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Antitrust and Politics as a Process
James M. Buchanan is a Nobel Prize winning economist widely recognized for his work in the field of public choice theory and constitutional economics.
In this video from a 1983 Center for the Study of Market Processes (now the Mercatus Center at George Mason University) event, James M. Buchanan gives his own opinion on rules that plan for competition, colloquially known as antitrust rules. He speaks briefly about the process of determining just rules for a society behind a Rawlsian veil of ignorance (or as he put it, in a pre-constitution state) and provides a theoretical example of two farmers with the exclusive ability to grow a unique crop to illustrate his point.
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This Month at Cato Unbound: What Keeps Money Out of Politics?
Jason Kuznicki
It’s called the Tullock Paradox: if you run the numbers, the expected returns to lobbying commonly appear much larger than they ought to be. Bad behavior pays really well, and yet corporations and interest groups routinely pass on what would seem, from a coldly amoral stance, to be easy money. Rational economic actors ought to bid up the price of government favor—and thus bid down the rate of return—but real-world actors don’t do so.
Why don’t we see even more money in politics? That’s the question we ask in the April, 2013 issue of Cato Unbound.
To answer that question, we have invited Fred L. Smith, founder and chairman of the Competitive Enterprise Institute, a man who has spent much of his career pondering just this question, and who benefits from an insider’s view of political advocacy. His lead essay suggests that there is a widespread distaste for political activity among people who would otherwise turn to lobbying, and often that’s with good reason.
To discuss with him the potential pitfalls of public choice modeling, we have invited a panel of distinguished academics: Professors Stephen Ansolabehere of Harvard University, Francesco Parisi of the University of Minnesota School of Law, and Raymond J. La Raja of the University of Massachusetts at Amherst.
As always, Cato Unbound readers are encouraged to take up our themes and enter into the conversation on their own websites and blogs, or on other venues. We also welcome your letters. Send them to jkuznicki at cato dot org. Selections may be published at the editors’ option.
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Are Spending Cuts Good Politics?
Chris Edwards
Chris Edwards says “yes.” From Downsizing the Federal Government:
Another myth is that policymakers cannot make budget cuts without a backlash from voters. Yet reform efforts in the 1990s did not lead to a voter rebuke. In 1996, the Republicans were denounced viciously when they were reforming welfare. But they stuck together and succeeded, and today the achievement is widely hailed. Also in the 1990s, the Republicans proposed reductions to many sensitive programs including Medicare, Medicaid, education, housing, and farm subsidies. In their budget plan for 1996, House Republicans voted to abolish more than 200 programs including whole departments and agencies.
The Republicans who led on these reforms were not thrown out of office, despite many of them being specifically targeted for defeat in 1996. The most hardcore budget cutters in the 104th Congress were freshmen who were reelected with larger vote margins than they had received in 1994. They included John Shadegg and Matt Salmon of Arizona, Joe Scarborough of Florida, David McIntosh and Mark Souder of Indiana, Steve Largent and Tom Coburn of Oklahoma, Mark Sanford of South Carolina, Van Hilleary of Tennessee, and Mark Neumann of Wisconsin. Indeed, many budget-cutting Republican freshman got reelected in districts that went for Bill Clinton on the presidential ticket in 1996. The high-profile leader of the House budget cutters, John Kasich (R-Ohio), consistently won reelection throughout the 1990s with two-to-one margins. In sum, cutting the budget can be good politics when done in a serious and up-front manner.
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It’s Cowboys vs. Packers in the Game of Politics, and the Price of Beef Is at Stake
K. William Watson
An effort is underway at the Department of Agriculture to reform the federal government’s mandatory country-of-origin labeling rules for beef. The current scheme was successfully challenged by Canada and Mexico as a violation of WTO obligations prohibiting protectionist regulatory discrimination. If the United States does not bring its law into compliance, Mexico and Canada will have the option of raising tariffs on U.S. goods in retaliation.
The supposed purpose of mandatory origin labels is to improve food safety by providing consumers with information. How does the country of origin of the cattle impact food safety? I surely do not know. If consumers want this information, why is a law needed to compel businesses to provide it? I don’t know that either.
The actual purpose of the law is to prevent Canadian cattle raisers from competing with American cattle raisers. The labeling scheme accomplishes this not by informing consumers that their beef is made from cattle that ate grass north of the 49th parallel, but by imposing on downstream processors the expense of keeping track of the cattle’s historical whereabouts. The meat packers can avoid this expense by purchasing only purely U.S. origin cattle. The price of American cattle goes up accordingly.
The extent of any reforms made this year will tell us how much the WTO ruling affected the balance of political power within the cow-to-hamburger value chain. The law’s existence is evidence that cattle raisers currently have more influence in Washington than meat packers, but the WTO ruling has already made a difference simply by prompting the initiation of a reform effort. The possibility of retaliation by Canada and Mexico spreads the negative consequences of the law to other politically relevant U.S. industries with a stake in North American trade. These industries will not sit idly by while their own businesses suffer in the name of expensive beef.
Let the lobbying begin!
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“Good” Politics: The Government Redefines Poverty (In a way in which poverty likely will NEVER be “reduced”)
The federal government has just decided that poverty for family of 4 in New York City means an income of up to $37,500, not $22,500. Quite a leap. As before, the figure excludes earned income tax credit cash checks from the government and also medical and other non-cash assistance.
The change in the definition of poverty may have a link to Obamacare; it may make more people eligible for Medicaid under that legislation. It may affect eligibility in other ways.
One would like to think of poverty programs as being unaffected by crony capitalism, the merger of special interests and government. But the facts suggest otherwise. Big agri-businesses and convenience stores have a lot of say about the food stamp program which now covers 47mm Americans. When cell phones were handed out in recent years by the government, it turned out that a disproportionate number were going to Ohio, the presidential election swing state, and the phones were being made by a large donor to and fundraiser for Obama.
When we look at these government statistics, let’s also remind ourselves to take them with a grain of salt. Just as the definition of poverty has now radically changed, the definition of inflation and unemployment has also radically changed. When people say that unemployment is not as bad as in the Great Depression, they are comparing one definition to another. Computed the same way, we do have Depression levels of unemployment.
(From The New York Post)
This means it will be difficult to reduce poverty in America no matter how much the living conditions of the poor actually improve. Imagine a sprinter in a race where the finish line is moved back four feet every time the runner takes a step.
Look at it this way: If the real income of every single American were to double overnight, the new measure would show no drop in poverty because the poverty-income thresholds also would double. Under this new definition, we can reduce poverty only if the incomes of the “poor” rise much faster than those of everyone else.
The goal of fighting poverty is no longer about meeting physical needs; instead it has been covertly shifted to equalizing incomes, or “spreading the wealth.”
The post “Good” Politics: The Government Redefines Poverty (In a way in which poverty likely will NEVER be “reduced”) appeared first on AgainstCronyCapitalism.org.
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The Politics of Procrastination—Russian Trade Edition
By K. William Watson
The House of Representatives passed a bill today authorizing permanent normal trade relations (PNTR) status with Russia, by a vote of 365-43. The bill repeals a cold war–era trade restriction that has prevented the United States from benefiting directly from Russia’s entry into the World Trade Organization last August (and Moldova’s entry in 2001). It also adds a travel restriction on certain Russian officials involved in a particular incident a few years ago in which an anti-corruption activist died in a Russian jail. There is no doubt the bill will pass the Senate in its current form.
It has been almost a year since Russia completed the negotiations necessary to be accepted into the WTO, after almost two decades of on-and-off diplomatic effort. If PNTR with Russia could pass by a margin of 8-1, why did it take so long to get it through Congress?
The only answer I can offer is dishearteningly cynical. The consensus among close observers is that the Republican House leadership delayed taking up the matter in a bid to pressure President Obama into more vocally supporting the bill, thereby alienating his Big Labor campaign allies—the only constituency that offered any opposition—and so they could look tougher than the president on foreign policy. The president chose not to play that game and deflected the resulting scorn from a not-insignificant portion of the business community toward Congress. Is it naïve of me to wish that elected officials would just vote for what they think is right instead of playing partisan games with our fortunes and freedoms? Probably.
When Russia joined the WTO last August, I wrote that it was a good day for liberty everywhere but in the United States. After some frustrating and needless delay, the American people are getting to join the party.
H? ????????!
The Politics of Procrastination—Russian Trade Edition is a post from Cato @ Liberty – Cato Institute Blog
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The Politics of Hope — and Denial
By Roger Pilon
This morning POLITICO Arena asks:
What does President Obama’s victory mean?
My response:
Obama’s victory means, for now at least, that the politics of personal destruction and division by identity (“Voting is the best revenge”) has carried the day with a thin majority of the electorate, who seem to believe that the laws of economics, which Obama has never understood, can be reversed. They think that in Greece too, and march in the streets accordingly, as if that could reverse those laws.
In his victory speech last night Obama said that “this country only works when we accept certain obligations to one another and to future generations.” Future generations? This from the man who has overseen a $5 trillion increase in the debt that falls on those future generations?
It’s striking, however, how little has actually changed. The House, which controls the public purse, remains solidly Republican. We’re already hearing calls for the majority there to bend to the will of Obama, the Senate, and that thin majority. That would mark the end of the Republican Party, so it’s not likely. Brace yourself, then. It’s either gridlock, or self-destruction. Take your pick.
The Politics of Hope — and Denial is a post from Cato @ Liberty – Cato Institute Blog
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Money and Politics in the Tennessee Democratic Party
By David Boaz
Buried inside a Washington Post feature on “America’s worst candidate” is this revealing look on politics as it is played:
Tennessee Democrats, who’d watched their conservative voters drift to the GOP, finally lost the state House in 2010. That had been a financial lifeline for Democrats, since the legislature has broad powers over patronage.
“That pretty much was the end,” said [Will T. Cheek, a Nashville investor who has been a member of the state Democratic Party’s executive committee since 1970]. “Because we have nothing left. In the other low points, we had the Election Commission, we had the Building Commission. .?.?. If you wanted to get state deposits into your bank, those were all ours. And that’s where you’d raise your money.”
Losing those powers “really kicked the props out from under the financing of the party,” Cheek said.
Money and Politics in the Tennessee Democratic Party is a post from Cato @ Liberty – Cato Institute Blog
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Politics Is Better as Fiction
By David Boaz
If the season’s got you thinking cynically about politics and politicians, TCM has the movies for you. It’s running a series all this month called “American Politics on Film.” You’ve missed classics like “A Face in the Crowd,” but there’s still time to catch “All the King’s Men” this Thursday night, about a Southern reformer who becomes corrupted by power, and “All the President’s Men” on Friday night, about an ambitious Westerner who was probably corrupt long before he got power. Also on Friday night: “Advise and Consent” and “Seven Days in May,” made from the great political novels of the 50s and 60s. Whatever happened to great political novels, anyway?
For movies about freedom, click here.
Politics Is Better as Fiction is a post from Cato @ Liberty – Cato Institute Blog
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Speed of Politics, Speed of Tech
By Julian Sanchez
The Brookings Institution held a forum this morning on “Fostering Internet Competition“—at which, oddly, many panelists seemed resigned to the idea that one layer or another of the Internet would not be competitive: The question, as they saw it, was how to regulate the monopoly player at one layer to foster competition at the next layer up.
For Loyola University law professor Spencer Waller, it is online social platforms like Facebook and Twitter and Google that raise the specter of monopoly, and the question is how to regulate them so as to ensure competition and innovation in services built atop these platforms. Harvard’s Susan Crawford thought the application layer could probably take care of itself, provided the monopolistic physical infrastructure—the means of providing broadband connectivity to end users—was properly regulated. Only one panelist, media theorist Doug Rushkoff, seemed interested in the possibility of fostering competition all the way down—he was, rather astonishingly, the first to utter the phrase “mesh networking” at the very end of the question and answer period. The others—as revealed by frequent analogies to electric grids and interstate highways—seemed stuck in a model that failed to take seriously what is probably the most important fact about Internet policy: Technology moves faster than politics.
The beguilingly broad word “infrastructure” may be partly at fault here. Roads, sewers, railway lines, electric grids, broadcast spectrum, broadband pipes, the TCP/IP protocol, and Facebook are all “infrastructure” in some sense. They’re also wildly different in many ways—and loose analogies that conflate them are lethal to sound policy thinking. Whether a particular infrastructure provider constitutes a “monopoly” or even a “natural monopoly,” after all, is powerfully determined by technological context. Telephone service is only a “natural monopoly” until someone invents cell phones—and as an important and prescient Cato anthology The Half-Life of Policy Rationales pointed out, technological progress often alters that context so radically that it undermines the justification for policies implemented in response to the problems of the old context. This obvious point suggests a simple rule of thumb: Even if you have a clear cut problem that seems amenable to a regulatory solution, only act if you’re sure the context in which that problem is embedded will change a good deal more slowly than the political process moves, because a regulatory scheme that no longer fits the facts on the ground may well be difficult to dislodge even when it’s doing harm. Or, in a nutshell: Make sure there’s more inertia in your infrastructure than in your regulatory structure.
Roads and bridges and electric grids are technologies with a lot of inertia. They’re big, clunky physical objects that, once built, are apt to remain in use for 50 or 100 years. Even as particular physical pieces of each network are torn down and replaced, the essential nature of the technology remains constant: We drive on wheeled vehicles over concrete; power is delivered to homes over buried or suspended wires. When these infrastructures look like natural monopolies, reasonable people can debate what kind of regulatory structure is appropriate, but a policy well adapted to the facts of the technology is likely to remain relatively well adapted, because the facts change slowly. The roads and power grid in the town where I was born were mostly there before I was born.
This is not what Internet technology looks like. When I was in high school, as ordinary Americans were just starting to get wind that something called “the Internet” existed, almost everyone who connected from home connected over ordinary phone lines to a dial-up service—and many wondered which of these behemoths might ultimately dominate the market: CompuServe, Prodigy, GEnie, Delphi, or America Online? (Remember them?) By the time I finished college, home users were largely connecting via cable television pipes—and for many Americans, that remains the lone wired broadband option even now. But as growing numbers of Americans connect primarily through mobile devices, it’s hardly their only option or getting on the Internet—and as 4g wireless broadband networks roll out nationally, with a variety of other wireless broadband technologies waiting in the wings—it becomes increasingly possible for the average user to ditch wired broadband entirely, even for applications like high-quality streaming video. (Crawford, rather oddly, referred in passing to wireless broadband as a “natural monopoly”—by which I think she meant there are fewer national carriers than she’d like, but I can’t be certain.)
To be sure, wireless broadband is unlikely to match the top speeds of the fastest wired FiOS lines anytime soon—and Baja Fresh isn’t a perfect substitute for Chipotle. But perfect substitutability has never been necessary to provide competitive pressure and avoid the harms of monopoly. The wireless alternative just has to be a good enough substitute for enough customers that the wireline provider can’t afford to act like they’re the only game in town.
Notwithstanding all this, it is no doubt true that there are currently many Americans for whom broadband is a monopoly service available from their local cable operator, with locally available wireless Internet too slow to constitute a realistic replacement. But even if (purely for the sake of argument) you’ve got the perfect legislative response to the current facts on the ground, the relevant policy question is whether those facts are likely to remain constant over the time it takes to implement that legislative response—and, because regulatory structures have their own inertia, two and three and five years later. It seems obvious they are not.
The assumption of a persistent monopolist in online platforms seems even more obviously confused. Facebook is now supposed to be the invulnerable social networking monopolist. A few years ago it was MySpace, which took the crown from Friendster. In the world of search, we’re all beholden to the imperial will of Altavista… wait, sorry, I meant Yahoo!… wait, sorry, I meant Google. Is it still Google? How about now?
There is, to be sure, plenty government could do to foster greater competition at the lowest layer of the Internet stack. It is a little insane that, in a country where the overwhelming majority of households have cable or satellite TV (or have abandoned traditional TV entirely for services like Netflix and Hulu), federal policy keeps some of the most valuable spectrum locked up as a delivery mechanism for reruns of Friends in high def, something the FCC is slooowly moving to change. The agency could also be moving faster to encourage experiments with spectrum sharing and “white spaces.” All of these exciting possibilities would have made for a fascinating discussion about how public policy could “foster Internet competition.” So it was disappointing that most of the Brookings panelists seemed to assume the indefinite persistence of the status quo, and focused on how to make monopoly bearable. If we’d taken this approach a decade ago, we’d probably be getting the first final rulemaking out of the Subcommittee on Ask Jeeves any day now.
Speed of Politics, Speed of Tech is a post from Cato @ Liberty – Cato Institute Blog
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