Too Much Information

Posted on by Sarah Brodsky

Information is a scarce resource: There’s a cost to gathering it, analyzing it, and promulgating it. Human attention is also scarce. Not even Stephen Wolfram can process all of the information that’s out there.

That’s why requiring businesses to provide data to consumers isn’t always sound policy. It’s like a tax. Well-established businesses will be able to pay upfront and pass on the cost, in the form of higher prices, to its customers. Businesses with fewer resources will be forced to close. And those that would like to enter the market will have to meet this additional expense besides all the usual costs of entry.

This analysis applies to calorie posting requirements, including the one proposed in New York state. A posting requirement would limit entry into the chain restaurant business, restricting consumers’ choices. People might even have fewer healthy options as a result of the law, if new chains that would have offered healthier menus can’t break into the market.

Then there’s the question of what consumers do with the data. Calorie counts by themselves aren’t that informative if people don’t understand what they mean or how many calories they need a day. And healthy eating involves more than just calories; consumers would also have to consider variables like protein and vitamins to make good choices.

For some people, being bombarded with calorie information could actually hurt their health. For example, Harvard discontinued its practice of posting calorie counts in dining halls over fears that it could exacerbate students’ eating disorders.

The following argument would be amusing if it weren’t marshaled in support of a potentially destructive policy:

Studies show that most people find it difficult to guess the calorie counts of typical restaurant meals; one study showed that less than 15 percent of New Yorkers could guess the lowest or highest calorie menu items at any chain restaurant in the survey.

I’m reminded of those surveys they do every now and then, that find most people can’t name the vice president or a member of the Supreme Court. People are generally bad at identifying things for surveys, and we shouldn’t conclude from a survey that they have no idea fast food is unhealthy.

There will probably be more debate about this policy here in Missouri, too. This is the bill that our state legislators proposed for calorie counts.

Two Wrongs Don’t Make a Right

Posted on by Sarah Brodsky

An article in the Springfield News-Leader reports on a labor law that has more to do with retaliation than with sound economic principles:

Twenty-two states including Illinois, Iowa and Oklahoma, have laws that restrict Missouri laborers from working on public works projects in those states during high unemployment.

Accordingly, Missouri Law states that during such periods, public works projects may only employ Missourians or workers from nonrestrictive states.

The other states that have restrictions in place are hurting their own taxpayers through protectionism. Missouri shouldn’t imitate them.

The first reason is that Missouri shouldn’t waste its tax money just because other states are doing it. Second, beyond the adverse effects of the policy itself, this kind of retaliation makes it less likely that other states will do away with their protectionist laws. If we ignore another state’s bad law, the citizens of that state might eventually learn from our example and realize that their policy is short-sighted. If we instead copy them, they’ll take it as validation of their unwise law. Even worse, states can get locked into a protectionist arms race in which no state will reform its labor laws unless other states act first.

The War on Cuteness

Posted on by Sarah Brodsky

Ever since Maine banned novelty cigarette lighters last year, some lawmakers in other states have been eager to follow suit. The bill introduced in Missouri didn’t go anywhere, but I’m sure the idea will return in future sessions.

As you can guess, the rationale for a ban is increased safety. Kids like to play with things that look like toys, so they’ll play with novelty lighters and start fires.

The Missouri bill would have limited the ban to novelty lighters that would appeal to children younger than age 18. To achieve their goal of lighter safety, legislators would have to ban all lighters that would appeal to anyone, adults included. Toddlers think anything small and movable is a toy; they don’t check to see whether it looks like something from Toys”R”Us before playing. And that’s why parents shouldn’t leave any lighter, novelty or otherwise, within the reach of children.

It takes a lot of legislation to substitute for a little bit of common sense.

Single-Sex Charter Schools

Posted on by Sarah Brodsky

Missouri has no single-sex charter schools yet, although a few charters do offer single-sex classrooms. So we haven’t run into the legal dilemma single-sex charters in Illinois may face. The Illinois charter school law prohibits charters from discriminating in admissions based on gender, as does Missouri’s law. This article (link via Edspresso) mentions a possible situation that administrators in Illinois are anticipating:

The School Board’s administration said Tuesday the school can’t, by law, discriminate against female applicants, and if a girl applies and is chosen by computerized lottery, she’d be a student there, too.

It seems that the charter schools don’t expect students of the opposite sex to apply. The two single-sex high schools in Chicago have been open for several years without problems. I doubt any teenage boy would want to attend the Young Women’s Leadership Charter School of his own initiative, but it could be that adults will decide to challenge the schools’ legality.

Professional Licensing: A First-Person Perspective

Posted on by Josh Smith

In addition to my involvement with the Show-Me Institute, I have also worked part-time as a licensed taxicab driver for Chesterfield Car Service, for a little more than three years. Apart from licensing drivers, the cabs themselves also require a license, which must similarly be renewed annually. Earlier today, I reported to the company parking lot where an inspector was going through the routine on some of our company’s cars. As I understand it, the inspector is an employee of the Metropolitan Taxicab Commission who performs inspections year-round on taxis in St. Louis. Between 8:00 a.m. and noon, today and tomorrow, all 30 or so taxis in our company will be inspected.

The inspection largely consists of giving the exterior a once-over glance and checking a few necessary things, such as brake lights and blinkers. Some cabs get a more thorough inspection than others, but it seems that the inspector is mostly looking for glaring defects or safety hazards. The inspector also verifies that the car’s meter has been recently inspected by a third-party meter inspecting agent, and that the car has proper insurance. The meter inspection is another required annual appointment, usually completed a week or two prior to the vehicle inspection. 

If the inspector finds a defect, it must be repaired before the car can continue to operate as a taxi in the Metropolitan Taxicab Commission (MTC) district (both St. Louis County and city — other areas have their own taxi certification agencies and processes). I’m pretty sure this is why the inspection is typically scheduled over two days, so that defects spotted on day one can be repaired and ready for day two.

Show-Me Institute scholars have spoken out a few times about the subject of professional licensing. This is certainly another example of an area where market forces, rather than government bureaucracy, would most efficiently produce the quantity and quality of services that people want. The MTC limits both the number and quality of taxis in its district, as well as the prices these taxis can charge. Limiting number or quality leads to increased prices, as basic economics would indicate. Price ceilings lead to shortages, made worse by the other limitations on quantity and quality. If you’ve ever been to Mardi Gras in St. Louis, participated in New Year’s Eve festivities, or even attended a Blues or Cardinals game, and tried to get a taxi, it is likely that you had to wait a long time — especially during those once-a-year holidays. Granted, I and other taxi drivers working at those times make a terrific hourly rate — especially for an occupation requiring practically no special training, education, or experience — but I care more about fostering a market in which customers get the taxi services they want than I do about making good money a few days per year.

Like most other businesses and services, you can get a pretty good idea about what kind of taxi you’re stepping into with just a superficial examination. Also like other businesses, it is difficult for taxicab companies to persist in the market if they don’t engender repeat business by offering good quality and reasonable prices. Market forces push toward price equilibrium, and entrepreneurs predictably exploit arbitrage opportunities, bringing people what they want more often in more efficient ways. The market would be a better steward of taxi services in St. Louis than the MTC is today.

An Interesting Variation on “Buy Local”

Posted on by Sarah Brodsky

Locavores buy food that was grown within a predetermined distance from where they live. Protectionists buy products that were manufactured in their home country. Now, one couple has taken the idea a step further — they’re patronizing only those stores that are owned by people of their race:

“We kind of enjoy the sacrifice because we get to make the point … but I am going without stuff and I am frustrated on a daily basis,” Maggie Anderson said. “It’s like, my people have been here 400 years and we don’t even have a Walgreens to show for it.”

As a campaign, I’m not opposed to this strategy. It could be a good way to get the public focused on economic opportunities for people in minority groups. The Andersons are not telling everyone else to change their spending habits or trying to get any preferences written into law. They’re just using their own experiences to spread their message.

The Andersons’ experiment does, however, underscore some drawbacks of protectionist policies. The Andersons are patronizing minority-owned businesses at a significant cost to themselves. Whatever the businesses gain financially from the experiment is more than outweighed by the material losses to the Andersons when they have give to up items they couldn’t find. The Andersons think it’s worth it for the sake of making a statement they care about, but people who have comparable experiences forced on them by protectionist policies would be less happy to sacrifice.

In addition, as I think the Andersons would agree, their campaign doesn’t solve any of the problems that prevent minorities from successfully starting and maintaining businesses. They’re successfully publicizing the issue, but their purchases alone aren’t going to open the floodgates to a new generation of minority entrepreneurs. Similarly, protectionist policies may call attention to supply problems in local areas, but they don’t correct the root causes of those problems.

No Personalized Laws

Posted on by Sarah Brodsky

At times, the state singles out somebody or something for special recognition, as in a resolution declaring crayfish the official state invertebrate. I’ve criticized state symbol resolutions in the past, because they waste time and distract from substantive policy issues. However, I must concede that once a resolution like that has passed, it doesn’t do any more damage. Crayfish don’t acquire any advantage over other invertebrates as a result of their official favor.

Regulations or exemptions that apply to just one business have longer-lasting effects. Legislators waste their time considering a particular case when they should be writing laws that apply more broadly. Then, after the bill passes, the harm is just beginning. That particular business is free to do something that competing businesses can’t. The favored business gets ahead, even if the competition served consumers equally well. The competition didn’t have a fair chance.

An example in the news today is this law allowing certain bars to sell half-gallon containers of beer. I should say, rather, one certain bar. The language of the law makes a pretense of impartiality, defining which bars are affected based on the number of beers they sell and so forth, but when you look at the specifics, it turns out that only one bar falls into that category. The law might as well have that bar’s name on it.

Laws should be broad enough that competing businesses are subject to the same rules. No one would suggest that the law should permit fire stations or elementary schools to sell half-gallon containers of beer; that would be silly, because they don’t sell beer in the first place. But such a law should apply to all businesses engaged in the same activity, leaving out the particulars of what proportion of food they sell or how many beers are on tap. Those details limit the law too narrowly.

Monograms belong on bath towels — not on legislation.

Summary of Show-Me Institute Pension Presentation in the News-Leader

Posted on by David Stokes

Today’s Springfield News-Leader has a detailed article about the city’s pension issues, which also discusses the Show-Me Institute’s presentation at a luncheon yesterday and comments by our executive vice president, Dr. Joseph Haslag, before the pension commission last night.

Actuarial expert Richard C. Dreyfuss participated in yesterday’s lunch presentation, discussing Springfield’s pension problems (he also wrote a policy study for us last year detailing Missouri’s public pension issues). Springfield is in a very tricky situation with its pension, and the privatization of City Utilities would be one way to address it — unless this guy gets to decide how to fix the problem. I feel I must give one correction to a statement in this column, when he said that private utilities, aka IOUs, “are not accountable to the communities they serve. IOUs do not have a local Board for Utilities or City Council to report to.”

First, private utilities are generally more regulated than public utilities. Second, Springfield is free to require reporting to a local utility board as a condition of any sale or franchise agreement with a private utility. Springfield might see a decrease in the price offered for CU if it did insisted on such a requirement, but it is certainly an option. The Public Service Commission and Dept. of Natural Resources would still be the dominant regulators, but Springfield could add additional requirements if it so chose.

There’s No Free Lunch ? Even When You Recycle

Posted on by Sarah Brodsky

Some St. Louis residents are disappointed that the city ended a recycling pilot program. You can still recycle in St. Louis, but now you have to bring your own stuff to the recycling center. The city won’t pick it up for you the way they pick up garbage.

People are finding some costs of recycling difficult to face. Here’s one comment about the change in policy:

“Now it’s become very unhandy to recycle.”

In fact, it always was unhandy to recycle. It was never free and instantaneous. Under the pilot program, St. Louisians enjoyed the benefits of the recycling pickup without paying for it directly. The cost was spread out through taxation, and no one got a bill specifically for that service.

Once again, St. Louis residents will have to bear some of the cost of recycling, either by paying for a pickup service or by taking it to one of the drop-off centers themselves. People who truly value recycling will gladly give up the extra time or money. Those for whom recycling is less important will find better uses for their resources.

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