by Joe Kernen
It’s also a good place to start thinking about the costs of regulation.
The Cincinnati Reds are my hometown baseball team, and I have been a fan as long as I can remember. The first World Series I remember was the 1961 Reds-versus-Yankees disappointment, which was nothing compared to the disaster of trading Frank Robinson for Milt Pappas (and the immortal Jack Baldschun) when I was nine. I grew up with Jim Maloney and Pete Rose and Tony Perez and Lee May and sweated out the threatened move to San Diego in 1967. And of course I firmly believe that the Big Red Machine of the mid-1970s was the greatest team ever. In fact, I feel sorry for anyone who doesn’t realize this.
I’m aware that the years since haven’t always been so glorious (and if I forget, my Squawk Box colleague Carl Quintanilla is always happy to remind me how the Phillies swept Cincinnati in the 2010 Division Series, only to lose to the Giants in the League Championship Series, which was at least some comfort).
Getting tickets to see the Reds has generally been pretty easy: Johnny Bench, the Reds’ Hall of Fame catcher, is an old friend. However, in 2008 a series of screwups (mine; I had asked for tickets for the game being played the following day) left us without tickets for a Pirates-Reds game and no choice but to visit the entrepreneurs strolling along what used to be called Main Street (and is now Joe Nuxhall Way) in order to pay three times face value for the seats.
A lot of people, even those who end up buying scalped tickets, find this unfair. Blake isn’t one of them. She had no problem with paying a lot for the tickets, not because of what economists call price inelasticity—this is the phenomenon that keeps demand from falling for certain categories of stuff, even when their prices rise; we don’t buy less Halloween candy just because the price goes up, not in the Kernen household, anyway—but because her cost for the tickets is the same whether we pay list price or five times list price: zero.
However, “price gouging” at sporting events, plays, and concerts is subject to a dizzying amount of regulation and prohibition. The last time anyone checked, twenty-six states and dozens of municipalities representing three-quarters of the U.S. population—and including virtually every city with an MLB, NFL, or NBA franchise—have some kind of antiscalping regulation. Ninety years ago such laws were sold to the public as, essentially, antinuisance laws, like a requirement to clean up after your dog. What happened was that one nuisance—scalpers cluttering the sidewalk in front of baseball stadiums and concert arenas—was replaced by an even bigger one: the inability to buy a ticket to the event. As always with good intentions, the results were nothing like the original intent.
Welcome to the wide and wonderful world of regulation.
The desire to regulate economic life might be the defining characteristic of Progressive philosophy. It combines a mistrust of the free market in allocating resources; an appeal to a vague and indefinable virtue (“fairness”); a desire to achieve perfection in economic outcomes; a deference to experts over the judgment of ordinary folks; and, best of all, a chance to tell other people what to do. Oh, heck, let’s just say it: Regulation is progressivism.
It is also the perfect way to illustrate just how much Progressive thinking depends on treating adults like kids. Because kids love regulation.
“Blake?”
“Yes, Dad?”
“You know cigarettes are bad for you, right?”
Eyes roll upward.
“And you know that people aren’t allowed to smoke in restaurants or lots of other places, right?”
“They shouldn’t be allowed to smoke anywhere.”
“Why not?”
“Because it’s bad!”
The usual argument offered by Progressives who want to ban indoor smoking is that secondhand smoke is so dangerous that it presents a clear and present danger to nonsmokers as well. Then, when restaurants and bars proposed segregating smokers and nonsmokers, the Progressive response was to leap to the defense of bartenders and waiters, who presumably had no choice but to work in places that permitted a tinge of tobacco smoke. New York City is currently considering banning smoking in the new “pedestrian islands” in Midtown streets that have been partly blocked from automobile traffic, evidently so that nonsmokers can safely sip their drinks without any tobacco smoke added to the exhaust of a thousand cabs and buses.
Ninety years ago, reform-minded Progressives wouldn’t have felt any need to hide their real reasons any more than Blake did: The logic behind the movement to prohibit alcohol consumption by amending the Constitution—a movement led by Progressives—was simply that people need to be forbidden things that are bad for them.
Unfortunately, it’s hard to know when to stop.
“What about McDonald’s, Blake?”
“What about it?”
“You know that fast-food burgers aren’t real good for people either, right?”
“So?”
“So . . . should people be allowed to eat food that’s bad for them?” Blake thought about this for a minute.
“I have it: People who are fat shouldn’t be allowed to go to McDonald’s.”
“You want to put a scale in every fast-food restaurant?”
“Uh-huh. Though . . .”
“What?”
“Maybe if they weren’t too fat, they could eat at McDonald’s once a month.”
In November 2010, the city of San Francisco did Blake one better: The city’s board of supervisors voted to forbid any restaurant from giving away toys with “unhealthy” meals, thus protecting children from the peril of Happy Meals. What’s unhealthy? Any meal of more than six hundred calories with more than 35 percent of them from fat (toys can still accompany meals below that threshold—so long as they have both fruits and vegetables as well). This is a reminder, if you really need one, that regulations get complicated really fast. They demand rules. Lots and lots of rules. Which is one of the reasons a regulatory response to pretty much anything is comforting to a ten-year-old: Blake’s entire life—and Scott’s—consists of rules: things that are either forbidden or required.
I’m just worried that we’re headed into a future in which that will be true when they’re adults, as well. Partly, this is because the Obama administration has the urge to regulate in its most virulent form. The Office of Information and Regulatory Affairs, under Obama nominee Cass Sunstein (according to conservative writer David Frum, who originally supported Sunstein’s appointment), has approved literally hundreds of new mandates and prohibitions, including a ban on the sale of oysters in months without an R (actually just the summer, but you get the idea); regulation of the refrigeration temperature of eggs; and imposition of a $27,500 fine on airlines for every passenger stuck on the tarmac for more than three hours. No one has any idea how this number was arrived at, since even the lawyers who will be hired to fight the lawsuits that will be the regulation’s inevitable result don’t charge $9,167 dollars an hour.
This doesn’t mean that all regulations, or even most, are intended to protect Americans from harm, or even inconvenience. For every construction building code that is required to guarantee that a new structure is (mostly) fire safe or that its plumbing won’t spew raw sewage into a public catch basin, for every regulation that requires a restaurant to maintain a clean kitchen or a rancher to test cattle for disease, there are a dozen—probably a hundred—other regulations written to protect one group of Americans from another.
In the Obama era, the group that gets regulatory protection is, most often, a labor union.26 But there are plenty of other folks who owe their prosperity to regulation. Not all crony regulations are national in scope or written to help out million-member unions. Just as ridiculous are the thousands of licensing laws written to protect, ahem, special interests.
Consider, for example, the tour guides who will be happy to show you where the First Family lives. You might think that the risk to public health of an unlicensed tour guide explaining when the Capitol dome was constructed is minimal. But that doesn’t stop the city of Washington, DC,
from requiring that anyone doing so must have a special license costing a couple of hundred dollars in fees just for the application. And don’t forget the test: a passing grade on the District of Columbia Sightseeing Tour Guide Professional Licensing Exam—so unless you know that the Smithsonian National Zoological Park (the “National Zoo”) isn’t technically a Smithsonian Museum but a Smithsonian Research Center, well, you’re out of luck.
Don’t plan on traveling to DC anytime soon? How about getting your hair cut? Cosmetology licenses—which can cost $15,000 to acquire, a big chunk of which is paid for by government-insured student loans—are usually justified on safety grounds: People who use razor blades or caustic chemicals around the face are easy targets for fearmongering. And thank the regulatory gods that someone makes sure that no one is going blind from having bleach sprayed into her eyes—except that the risk, once again, seems modest. The United Kingdom, which doesn’t have a lot of hostility to regulation in general, doesn’t require any license to cut or style hair and hasn’t required one since 1964—without, so far as I can tell, any epidemic in infection, hair loss, or lost ears.
One reason that licenses are so pervasive is that states and municipalities make money issuing them (as do the schools and trainers who make a living preparing people to take the tests required to earn them). But the real support for such licenses, inevitably, comes from the people who have them and are understandably peeved at the prospect of competitors who haven’t spent the same amount of time and money to join the club. As Matthew Yglesias points out, on the South Side of Chicago, where a significant number of African American women like their hair braided, licensed cosmetologists got in the habit of calling in the police to raid the shops of hair braiders, who learned their skill as apprentices because most cosmetology schools don’t even teach it.
The Institute for Justice, based in Arlington, Virginia, documents hundreds of similar licensing scams, which make for entertaining reading so long as you can forget their economic costs. If you want to be a used-book seller in the city of Los Angeles, for example, you may be required not only to get a police permit but also to fingerprint a customer trying to sell you a collection. The District of Columbia protects not only tourists from unlicensed tour guides but also homeowners from interior designers who have failed to pass a thirteenhour test. And it isn’t just Chicago looking out for barbershop customers: In Newark, New Jersey, cutting hair means working for a fully licensed barber for three years before doing it on your own.
Anytime the government regulates entry to a profession, the result is protectionist, no matter what the original impulse, and the people who are protected tend to like it that way. New York City, for example, forbids any cab without a license—a “medallion”—from picking up passengers at airports or on streets, and because the city didn’t issue a new medallion for more than fifty years, the only way to get one was to buy one from an existing owner, at a cost that eventually reached several hundred thousand dollars—ten times the cost of the cab itself. Not very surprising, then, that medallion owners love that particular regulation—or that tens of thousands of New Yorkers can’t find a cab during rush hour.
Licensing regulations, no matter how obviously they benefit one group at the expense of everyone else, are usually sold to the public as a public benefit: more safety or reliability or something. Other regulations are sold to the public to correct a “failure of the market.”
That phrase, of course, is a loud warning siren for anyone who believes in the free market, since the idea that the market can’t produce what some people think of as an efficient (or, more likely, “fair”) outcome is one of the first commandments of Progressivism. The typical regulation-happy Progressive, for example, always argues that laws are needed to regulate industries that are “natural” monopolies, like telephone service or power utilities. The market, they tell us, can’t allocate these “scarce” resources; without regulation of telephones and electric power, the argument goes, companies would build a dozen telephone poles outside every house in America.
The reality, as always, is a little different. Way back in 1960, an economist named Ronald Coase took on the idea of the need for government regulation in the free market, even in those areas where everyone “knew” the need was obvious. Radio airwaves, for example, “needed” regulation because otherwise stations would broadcast on frequencies that were too close together, thus interfering with clear transmission. Coase showed that so long as there were clear property rights to given frequencies and low costs for buying or selling those rights, the market would very quickly resolve any interference problem, since the station that wanted the space in the broadcast spectrum more would pay the station that wanted it less.
Needless to say, this is not exactly a communications policy favored by Progressives—in this case, generations of Progressives in both political parties—who fear and distrust any solution that is generated by the unaided free market. But whether the stated reason for regulation is public safety, promotion of a “good” special interest (like unions or homeowners or the disabled), or prevention of “market failures,” the most reliable characteristic of regulations, in addition to adding cost to economic transactions—something that Progressive bureaucrats aren’t paid to care about anyway—is that they hardly ever accomplish what they were intended to do, and almost always have some genuinely bad unintended consequences.
For example, while I made fun of licensing barbers and tour guides above, the Kernen family actually likes hiring licensed plumbers and electricians because of the peace of mind that comes with the (sometimes naive) belief that the people installing a new toilet actually know what they’re doing. Similarly, when I had an emergency appendectomy last year, I didn’t check to see that the surgeon had actually attended medical school, trusting to the various regulations—board certifications, state licensing—that would do the checking for me.
However, that unseen diploma is actually a pretty good example of the problem with good regulatory intentions. Back in 1910—not at all coincidentally, the high point of the first American Progressives—the Carnegie Foundation hired a guy named Abraham Flexner to write a report about the state of American medical education, which was, at that moment, kind of a mess. America’s medical schools were more like vocational schools, usually run by a few doctors and requiring nothing more of their students than a couple of years of lectures, with no lab work or hands-on practice. Most didn’t even demand a high-school diploma. The Flexner report recommended a whole lot of changes: requiring at least two years—later four—of college, plus at least four years of medical education, plus additional time to learn a specialty. It also recommended closing the medical “trade schools”—reducing the number of medical schools from 155 to 31—and requiring every medical school to affiliate with a university.
The result, once the recommendations were adopted by the medical establishment—and, very important, enforced by state regulations—was a system of medical education that looks a lot like the one my surgeon went through. It also created a regulatory cartel. Since no medical school could open its doors without the approval of the state medical association (or educate more than a state-approved number of doctors), the number of physicians dropped like a stone, resulting in a lot more income for the ones left. And much larger medical bills for the American public. Better medical education was definitely a well-intended Progressive goal; its price was an agreement to not just improve medical education but also to restrict it in order to keep prices high.
Or consider the Americans with Disabilities Act. Hardly any federal legislation of the past fifty years had better intentions or more widespread support; in 1990 the ADA passed the U.S. House of Representatives by a vote of 377 to 28 and the Senate by a vote of 91 to 6. Its primary objective was to improve job prospects for disabled Americans. However, employment of disabled men in their prime earning years—age twenty-one to fifty-eight—declined after the passage of the ADA—almost certainly because the ADA turned t
he disabled into litigation time bombs, or at least created that perception in the minds of potential employers.
The ADA also produced at least one unintended consequence that deserves to be called mind-boggling: As reported by the invaluable libertarian reporter John Stossel, the Exxon Valdez’s captain, Joseph Hazelwood, had already been in rehab for alcoholism before running his tanker aground in Prince William Sound in 1989. In response, Exxon subsequently prohibited employees with a history of drugs or drinking problems from holding similar jobs. However, in the intervening months, the ADA had passed, with the result that those employees argued that alcoholism was a disability, then sued under the law’s nondiscrimination provisions—and won.
Want more? The explosion of BP’s Deepwater Horizon drilling rig on April 20, 2010, was by any measure a huge mess: nearly 5 million barrels (or 185 million gallons) of crude oil. For months the cleanup, which as of this writing is still going on, was priority number one for dozens of different federal, state, and municipal governments—or it should have been. A short list of even higher-ranking regulatory priorities would include the following:• On June 18, sixteen oil-sucking barges were shut down by the Coast Guard, pending an investigation to make sure there were enough life preservers onboard (there were). “The Coast Guard is not going to compromise safety. . . . That’s our number one priority,” according to its spokesman, Robert Brassel.
• The 1920 Jones Act—a naked bit of protectionism—mandated that only U.S. vessels and crews could operate within three miles of the U.S. coastline, thus barring help from anywhere else.