Post image for Professional Licensing: A Risk to the Free Markets and Freedom of Speech

From physicians to dentists to lawyers, the licensing requirements of many professions are well known—but for bloggers? A recent case in North Carolina demonstrates the dangers that mandatory occupational licensing poses to liberty and how established interests use such requirements to protect their bottom line.

North Carolina resident Steve Cooksey was ill, obese, and struggling with type 2 diabetes. In 2009, after being rushed to the hospital, nearly in a coma, he decided to do everything in his power to get healthy. By following a low-carbohydrate diet, Cooksey claims he was able to drop 45 pounds and get off insulin and drugs. He documented his story on his personal blog, where he provided advice to others practicing the “paleo” diet that he believes saved his life.

That sounds like a win-win situation, but not according to the North Carolina Board of Dietetics and Nutrition (NCBDN), which decided to go after Cooksey for the “crime” of offering nutritional advice without a dietitian’s license. In 2011, it sent Cooksey a letter, claiming that his blog, by giving readers “unlicensed dietetic advice,” even for free, violated North Carolina law. The NCBDN included a 19-page copy of his online writings with comments in red ink pointing out what he could and could not say.

Even more surprising, the notice asserted that Cooksey’s private conversations with readers and friends via email and telephone also constituted a violation of the state’s dietitian licensing law!

Unfortunately, Cooksey’s case is far from an isolated incident. In just about every state, there is a dizzyingly long list of jobs that require would-be workers to go through a long, expensive, and sometimes arduous process to earn the privilege of entering into a given profession. While the stated reason for requiring occupational licenses is public safety, established players operating under existing licensing schemes usually fight tooth and nail to maintain occupational license requirement in place, to make it harder for potential competitors to enter the market.

Today, roughly 30 percent of jobs in the U.S. require some form of license (a sharp increase from a low back in 1950, when the share was only 5 percent). Fortunately, some workers are fighting these licensing regime—and many are winning.

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Post image for Food Policy Fight: Junk Study on Vegetarian Diet

Log on to Twitter and you might read: “A vegetarian diet is associated with poorer health, a higher need for health care, and poorer quality of life.” Here we have junk science going viral! And its fanning the flames between meat-eating and vegetarian advocates. But it shouldn’t.

You can’t really blame the person pushing out this tweet too much, however, because her source is a study published in a PLOS One research paper. It highlights some of the pitfalls associated with paying too much attention to isolated studies that rely on questionable methodology and overblown claims.

This study is another example of how junk science adversely impacts public policy debates, which is why I recently developed A Consumer’s Guide to Chemical Risk: Deciphering the “Science” Behind Chemical Scares.” As this study on vegetarian diets shows, it’s not just chemical policy that’s negatively impacted by bad science. Personal choice, should rule the day when it comes to dietary choices, but because government is so involved — setting guidelines and telling us what we should and shouldn’t eat — food politics are unavoidable. Accordingly, meat-eaters might use this dumb study to push their agenda, but the facts do not really support them.

This study placed all vegetarians into one category, but there is no such thing as a single vegetarian diet. For example, some vegetarian diets might include mostly processed food and french fries, while others consist of nuts, beans grains, and fresh vegetables. It makes no sense to lump these diets into one category. Yet there are no more details in this study about what the vegetarian participants’ diets included and when the participants began them. Nor does the study include any empirical medical data; just reports from individuals about their perceived health profile.

Apparently, assessing the value of any particular diet was not really the point of this study, despite its conclusions. Rather it addresses the subjects lifestyles’ and perceptions about them, and it found that vegetarians (at least the Austrians in this survey) worry more about their health and report having more health problems than do meat eaters. It does not demonstrate that a vegetarian diet can’t be as healthy as or healthier than a diet that includes meat.

Yet the authors somehow conclude:

Moreover, our results showed that a vegetarian diet is associated with poorer health (higher incidences of cancer, allergies, and mental health disorders), a higher need for health care, and poorer quality of life. Therefore, public health programs are needed in order to reduce the health risk due to nutritional factors.

This conclusion offers lots of opportunity for anti-vegetarian soundbites, but the study really doesn’t show what this conclusion says. First the “association” does not prove cause-and-effect; and second it’s not a vegetarian diet that causes these problems. It’s the alleged lifestyles of the vegetarians, such as not getting vaccinated as often and not pursuing preventative health check-ups.

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Post image for CEI’s Battered Business Bureau: The Week in Regulation

After a slow start to the year, regulations are now coming out at their usual pace, with nearly 80 rules last week. The Federal Register will likely exceed 20,000 pages this week.

On to the data:

  • Last week, 79 new final regulations were published in the Federal Register. There were 64 new final rules the previous week.
  • That’s the equivalent of a new regulation every 2 hours and 8 minutes.
  • So far in 2014, 809 final regulations have been published in the Federal Register. At that pace, there will be a total of 3,112 new regulations this year. This would be the lowest total in decades; this will likely change as the year goes on.
  • Last week, 1,134 new pages were added to the Federal Register.
  • Currently at 18,961 pages, the 2014 Federal Register is on pace for 72,927 pages, which would be the lowest total since 2009.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. 10 such rules have been published so far this year, none of them in the past week.
  • The total estimated compliance costs of 2014’s economically significant regulations currently ranges from $1.05 billion to $1.34 billion. They also affect several billion dollars of government spending.
  • Seventy-three final rules meeting the broader definition of “significant” have been published so far this year.
  • So far in 2014, 174 new rules affect small businesses; 24 of them are classified as significant.

Highlights from selected final rules published last week:

For more data, see Ten Thousand Commandments and follow @10KC and @RegoftheDay on Twitter.

On 60 Minutes, Michael Lewis accused high-frequency traders of front-running. Apparently it’s become necessary to remind critics of high-frequency trading of the definition of “front-running.”

Front-running  - n. “The practice by market makers of dealing on advance information provided by their brokers and investment analysts, before their clients have been given the information.”  — Oxford English Dictionary

There is room for reasonable debate about the merits of HFT. And there is room for multiple exchanges catering to multiple types of investors.  But one thing critics should be wary of is distorting the terms of debate. Many, if not most, HFT firms are ”prop shops.” That is, they are proprietary traders, trading on behalf of their own accounts, not clients. There are no clients for these particular high-frequency traders to “front-run.”

Front-running is already illegal under current law. If firms that do take in outside capital are front-running, then they should be prosecuted. But indiscriminate use of that term detracts from the HFT debate.

Have a listen here.

Senior Fellow William Yeatman is skeptical of an EPA report claiming the Clean Air Act will have nearly $2 trillion in annual benefits by 2020.

Everyone seems to be jumping into the debate about high-frequency trading, now that Michael Lewis is peddling his new book, Flash Boys.

Lewis contends that the stock market is rigged, and that the culprit is high-frequency traders. But not everyone agrees that they are to blame, or that the stock market is even rigged to begin with.

Cliff Asness, founder of AQR capital, suggests that high-frequency traders have in fact made trading cheaper for hedge funds. And this, in turn, benefits clients, such as pension funds or university endowments:

What is good for us is lower trading costs because it translates into better investment performance and happier clients, which makes our business slightly more valuable. How do we feel about high-frequency trading? We think it helps us … we devote a lot of effort to understanding our trading costs, and our opinion, derived through quantitative and qualitative analysis, is that on the whole high-frequency traders have lowered costs.

So the hedge funds that benefit from these lower transaction costs are able to pass those savings along to their investors. And their investors are made up largely of pension funds and university endowments.

In short, the savings that high-frequency traders generate get passed on to a very broad base of consumers, including those who only participate in the market indirectly — via a pension plan or as the beneficiary of a university endowment.

There is undoubtedly lots of room for innovation in market microstructures. And new exchanges may be one solution to what some people perceive as a problem. But competition among market participants and exchanges is the way to bring about that innovation — not increased regulatory scrutiny.

I wonder if the same Luddites who whine about HFT would have complained to Thomas Edison that his Universal Stock Ticker gave some investors an unfair advantage over those who relied on newspapers to get their price information.

Post image for Consumer’s Guide to Chemical Risk

Will these chemicals make me fat? That sounds like a weird question, but some consumers may actually have such worries, thanks to a constant barrage of news headlines suggesting that synthetic chemicals—an even some naturally occurring ones—are responsible for nearly every public health problem imaginable.

My website and CEI‘s recently released booklet, A Consumer’s Guide to Chemical Risk: Deciphering the ‘Science’ Behind Chemical Scares,” are tools designed reduce both the confusion and fear about chemicals. These tools provide consumers with some insights on the science and the politics behind the headlines.

For example, when confronted with a new claim, consumers can evaluate the underlying science by asking the following questions:

  • Is the association strong and statistically significant? Most of the studies in the news are merely statistical analyses that assess whether two factors occur at the same time. They don’t prove cause-and-effect relationships, which can only be inferred when the association is very strong. Accordingly, if researchers report a “weak association” or “suggestive” one, consumers should be suspicious of the claims.
  • Is the sample any good? Ideally, a randomly selected, large sample of a population provides the best chance of good data, but locating and developing such samples is difficult and expensive. Accordingly, researchers often work with less-than-ideal samples and existing databases that offer imperfect data, or both. Accordingly, a study with 1,000 subjects is more reliable than one with 100 subjects.
  • Are there serious confounding factors? The the possibility that a factor other than the two variables in question is responsible for the result is always present. While scientists attempt to apply “controls” in studies in an effort to negate the impact of such confounding factors, it does not always work. Consumers should be suspicious when there are other factors that more likely contributed to the result.
  • What is the potential for recall bias among study participants? Some studies require interviewing subjects about their personal behavior, sometimes expecting them to recall chemical exposures dating back decades. The subject’s failure to recall the facts accurately can so undermine the validity of the data that the final study results are completely off the mark. Be wary of studies that rely on this type of subjective data collection.
  • Does the language used by researchers suggest they are stretching the truth? Good researchers will strive to keep their biases in check, while still working toward finding something interesting. Yet others add “spin” to weak and meaningless “findings” to garner publication and media interest—and more funding. For example, researchers trying to prove that trace chemicals can make us fat have captured headlines by labeling these chemicals as “obesogens.” Their science may be weak and inconclusive, but their marketing it this way garners lots of media coverage.
  • Is the study relevant to humans? Tests on rodents involve administering massive amounts of chemicals to animals bred to be highly susceptible to cancer, and many form tumors as a result. Despite what headlines may suggest, such tests are not particularly relevant to risks associated with human exposures to trace levels of chemicals.
  • Is the exposure significant enough to matter? Many substances that are helpful or benign at low levels can sicken or kill at high levels. Accordingly, if the study involved high exposures, consumers should question whether it’s relevant to trace exposures through consumer products.
  • Is the study peer reviewed and published? Peer review is designed for an industry to self-regulate to reduce fraud and poor quality research. While it alone isn’t sufficient to assure a study is completely sound, consumers should be very skeptical of claims from studies that have not undergone any peer review.
  • Can other researchers reproduce the study results? Science is a long process of discovery that brings us closer to an answer as an issue is examined time and again. Part of that process involves repeating specific studies to see whether different scientists or teams of scientists can reproduce results of their peers’ or even their own research. If data is unavailable or other researchers have not been able to reproduce the result, the study is less compelling and may be discredited.

Find out more at SafeChemicalPolicy.org.

Post image for Taxable Bitcoins: Property or Money?

Is Bitcoin currency or property? It depends on which parts of the federal government you ask. Last week the Internal Revenue Service (IRS) announced that bitcoins are taxable and how it would implement such taxation. While the rule could have been much worse, the manner in which the IRS went about doing so brings up many more legal questions.

In context, the fluctuating exchange rate between bitcoins and dollars does cause the cryptocurrency to behave more like property in terms of valuation. The IRS merely took its explanation on “virtual currencies” from the current definition of taxable bartering:

Bartering is an exchange of property or services. You must include in your income, at the time received, the fair market value of property or services you receive in bartering. If you exchange services with another person and you both have agreed ahead of time on the value of the services, that value will be accepted as fair market value unless the value can be shown to be otherwise.

This is clearer when seeing the IRS’s answer to how Bitcoin values must be calculated for tax purposes:

…A taxpayer who receives virtual currency as payment for goods or services must, in computing gross income, include the fair market value of the virtual currency, measured in U.S. dollars, as of the date that the virtual currency was received.

This classification of Bitcoin as non-currency for tax purposes isn’t that new. Back in January 2014, Sweden’s Tax Agency moved to classify bitcoins as assets rather than currency itself. In Australia, this month, the tax authority announced Bitcoin transactions person-to-person would be subject to a “goods and services” tax, similar to the IRS classification, as well as a capital gains tax for profits made through Bitcoin. It is not unusual for bitcoins to be treated as non-currency for tax purposes.

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Post image for Why Is Obama’s Report to Congress on the Benefits and Costs of Federal Regulation Delayed?

In April 2013, the White House Office of Management and Budget (OMB) issued its Draft 2013 Report to Congress on the Benefits and Costs of Federal Regulations, which covered rules and regs issued in fiscal year 2012. The final 2013 edition never appeared; now, the Draft 2014 edition is due. I’m not holding my breath.

President Obama claimed again as recently as February 2013 that “this is the most transparent administration in history.”

But getting this important document, as well as the oft-delayed Unified Agenda of Federal Regulatory and Deregulatory Actions, is like pulling teeth. Part of the recent House-passed ALERRT Act addressed the Agenda’s tardiness; it’s naturally stuck in the Senate. (The Agenda is an obscure but important document wherein federal departments and agencies reveal their priorities along with disclosing recently completed rules.)

The 2013 Draft Report revealed that costs of major rules jumped under Obama; The 14 rules added during the fiscal year ended September 2012 imposed costs of from $14.8 billion to $19.5 billion (that’s in the 2001 dollars OMB uses, which look better than 2012 dollars).

The OMB breakdown incorporates only benefits and costs of a handful of major rules which the OMB or agencies have expressed in quantitative and monetary terms. It omits numerous categories and cost levels of rules altogether, and rules from independent agencies are entirely absent.

OK, that’s worrisome, but normally, final reports look fairly identical to draft reports, so the reluctance to release it is unclear. We presumably already have the “bad news.” In any event, normally by April OMB has issued the year’s Draft Report, as can be seen in the list below. There were two big exceptions: one during Obama’s first year, one during George W. Bush’s last.

April is upon us, and without the final 2013 report, it’s not looking likely that the Draft 2014 we need to see is imminent. Regarding final reports, they always appeared by year-end up through 2005. Since then, apart from 2010 and 2011, a given year’s report hasn’t appeared until the following year. But they have only been this late twice (in 2012 under Obama, and in 2007 under Bush). Even when final reports were delayed into the subsequent year, we usually had them by January.

It should be adequate that regulation is allowed to grow without much restraint; the lack of timely disclosure of the relative handful of rules that get scrutiny in the only formal report on regulatory costs is too much.

Here is a list of Draft and Final reports’ dates of appearance since 2002.

Date Draft Final
2014 Due Now n/a
2013 April Overdue
2012 March April 2013
2011 March June
2010 April July
2009 September January 2010
2008 September January 2009
2007 March June 2008
2006 April January 2007
2005 March December
2004 February December
2003 February September
2002 March December

Post image for Ryan FY 2015 Budget Calls for Transportation Funding Rationalization

House Budget Committee Chairman Paul Ryan, R-Wisc., released his FY 2015 budget today. In just three pages, he calls for surprisingly sensible reforms to federal transportation programs. Unlike the Obama and Camp budgets — which I earlier criticized for continuing trust fund bailouts and merely kicking the can down the road — Ryan makes an attempt to fix the Highway Trust Fund’s revenue/outlay imbalance by refocusing transportation funding on core programs, while allowing states more flexibility to experiment with self-funding and -financing mechanisms.

As Ryan notes:

The budget recommends sensible reforms to avert the bankruptcy of the Highway Trust Fund by aligning spending from the Trust Fund with incoming revenues collected. The budget also includes a provision to ensure any future general-fund transfers will be fully offset, while at the same time providing flexibility for a surface-transportation reauthorization that does not increase the deficit. The budget includes a reserve fund to provide for the adjustment of budget levels for consideration of surface-transportation legislation, as long as that legislation is deficit neutral.

In addition, Ryan recommends the following positive transportation policy changes:

  • Eliminate Amtrak’s billion-dollar-plus annual subsidy;
  • Reduce the Transportation Security Administration’s outlays; and
  • Eliminate the Essential Air Service.

With highway bill reauthorization around the corner, it is great to see some real positive reforms being put on the table. Many free market transportation advocates would certainly like to see more, but we need to start somewhere, and Ryan’s budget appears to be that starting point.