Last week I posted about the regulatory barriers facing an ice cream shop in San Francisco.  A student passes along a story that hits a bit closer to home: the sale of beer right here in Arlington County.  Apparently, the owner of the Westover Beer Garden has had enough:

It’s been a contentious couple of weeks for the Westover Market and Beer Garden. Upon receiving a warning from Arlington County, it suddenly declared the beer garden would shut down until April 1. Today, the saga continues as management has decided to re-open the beer gardenagainst the County’s wishes.

Owner Devin Hicks said he’s tried working with the county on the matter but his efforts have not been successful. Now he’s going to do what he believes Westover Market is entitled to do by law — operate a year-round patio area.

Arlington County has a website devoted the Westover Beer Garden and its regulation thereof.  The heart of the dispute appears to be whether a parking requirement imposed by the county is optional or mandatory.

On the page, it states that establishments with outdoor patios must have ample parking for the number of people being served, but that parking requirement is reduced if the establishment is near a Metro stop. The County allows establishments to get around the parking rule by becoming “seasonal” and closing for three or more months each year.

Because the Westover beer garden isn’t deemed as having enough parking, it’s supposed to be seasonal. However, Hicks points out the rule is technically a “guideline” and not an actual “ordinance.” He believes the county has been enforcing a measure that was never officially put in the books.

The County’s web page for Westover Market links to another County page, titled “Guidelines for Outdoor Cafes.” On that document it states: “Unless otherwise required by the County Board, outdoor cafes shall be exempt from any parking requirement.” It goes on to say: “There is no explicit requirement in the Zoning Ordinance that requires them to be temporary or seasonal.”

Of his long-running trouble with the county, Hicks said relations have improved over the past year or so, but he believes he’s currently being unfairly targeted with the enforcement of the seasonal rule.

“We’re just going to go ahead and do what’s legally right,” Hicks said. “There’s nothing in the rules that says it has to be seasonal.”

As I mentioned in the post on the bay area ice cream shop, I suspect the pernicious economic effects of local barriers to entry, rather than those at the state or federal level, are much larger than generally presumed.

Filed under: antitrust, barriers to entry, business, cartels, economics

Pretty interesting interview with Google’s Senior VP Amit Singhal on where search technology is headed.  In the article, Singhal describes the shift from a content-based, keyword index  to incorporating links and other signals to improve query results.  The most interesting part of the interview is about what is next.

Google now wants to transform words that appear on a page into entities that mean something and have related attributes. It’s what the human brain does naturally, but for computers, it’s known as Artificial Intelligence.

It’s a challenging task, but the work has already begun. Google is “building a huge, in-house understanding of what an entity is and a repository of what entities are in the world and what should you know about those entities,” said Singhal.

In 2010, Google purchased Freebase, a community-built knowledge base packed with some 12 million canonical entities. Twelve million is a good start, but Google has, according to Singhal, invested dramatically to “build a huge knowledge graph of interconnected entities and their attributes.”

The transition from a word-based index to this knowledge graph is a fundamental shift that will radically increase power and complexity. Singhal explained that the word index is essentially like the index you find at the back of a book: “A knowledge base is huge compared to the word index and far more refined or advanced.”

Right now Google is, Singhal told me, building the infrastructure for the more algorithmically complex search of tomorrow, and that task, of course, does include more computers. All those computers are helping the search giant build out the knowledge graph, which now has “north of 200 million entities.” What can you do with that kind of knowledge graph (or base)?

Initially, you just take baby steps. Although evidence of this AI-like intelligence is beginning to show up in Google Search results, most people probably haven’t even noticed it.

For example:

Type “Monet” into Google Search, for instance, and, along with the standard results, you’ll find a small area at the bottom: “Artwork Searches for Claude Monet.” In it are thumbnail results of the top five or six works by the master. Singhal says this is an indication that Google search is beginning to understand that Monet is a painter and that the most important thing about an artist is his greatest works.

When I note that this does not seem wildly different or more exceptional that the traditional results above, Singhal cautioned me that judging the knowledge graph’s power on this would be like judging an artist on work he did as a 12- or 24-month-old.

Check out the whole article.  Counterfactuals are always difficult — but its difficult to imagine a basis for arguments that the evolution of search technology would have been — or will be — better for consumers with government regulation.

Filed under: google, Internet search, technology

A great video recounting the trials and tribulations of an entrepreneur and her attempts to open an ice cream shop in San Francisco (HT: Scott James at the NY Times and Craig Newmark).  From the NY Times story:

Ms. Pries said it took two years to open the restaurant, due largely to the city’s morass of permits, procedures and approvals required to start a small business. While waiting for permission to operate, she still had to pay rent and other costs, going deeper into debt each passing month without knowing for sure if she would ever be allowed to open.

“It’s just a huge risk,” she said, noting that the financing came from family and friends, not a bank. “At several points you wonder if you should just walk away and take the loss.”

Ms. Pries said she had to endure months of runaround and pay a lawyer to determine whether her location (a former grocery, vacant for years) was eligible to become a restaurant. There were permit fees of $20,000; a demand that she create a detailed map of all existing area businesses (the city didn’t have one); and an $11,000 charge just to turn on the water.

The ice cream shop’s travails are at odds with the frequent promises made by the mayor and many supervisors that small businesses and job creation are top priorities. ….

Even after she acceded to all the city’s demands, her paperwork sat unprocessed for months. Ms. Pries would not say exactly how much it all cost, including construction, but smiled and nodded when asked if it was in the hundreds of thousands of dollars.

I suspect the pernicious economic effects of local barriers to entry, rather than those at the state or federal level, are significantly greater than commonly thought.  They are certainly understudied.

Filed under: business, economics, regulation

Douglas Ginsburg and I have posted “Free to Err: Behavioral Law and Economics and its Implications for Liberty” on the new and very good Liberty Forum.  Our contribution is based upon a more comprehensive analysis of the implications of behavioral law and economics for both economic welfare and liberty forthcoming in the Northwestern Law Review.   We were fortunate to draw several thoughtful responses to our piece as part of the Forum, and I’ve provided links to those here:

• Nudging for Liberty (Patrick Lynch)
• Putting Our Bourgeois-Bohemian Rulers in Their Place (Peter Lawler)
• The Paternal State and the Police State (Mario Rizzo)
• Is the Hayekian Response to “Libertarian Paternalism” Sufficient? (Joseph Postell)

We have have some thoughts to the various responses later, but please do go and read them.

And a reminder to readers interested in the topic more generally that our “Free to Choose” symposium on behavioral law and economics is available here.

Filed under: behavioral economics, free to choose symposium

The Institute for Competition Law and GW Law have put together the Antitrust Writing Awards.  You can vote on academic or business articles here.  I’m very pleased to report that one of my articles — Does Antitrust Enforcement in High-Tech Markets Benefit Consumers?  Stock Price Evidence from FTC v. Intel (Review of Industrial Organization) — was nominated in the “economics” category.

Here is a description:

The Antitrust Writing Awards’ goal is to promote antitrust scholarship and competition advocacy by recognizing and awarding the best articles published in the antitrust law and law & economics fields in the last 12 months. The Awards feature two different categories of articles: Academic and Business. The Academic Articles category comprises articles published in academic journals, whereas the Business Articles category features articles published in professional magazines or newsletters. The articles are selected by a jury and by readers. The jury consist of a Board, an Academic and a Business Steering Committees composed of the leading academics and counsels. Readers contribute to the selection process by voting for articles. The Institute of Competition Law – the publisher of the Journal Concurrences and the e-Competitions Bulletin – and George Washington University Law School, are organizing these first of their kind Antitrust Writing Awards with the support of partners. The Awards ceremony will take place in Washington DC on 27 March 2012.

The Board ultimately selects the winners with input from reader votes and steering committees (I am a member of the academic steering committee).

Lots of interesting articles nominated; go check them out and vote.

Filed under: antitrust, economics

I’ve posted a new project in progress (co-authored with Angela Diveley) to SSRN.  In “Do Expert Agencies Outperform Generalist Judges?”, we attempt to examine the relative performance FTC Commissioners and generalist Article III federal court judges in antitrust cases and find some evidence undermining the oft-invoked assumption that Commission expertise leads to superior performance in adjudicatory decision-making.  Here is the abstract:

In the context of U.S. antitrust law, many commentators have recently called for an expansion of the Federal Trade Commission’s adjudicatory decision-making authority pursuant to Section 5 of the FTC Act, increased rulemaking, and carving out exceptions for the agency from increased burdens of production facing private plaintiffs. These claims are often expressly grounded in the assertion that expert agencies generate higher quality decisions than federal district court judges. We call this assertion the expertise hypothesis and attempt to test it. The relevant question is whether the expert inputs available to generalist federal district court judges translate to higher quality outputs and better performance than the Commission produces in its role as an adjudicatory decision-maker. While many appear to assume agencies have courts beat on this margin, to our knowledge, this oft-cited reason to increase the discretion of agencies and the deference afforded them by reviewing courts is void of empirical support. Contrary to the expertise hypothesis, we find evidence suggesting the Commission does not perform as well as generalist judges in its adjudicatory antitrust decision-making role. Furthermore, while the available evidence is more limited, there is no clear evidence the Commission adds significant incremental value to the ALJ decisions it reviews. In light of these findings, we conclude there is little empirical basis for the various proposals to expand agency authority and deference to agency decisions. More generally, our results highlight the need for research on the relationship between institutional design and agency expertise in the antitrust context.

We are in the progress of expanding the analysis and, as always, comments welcome here or at my email address on the sidebar.

Filed under: antitrust, economics, federal trade commission, scholarship, SSRN

Late last year, with support from the International Center for Law and Economics, I published a paper that empirically analyzed the Philadelphia civil court system. That study focused upon the Philadelphia Complex Litigation Center (PCLC) which handles large mass tort programs including asbestos cases, hormone therapy replacement cases, various prescription drug-related injuries, and other mass tort programs. The PCLC has recently come under criticism for the use of a number of controversial procedures including the consolidation of asbestos cases and the use of reverse-bifurcation methods, where a plaintiff’s damages are calculated prior to the establishment of liability. That paper considered publicly available data from the Administrative Office of Pennsylvania Courts to analyze trends in docketed and pending civil cases in Philadelphia compared to other non-Philadelphia Pennsylvania counties, cases in federal court, and a national sample of state courts.

Read the full piece here. 

President Obama has, as rumored, appointed Bill Baer (Arnold & Porter) to head the Antitrust Division.  Reuters reports:

Baer, who is the chair of Arnold and Porter’s Antitrust Practice Group, also previously headed the Federal Trade Commission’s competition division when it stopped a merger between Staples and Office Depot in 1997.

He will replace Sharis Pozen, the acting assistant attorney general for antitrust, who plans to step down at the end of April. Pozen succeeded Christine Varney, who left last August.

Baer’s nomination, which was widely expected, still must be confirmed by the U.S. Senate.

…
Baer is seen as someone who would continue the present policies of the Justice Department’s antitrust office.

The division’s key outstanding cases include the purchase of Nortel’s patent assets by a consortium led by Apple, and Google’s purchase of Motorola Mobility. It also has a number of criminal price-fixing probes.

Mr. Baer is a very well respected figure in the antitrust community and I expect this to be perceived — as it should be — as a very high quality appointment.

Filed under: antitrust

I think reference bloat is a problem, particularly in management journals (not so much in economics journals). Too many papers include tedious lists of references supporting even trivial or obvious points. It’s a bit like blog entries that ritually link every technical term or proper noun to its corresponding wikipedia entry. “Firms seek to position themselves and acquire resources to achieve competitive advantage (Porter, 1980; Wernerfelt, 1984; Barney, 1986).” Unless the reference is non-obvious, narrowly linked to a specific argument, etc., why include it? Readers can do their Google Scholar searches if needed.

Read the full piece here.