The New York Times reports that the most recent price for a taxi in New York medallion is $1,000,000.  Wikipedia reports that there are 13,237 licensed cabs in New York.   (A “medallion” is  the physical form of a taxicab license.)  This means that the present value of the rents created by limiting taxicabs is $13,237,000,000  — thirteen billion dollars.  This is just the rents; the total lost consumer surplus is much greater because the lack of taxicabs creates substantial deadweight losses.  For example, I am confident that many people have cars in New York only because they cannot count on getting a cab.  Cabs change shifts during rush hour because they can earn less at this time and so that is when they go out of Manhattan to change drivers, just when demand is greatest.  (This is also caused by the relatively too low price for waiting compared with the price for driving.)  There is a proposal which will make it easier for limousines to pick up passengers.  Of course, the taxi owners are opposed to this plan, but it would clearly be an efficient change.

Filed under: business, licensing, regulation Tagged: New York, Taxicabs

I was invited to attend the Financial Times Global Conference “The View From the Top: The Future of America” and since I was in New York anyway I thought it would be fun.  I don’t hang around with macro types much, and even less with liberal macro types.  I will not summarize the entire conference, but a few observations:

1. Reinhart-Rogoff was a hit, mentioned several times.  Aside from the merits of the book, I think people were trying to give Obama cover for no recovery.  R-R apparently says it takes an average of 7 years to get out of a financial crisis.
2. The first speaker (Gene Sperling) was late and the Gillian Tett of the FT, the moderator, took some informal polls of the audience (mainly business journalists.)  Pretty pessimistic: Thought that there would be a double-dip, the EU would lose at least one member, and yields would not increase.
3. Sperling (Director of the National Economic Council) spent a lot of time talking about how bad unemployment is and arguing for the President’s Jobs plan (which the Senate has already rejected.)  Not much new to propose.
4. Peter Orszagh (former OMB Director, now with CITI) made a few interesting points.  He said that the Administration got the original forecast wrong, and did not realize that the recession was “L” and not “V” shaped.  He also predicted that middle class incomes will not return to their original level and that policy should not fool people into thinking they would.
5. Several speakers (Laura Tyson of Berkeley and former CEA Chair; Steve Case , AOL founder) argued for better immigration laws (no quarrel there: the Republicans have got themselves into a terrible position on immigration).  Tyson in particular argued for more STEM (science, technology, engineering, mathematics) education.  I asked her if she thought the increasing gender imbalance in colleges (now about 2 women per man) was responsible for the STEM problem and she indicated that it might be part of the problem.  Really something worth further examination and some policy analysis.  Of course the immigration mess makes this problem worse since it is harder to import engineers from abroad.
6. Someone (I think Steve Rattner, former Auto Czar) made the point that while the American economy is doing badly and unemployment is a real problem, American companies are doing very well, in part because of foreign earnings.  There were also several inconclusive discussions of a tax holiday for repatriation of foreign earnings.  Some said that this would be “unfair” but others understood that future effects, not past fairness, was what was relevant.  Not clear what the effects would be, however.
7. A few mentions of Sarbanes-Oxley and Dodd-Frank, but mostly the role of regulation was ignored.  Health care was mentioned but not, I believe, Obamacare.  Everyone agreed that businesses were “afraid” to spend money but little discussion of the source of the fear.
8. Most were not worried about conflict with China.  I asked about Chinese demographics (aging population, gender imbalance with too many males.)  Whenever I hear discussions of China I raise this issue since people seem to ignore it and it is a serious issue.  Michael Spence (Nobel Laureate, now at NYU) said that China was in a position to establish a viable retirement program (no details) but that the gender issue was not one that was being dealt with.  There seemed to be almost envy of the ability of the Chinese to do what they wanted independent of the desires of the people.
9. Laurence Fink of BlackRock made the interesting point that the current situation seems a lot like the 1970s, including the widespread pessimism.  Martin Wolf, Chief Economics Commentator of the FT, agreed.  But the lesson he drew was that we need more and wiser regulation.  I spoke with him briefly and indicated that I was in the Reagan Administration, and that last time we got in a pessimistic mess like this deregulation al la Reagan was the solution.  He rejected this approach.  But I am hopeful.

Filed under: business, economics, Education, financial regulation, markets, sarbanes-oxley Tagged: macro

Stewart Baker at the Volokh Conspiracy has a very interesting post on the new Amazon browser.  He thinks it might revolutionize doing business on the Web, with a tremendous increase in security.  This increase in security will entail a loss in privacy, so let’s hope the privacy guys don’t stop it.

Filed under: business, Internet search, markets, privacy Tagged: Amazon’s new browser

In a much anticipated move, the Federal Trade Commission has started a formal monopolization investigation of Google . Because of its dominance in the search market, Google has been in the antitrust crosshairs for some time now, both in the U.S. and in Europe. U.S. antitrust enforcers blocked a proposed joint venture with Yahoo in 2008, and more recently barely cleared the acquisition of travel site software company ITA. The E.U. is already investigating Google over allegations it has abused its dominant position in online search.

The GAO has recently issued a report on medical devices.  The thrust of the report is that “high-risk” medical devices do not receive enough scrutiny from the FDA and that recalls are not handled well.  This report and other evidence indicates that the FDA is likely to require more testing of devices.  As of now, most medical devices are approved on a fast track that requires significantly less testing than that required for new drugs.  (As I have discussed in a forthcoming Cato Journal article, medical devices are also subject to more immunity from state produce liability lawsuits.)

The GAO report is remarkable.  The GAO defines its mission as

“Our Mission is to support the Congress in meeting its constitutional responsibilities and to help improve the performance and ensure the accountability of the federal government for the benefit of the American people. We provide Congress with timely information that is objective, fact-based, nonpartisan, nonideological, fair, and balanced.”

But the report on medical devices is entirely unbalanced.  It deals only with procedures for approval and the recall process (both of which are judged inadequate.)  There is no discussion of either costs or benefits.   That is, no evidence is presented that there is any actual harm from the “flawed” approval and recall processes.  Even more importantly, there is no evidence presented about the benefits to consumers from easy and rapid approval of medical devices.

As is well known, virtually all economists who have studied the FDA drug approval process have concluded that it causes serious harm by delaying drugs.  The import of the GAO Report is that we should duplicate that harm with medical devices.  This is an odd and perverse way of providing a “benefit” to the American people.

Filed under: consumer protection, cost-benefit analysis, regulation, torts Tagged: FDA, Medical Devices

The Wall Street Journal reports major conflicts between the DOJ and the FTC over antitrust jurisdiction.  There are only two of them, and they are not subject to rules against collusion and open agreements.  Nonetheless, they can’t get along and they cannot decide on market division.    Maybe they will take this as information about difficulties of collusion, even in duopoly situations.

Filed under: antitrust, cartels, federal trade commission

Recently the Wall Street Journal had an article about medical billing errors.  These can be very costly because they can impact your credit rating.  But there is one billing practice they missed.  Some health care providers (we have found this with two and it is probably more common) begin the billing date as of the date of service but don’t send a bill until insurance has paid their part.  Then when they do send a bill for the coinsurance  it is “late” and they threaten to turn it over to a collection agency.  In other words, the very FIRST bill you may get already has your account as delinquent.

Filed under: consumer protection, personal finance

Two stories about Google indicate the dangers of antitrust in fast moving tech industries.  Microsoft is urging the EU antitrust authorities to sue Google.   (Microsoft was itself the victim of a massive antitrust action. I guess it is true that abusers are likely to have been themselves abused.)  At the same time Google is rolling out a new social tweak to its search function because it is losing business to Facebook.  Let’s hope Google doesn’t sue Facebook.  The Web was better when it was the Wild West.

Filed under: antitrust, technology

Google’s efforts to make out of print books available online has run into a major stumbling block. Judge Chin ordered that books can only be digitized by Google if the author opts in; the agreement which he through out called for opt out.  This is an shame and a highly inefficient result.  As reported, the intricacies of copyright law and the unavailability of many rights holders means that opt in is not feasible in many cases.  As a result, thousands of books will not be digitized at all.  Instead of transferring rights to authors (which was apparently Judge Chin’s intent) he has simply destroyed valuable property rights.  This case was argued as an issue of the distribution of rights, but it is really about the creation of  rights — or, as it turns out, their non-creation.

Filed under: copyright, google, litigation Tagged: property rights