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California’s $15 Minimum Wage Is a Terrible, Unethical ‘Experiment’ by David R. Henderson

The law will have devastating consequences, particularly for immigrants, minorities, and the less educated.

In yesterday’s Washington Post, Charles Lane reports on the move, that’s almost a done deal, to raise California’s minimum wage in stages to a whopping $15 an hour by 2022. Lane, or his editors, wisely titled the article, “The risks of California’s minimum-wage increase.”

Lane writes:

By 2022, when fully phased in (small firms with fewer than 25 workers would have until 2023 to comply), the California minimum wage would represent 69 percent of the median hourly wage in the state, assuming 2.2 percent annual growth from the current median of roughly $19 per hour.

That 69 percent ratio would be all but unprecedented, in U.S. terms and internationally. The current California minimum wage represents about half the state’s median hourly wage, just as the federal minimum wage averaged 48 percent of the national median between 1960 and 1979, according to a 2014 Brookings Institution paper by economist Arindrajit Dube. (It is currently 38 percent of the national median.)

Other industrial democracies with statutory minimum wages typically set theirs at half the national median wage, too.

Even Dube recommends a minimum wage equal to half the median wage. One that’s 69 percent of the minimum wage is 38% higher than the level Dube recommends.

So Dube would oppose such an increase, right?

Wrong. Assuming that Lane reported Dube’s response accurately, he favors the increase. Why? Lane writes:

He [Dube] told me by email that California’s experiment is worth running and monitoring.

But these are humans being experimented on. Worth monitoring? Absolutely. Worth running? No damn way.

Economist Jonathan Meer, whose work Lane also cites, writes on Facebook (I am quoting with permission):

Playing with the March CPS [Current Population Survey], I find that a whopping 11% of young high school dropouts in California have a full time job. 85% of all high school dropouts in California are paid $15 an hour or less.

Among young (under 30) high school dropouts, that number is 96%.

Among *all* black and Hispanic respondents under 30 (irrespective of education), 90% are paid $15/hr or less.

This will not be good.

Cross-posted from Econlog.

David R. HendersonDavid R. Henderson

David Henderson is a research fellow with the Hoover Institution and an economics professor at the Graduate School of Business and Public Policy, Naval Postgraduate School, Monterey, California. He is editor of The Concise Encyclopedia of Economics (Liberty Fund) and blogs at econlib.org.

How Many People Can Planet Earth Sustain? by Robert P. Murphy

Asked whether or not the growing world population will be a major problem, 59% of Americans agreed it will strain the planet’s natural resources, while 82% of U.S.-based members of the American Association for the Advancement of Science said the same. Just 17% of AAAS scientists and 38% of Americans said population growth won’t be a problem because we will find a way to stretch natural resources.
Pew Research Center

“If humanity is to have a long-term future,” writes James Dyke at the Conversation, “we must address all these challenges [of population growth] at the same time as reducing our impacts on the planetary processes that ultimately provide not just the food we eat, but water we drink and air we breathe. This is a challenge far greater than those that so exercised Malthus 200 years ago.”

Thomas Malthus was a pioneer in political economy who wrote a famous 1798 essay on the dangers of population growth. Nowadays, environmentalists concerned with “sustainable growth” typically invoke Malthusian concerns as they recommend government interventions.

Free-market thinkers tend to reject such “solutions” as unnecessary, but beyond the technical policy debate, there is also a strand in the free-market community that embraces population growth with optimism.

The crux of Malthus’s original essay was that unchecked populations grow exponentially, whereas food production grows — at best — linearly. The following passage sums up the bleak Malthusian view of life:

The power of population is so superior to the power of the earth to produce subsistence for man, that premature death must in some shape or other visit the human race. The vices of mankind are active and able ministers of depopulation. They are the precursors in the great army of destruction, and often finish the dreadful work themselves. But should they fail in this war of extermination, sickly seasons, epidemics, pestilence, and plague advance in terrific array, and sweep off their thousands and tens of thousands. Should success be still incomplete, gigantic inevitable famine stalks in the rear, and with one mighty blow levels the population with the food of the world.

The Malthusian mindset explains Paul Ehrlich’s runaway bestseller The Population Bomb and the popularity of the “zero population growth” (ZPG) movement in the 1960s. Ehrlich said, “The mother of the year should be a sterilized woman with two adopted children.” (Advocates of ZPG over the years have differed on whether their goal could be achieved purely through voluntary sterilization and restraint versus government controls.)

How does a free-market economist respond to modern-day Malthusianism?

We should first make the obvious point that people in the private sector are just as capable of extrapolating population figures as government officials. Indeed, as I explained in “Are Markets Myopic?,” market prices — particularly in futures markets — give private owners the proper incentives to balance current consumption against future uses, even for nonrenewable resources. It is, in fact, democratically elected government officials who are myopic, since their control over such resources is fleeting.

To illustrate the shortcoming of a naïve natural scientific perspective on these issues, consider an anecdote from my high school years. I remember that my biology textbook asked us to consider a petri dish with a population of bacteria that would double every day. By stipulation, the bacteria would completely fill the dish — and thus hit the ceiling of its “carrying capacity” — on the 30th day. The textbook then delivered the stunning observation that on the day before this crisis, the dish would only be half full. The textbook’s point, of course, was to warn that trends in biology were not linear, and that crises could develop rapidly out of apparent tranquility and abundance.

If my classmates and I learned this principle in high school biology, then presumably at least some traders in the Chicago agricultural commodities markets have thought about it, too. If Earth’s population will grow more rapidly than food production over the next decade, then the spot prices of wheat, soybeans, and beef will eventually skyrocket as the crunch sets in. If the crisis of population growth is “obvious” to academics the world over, then this growth would be factored into market prices and food prices would already be high in anticipation of the future disaster.

Although there are sophisticated arguments involving the “negative externalities” of climate change, generally speaking, the possible dangers of excessive population growth would manifest themselves in the form of higher prices for raising children. Couples would voluntarily reduce their (biological) family size as real estate prices, tuition, health care, and food prices rose faster than wages to reflect the impending crunch. There is nothing for government officials to do in this area except to get out of the way and let market prices do their job, as opposed to subsidizing population growth through poorly designed welfare systems, “free” government schooling, and similar programs. People in the market make horrible forecasting decisions all the time, but government policies typically reinforce those flaws in human nature rather than counteract them.

As with any serious thinker, Malthus’s real work was imbued with nuance. Rather than making him a hero of progressive interventionists, one could hold up Malthus as a pioneer in understanding the importance of market institutions in encouraging responsible decision making when it comes to family size. However, if we focus on the narrow empirical prediction that exponential population growth must outstrip food production, then Malthus was simply wrong, or at least he has been so far. The “green revolution” is the shining example in the more general history of human ingenuity overcoming obstacles, especially in the context of relatively free markets. Julian Simon famously won a bet with Ehrlich predicting that the prices of key commodities — which he let Ehrlich and his colleagues choose — would fall during the 1980s.

In his own work, Simon stressed human creativity and adaptation as the “ultimate resource.” When typical Malthusians look at humanity, they see billions of bellies that must be filled. Instead, Simon saw billions of brains that could produce a new strain of crop, discover a cure for cancer, or develop a new technique for locating oil deposits.

One of Simon’s most compelling arguments is to point out that human labor is the one resource that has consistently become relatively more scarce over the centuries. Specifically, the amount of labor time that the typical worker needs to spend in order to earn the wages for buying other resources has dropped dramatically. (Robert Bradley provides some compelling graphics on the topic.) If the Malthusians had been right, then labor would have become relatively abundant and superfluous, with commodity and energy prices rising far more than wage rates.

As the population grows, two competing forces affect living standards. On the one hand, higher population allows for a greater division of labor, as well as more inventions that can be easily scaled. (The work of J.K. Rowling and Steve Jobs would not have been nearly as valuable on a tropical island with 100 people.) On the other hand, there are finite limits on certain resources — such as standing room on Earth, for the foreseeable future — and thus at some point further population growth drives down average wages.

Nonetheless, the market contains the proper incentives to allow individuals to make informed choices about procreation. Furthermore, experience to date has definitely come down on the side of the optimists. So far, free societies have proven “the more, the merrier” to be true. Wherever population growth appears to fall into a Malthusian trap, we find excessive statism, not free markets and private property rights.

Robert P. Murphy
Robert P. Murphy

Robert P. Murphy is author of Choice: Cooperation, Enterprise, and Human Action (Independent Institute, 2015).

A Deadly Caution: How the FDA’s Precautionary Principle Is Killing Patients by Alexander Tabarrok

I have long argued that the FDA has an incentive to delay the introduction of new drugs because approving a bad drug (Type I error) has more severe consequences for the FDA than does failing to approve a good drug (Type II error).

In the former case, at least some victims are identifiable and the New York Times writes stories about them and how they died because the FDA failed. In the latter case, when the FDA fails to approve a good drug, people die but the bodies are buried in an invisible graveyard.

In an excellent new paper (also here), Vahid Montazerhodjat and Andrew Lo use a Bayesian analysis to model the optimal tradeoff in clinical trials between sample size, Type I and Type II error.

Failing to approve a good drug is more costly, for example, the more severe the disease. Thus, for a very serious disease, we might be willing to accept a greater Type I error in return for a lower Type II error. The number of people with the disease also matters. Holding severity constant, for example, the more people with the disease the more you want to increase sample size to reduce Type I error. All of these variables interact.

In an innovation, the authors use the US Burden of Disease Study to find the number of deaths and the disability severity caused by each major disease. Using this data, they estimate the costs of failing to approve a good drug. Similarly, using data on the costs of adverse medical treatment, they estimate the cost of approving a bad drug.

Putting all this together the authors find that the FDA is often dramatically too conservative:

We show that the current standards of drug-approval are weighted more on avoiding a Type I error (approving ineffective therapies) rather than a Type II error (rejecting effective therapies).

For example, the standard Type I error of 2.5% is too conservative for clinical trials of therapies for pancreatic cancer — a disease with a 5-year survival rate of 1% for stage IV patients (American Cancer Society estimate, last updated 3 February 2013).

The BDA-optimal size for these clinical trials is 27.9%, reflecting the fact that, for these desperate patients, the cost of trying an ineffective drug is considerably less than the cost of not trying an effective one.

(The authors also find that the FDA is occasionally a little too aggressive, but these errors are much smaller: for example, the authors find that for prostate cancer therapies the optimal significance level is 1.2% compared to a standard rule of 2.5%.)

The result is important especially because, in a number of respects, the authors underestimate the costs of FDA conservatism.

Most importantly, the authors are optimizing at the clinical trial stage assuming that the supply of drugs available to be tested is fixed. Larger trials, however, are more expensive, and the greater the expense of FDA trials, the fewer new drugs will be developed. Thus, a conservative FDA reduces the flow of new drugs to be tested.

In a sense, failing to approve a good drug has two costs: the opportunity cost oflives that could have been saved and the cost of reducing the incentive to invest in R&D.

In contrast, approving a bad drug, while still an error, at least has the advantage of helping to incentivize R&D (similarly, a subsidy to research incentivizes R&D in a sense mostly by covering the costs of failed ventures).

The Montazerhodjat and Lo framework is also static: there is one test and then the story ends.

In reality, drug approval has an interesting asymmetric dynamic. When a drug is approved for sale, testing doesn’t stop but moves into another stage, a combination of observational testing and sometimes more RCTs — this, after all, is how adverse events are discovered. Thus, Type I errors are corrected.

On the other hand, for a drug that isn’t approved, the story does end. With rare exceptions, Type II errors are never corrected.

The Montazerhodjat and Lo framework could be interpreted as the reduced form of this dynamic process, but it’s better to think about the dynamism explicitly because it suggests that approval can come in a range for forms — for example, approval with a black label warning, approval with evidence grading, and so forth. As these procedures tend to reduce the costs of Type I errors, they tend to increase the costs of FDA conservatism.

Montazerhodjat and Lo also don’t examine the implications of heterogeneity of preferences or diseases morbidity and mortality. Some people, for example, are severely disabled by diseases that on average aren’t very severe — the optimal tradeoff for these patients will be different than for the average patient. One size doesn’t fit all.

In the standard framework, it’s tough luck for these patients. But if the non-FDA reviewing apparatus (patients/physicians/hospitals/HMOs/USP/Consumer Reports, and so forth) works relatively well — and this is debatable, but my work on off-label prescribing suggests that it does — this weighs heavily in favor of relatively large samples but low thresholds for approval.

What the FDA is really providing is information, and we don’t need product bans to convey information. Thus, heterogeneity (plus a reasonable effective post-testing choice process) mediates in favor of a Consumer Reports model for the FDA.

The bottom line, however, is that even without taking into account these further points, Montazerhodjat and Lo find that the FDA is far too conservative, especially for severe diseases. FDA regulations may appear to be creating safe and effective drugs, but they are also creating a deadly caution.

Hat tip: David Balan.

A version of this post first appeared at the Marginal Revolution blog.

Alex Tabarrok
Alex Tabarrok

Alex Tabarrok is a professor of economics at George Mason University. He blogs at Marginal Revolution with Tyler Cowen.

Privatize Social Security — Even if the Market Crashes by Michael D. Tanner

There have been many good, if ultimately unconvincing, arguments against allowing younger workers to privately invest a portion of their Social Security taxes through personal accounts. There have been even more silly ones.

One of the silliest is the one regurgitated Monday by ThinkProgress, that this week’s stock market decline proves that “If Social Security Had Been In Private Accounts The Stock Market Drop Could Have Been A Disaster.”

Few personal account plans would require a retiree to cash out their entire account on the day that the market crashed. But what if they did? It is important to understand that someone retiring Monday would have begun paying into their account 40 years ago when the Dow was at 835.34. After yesterday’s decline, it opened at 15,676 today. Over those 40 years, the worker would have made roughly 1,040 contributions to their account. Only 48 of them would have been at a time when the market was higher than today’s open.

Yep, even after Monday’s crash, the worker would have made a tidy profit. In fact, his return would have been substantially higher than what he could expect to receive from Social Security.

The last time that defenders of the status quo made this argument was 2009, during the market crash that led into the Great Recession. At that time the market hit a low of 6,547.  Obviously, if workers had been allowed to start investing then, they would have done pretty well. But more importantly, retirees in 2009 would have done well too, once again better than Social Security.

Cato published this comprehensive study of that downturn and its impact on personal accounts.

Social Security is running nearly $26 trillion in future unfunded liabilities. It cannot pay promised future benefits to young workers without substantial tax hikes. We should begin a discussion of how to reform this troubled program.

A start to such a discussion would be to retire the canard about market crashes and personal accounts.

Cross-posted from Cato.org and TannerOnPolicy.

Michael D. Tanner

Michael D. Tanner

Michael Tanner is a senior fellow at the Cato Institute, studying poverty and social welfare policy, health care reform, and Social Security.

Environmental Doom-mongering and the Myth of Vanishing Resources by Chelsea German

Media outlets ranging from Newsweek and Time, to National Geographic and even the Weather Channel, all recently ran articles on the so-called “Overshoot Day,” which is defined by its official website as the day of the year

When humanity’s annual demand for the goods and services that our land and seas can provide — fruits and vegetables, meat, fish, wood, cotton for clothing, and carbon dioxide absorption — exceeds what Earth’s ecosystems can renew in a year.

This year, the world allegedly reached the Overshoot Day on August 13th. Overshoot Day’s proponents claim that, having used up our ecological “budget” for the year and entered into “deficit spending,” all consumption after August 13th is unsustainable.

Let’s look at the data concerning resources that, according to Overshoot Day’s definition, we are consuming unsustainably. (We’ll leave aside carbon dioxide absorption — as that issue is more complex — and focus on all the other resources).

Fruits and vegetables

Since millions of people rose from extreme poverty and starvation over the past few decades, the world is consuming more fruits and vegetables than before. We are also producing more fruits and vegetables per person than before. That is, partly, because of increasing yields, which allow us to extract more food from less land. Consider vegetable yields:

Meat and fish

As people in developing countries grow richer, they consume more protein (i.e., meat). The supply of meat and fish per person is rising to meet the increased demand, just as with fruits and vegetables. Overall dietary supply adequacy is, therefore, increasing.

Wood

It is true that the world is losing forest area, but there is cause for optimism. The United States has more forest area today than it did in 1990.

As Ronald Bailey says in his new book The End of Doom, “In fact, except in the cases of India and Brazil, globally the forests of the world have increased by about 2 percent since 1990.”

As the people of India and Brazil grow wealthier and as new forest-sparing technologies spread, those countries will likely follow suit. To quote Jesse H. Ausubel:

Fortunately, the twentieth century witnessed the start of a “Great Restoration” of the world’s forests. Efficient farmers and foresters are learning to spare forestland by growing more food and fiber in ever-smaller areas. Meanwhile, increased use of metals, plastics, and electricity has eased the need for timber. And recycling has cut the amount of virgin wood pulped into paper.

Although the size and wealth of the human population has shot up, the area of farm and forestland that must be dedicated to feed, heat, and house this population is shrinking. Slowly, trees can return to the liberated land.

Cotton

Cotton yields are also increasing — as is the case with so many other crops. Not only does this mean that we will not “run out” of cotton (as the Overshoot Day proponents might have you believe), but it also means consumers can buy cheaper clothing.

Please consider the graph below, showing U.S. cotton yields rising and cotton prices falling.

While it is true that humankind is consuming more, innovations such as GMOs and synthetic fertilizers are also allowing us to produce more. Predictions of natural resource depletion are not new.

Consider the famous bet between the environmentalist Paul Ehrlich and economist Julian Simon: Ehrlich bet that the prices of five essential metals would rise as the metals became scarcer, exhausted by the needs of a growing population. Simon bet that human ingenuity would rise to the challenge of growing demand, and that the metals would decrease in price over time. Simon and human ingenuity won in the end. (Later, the prices of many metals and minerals did increase, as rapidly developing countries drove up demand, but those prices are starting to come back down again).

To date, humankind has never exhausted a single natural resource. To learn more about why predictions of doom are often exaggerated, consider watching Cato’s recent book forum, The End of Doom.

A version of this post first appeared at Cato.org.

Chelsea German

Chelsea German

Chelsea German works at the Cato Institute as a Researcher and Managing Editor of HumanProgress.org.

RELATED ARTICLE: EPA’s Hightest Paid Employee, “Climate Change Expert,” Sentenced to 32 Months for Fraud, Says Lying Was a ‘Rush’

How Minimum Wages Discourage Entrepreneurship by Donald J. Boudreaux

In a letter to the Wall Street Journal, Brian Collins asks, “Do you truly believe that absent any increase in the minimum wage that Wendy’s or any other business will suspend efforts to develop and implement new forms of automation that promise to reduce staff levels?”

The answer is “no.” Contrary to Mr. Collins’s implication, however, this fact does nothing to excuse raising the minimum wage.

Even in a world in which market forces naturally promote automation, raising the minimum wage has two pernicious effects.

First, it causes the rate of automation to be faster than it would be if the minimum wage were not raised. That is, raising the minimum wage results in automation being introduced at a rate that is too fast given the size of the low-skilled labor force.

Second, raising the minimum wage destroys incentives for entrepreneurs and businesses to find ways to profitably employ workers whose limited skills prevent them from producing hourly outputs valued at least as high as the minimum wage.

The first effect throws some low-skilled workers out of jobs that they would otherwise retain, while the second effect ensures that no one has incentives to find ways to profitably employ these and other low-skilled workers.

If it is inhumane to outlaw the profitable employment of those workers whose skills are the least valuable, then the minimum wage is deeply inhumane.

If the government instituted a minimum wage of $100 per hour and, therefore, made unlawful the profitable employment of all those people whose skills are too meager to enable them to produce at least $100 worth of output per hour, there would be a national uproar — and rightly so.

Yet when the government implements such a policy but in a way that outlaws the profitable employment only of people whose skill-sets are among thelowest, relatively few people object and many people — especially “Progressives” — applaud the policy as humane.

How sad. And how especially sad that many economists today, who above all should know better, lend their authority to such an inhumane policy.

A version of this letter first appeared at Café Hayek.

Donald J. Boudreaux
Donald J. Boudreaux

Donald Boudreaux is a professor of economics at George Mason University, a former FEE president, and the author of Hypocrites and Half-Wits.

Can We Afford ‘Affordable Care’? by D.W. MacKenzie

Does the Supreme Court decision upholding health insurance subsidies prove that Obamacare is here to stay?

With its legality settled, the longevity of the healthcare program is supposed to be politically inevitable. The millions of voters who receive subsidies from the Affordable Care Act will not tolerate the loss of this money. Insurance companies will no doubt also lobby to prevent any loss of ACA subsidies, as stockholders and employees are major beneficiaries of this program.

Political factors may well preserve the ACA in the short run. But the Court’s ruling came on the heels of a gloomy report from the Congressional Budget Office that may prove to be more decisive for the law than all of Chief Justice Roberts’ legal gymnastics.

The CBO forecasts anemic economic growth and rising public debt for decades to come. Projected revenues and projected spending indicate a growing imbalance in federal finances, driven by long-term unfunded liabilities in old entitlement programs — mainly Social Security and Medicare.

The Affordable Care Act was supposed to control health insurance costs — hence the name. Unfortunately, things are not working out that way, and insurance companies are pressing for significant rate increases.

Consumers might hope that government officials would resist pressure for rate increases, but such actions are unlikely: Stock prices for major health insurers rose sharply after the Supreme Court ruled in favor of the Obama administration. Clearly, investors expect the ACA to benefit health insurers. And in Oregon, state regulators actually raised premiums higher than insurers requested, just to keep companies in the market. Rising premiums will likely drive more subsidies, worsening the looming debt and entitlement crisis.

Politicians have ignored these issues for decades because they seemed like “long-term” problems, and political pressures from elections and lobbying force them to be shortsighted. The short-term financial situation is being shored up by the willingness of investors to buy federal debt at low rates.

The trouble is that the long term isn’t as far off as it used to be. The CBO indicates that the fiscal situation in the federal government worsened significantly over the past few years, even as the deficit was declining. Further deterioration in federal finances is expected over the next decade. How much longer will private investors continue to finance this soaring debt?

A large part of the problem with rising debt is that financing it requires steady economic growth, but large public debts can crush growth. Federal debt is a millstone on the economy, the burden of which could at some point lead to national bankruptcy. The ACA, with its enormous subsidies and regulatory compliance costs, will simply pile on an already unaffordable mass of federal spending programs.

The bottom line is that Supreme Court maintained the ACA subsidies legally,but the American people will not be able to maintain them financially.

The passage and continued defense of the Affordable Care Act is an example of the rank irrationality of public budgeting. The outcome of our political and legislative processes over the past few decades has been to create a myriad of wasteful and financially unsustainable federal programs. Meanwhile, the analytical office the legislative branch of government has been quietly raising the alarm about to the direction and sustainability of government finances. It would seem that delirium is winning out over reason.

There is, of course, nothing truly inevitable about the growth of federal spending. Federal spending developed into its present irrational state because many people pressed for this growth.

But spending can and will be curtailed. Citizens can push for real spending cuts through the electoral process. Otherwise, investors in financial markets will at some point put a sharp and sudden stop to government excesses.


D.W. MacKenzie

D. W. MacKenzie is an assistant professor of economics at Carroll College in Helena, Montana.

RELATED ARTICLE: Under Obamacare, Uninsured Rate Fell to Lowest Level in 50 Years. Why There’s More to That Number.

Government Ruins the Dishwasher (Again) by Jeffrey A. Tucker

The regulatory assault on the dishwasher dates back at least a decade. For the most part, industry has gone along, perhaps grudgingly but also with a confidence that dishwashers would survive. Surely government rules wouldn’t finally make them useless.

But the latest regulatory push by the Department of Energy might have finally gone too far. The DoE says that loads of dishes can’t use more than 3.1 gallons. This amounts to a further intensification of “green” policies that are really just strategies to wreck the consumer experience.

The agency estimated that this would “save” 240 billion gallons of water over three decades. It would reduce energy consumption by 12 percent. It would save consumers $2 billion in utility bills.

But as with all such estimates, these projections have three critical problems.

First, saving money and resources is not always an absolute blessing if you have to give up the service for which the resources are used. Giving up indoor plumbing would certainly save water, just as banning the light bulb would save electricity. The purpose of resources is to use them to make our lives better.

Second, the price system is a far better guide to rational resource use than bureaucratic diktat. If the supply of water or electricity contracts, prices go up and consumers can make their own choices about how to respond. This is true with one proviso: There has to be a functioning market. This is not always true with public utilities.

Third, the bureaucrats rarely consider the possibility that people will respond to rationing by using resources in a different way. A low-flow toilet causes people to flush two and three times, a low-flow showerhead prompts people to take longer showers, and so on, with the end result of even more resource use.

What does breaking the dishwasher accomplish? It drives us back to filling sinks or just running water over dishes for 10 minutes until they are all clean, resulting in vastly more water use.

The Association of Home Appliance Manufacturers, which has quietly gone along with this nonsense all these years, has finally said no.

“At some point, they’re trying to squeeze blood from a stone that just doesn’t have any blood left in it,” said Rob McAver, the lead lobbyist.

The Association demonstrated to the regulators that the new standards do not clean the dishes. They further pointed out that this can only lead to more hand washing. The DoE now says it is revisiting the new standards to find a better solution.

All of this is rather preposterous, since dishwashers are already performing at a far lower level than they did decades ago. Even when I was growing up, they were getting better, not worse. You could put dirty dishes in, even with stuck-on egg and noodles, and they would come out perfectly clean.

I started noticing the change about five years ago. It was like one day to the next that the dishes started coming out with a gross-me-out film on the glasses. I thought it was my machine. So I bought a new one. The new one was even worse, and it broken within a year. Little by little, I started hand washing dishes first, just to make sure they are clean.

It turns out that this was happening all over the country. NPR actually discerned this trend and did a story about it. The actual source of the problem was not the machine or the user, but something that everyone had taken for granted for generations: the soap itself.

The issue here is phosphorous. The role of phosphorus in soap is critically important. It is not a cleaning agent itself but a natural chemical that unsticks the soap from fabrics and surfaces generally. You can easily see how this works by adding phosphorus to a sink full of suds. It attacks the soap and causes it to bundle up in tighter and heavier units, taking oil and dirt with it and pulling it down the drain. It is the thing that extracts the soap, making sure that it leaves surfaces.

Painters know that they absolutely must use phosphorous to prepare surfaces for painting. If they do not, they will be painting on a dirty, oily surface. This is why the only phosphorus you can now find at the hardware store is in the paint department (sold as Trisodium Phosphate). Otherwise, it is gone from all detergents that you use on clothes and dishes, which is a major reason why both fabrics and dishes are no longer as clean as they once were.

Why the war on phosphorous? It is also a fertilizer. When too much of it is dumped into rivers and lakes, algae growth takes over and kills off fish. The bulk of this comes from large-scale industrial farms in specific locations around the country. Regulators, however, took on the easy target of domestic soaps, and manufacturers faced pressure to remove it from their soaps.

Now it is impossible to get laundry or dish soap with phosphorous as part of the mix. If you want clean, you have to physically add your own by purchasing trisodium phosphate in the paint department and adding it to the mixture by hand.

Welcome to regulated America, where once fabulous consumer inventions like refrigerators, freezers, washing machines, and dishwashers have been reduced to a barely functioning state. The reasons are always the same: 1) phosphorous-free detergent, 2) a fetish with saving water, 3) weaker motors that use less electricity, 4) more tepid water due to low default settings on hot water heaters, and 5) reduced water pressure in general.

Put it all together and you have an array of products that no longer function in ways that make our lives better. There is an element of dystopia about this, especially given that these household appliances were first invented and widely deployed in postwar America. This was the country where women, in particular, first started to enjoy the “freedom from drudgery.” It was machines as much as ideology that began to enable women to cultivate professional lives outside the home.

No, we are not going to be forced back to washboards by the river anytime soon. But suddenly, the prospect of having to hand wash our dishes does indeed seem real. If the regulators really do get their way, functioning dishwashers could become like high-flow toilets: contraband to be snuck across borders and sold at a high black market prices.

It seems that the regulators can’t think of much to do these days besides ruining things we love.


Jeffrey A. Tucker

Jeffrey Tucker is Director of Digital Development at FEE, CLO of the startup Liberty.me, and editor at Laissez Faire Books. Author of five books, he speaks at FEE summer seminars and other events. His latest book is Bit by Bit: How P2P Is Freeing the World. Follow on Twitter and Like on Facebook.

Hillary Staffers Can’t Afford New York’s Government-Controlled Housing Market by David Boaz

The New York Times reports:

For decades, idealistic twenty-somethings have shunned higher-paying and more permanent jobs for the altruism and adrenaline rush of working to get a candidate to the White House. But the staffers who have signed up for the Clinton campaign face a daunting obstacle: the New York City real estate market….

Mrs. Clinton’s campaign prides itself on living on the cheap and keeping salaries low, which is good for its own bottom line, but difficult for those who need to pay New York City rents….

When the campaign’s finance director, Dennis Cheng, reached out to New York donors [to put up staffers in their apartments], some of them seemed concerned with the prospective maze of campaign finance laws and with how providing upscale housing in New York City might be interpreted.

Here are some words that don’t appear in the article: rent control, regulation, zoning.

But those are among the reasons that housing is expensive in New York. As a Manhattan Institute report noted in 2002:

New York City and State have instituted policies that severely distort the dynamics of housing supply and demand. Only 30 percent of the city’s rental units, for instance, are subject to market prices.

These distortions — coupled with Rube-Goldbergian environmental and zoning regulations — have denied New York the kind of healthy housing market enjoyed by most other major cities.

And a report by Edward Glaeser and Joseph Gyourko for the Federal Reserve Board of New York Economic Policy Review suggests that “homes are expensive in high-cost areas primarily because of government regulation” that imposes “artificial limits on construction.”

As I’ve said in other contexts: This is the business you have chosen. If you want the government to control rents and impose regulatory costs on the building of housing, then you can expect to see less housing and thus more expensive housing. Welcome to your world, Hillary Clinton staffers.

This post first appeared at Cato.org.

Related: Jim Epstein notes that fully one third of Manhattan, and 33,000 buildings and 114 entire districts across the city, are “encased in a life-sized historical diorama,” unable to be modified or demolished thanks to the city’s “landmark preservation” law.


David Boaz

David Boaz is executive vice president of the Cato Institute. He is the editor of The Libertarian Reader, editor of The Cato Handbook for Policymakers, and author of The Politics of Freedom.

Greeks Prepare to Be Pillaged by Jeffrey A. Tucker

In the world of banking, a “holiday” means you can’t get your money. It’s been a few years since we’ve seen that happen in any developed world economy, but that is exactly what the Greek government is doing, starting now, to stop a massive bank run.

Greece owes the International Monetary Fund a payment of $1.5 billion, due tomorrow, from the last time the government was bailed out. But, of course, governments can’t make wealth, and the money didn’t just magically materialize. They have to beg, borrow, and steal to get it, and Greece has finally found those limits.

Athens had hoped that it could once against tap the European Commission. But drained and fed up, other governments refused to extend yet another loan to Greece unless they agreed to reform their bloated and corrupt welfare state.

Unfortunately for Greeks, the ruling coalition in Greece swept into power in January on the platform of stopping “austerity” and rolling back budget cuts. They balked at the EU’s (and especially Germany’s) conditions for the next round of bailout money.

As a result, Athens has really and truly run out of money, and they will default on their debts starting tomorrow — and the European Central Bank has said it will cut off emergency credit to Greek banks if the government fails to pay its debts.

The news that no deal would be reached sent bank depositors into a panic, and thousands have been lined up at ATMs all over the country since Friday.

Prime Minister Alexis Tsipras announced that he was closing all banks for at least a week as a way to stem the tide. Many ATMs are empty; the rest, by government order, will only dispense €60 per person per day. The government is now imposing capital controls to stop cash from leaving the country.

One thing needs to be said about this frantic authoritarian approach: It never works. Bank closings add to the atmosphere of panic. They are often followed by an announcement that the government is going to devalue or outright steal people’s money. Whatever trust remains in the system is drained away along with the value of the currency.

But there’s another factor in play, for the first time. People are looking at Bitcoin as a way to store and move money.

There is now a Bitcoin ATM in Athens that is reportedly doing a brisk business. Redditors are sharing tips. And, of course, the exchange rate of Bitcoin is on the move again.

This past week, I was out of touch of the news entirely because I was at the New Hampshire liberty retreat, Porcfest. There you can buy almost anything with Bitcoin, so I was checking the price often. I noticed the upward price pressure, and I had an intuition that something serious was happening.

Sure enough, this morning I was awakened by a call from Russia Today. They wanted me on a two-hour segment today to talk about the meltdown in Greece. I turned them down because I haven’t followed it closely enough (though that doesn’t usually stop most commentators!).

But when I looked into it, I suddenly understood: Sure enough, Bitcoin is on the move for a reason.

Many price watchers are predicting another spike in the exchange rate if Greece actually defaults and leaves the euro. Maybe, maybe not. It actually doesn’t matter. The exchange rate can be anything; it doesn’t affect the utility of having access to a global currency and payment system that is outside regional banking systems — one that can’t be closed, controlled, confiscated, or devalued at the whim of desperate regimes.

Cryptocurrency is here to stay. It is the world’s new safe haven, displacing the role that gold once played. The reasons are rather obvious: Bitcoin is more liquid than gold. It takes up no space, weighs nothing, and is more secure. Once you are an owner, nothing can take away what you own — and you don’t have to rely on a third party such as a gold warehouse or a bank (or a government) to take care of your money.

Given all of this, there is supreme irony in the announcement made by the Greek central bank last year that consumers should be wary of Bitcoin. Bitcoin is vastly more safe and reliable than any national currency, including the euro and the dollar.

There is no government anywhere that would decline to shut the banks if their ruling class feared financial meltdown. That’s what’s happening in Greece. That could happen in any European country, and it could happen (and has happened) in the United States, too.

In the end, government regards itself as the ultimate owner of all a nation’s currency and the wealth it carries.

It’s wise to have another option, and people have long known that. The question is: What is that option? Today, not for the first time, and not for the last, Bitcoin is here to save the day.


Jeffrey A. Tucker

Jeffrey Tucker is Director of Digital Development at FEE, CLO of the startup Liberty.me, and editor at Laissez Faire Books. Author of five books, he speaks at FEE summer seminars and other events. His latest book is Bit by Bit: How P2P Is Freeing the World.

SCOTUS Says You Can Be Sued for Unintentional Discrimination by Walter Olson

Stop calling it fair housing law. If it was ever a matter of fairness, it isn’t now.

Under today’s 5-4 Supreme Court holding in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, you can be held liable for housing discrimination whether or not you or anyone in your organization intended to discriminate.

Instead — to quote Justice Anthony Kennedy, who joined with the Court’s four liberals in a 5-4 majority — you might have been influenced by “unconscious prejudice” or “stereotyping” when you lent money or rented apartments or carried on appraisal or brokerage or planning functions.

What you did had “disparate impact” on some race or other legally protected group, and now you’re caught up in potentially ruinous litigation in which it’s up to you to show that you had a good reason for what you did and could not have arranged your actions in some other way that had less disparate impact.

The decision is quite broad in its implications. For example, in employment discrimination law, where disparate impact has long been legally established, it is increasingly legally dangerous to ask job applicants about criminal records, or carry out criminal background checks on them before a job offer, for fear of disparate impact.

Is it still safe to ask such questions of prospective tenants in your apartment building? Better ask your lawyer.

The case hinged on statutory interpretation, and as Justice Alito’s dissent makes clear, King v. Burwell wasn’t the only case decided today in which a majority mangled the clear meaning of a law’s text to get the result it wanted.

As Justice Ginsburg was frank enough to note at oral argument, “”If we’re going to be realistic about it…in 1968, when the Fair Housing Act passed, nobody knew anything about disparate impact.”

On the contrary, the law’s text specified that it was banning decisions taken “because of” race, and to find a loophole the majority was obliged to fall back on an incidental clause banning the making “unavailable” of a “dwelling,” which we are meant to believe snuck in a huge new area of liability.

As the majority stresses, many appeals courts did go along with a liberal interpretation. But the Executive Branch did not — in 1988 it took the position before the Court that the law did not permit disparate impact claims — while Congress hedged the issue in later enactments so as to keep all sides on board a compromise.

Despite ridiculous claims (like that in a Vox headline) that the Court today “saved” the Fair Housing Act or that a contrary decision would have “gutted” it, the great majority of litigation under the Act has been on disparate-treatment complaints (which, as Alito notes, can already use disparate impact as evidence of pretext.)

But the Obama administration, as I’ve documented elsewhere, has launched a huge effort to turn disparate-impact law into an engine of revolutionary changes in local government and housing practice, introducing, for example, such concepts as a local government obligation to pursue subsidized federal housing grants and to enact laws forcing private landlords to accept Section 8 tenants.

As the four dissenters make clear, a compliance and litigation nightmare now looms for many in real estate, finance, and local government as they try to dodge liability.

“No matter what [Texas] decides” in the case at hand on locating low-income housing, for example, one or another group “will be able to bring a disparate-impact case” based either on the theory that projects should be put in poorer areas (which enables building more of them) or in affluent areas (which will benefit some future residents).

If you have time to read only one bit of today’s opinion, read Justice Clarence Thomas’s separate dissent. Thomas brilliantly recounts the EEOC’s successful subversion of its own founding statute, culminating in the Court’s profoundly mistaken opinion in Griggs v. Duke Power, the employment case that founded disparate impact theory.

“We should drop the pretense that Griggs’ interpretation of Title VII was legitimate,” he writes. It’s a tour de force — and already being denounced vehemently on the Left.

This post first appeared at Cato.org.


Walter Olson

Walter Olson is a senior fellow at the Cato Institute’s Center for Constitutional Studies.

5 Reasons the FDA’s Ban on Trans Fat Is a Big Deal by Walter Olson

The Obama administration’s Food and Drug Administration today announced a near-ban, in the making since 2013, on the use of partially hydrogenated vegetable fats (“trans fats”) in American food manufacturing.

Specifically, the FDA is knocking trans fats off the Generally Recognized as Safe (GRAS) list. This is a big deal and here are some reasons why:

1. It’s frank paternalism. Like high-calorie foods or alcoholic beverages, trans fats have marked risks when consumed in quantity over long periods, smaller risks in moderate and occasional use, and tiny risks when used in tiny quantities. The FDA intends to forbid the taking of even tiny risks, no matter how well disclosed.

2. The public doesn’t agree.2013 Reason-RUPE poll found majorities of all political groups felt consumers should be left free to choose on trans fats.  Even in heavily governed places like New York City and California, where the political class bulldozed through restaurant bans some years back, there was plenty of resentment.

3. The public is also perfectly capable of recognizing and acting on nutritional advances on its own. Trans fats have gone out of style and consumption has dropped by 85 percent as consumers have shunned them.

But while many products have been reformulated to omit trans fats, their versatile qualities still give them an edge in such specialty applications as frozen pizza crusts, microwave popcorn, and the sprinkles used atop cupcakes and ice cream. Food companies tried to negotiate to keep some of these uses available, especially in small quantities, but apparently mostly failed.

4. Government doesn’t always know best, nor do its friends in “public health.” The story has often been told of how dietary reformers touted trans fats from the 1950s onward as a safer alternative to animal fats and butter.

Public health activists and various levels of government hectored consumers and restaurants to embrace the new substitutes. We now know this was a bad idea: trans fats appear worse for cardiovascular health than what they replaced. And the ingredients that will replace minor uses of trans fats – tropical palm oil is one – have problems of their own.

5. Even if you never plan to consume a smidgen of trans fat ever again, note well: many public health advocates are itching for the FDA to limit allowable amounts of salt, sugar, caffeine, and so forth in food products. Many see this as their big pilot project and test case.

But when it winds up in court, don’t be surprised if some courtroom spectators show up wearing buttons with the old Sixties slogan: Keep Your Laws Off My Body.


Walter Olson

Walter Olson is a senior fellow at the Cato Institute’s Center for Constitutional Studies.

EDITORS NOTE: This post first appeared at Cato.org.

Venezuela Hits 510% Inflation by Steve Hanke

Venezuela’s bolivar is collapsing. And as night follows day, Venezuela’s annual implied inflation rate is soaring. Last week, the annual inflation rate broke through the 500% level. It now stands at 510%.

With free market exchange-rate data (usually black-market data), the real inflation rate can be calculated. The principle of purchasing power parity (PPP), which links changes in exchange rates and changes in prices, allows for a reliable inflation estimate.

Using black-market exchange rate data that The Johns Hopkins-Cato Institute Troubled Currencies Project has collected over the past year, I estimate Venezuela’s current annual implied inflation rate to be 510%. This is the highest rate in the world. It’s well above the second-highest rate: Syria’s, which stands at 84%.

Venezuela has not always experienced punishing inflation rates. From 1950 through 1979, Venezuela’s average annual inflation rate remained in the single digits.

It was not until the 1980s that Venezuela witnessed a double-digit average, and it was not until the 1990s that Venezuela’s average inflation rate exceeded that of the Latin American region.

Today, Venezuela’s inflation rate is over the top.

A version of this post first appeared at Cato.org.

More on the Venezuelan Collapse


Steve H. Hanke

Steve H. Hanke is a Professor of Applied Economics and Co-Director of the Institute for Applied Economics, Global Health, and the Study of Business Enterprise at The Johns Hopkins University in Baltimore.

LA Unions Demand Exemption from $15 Minimum Wage They Created by Daniel Bier

If there was ever any doubt that LA’s minimum wage hike was meant to help the labor unions at the expense of everyone else, I hope we can now put that idea to bed.

The LA Times reports,

Labor leaders, who were among the strongest supporters of the citywide minimum wage increase approved last week by the Los Angeles City Council, are advocating last-minute changes to the law that could create an exemption for companies with unionized workforces. . . .

Rusty Hicks, who heads the county Federation of Labor and helps lead the Raise the Wage coalition, said Tuesday night that companies with workers represented by unions should have leeway to negotiate a wage below that mandated by the law.

“With a collective bargaining agreement, a business owner and the employees negotiate an agreement that works for them both. The agreement allows each party to prioritize what is important to them,” Hicks said in a statement. “This provision gives the parties the option, the freedom, to negotiate that agreement. And that is a good thing.”

Unions want to give workers and business the option — the freedom! — to prioritize what’s important to them and negotiate their own pay! Isn’t that nice. But only if those workers are paying union dues, and only if those businesses are using union labor.

The minimum wage hike was always meant to make independent workers more expensive and make unions look better by comparison. But it’s a bold move for the unions to simply say, in one breath, “Everyone deserves a living wage! It’ll be good for everyone! Except us, thank you. We’ll set our own pay — and also, give a break to any businesses who agree to go back to union labor.”

More on this transparently corrupt policy of the minimum wage by FEE’s Jeffrey Tucker.


Daniel Bier

Daniel Bier is the editor of Anything Peaceful. He writes on issues relating to science, civil liberties, and economic freedom.

A Simple Question for Minimum Wage Advocates by Donald J. Boudreaux

I will return in a later post to the topic of my previous post, namely, the validity or (as I see it) invalidity of the argument that proposes a tolerance of locally set minimum-wage rates if not of nationally or super-nationally set rates.

I state, however, here and again my conclusion: Legislating minimum wages – that is, enacting a policy of caging people who insist on entering voluntarily into employment contracts on terms that political elites find objectionable – is no more attractive or justified or likely to succeed at helping low-skilled workers if the particular caging policy in question is enacted locally than if it is enacted nationally or globally.

In this short post, I ask a simple question of all advocates of minimum wages:

If enforcement of minimum-wage policies were carried out in practice by policing low-skilled workers rather than employers – if these policies were enforced by police officers monitoring workers and fining those workers who agreed to work at hourly wages below the legislated minimum – would you still support minimum wages?

Would you be good with police officers arresting those workers who, preferring to remain employed at sub-minimum wages rather than risk losing their current jobs (or risking having do endure worsened employment conditions), refuse to abide by the wage terms dictated by the legislature?

Would you think it an acceptable price to pay for your minimum-wage policy that armed police officers confine in cages low-skilled workers whose only offense is their persistence at taking jobs at wages below those dictated by the government?

If a minimum-wage policy is both economically justified and morally acceptable, you should have no problem with this manner of enforcement.

(You might still prefer, for obviously aesthetic reasons, enforcement leveled mainly at employers. But if the policy is to unleash government force to raise wages above those that would be otherwise agreed to on the market voluntarily between employers and workers, then you should agree that, if for some reason enforcement aimed at employers were impossible or too costly, enforcement aimed at workers is morally and economically acceptable.)

If, however, you do have a problem with minimum-wage regulations being enforced by targeting workers who violate the legislature’s dictated wage terms, then you might wish to think a bit more realistically and deeply about just what it is you advocate in the name of economic improvement or “social justice.”

This post first appeared at Cafe Hayek, where Don Boudreaux blogs with Russ Roberts.

Donald Boudreaux

Donald Boudreaux is a professor of economics at George Mason University, a former FEE president, and the author of Hypocrites and Half-Wits.