal restraint, we cannot afford to put parochial political interests ahead of our national security.

We urge you to vote YES on the following sensible amendments:

Amendment 8. (filed as #277)—Polis (CO), Blumenauer (OR): Prohibits funds from being used for the Navy to carry out the refueling and complex overhaul of the USS George Washington and strikes $483 million in unrequested funding for that purpose.

Amendment 24. (filed as #221)—Blumenauer (OR): Requires the Congressional Budget Office (CBO) to update, on an annual basis, their report on the projected costs of U.S. nuclear forces.

Amendment 37. (filed as #131)—Griffith (VA), Ellison (MN): Requires the Department of Defense to fulfill former Secretary Robert Gates’ Efficiency Initiative relating to the number of general and flag officers by reducing approximately 33 positions through attrition by the end of 2015.

Amendment 87. (filed as #72)—Burgess (TX), Lee (CA): Requires a report ranking all military departments and Defense Agencies in order of how advanced they are in achieving auditable financial statements as required by law.

Amendment 120. (filed as #301)—Nolan (MN): Requires review of any construction project in Afghanistan in excess of $500,000 that cannot be physically inspected by U.S. personnel.

Amendment 138. (filed as #307)—Mulvaney (SC), Murphy (FL) : Codifies criteria developed by the Office of Management and Budget (OMB) in 2010 to clarify when military spending should be designated as contingency operations and properly be part of the Overseas Contingency Operation budget.

Amendment 139. (filed as #284)—Walberg (MI), Cohen (TN): Prohibits any new funds for the Afghanistan Infrastructure Fund until previously appropriated funds have been fully expended.

Amendment 147. (filed as #278)—Polis (CO), Nadler (NY): Urges the Secretary of Defense to conduct successful operationally realistic tests before purchasing additional ground-based missile defense interceptors.

As you vote on the defense authorization bill, we thank you for considering our broad consensus for finding sensible savings to make our nation more secure.

Campaign for Liberty
Center for International Policy
Coalition to Reduce Spending
Council for a Livable World
Friends Committee on National Legislation
Just Foreign Policy
National Priorities Project
National Security Network
National Taxpayers Union
Peace Action
Peace Action West
Progressive Democrats of America (PDA)
Project On Government Oversight
R Street Institute
Taxpayers for Common Sense
Taxpayers Protection Alliance
United for Peace and Justice
U.S. Labor Against the War (USLAW)
Win Without War
Women’s Action for New Directions
Women Legislators’ Lobby

Coalition opposes Section 303 of the FIRST Act

May 22, 2014, 4:15 PM

The Hon. Lamar Smith
Chairman, Committee on Science, Space and Technology

The Hon. Eddie Bernice Johnson
Ranking Member, Committee on Science, Space and Technology

CC: Members of the Committee on Science, Space, and Technology

Re: Opposition to Section 303 of the Frontiers in Innovation, Research, Science, and Technology Act of 2014 (FIRST Act)

May 19, 2014

We, the undersigned organizations, write to express our opposition to language contained in Section 303 of the Frontiers in Innovation, Research, Science, and Technology Act of 2014 (FIRST Act).

Our organizations believe that taxpayers deserve open, timely access to the results of taxpayer-funded research. Any other dynamic is tantamount to double-taxation: with taxpayers paying once to fund the research and paying a second time to access the results thereof. Moreover, allowing ready access to publicly funded work benefits our economy, and society more generally, by increasing the likelihood that said research findings will be utilized by a broader audience, thus spurring innovation, economic growth and creating jobs.

The broad principle of open access to taxpayer-funded research is backed not only by our organizations, but also by the publishing industry proper, which issued the following statement:

“Publishers share the goal of the House Science Committee, the White House, and others around the country to enable public access to high-quality peer-reviewed research articles.”—Association of American Publishers letter to Chairman

In February 2013, the White House Office of Science and Technology Policy (OSTP) issued a directive on public access to the results of federally funded Research, which put the United States on a path to ensuring stronger adherence to open access standards. The directive requires “federal agencies with more than $100 million in annual R&D expenditures to develop plans to make the published results of federally funded research freely available to the public within one year of publication.” Said agencies have since submitted draft policies in accordance with the directive which are in the process of being reviewed by the White House. We anticipate the release of these plans in the coming weeks.

Sadly, rather than supporting basic open access principles, Section 303 contravenes them, and undermines the progress that has been made towards achieving open access by:

  1. Allowing for a 24-month embargo period during which the results of publicly funded research may be withheld from the public – an unconscionably long delay, which is completely out of step with policies currently established in the United States and around the world.
  2. Allowing for an additional 12-month extension of this already too-long embargo window.
  3. Duplicating the efforts of the OSTP memorandum and needlessly delaying the implementation of agencies’ open access plans by 18 months or more.

We urge you to do right by taxpayers by amending the FIRST Act so as to modify section 303, with language that supports the ongoing implementation of strong open access mandates across the federal

Campaign for Liberty
Demand Progress
Liberty Coalition
R Street

School reformers should try to make public schools cheaper, not just better

May 22, 2014, 10:55 AM

Say you were given $26,000 to educate a young kid for a year. Do you think you could put that money to good use? I do.

In most of the country, there are quite good private schools that would charge you substantially less for a year’s tuition, leaving you with plenty of extra money for field trips, academic enrichment programs, summer camp. Tuition at the average Catholic elementary school, for example, is $3,673, and it is $9,622 for a freshman in high school. To be sure, tuition tends to be higher at nonsectarian schools, but the average is nowhere near $26,000. There are rarefied schools in America’s big cities and boarding schools where tuition is substantially higher than $26,000, but that largely reflects the fact that those schools long to be highly exclusive status symbols.

Let’s leave aside this crazy notion that you’d just spend your $26,000 on private school tuition and a few extras for the kid in question. That’s too easy. Let’s instead imagine that you’re given $26,000 per student to educate 30 kids, or a classroom’s worth. If my math’s not off—and it very well could be, as I am a product of America’s public schools—you would have $780,000. Don’t you think you could hire a couple of pretty good teachers, two personal trainers, a chef, and a social worker for that much money—and have enough left over to rent a light and airy loft space in a typical American city? The rent might be cheaper still in a depressed inner-city neighborhood. If you decided to skimp on the personal trainers, you’d have more money to spend on high-tech gadgets and enriching experiences for your young charges. Lots of people would come up with lots of different ways to give their students an engaging learning experience. Yes, I’m making this sound much easier than it would be in practice. It takes a lot of experience to know which teachers you should hire, and to navigate the thicket of regulations designed to prevent amateurs like me from setting up fly-by-night schools.

The reason I’m so fixated on this $26,000 figure is that in 2010, when Newark, N.J., became ground zero of the education reform movement, the local schools were spending more than $26,000 per student. That was the year Facebook CEO Mark Zuckerberg pledged $100 million to back education reform efforts in Newark if the city raised another $100 million, a pledge that helped put then-Mayor Cory Booker and Gov. Chris Christie on the national radar. It’s admirable that Zuckerberg chose to devote this money to poor kids and not to buying an island off the coast of Central America and populating it with reanimated dinosaurs. But Rick Hess, the director of education policy studies at the conservative American Enterprise Institute, points out the inconvenient fact that this $200 million cash infusion—Zuckerberg’s money plus the matching funds—would represent just a 4 percent increase in Newark’s annual public school spending over the course of its five-year payout.

An extra $40 million a year might have made a difference if Newark’s public schools were a well-oiled machine. That’s not the impression you get from Dale Russakoff’s sobering account of Newark’s school reform efforts in The New Yorker. Russakoff reports that there is one administrator for every six public school students in Newark, and clerks represent 30 percent of the central bureaucracy’s workforce. Despite this army of administrators, Russakoff observes that “payroll checks and student data were habitually late and inaccurate.” Given the enormous amount Newark was spending on clerks, and clerks’ clerks, is it obvious that Newark’s public schools needed bigger budgets to improve the quality of education?

Newark is a rough town. It has long been one of America’s poorest and most corrupt cities, and the problems plaguing its public schools are so egregious that one hesitates to treat it as a test case. Even if Newark’s public schools were run by crackerjack professionals, they’d face serious challenges. Unfortunately, its problems aren’t unique. Few of Newark’s children are raised in the kind of stable homes that offer a solid foundation for educational success, and that’s a phenomenon that’s increasingly common across the country.

In fairness, Newark’s per pupil spending is unusually high. The K-12 average for the United States in 2010 was $11,826. That is 39 percent higher than the average per pupil spending in the world’s rich democracies, and it is second only to Switzerland. Though American students don’t perform terribly well in math, reading and science compared with students in other rich democracies, American schools know how to spend. As of 2011, the United States spent $550 billion on K-12 public schools. This masks enormous variation across states. New York state, for example, spent $18,618 per pupil in 2010 while Utah spent $6,064. To some extent, this reflects differences in the cost of living, but the cost of living isn’t three times as high in Oswego, New York, as it is in St. George, Utah. Is New York state’s spending buying better results?

One crude way to answer this question is to consider how New York state students fare on the National Assessment of Educational Progress. When we compare the average math scores of fourth-graders who are eligible for the national school lunch program, we find that poor kids in New York state score 231 while poor kids in Utah score 233. This is hardly a slam-dunk case. Kids in New York state and kids in Utah are different in all kinds of ways that go beyond income. But are they “we have no choice but to spend three times as much” different?

Or consider Milwaukee, which has had a system of school vouchers in place for several years. In 2012, 57 percent of voucher students scored proficient or higher in reading on a statewide standardized test while the same was true of 60 percent of Milwaukee Public School students. Score one for traditional public schools! The math results were similar: 41 percent of voucher students reached proficiency while 50 percent of their MPS peers cleared the same bar. So was this a clear case of public school superiority? Not quite. It turns out that while MPS spent an average of $9,812 per student, the voucher program spent $7,670 per student. This partly reflects the fact that voucher schools are often more bare bones than local public schools. But the voucher schools also did a much better job of getting their students to graduate. Though Milwaukee’s voucher schools are far from perfect, they appear to be doing something right, starting with the fact that they’re using public dollars more efficiently. (Here is a more rigorous take on how Milwaukee’s voucher schools stack up against its public schools.)

Calling for higher spending is an easy way to signal that you care about The Children. Yet there is very little reason to believe that spending more leads to better results. Though per-pupil spending in the United States has doubled since 1983 in inflation-adjusted terms, educational outcomes have remained stagnant. What does make a difference is allowing new educational models to flourish. Instead of top-down “reform” of the kind that Cory Booker and Chris Christie championed in Newark, America’s school districts need to “relinquish” their power over how schools are run day to day, as Neerav Kingsland, the CEO of New Schools for New Orleans, has argued. Over the course of six years, New Orleans cut the gap in educational performance between its students and students across the state of Louisiana by 70 percent. The share of students attending failing schools fell from 78 percent to 40 percent. All of this happened without a big funding boost. Rather, it was the result of the steady replacement of traditional public schools with innovative public charter schools, which found new ways to do more with less.

If you really care about public education, calling for more spending is exactly the wrong thing to do. Pouring more money into dysfunctional schools gives incompetent administrators the excuse they need to avoid trimming bureaucratic fat and shedding underutilized facilities and under-performing personnel. It spares them the need to focus on the essentials, or to rethink familiar models. The promise of constant spending increases is what keeps lousy schools lousy. When private businesses keep failing their customers year after year, they eventually go out of business. When public schools do the same, they dupe taxpayers, and the occasional tech billionaire, into forking over more money. If you really, really care about The Children, call for a system in which the most cost-effective schools expand while the least cost-effective schools shrink, and school leaders are given the freedom to figure out what works best for their teachers and their students.

Democracy and open data: are the two linked?

May 22, 2014, 8:00 AM

Are democracies better at practicing open government than less free societies? To find out, I analyzed the 70 countries profiled in the Open Knowledge Foundation’s Open Data Index and compared the rankings against the 2013 Global Democracy Rankings. As a tenet of open government in the digital age, open data practices serve as one indicator of an open government. Overall, there is a strong relationship between democracy and transparency.

Using data collected in October 2013, the top ten countries for openness include the usual bastion-of-democracy suspects: the United Kingdom, the United States, mainland Scandinavia, the Netherlands, Australia, New Zealand and Canada.

There are, however, some noteworthy exceptions. Germany ranks lower than Russia and China. All three rank well above Lithuania. Egypt, Saudi Arabia and Nepal all beat out Belgium. The chart (below) shows the democracy ranking of these same countries from 2008-2013 and highlights the obvious inconsistencies in the correlation between democracy and open data for many countries.

There are many reasons for such inconsistencies. The implementation of open-government efforts – for instance, opening government data sets – often can be imperfect or even misguided. Drilling down to some of the data behind the Open Data Index scores reveals that even countries that score very well, such as the United States, have room for improvement. For example, the judicial branch generally does not publish data and houses most information behind a pay-wall. The status of legislation and amendments introduced by Congress also often are not available in machine-readable form.

As internationally recognized markers of political freedom and technological innovation, open government initiatives are appealing political tools for politicians looking to gain prominence in the global arena, regardless of whether or not they possess a real commitment to democratic principles. In 2012, Russia made a public push to cultivate open government and open data projects that was enthusiastically endorsed by American institutions. In a June 2012 blog post summarizing a Russian “Open Government Ecosystem” workshop at the World Bank, one World Bank consultant professed the opinion that open government innovations “are happening all over Russia, and are starting to have genuine support from the country’s top leaders.”

Given the Russian government’s penchant for corruption, cronyism, violations of press freedom and increasing restrictions on public access to information, the idea that it was ever committed to government accountability and transparency is dubious at best. This was confirmed by Russia’s May 2013 withdrawal of its letter of intent to join the Open Government Partnership. As explained by John Wonderlich, policy director at the Sunlight Foundation:

While Russia’s initial commitment to OGP was likely a surprising boon for internal champions of reform, its withdrawal will also serve as a demonstration of the difficulty of making a political commitment to openness there.

Which just goes to show that, while a democratic government does not guarantee open government practices, a government that regularly violates democratic principles may be an impossible environment for implementing open government.

A cursory analysis of the ever-evolving international open data landscape reveals three major takeaways:

  1. Good intentions for government transparency in democratic countries are not always effectively realized.
  2. Politicians will gladly pay lip-service to the idea of open government without backing up words with actions.
  3. The transparency we’ve established can go away quickly without vigilant oversight and enforcement.
This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.

R Street encouraged by draft bill offering alternatives to EPA regulation

May 21, 2014, 4:44 PM

WASHINGTON (May 21, 2014) – The R Street Institute welcomed today’s release of a discussion draft of legislation empowering states to adopt market-based solutions as a substitute for onerous EPA climate rules.

Authored by Rep. John Delaney, D-Md., the State’s Choice Act requires the EPA to offer states the option to impose state-level excise taxes on greenhouse gas emissions from regulated sources as a way to comply with section 111 (d) of the Clean Air Act. While imperfect, the draft bill is a step toward providing businesses with greater certainty by allowing states to substitute carbon taxes for forthcoming emissions rules the EPA is expected to release June 2.

“This legislation is a first step in the right direction toward allowing states to use a pricing mechanism as a substitute for a misguided command-and-control regulatory scheme,” said R Street Executive Director Andrew Moylan. “States should be able to take a market-based approach to blunt the economic impact of EPA rules while still reducing emissions.”

Moylan cautioned that more work is needed to ensure that states utilize carbon pricing as a complete substitute for the regulations, and urged states to devote the proceeds from any new excise taxes toward steep reductions in income, sales and other taxes.

“Under the new plan, states should ensure that any carbon price is completely revenue-neutral and takes full advantage of the alternative instead of implementing it in conjunction with damaging regulation, which will almost certainly place undue burdens on energy producers and consumers,” he said.

TNCs fight for footing in California’s legislature

May 21, 2014, 11:36 AM

A recent R Street post by Zachary Cohn laid out three steps that transportation network companies like Uber, Lyft and Sidecar should take to solidify their place in heavily regulated environments. One of his recommendations, to “focus on strengthening government relations in their new and existing cities,” is a lesson that TNCs have yet to learn at the state level here in California. If they fail to understand this soon, both they and the state could be worse off for it.

Many of California’s elected officials hew closely to a narrative about the state’s penchant for acting as an incubator to new and exciting industries. Adventurous at the least, legislators will assume the necessary intellectual and political poses en route to supporting industries they deem exciting. Consider that, in its latest session, the Legislature passed and the governor signed a bill to provide a tax break to for-profit space exploration firms with virtually zero opposition.

While not taking their clients into orbit, TNCs have the benefit of being seen as an “exciting” new industry. Yet they have failed inspire California lawmakers to sponsor or advance legislation on anything like their own terms. Concerns about driver safety and insurance policy gaps, after the death of a young girl in San Francisco, have tempered a full-on embrace of what the new industry can offer. In fact, to date TNCs have played nothing but defense in California’s political arena.

First, they were forced to address a taxi industry-sponsored bill that would have required them to maintain full livery coverage. This proposal would have dramatically increased the cost of doing business and was, with the help of insurers, derailed. Second, they had to address an insurance industry-sponsored bill that codifies the parameters of TNC insurance coverage. Despite their best efforts, TNCs find that the second bill is defining thought and conversation about their industry around the Capitol.

It is understandable that TNCs are concerned that their business model is being totaled. Their concerns are well founded. Frustratingly for them, that is the nature of the market they have entered. Alternative products, specifically tailored to their business, are not yet available and will not be available for some time. In California, under the regulatory purview of Proposition 103, automobile insurance policies are required to undergo a lengthy vetting process before they may be approved by the Department of Insurance.

This places innovators like the TNCs in a difficult situation by forcing them to address two bad hands. On the one hand, the necessary insurance product is unavailable now and will not become available in the near future. On the other hand, stakeholders from other, more established industries are seeking to maintain predictability and strength in their dealings with TNCs and thus have incentive to use the power of the state to paint bright lines around the TNCs.

To transcend their current predicament, TNCs need to stop squandering their structural “excitement” advantage by presenting an adversarial face toward insurers. Instead, TNCs should be seeking common cause with insurers, who hold the bulk of the expertise in dealing with the regulators likely to be responsible for the TNC industry. More specifically, TNCs need to directly engage insurers to assess the risks the new industry poses and to arrive at agreed-upon solutions. TNCs have everything to gain if they can work with insurers, particularly as the insurers seek to make policy and rate filings.

“Strengthening government relations” need not begin and end with policymakers: it should also include engagement within communities of like interest.

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

Florida’s Citizens readies $1.5 billion catastrophe bond deal

May 20, 2014, 5:25 PM

From Insurance Journal:

Members of the Safe Florida Coalition, which includes Associated Industries of Florida, Florida Wildlife Federation and the R Street Institute, expressed their support for Citizens plans.

“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,” said Christian Camara, R Street Institute Florida state director.

Privacy shouldn’t trump free speech

May 20, 2014, 5:16 PM

In a decision surprising to many close observers, Europe’s highest court ruled last week that Google must establish a process to receive and vet requests to take down embarrassing search results that individuals believe violate their privacy rights. The ruling raises the threat that all search engines doing business in Europe may be forced to comply with individuals’ requests to remove links about them, even if those links are to factually accurate public information.

The high court’s ruling contradicts the recommendation of the EU’s advocate general. It also does a lot more than slightly impede the bottom line of the search giants. It muzzles the right to free expression in the name of protecting privacy, laying the foundation for a censored, fragmented and walled-off Internet.

The original case began with a lawyer named Mario Costeja González. In 1998, he found himself, and the foreclosure of his home, the subject of an article in La Vanguardia, a major print newspaper in Spain. Years later, an online version of the article was still appearing near the top of Google’s search results for his name. He decided to sue Google Spain and the newspaper, and the case made its way to Europe’s top court.

While the final decision did not require the newspaper to take down the offending article, it found that Google must take down links to the article, formalizing the idea that all Europeans have a ”right to be forgotten.”

EU Commissioner for Justice Viviane Reding, a long-time champion of an expansive “right to be forgotten,” was quick to call the judgment “a clear victory for the protection of personal data of Europeans.” She continued, “data belongs to the individual, not to the company.”

But should people really own facts about themselves? Especially ones that are already public knowledge?

In the aftermath, Google already has received more than 1,000 requests from individuals seeking to edit their search results. These aren’t just lawyers embarrassed about going bankrupt. They include a plastic surgeon sued for malpractice, a disgraced politician seeking re-election, a doctor with negative online reviews and a convicted pedophile. Do they have the right to be forgotten, too?

Mike Masnick sums it up well at TechDirt, “[t]hose who keep cheering this ruling on as a victory for ‘privacy’ don’t seem to understand what privacy means. Public information about bad things you did is not private information.” But there are major currents in the European legal tradition that run counter to this idea. In French law, for example, there exists an earlier right to be forgotten – le droit à l’oubli — which gives a criminal the right to “object to the publication of the facts of his conviction and incarceration” after he has served out his sentence.

While there is theoretically an exception for public figures and politicians in the EU’s ruling, it’s hard not to see the the slippery slope of privacy trumping public interest. In France, a court recently ordered Google to censor links about former Formula One President Max Mosley’s infamous S&M sex party. The same logic could be applied to a political scandal, and there are clear incentives to push policy in that direction.

The full implications of a universal “right to be forgotten” remain unclear. It’s important to note that the EU’s ruling only covered information the court deemed “inadequate, irrelevant … or excessive in relation to the purposes for which they were processed,” and only after a decade had passed. Whether or not European authorities will also censor newer information, or information with a stronger public interest (such as political scandals and malpractice lawsuits), remains to be seen.

Still, the implications of this policy for the broader Internet are very disturbing. As a Wall Street Journal  editorial notes, if Google results are different in Spain, the United Kingdom and the United States, that creates a dangerous precedent for continued balkanization and fracturing of the web.

It also creates a chilling effect on journalists and news outlets, whose revenue model is dependent on traffic in large part coming from search engines. It also sets up incentives for news sites and search engines to avoid publishing certain types of information, and to err on the side of removing ambiguous cases when challenged in order to save the cost of disputing them.

It’s also ambiguous what kinds of entities could be affected by the ruling. Does it apply to searches on or about social media? How about the search bar on a news website (often powered by Google or Bing)? What about search engines for academic, news and legal research, like LexisNexis? With today’s multitude of blogs and news websites, making something unsearchable could be just as effective as deleting it.

An expansive version of the “right to be forgotten” would be a very bad thing for the Internet and for a free society. When censorship becomes institutionalized under the banner of protecting privacy, it undermines the democratic process, hinders public access to information and weakens the freedom of the press. If Europeans value a free and open Internet, they would be wise to abandon the idea. Though we can at least be glad it hasn’t taken hold in America.