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Big Daddy Wants To Neutralize Your Net

09 Friday Jan 2015

Posted by Nuetzel in Uncategorized

≈ 4 Comments

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AEI, Bureaucracy, central planning, Common Carrier, Cronyism, Don Boudreaux, FCC, Google, Internet REgulation, ISPs, Jeffrey Eisenach, Market Solutions, Net Neutrality, Netflix, Peter Suderman, Reason, Ronald Coase, Tom Wheeler, Wired

Net-Neutrality

Once again, President Obama is trying his hand as populist candyman, now pressing the FCC to adopt “net neutrality” rules for regulating internet service providers (ISPs) as common carriers. Net neutrality refers to regulations on ISPs that would prohibit different treatment of different types of internet content, matters that are better left to market participants. Obama has no idea what he’s doing or who he’ll be hurting (hint: internet users of all stripes). The candy is an illusion. Peter Suderman’ has an aptly titled article on this topic at Reason: “Will 2015 Be the Year the FCC Regulates the Internet Back to 1934?” He offers some background on the history of U.S. telecommunications regulation and explains the context within which FCC Chairman Tom Wheeler and the Commission will deal with the issue. Suderman closes with this thought:

“If Wheeler does take this route (reclassification of ISPs as common carriers], as he now seems to determined (sic), we’ll end up with an Internet that is more regulated, more subject to regulatory uncertainty in the near-term, and more like a public utility from another era than an information delivery service for the modern age. It’ll be 2015—but for the Internet, it’ll be 1934 all over again.”

Wired also gives its perspective but implies that Wheeler is seeking ways to reclassify the ISPs, impose neutrality rules, while also creating sufficient exceptions to mollify the ISPs, avoiding litigation as well as market disruption. That would be nice as far as it goes.

Net neutrality is a misnomer, as Sacred Cow Chips has discussed on two previous occasions in “The Non-Neutrality of Network Hogs“, and “Net Neutrality: A Tangled Web“. A lowlight is the corporate cronyism inherent in calls for net neutrality. The biggest beneficiaries are not consumers, but large content providers such as Netflix and Google, though the latter has altered its position on neutrality now that it is entering the market as an ISP. Another lowlight is the disincentive for network expansion created by forced subsidies to the large content providers, who are extremely heavy users of internet capacity.

Jeffrey Eisenach at AEI picks apart the arguments in favor of internet regulation. He also counters assertions that consumers are likely to benefit from internet regulation. Here are two choice quotes:

“And while much is made of consumers’ limited choices, the broadband market is actually less concentrated than the markets for search engines, social networks, and over-the-top video services: discriminatory regulation of ISPs cannot be justified on the basis of market power.”

“Finally, there’s the argument about fast lanes and slow lanes, or, in regulatory jargon, “paid prioritization.” The simple reality is that edge providers like Netflix require prioritization for their services to work. It’s just the “paid” part they don’t like.”

Finally, Don Boudreaux provides two relevant quotes on regulation, one from the great Ronald Coase, along with some of his own thoughts. I close with Boudreaux’s summation:

“Government imposition of “net neutrality” will substitute bureaucrats’ politically poisoned judgments on what are and what are not appropriate business practices for the market-tested judgments of legions of suppliers competing for the patronage of hundreds of millions – indeed, often billions – of consumers.“

Statists Can’t Imagine Liberty

04 Sunday Jan 2015

Posted by Nuetzel in Uncategorized

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Cuba, Don Boudreaux, Fidel Castro, Grading Quotas, Jonah Goldberg, Leftist Double Standards, Peak-Left, W. Lee Hansen, Walter Russell Mead, Wisconsin-Madison

Evolution+of+the+left

Imagine all the people, living for today AND tomorrow, free to do whatever the hell they want, creating, trading, investing, growing, playing, praying, partying. But any human initiative to improve upon the harsh conditions of the natural world is apparently offensive to the nihilistic sensibilities of those on the Left (as are a host of other freedoms). That attitude is often expressed by gentry leftists, already living quite comfortably, without recognition that the statist policies they advocate would render the same conditions unattainable for most others and probably unsustainable for themselves. The hypocrisy is glaring. Here are links to a few recent articles and posts illustrating the duplicity of the Left.

Jonah Goldberg has some fun with a recent piece on the many double standards of the Left. According to Don Boudreaux, this piece is flawed only in Goldberg’s use of the term “liberal” rather than the more accurate “statist”:

“If you work from the dogmatic assumption that liberalism is morally infallible and that liberals are, by definition, pitted against sinister and — more importantly — powerful forces, then it’s easy to explain away what seem like double standards. Any lapse, error, or transgression by conservatives is evidence of their real nature, while similar lapses, errors, and transgressions by liberals are trivial when balanced against the fact that their hearts are in the right place. Despite controlling the commanding heights of the culture — journalism, Hollywood, the arts, academia, and vast swaths of the corporate America they denounce — liberals have convinced themselves they are pitted against deeply entrenched powerful forces and that being a liberal is somehow brave. Obama, the twice-elected president of the United States, to this day speaks as if he’s some kind of underdog.”

To digress briefly, Boudreaux elaborates on the true meaning of liberalism here.

This essay by Walter Russell Mead, “The Liberal Retreat,” describes the state of the leftist agenda after six years of the Obama Administration. It is written from more of a conservative point of view than my preferred libertarian position, but it is very much on-target in its assertion that the “body politic” is not buying into the leftist agenda. We are post-“peak Left”:

“Shell-shocked liberals are beginning to grasp some inconvenient truths. No gun massacre is horrible enough to change Americans’ ideas about gun control. No UN Climate Report will get a climate treaty through the U.S. Senate. No combination of anecdotal and statistical evidence will persuade Americans to end their longtime practice of giving police officers extremely wide discretion in the use of force. No ‘name and shame’ report, however graphic, from the Senate Intelligence Committee staff will change the minds of the consistent majority of Americans who tell pollsters that they believe that torture is justifiable under at least some circumstances. No feminist campaign will convince enough voters that the presumption of innocence should not apply to those accused of rape.”

It is a point of no small irony that many on the Left express apprehension about the prospect of normalized relations between the U.S. and Cuba. Heaven forbid that this process might introduce the fruits of capitalism to Cuban shores. Here’s an interesting (and disturbing) take on Castro’s Hipster Apologists:

“Flickering across my computer screen, elements of the left were uniting with elements of the right, insisting that Cuba remain in the cold, a museum of the Cold War isolated from both the glories and evils of American culture. One lefty tweeter even complained that an invasion of icky American tourists would undermine ‘family values’ in Cuba.”

American universities are hotbeds of egalitarian philosophy as well as identity politics. Here’s a good example of the consequences of this sort of leftist mind freeze in an opinion piece by an economics professor at the University of Wisconsin, W. Lee Hansen, on an initiative to use grading quotas at the school:

“I would argue to the contrary that many students will suffer academically if they receive the artificial boost of higher grades than they actually earned just because they happen to be in a ‘targeted group.’ Students need accurate feedback on how they’re doing, not inflated grades that boost their egos.

I would also argue that the university’s reputation will be diminished by these efforts at equalizing grades between groups. Pressures to eliminate grading gaps will lead to the ‘dumbing down’ of courses and, even more likely, grade inflation for targeted minority students. This pretend solution won’t make the university better for anyone.”

Any university making use of grading quotas deserves scorn. It’s sad that a great institution like Wisconsin-Madison would stoop to such a practice. Then again, egalitarian philosophy and identity politics deserve scorn. These are ideas that ultimately breed envy, hatred and social failure.

The State and The Invisible Future Lost

14 Sunday Dec 2014

Posted by Nuetzel in Uncategorized

≈ 1 Comment

Tags

Capital investment, Don Boudreaux, Innovation, Opportunity cost, Prohibition, regulation, Taxes, Technology

lost-opportunities-clotilde-espinosa

Lost opportunities can have far reaching consequences. Our society routinely destroys economic opportunities as a matter of policy. This includes immediate discouragement of economic activity via tax disincentives and regulatory obstacles as well as lost capital investment and innovation.  And it includes actions that grant protected status for monopolists, a steady by-product of the regulatory state. Don Boudreaux at Cafe Hayek posts a letter from a reader and his own thoughts on these points. From the letter:

“California has 3,754 wineries and they provide good wines for customers, jobs for employees, profits for owners, and fun places to visit. Imagine if Prohibition had never ended or if regulations were such that a mere five wineries produced all the wine for the entire country. Who would have known what we would have been missing?”

The damage of such policies goes on and on, and the negative effects compound with the passage of time. But those effects are seldom visible when policies are made. We never observe the bounty of the counterfactual when a new plant or shop isn’t built, a new shift isn’t added, a new company isn’t formed, a price increase isn’t discouraged by competition, or when inventions and discoveries aren’t made. From Boudreaux:

“The unseen includes also, and more importantly, the greater and better and completely different goods and services, the newer and safer and less-resource-intensive ways of production, and the more full prospects for human flourishing and the heightened hopes and the improved and expanded life-style options that human creativity – unleashed by free markets and governed by open competition and private property rights – makes possible.”

Technology and the advance of knowledge is a process that builds upon itself. The achievements of recent decades were impossible for us to have imagined beforehand, but much more might have been possible. Looking forward, the opportunities lost to today’s stultifying policies will become more staggering as the decades pass, losses much greater than we can imagine today.

Locavoracious Rent-Seeking

07 Tuesday Oct 2014

Posted by Nuetzel in Uncategorized

≈ 1 Comment

Tags

Alberta Farmer, Don Boudreaux, Locavorism, Pierre Desrochers, rent seeking, Sustainability, the Locavore's Dilemma, transportation costs

eat weeds

Nothing sets my BS detector on high alert quite like admonitions to “buy local” in the interests of “sustainability” and protecting the environment. I like to support local merchants and producers as much as anyone, but in the end, one should buy what they like without guilt, regardless of its place of origin. The notion that local production is always better for the environment is based on faulty logic and a simple ignorance of actual production costs. The bad economics of locavorism is exposed in a recent Don Boudreaux column, “‘Sustainable’ and Superficial:”

“… transportation consumes only a small portion of the resources required to feed us. Labor, fuel, water, irrigation equipment, tractors and other farm tools, fertilizers, pesticides, packaging and (of course) land must also be used. … the amount of resources required to eat only locally grown foods would be stupendous. Some lands and local environments are better suited than are other lands and local environments to growing particular kinds of crops.”

The following Alberta Farmer post from 2010 illustrates the kind of ignorance cloaked in snobbery that typifies the locavorism:

“With their simplistic focus on food miles, locavores ignore other factors of sustainability. I was in a very chic restaurant in Tucson, Ariz., where the smug chef righteously proclaimed that all his ingredients were locally grown. He was quite offended when I asked him about the environmental and other costs of importing all that fresh water to grow that food in the Arizona desert.”

The author notes correctly that “the locavore fad is primarily restricted to the foodie elite …” who are often willing to pay premium prices to eat fungus and roughage scrounged from local woods and creek beds. (Oh, yum!) That fact is made abundantly clear in a post referenced by Boudreaux: Pierre Desrochers, author of The Locavore’s Dilemma, describes locavorism as “famine food”. His subtitle: “Middle-class foodies are paying a fortune to eat what peasants once lived on.”

“Not surprisingly, as soon as they could do it, our ancestors tried to supplement their local fare with imports from distant places. In time, non-perishable commodities like wheat, wine, olive oil, cod, sugar, coffee, coffee, cocoa, tea, spices, frozen meat and canned vegetables, produced in the most suitable agricultural locations rather than in close vicinity to final consumers, became increasingly plentiful and affordable.”

Our ancestors sensibly embraced these new opportunities to balance and improve their diets. The reactionary mindset of today’s locavores prevents them from understanding the true nature of “sustainability,” which is best promoted by markets and a willingness to engage in trades that are mutually beneficial. In a sense, locavores promote the sort of provincialism that is characteristic of many protectionist anti-trade arguments. That kind of rhetoric often supports monopoly rents for local producers.

Unicorns, The State and Sustainability

15 Friday Aug 2014

Posted by Nuetzel in Uncategorized

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Cafe Hayek, Don Boudreaux, Government Failure, Markets, Matt Ridley, Michael Munger, Platitudes, Sustainablility, Unicorns

Unicorn-meat

Every time someone says “the government should …,” ask them to replace the “G word” with “politicians I actually know, running in electoral systems with voters and interest groups that actually exist.” Does the speaker still think “the government should?” It’s a good test suggested by Michael Munger in his article “Unicorn Governance.” His point is that nearly all calls for state intervention really profess a kind of belief in unicorns. So let’s remove the unicorn from the argument. He says:

My friends generally dislike politicians, find democracy messy and distasteful, and object to the brutality and coercive excesses of foreign wars, the war on drugs, and the spying of the NSA.

But their solution is, without exception, to expand the power of “the State.” That seems literally insane to me—a non sequitur of such monstrous proportions that I had trouble taking it seriously.

Along the same lines, Don Boudreaux at Cafe Hayek offers a quote from Matt Ridley’s book, The Rational Optimist:

Economists are quick to speak of ‘market failure’, and rightly so, but a greater threat comes from ‘government failure‘. Because it is a monopoly, government brings inefficiency and stagnation to most things it runs; government agencies pursue the inflation of their budgets rather than the service of their customers; pressure groups form an unholy alliance with agencies to extract more money from taxpayers for their members. Yet despite all this, most clever people still call for government to run more things and assume that if it did so, it would somehow be more perfect, more selfless, next time.

Finally, Boudreaux has a recent piece in which he proposes a little Platitude Test. Is the speaker offering up a platitude? Well, “ask yourself if you can imagine a normal human adult believing the opposite.” If so, then there is truly something of substance at issue. Boudreaux notes that this is usually not the case when the word “sustainability” is trotted out:

<

p style=”padding-left:30px;”>You’ll discover, of course, that you can’t imagine anyone seriously supporting ‘unsustainability.’ Therefore, you should conclude that mere expressions of support for ‘sustainability’ are empty. And they can be downright harmful if they mislead people into supporting counterproductive government policies. Substantive issues involving sustainability invoke questions that have non-obvious answers. For example: At what rate must the supply of a resource fall before we conclude that continued use of that resource is unsustainable?

Ultimately, market mechanisms are fabulous guardians of real sustainability, since they price scarce resources so as to allocate them efficiently across time and space, providing incentives for conservation, to bring forth new supplies of the resource, and to develop rational substitutes. Unicorns and the state don’t do nearly as well.

NOTE: I apologize for the haphazard formatting in this post. I cannot seem to get the editor to cooperate tonight. I had similar problems last night but resolved them, though not in a fully satisfactory way. Tonight the issues seem worse.

More Obamacare Follies

31 Thursday Jul 2014

Posted by Nuetzel in Uncategorized

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ACA, adverse selection, crony capitalism, Don Boudreaux, Medicare, Megan McArdle, Obamacare, rent seeking

follies
Disconcerting news regarding the administration of the ACA just keeps on coming. The so-called “risk corridors” represent a bailout for health insurers for whom Obamacare premium revenue proves inadequate. Sure enough, but more interesting is how the Obama administration attempted to manipulate several provisions of the law on reimbursement in order to keep insurers happy after other changes with negative implications for their risk pools. In addition, when insurers expressed alarm about the “budget neutrality” of the corridors, the administration backtracked on that position. “… the administration had a choice: provide a bailout, or face the unpleasant prospect of having insurers price their products honestly.” The unfolding of these events is detailed in Emails Show Cozy Government- Insurer Alliance….

Don’t get too excited about the improvement in Medicare’s finances under the ACA. The chief actuary for the Centers for Medicaid and Medicare Services says that the ACA’s Medicare changes aren’t sustainable. Reimbursement rates under the ACA are inadequate barring “an unprecedented change in health care delivery systems and payment mechanisms.” In other words, an unlikely advance in productivity will be necessary in order to make Medicare’s finances work.

A few days ago, I posted about the Halbig vs. Sebelius District Court decision here, highlighting Jonathan Gruber’s one-time defense of the ACA’s rules that premium subsidies could be paid only on policies purchased on state exchanges. More recently, he claimed that the rule was not the intent of the legislation. Here are some further thoughts from Don Boudreaux on Gruber’s memory lapse, in which he links to a piece by Megan McArdle. Boudreaux:

The very claim that such a simple “mistake” infects the ACA calls into question the competence (or the incentives, or both) of elites, both political and intellectual, who seek ever more power for government.

A Vote Today Is Worth What Tomorrow? Who Cares?

07 Wednesday May 2014

Posted by Nuetzel in Uncategorized

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Don Boudreaux, Political Incentives, Private Incentives, Time Preference

Image

“One of the greatest economic misunderstandings is the myth that government officials are more attentive to the long run than are private entrepreneurs, investors and other owners of private property. Private property rights cause us to live for tomorrow, while the need to win political elections causes politicians to live only for today.” Don Boudreaux says it all in this op-ed: “Politicians live for today.” It should be fairly obvious that the kind of political incentives described by Boudreaux represent key techniques used by the Obama administration to achieve buy-in. Have we wised up? I’m afraid that’s wishful thinking.

Information Is Not Free And Seldom “Perfect”

15 Tuesday Apr 2014

Posted by Nuetzel in Uncategorized

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Don Boudreaux, Imperfect Information

Image

Economists invoke “perfect information” as a condition underlying ideal market outcomes. That assumption is usually unrealistic, but imperfect information no more justifies government intervention than any other resource scarcity. The same can be said of most information asymmetries, though it may depend upon the reasons. The post at the link below is described as “wonky” by its author, Don Boudreaux. So here is: A Note on Economic Theorizing and “Imperfect” Information

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