“After many years of working in the policy world, I have concluded that politics is at most 10 percent about making the world better and safer. The rest is at least 45 percent theater and 45 percent catering to special interest groups. Further evidence for my assessment comes from the recent grandstanding in the U.S. Senate on rail safety.
One reason why so much of what comes out of Congress is useless, if not straight up destructive, boils down to incentives. Politicians need something they can brag about when they seek reelection or election to higher office. Meanwhile, legislators are constantly surrounded by special interests who plead for government-granted privilege such as subsidies, loan guarantees, tariffs, or regulations cleverly designed to hamstring competitors. Politicians rarely hear from the victims of their policies. Few voters can trace the origin of the higher prices they pay and the lower living standards they suffer.”
“The authors find that “there is a sharp fall in the fraction of innovating firms just to the left of the regulatory threshold,” which they label an “innovation valley” because the regulatory consequences of increased employee size mean that firms choose not to innovate. This fact holds for firms’ responses to demand shocks, as firms “with size just below the regulatory threshold” choose not to increase production to meet this demand because of the regulatory implications.
In total, the authors conclude that labor regulations equate to a 2.5 percent tax on profit, which reduces innovation by about 5.4 percent and “reduces welfare by at least 2.2% in consumption equivalent terms.” This tax on profit continues to affect firms to the right of the threshold, resulting in “a greater flattening of the positive relationship between innovation and firm size.”
The authors examine the effects of labor regulations on firms with between 10 and 100 employees, noting that “many labor regulations apply to firms with 50 or more employees,” and measure the firms’ innovative capacity by the number of patents.
These regulations force firms to devote resources away from production, including spending revenue on worker training, offering union representation, and creating profit-sharing schemes and a works council with employee representation.
“We are not saying all regulations are bad, but rather it is important to go beyond the usual approach to thinking about costs and benefits which are short-term and generally ignore long-run innovation,” Van Reenen tells Reason.”
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“”Firms respond to incentives and disincentives and we find that even when firms experience positive developments, such as a surge in demand, they may still hesitate to invest in research and development and pursue innovation if they are near this size threshold,” Bergeaud explains to Reason. “Indeed successful innovation implies growth, which, in this case, would mean crossing the 50-employee threshold and incurring additional costs.”
Another interesting finding of the study is that firms innovating under substantive regulation tend to “swing for the fence” since “regulation deters incremental R&D” and firms want “to avoid being only slightly to the right of the threshold.” While significant innovations garner media coverage and drastically affect consumer well-being, minor innovations also provide benefits, allowing firms to deal with immediate concerns for less investment.”
“in St. Paul, Minnesota. In 2021, city voters passed a ballot initiative that imposed a 3 percent annual cap on rent increases without exemptions for new construction or allowances for inflation.
The result? Developers fled town en masse, walking away from already in-progress projects and canceling permit applications. The city hurriedly worked to weaken the voter-passed law.”
“It has been more than two years since New York notionally legalized recreational marijuana, and things are not going quite as planned. “Although Gov. Kathy Hochul suggested last fall that more than 100 dispensaries would be operating by this summer,” The New York Times notes, “just 12 have opened since regulators issued the first licenses in November.”
Part of the problem, as you might expect, is red tape and bureaucratic ineptitude. But another barrier to letting licensed marijuana merchants compete with the unauthorized vendors who have conspicuously proliferated since the spring of 2021 is the state’s affirmative action program for victims of pot prohibition.
New York, like several other states that have legalized marijuana, mandated preferences for license applicants who suffered as a result of the crusade against cannabis. While that idea has a pleasing symmetry, it never made much sense as a way of making up for the harm inflicted by cannabis criminalization. And in practice, executing the plan has drastically limited the legal marijuana supply, making it much harder to achieve the state’s avowed goal of displacing the black market.
To be clear: I don’t think people with marijuana convictions should be excluded from participating in the newly legal market, a policy that would add insult to injury. But that does not mean they should have a legal advantage over cannabis entrepreneurs who were never arrested but might be better qualified.”
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“New York reserved the first batch of up to 175 retail licenses mainly for people with marijuana-related criminal records or their relatives. Those applicants needed to show they had experience running a “profitable” legal business in the state. Nonprofit organizations with “a history of serving current or formerly incarcerated individuals” also were eligible, provided they had “at least five full time employees,” “at least one justice involved board member,” and a track record of operating “a social enterprise that had net assets or profit for at least two years.” Another requirement was demonstrating “a significant presence in New York State,” which led to litigation and a temporary injunction against issuing retail licenses in five areas of the state.
Satisfying the state’s criteria required “a lot of documentation,” Bloomberg CityLab reporter Amelia Pollard noted last fall, which gave New York’s Office of Cannabis Management (OCM) “a mound of paperwork to wade through.” As of November, the OCM had received more than 900 applications from would-be marijuana retailers. On November 20, it announced that it had granted 36 “provisional conditional adult-use retail dispensary licenses” to individuals and organizations.”
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“The approved retailers are far outnumbered by unauthorized vendors, many of whom openly sell marijuana from storefronts, trucks, and tables, unencumbered by the state’s licensing requirements, regulations, and taxes. Yelp’s list of the “best recreational marijuana dispensaries” in New York City includes 90 outlets, only a few of which are blessed by the OCM.”
“The most significant policy change—or, perhaps, the least insignificant—is new limits on how long mandatory National Environmental Policy Act (NEPA) reviews can take. The Fiscal Responsibility Act incorporated some changes first proposed by the Trump administration’s Council on Environmental Quality (CEQ) in 2020 to limit NEPA environmental reviews to no more than two years and the resulting environmental impact statements to no more than 150 pages.
That’s a welcome change. As part of the process that originally produced those suggestions, the CEQ found that the average environmental impact study is 661 pages and typically takes more than four years to complete. Time is money, and all those delays are expensive. In its report, the CEQ cited a study, by the nonpartisan reform coalition Common Good, estimating that “the cost of a 6–year delay in starting construction on public projects costs the nation over $3.9 trillion, including the cost of prolonged inefficiencies and avoidable pollution,” as Reason’s Ron Bailey reported at the time.
The environmental impact of major infrastructure projects is important to consider, but NEPA has devolved into a tool often wielded by opponents of development rather than sincere concern for the plight of the sage grouse. Placing limits on how long NEPA can delay a building project makes a lot of sense.
The NEPA tweaks included in the Fiscal Responsibility Act will “slightly improve the process,” says Stapp, “but the biggest problem—judicial review—was left untouched.”
Indeed, the Fiscal Responsibility Act’s limits on NEPA reviews don’t apply to the often-inevitable litigation that spirals out from them. Without that component, the new rules have a giant loophole—one that opponents of new construction will continue using to delay and drive up costs.”
“the Maine measure would institute what’s known as “asymmetrical criminalization” or the “Nordic Model” of prostitution laws, a scheme criminalizing people who pay for sex but not totally criminalizing those who sell it. This model has become popular in parts of Europe and among certain strains of U.S. feminists.
But keeping sex work customers criminalized keeps in place many of the harms of total criminalization. The sex industry must still operate underground, which makes it more difficult for sex workers to work safely and independently. Sex workers are still barred from advertising their services. Customers are still reluctant to be screened. And cops still spend time ferreting out and punishing people for consensual sex instead of focusing on sex crimes where someone is actually being victimized.
A recent study of prostitution laws in European countries found full decriminalization or legalization of prostitution linked to lower rape rates, while countries that instituted the Nordic model during the study period saw their rates of sexual violence go up.”
“The proposed rules are a less elegant and splashy solution than the Obama-era Clean Power Plan, but the complex set of proposals also stands a better chance of withstanding court scrutiny. The EPA breaks down requirements based on the type of plant, its size, and how often it is in use. Utilities, working with states, would ultimately decide how to meet the EPA’s emissions rates by choosing among available technologies. Coal plants, for instance, could fire less carbon-intensive fuels such as hydrogen and gas, to supplement coal. Coal and gas plants can also install carbon capture and storage or sequestration, a technology that removes carbon dioxide at the smokestack to eventually store it underground. Or a plant could bypass all this if it sets a retirement date in the medium term.
As a result, existing coal plants would cut their carbon pollution 90 percent by the end of the decade, unless a plant sets a retirement date before 2040. Existing gas plants get more leeway — only the largest gas plants, less than a third in operation, will have to slash their pollution by 90 percent by 2035.
The EPA makes a dent in coal pollution especially, but it doesn’t eliminate power plant pollution entirely. It leaves a mixed bag of winners and losers.”
“In an executive order signed on April 6, Biden fleshed out the details of how the new regulatory regime will operate. There are three major changes.
First, the executive order changes the threshold for what counts as an “economically significant” regulation from $100 million to $200 million—and orders the new, higher threshold to continue rising with inflation. Because regulations deemed to have economically significant costs are subject to additional layers of scrutiny before being approved, this change would expand the number of regulations that could be approved without that additional oversight.”
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“Secondly, Biden’s new rules instruct federal agencies to “promote equitable and meaningful participation by a range of interested or affected parties, including underserved communities.” This push for greater equity is so complicated that it requires a separate 10-page memo explaining how to implement it. That includes new guidance for how the White House’s Office for Information and Regulatory Affairs should “facilitate the initiation of meeting requests” from groups that have “not historically requested such meetings, including those from underserved communities.”
It’s certainly easy to roll one’s eyes at the federal government’s equity mess, but getting more feedback from groups that could potentially be affected by federal regulations is not necessarily a problem—even though it will surely include calls for greater regulation in many cases. At the very least, adding more steps to the approval process might slow the gears of the regulatory state.
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“Finally, Biden’s executive order also changes how regulations will be weighed by the federal agencies approving them, including the foreshadowed changes to how costs and benefits are calculated. Probably the most significant change is a new time horizon for the consideration of regulatory costs, including a new formula for calculating costs and benefits that will extend over multiple generations—seemingly an attempt to make climate regulations appear less costly.”