Archive for category Regulation
Posted by Joshua Sharf in Business, Economics, Regulation, Transportation on October 27th, 2014
Looking over a CoBank report on the state of rail capacity in the West, I came across this astonishing graph:
The Staggers Act effectively deregulated the rail industry in this country, after almost a century of increasingly heavy-handed rules set out by the Interstate Commerce Commission (RIP). It took a few years for volume to rise, but contrary to the arguments of the regulators, rates fell, revenue fell, and productivity shot up almost overnight. As effects rippled through the economy, volume began to take off.
In recent years, as the cost of fuel has risen, and capacity constraints have become more evident, rates and revenue have started to rise, which accounts for the turnaround in railroad stocks.
What’s really striking is the stasis that the railroad industry was held in before 1980. The ICC set their rates, limited their service, and forced freight lines to continue to run unprofitable and largely unused passenger service, competing with bus lines that were getting significant federal help through the interstate highway system. How much of the overall economy’s stagnation and deterioration through the 60s and 70s was a result of this misguided paternalism can only be guessed at.
Harley Staggers, the author and chief sponsor of the Staggers Act, was no economic or political libertarian. He was a 16-term Democratic representative from West Virginia who tried to subpoena the footage from a CBS documentary on Watergate and filed an FCC complaint over the F-word in a song on a radio station. But he had enough sense to see that Appalachia’s coal industry needed a healthy railroad system to grow. He’s lucky that this act from his final term in office is what people remember him by.
CFCs, not CO2?
Posted by Joshua Sharf in Regulation on June 2nd, 2013
Could CFCs, already known to be responsible for the ozone hole, also be responsible for global temperature change, rather than CO2?
That’s the conclusion from a new paper in Modern Physics B, a high-level peer-reviewed journal. The paper found that while the correlation between recent temperature anomalies and CO2 was close to 0 – as in, no correlation whatsoever – the correlation to CFCs was close to 1, almost a perfect fit:
Climate scientists have been hard-put to explain the fact that there’s been no net warming since 1998, despite increases in atmospheric CO2. If this is true, it is extraordinarily good news. CFC usage has been heavily reduced since their effects on the ozone layer were discovered, and are slowly being removed from the atmosphere. The 15-year lull in warming would not, then, be a pause before further warming, but the top of the roller coaster before we headed back down.
But more important, even the publication of the piece pulls the rug out from underneath the climate alarmists, who have been telling us for well over a decade that The Science Is Settled, and that CO2 emissions are responsible for global warming – or, as they now prefer, “climate change.” There has been plenty of reason to doubt these conclusions – historically, CO2 levels have closely led, rather than closely training, global temperatures. Moreover, climate has been changing for millennia, long before the industrial revolution. And recent papers have also cast doubt on the speed with which temperatures have actually been increasing.
CO2 emissions have become something of a totem in current policy debates, inserting themselves into just about every discussion, and they have been responsible for some of the most distortionist of recent economic policies. The people who suffer from these policies most are, of course, the poorest. Globally, the poorest find themselves victimized by added costs for their countries to industrialize and modernize. Locally, Americans find themselves with higher utility costs from green subsidies, higher food costs from diverting massive amounts of corn to ethanol, higher housing costs from mandatory efficiency requirements in building codes, and higher transportation costs from boondoggles like “cash-for-clunkers.” And of course, such policies make jobs scarcer for college grads, and less remunerative for a middle class already finding it hard to save for their futures.
On a grander scale, “greenhouse gas emissions” end up being the justification for wasteful light-rail, high-speed rail, and streetcar projects, and the excuse for diverting ever-more tax dollars into losing efforts to force people out of suburbs an into higher-density city centers. The Supreme Court’s ruling that CO2 is a pollutant has given the EPA carte-blanche to interfere in just about every industrial process in the country. This despite the fact that natural gas use has allowed the US’s CO2 emissions to fall to 1992 levels, even as actual industrial production has risen, without massive government intervention.
As, the climate alarmists have been seeing the debate slip away from them, they have resorted to more anti-science, political hardball tactics. The Climategate I and Climategate II emails laid bare the ruthlessness with which they treated those who questioned their orthodoxy. Recently, it was revealed that the Texas A&M Atmospheric Sciences Department was requiring what amounted to a climate loyalty oath for its faculty – usually not a sign of security that one’s position is supported by the actual science.
Add this paper to the growing body of evidence undermining the need for massive reordering of the global economy in order to stave off a disaster that looks increasingly unlikely.
Uber vs. PUC
Posted by Joshua Sharf in Business, PPC, Regulation, Transportation on January 29th, 2013
This past Saturday’s Wall Street JournalWeekend Interview was with Uber founder Travis Kalanick (“Travis Kalanick: The Transportation Trustbuster“). Uber allows a customer to summon an otherwise idle limo or SUV, on demand, through a smartphone app. The prices are competitive with town car service, and don’t require pre-arrangement. The article details, in part, Kalanick’s battles with various municipal regulatory authorities, who, often acting on behalf of established taxi interests, seek to keep his company from operating:
When I suggest to Mr. Kalanick that Uber, in the fine startup tradition, was using the “don’t ask for permission, beg for forgiveness” approach, he interrupts the question halfway through. “We don’t have to beg for forgiveness because we are legal,” he says. “But there’s been so much corruption and so much cronyism in the taxi industry and so much regulatory capture that if you ask for permission upfront for something that’s already legal, you’ll never get it. There’s no upside to them.”
Then, last year, came the clash with regulators in the city where they order red tape by the truckload: Washington, D.C. A month after Uber launched there, the D.C. taxi commissioner asserted in a public forum that Uber was violating the law.
This time Uber was ready with what it called Operation Rolling Thunder. The company put out a news release, alerted Uber customers by email and created a Twitter hashtag #UberDCLove. The result: Supporters sent 50,000 emails and 37,000 tweets. Mr. Kalanick says that Washington “has the most liberal, innovation-friendly laws in the country” regarding transportation, but “that doesn’t mean the regulators are the most innovative.” The taxi commission complained that the company was charging based on time and distance, Mr. Kalanick says. “It’s like saying a hotel can’t charge by the night. But there is a law on the books, black and white, that a sedan, a six-passenger-or-under, for-hire vehicle can charge based on time and distance.”
In July, the city tried to change the law—with what were actually called Uber Amendments—to set a floor on the company’s rates at five times those charged by taxis. “The rationale, in the frickin’ amendment, you can look it up, said ‘We need to keep the town-car business from competing with the taxi industry,’ ” Mr. Kalanick says. “It’s anticompetitive behavior. If a CEO did that kind of stuff—you’d be in jail.”
A determined PR campaign by Uber was able to derail DC’s efforts. By coincidence, this week, Uber posted on its Denver blog that the Colorado PUC is up to the same tricks:
Unfortunately, the Colorado Public Utilities Commission proposed rule changes this month which, if enacted, would shut UberDenver down. We need your help to prevent these regulations from taking effect! Sign the petition!!
Here’s a sampling of what’s being proposed (Proposed Rules Changes):
- Uber’s pricing model will be made illegal: Sedan companies will no longer be able to charge by distance (section 6301)
- This is akin to telling a hotel it is illegal to charge by the night.
- Uber’s partner-drivers will effectively be banned from Downtown — by making it illegal for an Uber car to be within 200 feet of a restaurant, bar, or hotel. (section 6309)
- This is TAXI protectionism at its finest. The intent is to make sure that only a TAXI can provide a quick pickup in Denver’s city center.
- Uber’s partner-drivers will be forced OUT OF BUSINESS — partnering with local sedan companies will be prohibited. (section 6001 (ff))
The PUC has run interference for the taxicab cartel here before, last year shutting down a popular airport ride sharing program. In 2011, they denied additional permits to Yellow and a proposed start-up, Liberty Taxi. And the Union Taxi Cooperative’s battle to begin service (eventually successful) was the stuff of legend. Their actions to the detriment of electricity ratepayers have been well-documented by Amy Oliver and Michael Sandoval over at the Independence Institute. But at least in those cases, they had the fig leaf of enforcing existing law. Here, as in DC, they’re actually proposing to change the rules in order to run the company out of town.
As a living, breathing example of regulatory capture, Colorado’s PUC is in a league of its own. Let’s hope that Uber’s supporters are able to persuade them to cease and desist their harassment of the company.
Everything Ends Up Subsidized Or Illegal
Posted by Joshua Sharf in Economics, Health Care, National Politics, PPC, Regulation on October 16th, 2012
We are Orthodox Jews.
We keep kosher.
And as we all know, kosher meat is expensive. A typical cut of kosher meat is something like twice the price of a comparable non-kosher cut. Ground beef is at $2.49 a pound? Kosher ground beef runs about $4.99 a pound. I just check the price of ribeye. Treif at $6.99, it’ll run you $14.89 a pound at the East Side Kosher Deli. (They’re not necessarily gouging here in Denver; it’s that way everywhere.)
Now, Susie just got a mailer from the Colorado Democrats stating that Mitt Romney would “[take] away vital health services for women,” by, “[signing] laws allowing your employer and your insurance company to make your birth control decisions.” Presumably, they mean he’d repeal the HHS Mandate requiring employers and insurers to pay for employees’, without co-pay.
They’re arguing that, now that such coverage is the law, going back to making someone pay for it themselves is the same thing as “restricting” it (their word), or allowing someone else decide whether or not you use it.
So what this means is that you, every one of you now reading this piece (unless you also keep kosher), are deliberately restricting Susie and me from our Constitutional right to keep kosher. You are in fact making our food choices for us. Unless, of course, you take out your checkbook right now and send Susie and me a check to cover the difference in cost between kosher and non-kosher meat. And you wouldn’t want that on your conscience, would you?
This is the reductio ad absurdum of the liberal line that not having someone else pay for something legal that you want is the same thing as restricting it. So ultimately, everything is either free or illegal.
Health Care, Religion, Government, and The Left – Part II
Posted by Joshua Sharf in Economics, Health Care, PPC, Property Rights, Regulation on May 23rd, 2012
Last night, I posted some audio of lawyers at a loss for words at a panel discussion on religion and government. This morning, I’d like to post another clip from the Q&A, one that I think is particularly revealing about the left’s attitude towards religious liberty. The commenter is Ed Kahn, the lawyer for the Colorado Center on Law and Policy, and he’s discussing to what extent a hospital’s association with a religious body should matter. Shorter answer: none. But let him tell you himself.
(The audio quality here is markedly worse than the clip last night from Ms. Hart. I think it’s a combination of Mr. Kahn’s voice and the fact that he was sitting farther away from the mike, but there’s a persistent hiss. I ran it through the noise reduction algorithm, and while it got rid of most of the hiss, there’s a residue that makes it sound like he’s talking from the engine room of a starship, if the engine were powered by boilers, but I think it’s easier to hear than the raw sound.)
They can close shop on Saturday, but that doesn’t make them like a church or synagogue in my view. And if they’re going to hold out their product or their service to the public, then they should not be able to mandate that their religious beliefs to which they subscribe, that the results of that belief should be visited on the people who are entitled to sign up for that service.
If there’s a market where comprehensive health care is available without restriction, and people understand that, then maybe it’s ok for somebody to say that we’re a Catholic health insurer and our hospital is going to be open six days a week, but our emergency room will be open on the Sabbath. But in general, I think that if you’re providing a public service that is a necessity, especially, that it ought to be provided across the board, and the law ought to require it as a condition of licensing.
Some states do say to Catholic (unintelligible) hospitals, “You cannot restrict (unintelligible) abortion, you cannot restrict contraception services or tubal ligation,” and that, I think, is the better standard. So I start there. I think the concept that these organizations are health care, providing what’s a necessity, not simply a good like a candy store, overrides the ability to finesse what services they will or won’t provide, given an economic necessity or need, especially in monopoly situations.
There’s almost too much here to unpack, but let’s give it a try. It embodies almost all the current liberal assumptions about having a right to other people’s work product, and the inconsequentiality of others’ religious beliefs, to the extent that they differ from your own.
The phrase that really popped out at me was this: “…people who are entitled to sign up for that service.” Who talks this way, about people “signing up for a service?” The Left, apparently. Remember when Michael Moore rolled up to congressmen, asking them if they would be willing “sign their kids up to serve in Iraq,” as though it were a particularly violent venue for sleep-away camp. Seventh-graders are “entitled to sign up for” band. Adults purchase products and services with their own money. Seventh-graders buy things, too, generally with their parents’ money, which leads them to feel entitled.
The statement provides a case study of the inevitable intersection between social issues and economic ones. The Left feels entitled to sign other people up to do things for them, without realizing that at a minimum, there’s an opportunity cost. Grant the dubious proposition that All Hospitals Are Created Equal, that you can require anything calling itself a hospital to provide a menu of services at all times, in all places. They still can’t pay for the staff, facilities, and equipment to be perpetually on-call for every conceivable service or procedure. They will have to make choices. And since they are the ones providing the services, their own priorities and values will and ought to guide those choices.
That’s really the only fair way to decide.
If Charles Bronson were still around, he might reprise his scene from The Magnificent Seven where he throws the Mexican child over his knee and whacks him a couple of times for ingratitude, reminding him that his parents don’t do everything for him because they have to. (Hey, you want to be treated like a child?) Nobody makes the church or churches run these hospitals in the first place, except themselves from their own religious conviction. If that same religious conviction prevents them from providing other services, Planned Parenthood should just see that as a market opportunity.
Of course, the same law that enables the HHS Mandate also makes it virtually impossible to open new, specialized, physician-owned hospitals, thus providing further justification for commandeering existing facilities.
EPA “Doesn’t Live In The Energy World”
Posted by Joshua Sharf in Colorado Politics, Economics, Energy, PPC, Regulation on May 14th, 2012
In a recent hearing of the U.S. House of Representatives Energy and Commerce Committee, EPA administrator Gina McCarthy said under questioning by U.S. Rep. Cory Gardner, R-Colo., and Committee Chairman Ed Whitfield, R-Ky., that her agency – despite issuing regulations that will have a profound affect on electricity production in the United States – “doesn’t live in the energy world.”
“Tri-State is a wholesale electric power supplier in Colorado that is owned by the 44 cooperative, generating – transmitting electricity and has come to my office multiple times trying to talk about their compliance with EPA’s Utility Max standards and…their estimate is that it would likely cost them $1 million …I’m asking you to comment on the rural co-ops which are non-profits.
Ms. McCarthy confirmed that some ratepayers would see their rates increase by about 3%, which the EPA calculated to be about $3 a month for the average family, there was this exchange between the panel and her:
Rep. Gardner: “And so that – the only way they can do that is to pass those increased costs on to their ratepayers?”
McCarthy: “I have trouble answering that question because I don’t live in the energy world, but my understanding is that compliance can be achieved by lower demand, as well as increased generation, fuel switching, and a number of techniques.”
Whitfield: “I think that’s the point that we’re trying to drive home. You’re right, Ms. McCarthy, you do not live in the energy world. But then you make extrapolations on gigawatt issues that are a reliability concern based on the chart I saw. DOE rolls over in acceptance of your electricity generation, or lack thereof, analysis, and when you have the people in the field who are disputing that analysis on the gigawatt issue, we’re debating with an environmental agency, not our Department of Energy. And if the analysis was close to what industry, financial people, FERC (Federal Energy Regulatory Commission), EEI (Edison Electric Institute) say then, we would cut some leeway.
“But the administrations proposal – actually, the environmental rules – and the effect on the electric grid, of 10 gigawatts, is laughable. And so, you can do all the analysis on emittants you want, but we reject the premise that you are experts in electricity generation, the cost of building plants, and developing those.”
Rep. Whitfield’s point is that the opinions of actual experts – which seem to be in broad agreement that the EPA rules run the risk of reducing the US’s overall electricity output – are being subordinated to the judgments of the EPA, which, by its own administrator’s admission, doesn’t live “in the energy world.”
Is it true? Well, the EPA estimates a loss of 10 gigawatts (GW) of electrical generation nationwide as a result of its new rules. This estimate is indeed not only out of line, but well out of line, with a variety of other estimates from Credit Suisse (50 GW realistic, 60+ GW possible), Friedman Billings Ramsay (45 GW), the North American Electric Reliabiliy Corporation, or NERC (33-70 GW), the Midwest Independent Transmission System Operator, or MISO (13 GW immediate, up to 61 GW retrofitted), and the Institute for Energy Research (34 GW).
It’s one thing to be independent of the industries you’re supposed to be regulating. But even independent regulatory bodies shouldn’t be making rules based on assumptions and models whose results virtually nobody in the field takes seriously. Maybe the EPA should live a little more “in the energy world,” a world it so closely regulates.
Chronicles of Crony Capitalism
Posted by Joshua Sharf in Business, Finance, PPC, President 2012, Regulation on February 23rd, 2012
So far, the LightSquared story has mostly been written as one of the FCC favoring a politically-connected company at the expense of its competition, and that favoritism having resulted in nothing but waste. See, for example, today’s Coffee and Markets podcast on the subject. Their related links (Documents: LightSquared shaping up as the FCC’s Solyndra and Documents show Obama’s FCC used regulatory muscle to destroy LightSquared’s competition) pretty much give the outline. It’s a simple story, and one that fits in neatly with an overarching narrative, as they like to say, of political money buying regulatory help.
As usual, the story is more complicated than that. And as usual, the full story makes things look even worse.
The Wall Street Journal ran a story discussing just how badly the FCC had tied itself up in knots over this. First, they declared a looming bandwidth shortage, and then quickly auctioned off additional spectrum, spectrum that happened to lie near to that used for GPS. This was done years ago, and Falcone and his people no doubt assumed that the FCC wouldn’t be selling spectrum that couldn’t be developed. Having gotten the favor, they then were surprised when the FCC didn’t turn around and tell the GPS people that this was coming, and that they should shield their equipment – technically well within their capability. Having failed to do that, they now have to argue that there’s no spectrum shortage, after all.
Even assuming that the FCC wasn’t out to clear the field for LightSquared, they failed badly in their regulatory duty here. The FCC has complete control over this stuff. They can decide how, where, and when spectrum gets exploited, and by whom. Either there is or isn’t, was or wasn’t, a spectrum shortage that will imperil future growth. Either the spectrum neighboring the GPS wavelengths is or isn’t usable. Either the burden of preventing interference lies with LightSquared (or whoever buys this tainted real estate from them), or it lies with the GPS companies.
Either the FCC didn’t know how it was planning to resolve this issues, or didn’t care. Or else, it knuckled under to a multi-million dollar lobbying campaign, in which case, what’s the point of claiming “independent” regulatory agencies are any good at all? If the FCC was throwing around its weight to help LightSquared, all these regulatory conflicts become even worse, leading other investors to throw their money after an investment the FCC must have known was headed for an iceberg.
The other example comes from the Department of Transportation:
Transportation Secretary Ray LaHood announced a $54.6 million loan to Kansas City Southern Railway Company (KCSR) for the purchase of 30 new General Electric ES44AC locomotives. These diesel-electric locomotives, built in Erie, Pennsylvania, will help KCSR meet increasing economic demand, and are more energy-efficient and produce significantly less carbon emissions than the locomotives they are replacing.
That’s nice. Railroads have had a very nice couple of years, and with the absence of KeystoneXL, are likely to have even more business, at least in the short term. Kansas Southern has a $7.8 billion market cap. It’s already carrying $1.6 billion in debt. Its quarterly depreciation expense is almost $50 million, or just about the size of the loan. Its operating cash flow was $170 million last quarter, and it showed a net income of $300 million. And it’s not as though GE is going to file for bankruptcy protection if it doesn’t get a $50 million order.
This from the same administration who reflexively defends a perfectly reasonable accounting change (see The Death of LIFO) by attacking oil companies, rather than by defending the change on its own merits.
The problem with both of these stories is that the finance is bound up inextricably with the politics. Analysts work by examining the underlying economic return, and to the extent that there are regulatory issues, they ought at least to be predictable or bounded. Companies getting regulatory benefits they can’t use, or subsidies they don’t need, don’t do anything to help create real wealth.
President Golf Calls You Lazy – Again
Posted by Joshua Sharf in Business, Economics, PPC, Regulation on November 14th, 2011
In what was called a “scripted conversation” with Boeing’s CEO James McNerney, Jr., President Obama reprised his Malaise Moment of a few weeks ago, and said, “We’ve been a little bit lazy, I think, over the last couple of decades,” which resulted in the 2009 dropoff in Foreign Direct Investment in the United States.
I have to admit that my first reaction was that I was too busy to be bothered with replying. But, as the saying goes, sharks gotta swim and bats gotta fly.
Taken at face value, I don’t have any idea what the hell he was talking about. Worse, I don’t think he does, either. Certainly even a cursory examination of the facts would reinforce the conclusion that Obama’s grasp of recent economic history isn’t any better than his grasp of mid-century diplomatic history.
Below is a quarterly graph of foreign direct investment in the United States, starting in 1980. The series starts in 1960, but it roughly zero from then until 1980, owing to the fact that the US, generating the lion’s share of the world’s wealth, was relying on exports more than FDI for growth:
You can see a couple of patterns here. First, FDI accelerates through the business cycle, as expected. As the economy picks up steam, it generates interest abroad and confidence in investors looking for growth. Second, over the last “couple of decades,” FDI has grown through each business cycle, if you discount the dot-com bubble evident in the very late 90s. Third, when the US economy goes into recession, foreigners stop investing here, until they see some evidence of a bounce-back. All of these patterns clearly apply to the most recent recession, and the current economy.
Of course, we all knew this was bunk, anyway. National accounts must balance, and the only way we can finance our trade deficit is through FDI in our economy. If we find ourselves unable to generate enough wealth, or attract enough investment, to import the things we want, that’s indeed an indictment of our ability to compete, but it likely has much more to do with government policy and regulation than with the work ethic of most Americans.
Obama’s statement that this pattern existed over “the last couple of decades,” is, I think, an attempt to include Bill Clinton’s presidency in his criticism, a back-handed return volley to Clinton’s oblique criticisms of Obama’s economic policies. It’s more than just his routine scolding of his fellow citizens, it also contains a domestic partisan political component, as well. One wants to resist the temptation to overstate the electoral consequences of such tension. But it may be that the President’s famously thin skin is once again getting the better of his judgment.
At this rate, maybe his staff should just use that XtraNorml animation engine for any future “scripted conversations.”
Efficiency Without Regulation
Posted by Joshua Sharf in Business, Economics, Energy, PPC, Regulation on October 27th, 2011
As many of you know, I’m completing a year’s sojourn here in Omaha, the midwestern town with a decidedly western sensibility. (Don’t believe me? Check out the River City Rodeo sometime.)
I’ve been doing web development for Werner Enterprises, one of the country’s larger trucking firms, but having dabbled in finance, I also always take a peek at the quarterly earnings reports. They almost always include a line like the following:
We continued to effectively manage the impact of higher fuel costs by improving our fuel miles per gallon… We are controlling truck idling; optimizing the speed, weight and specifications of our equipment; and implementing fuel enhancing equipment changes to our fleet.
How good are they at it? Turns out, they’re pretty good. Below is a graph of the national average diesel price vs. the company’s reported (or calculated) fuel cost per mile:
At first, you’ll see that the fuel cost grows faster than the fuel price. Some of this is a result of EPA emission regulations, which made the newer engines less fuel-efficient. As they newer engines were gradually introduced to the fleet, they affected overall operating costs. (In fact, at least one of the 10Qs from that era notes that Werner was able to command a premium when re-selling its older, hand-me-down tractors to other carriers.)
Over time, the company has managed to implement certain fuel-saving practices and patent aerodynamic designs that have cut fuel costs. The diesel price curve (courtesy of the US Energy Information Administration) look a lot like the curve leading up to 2008, but the cost per mile has dropped below it. For comparison, in Q3 2006 and Q3 2010, diesel was a little over $2.90/gallon, but Werner’s fuel cost per mile was 17% lower. That represents just under 4% of operating revenues, which is slightly enormous in this business.
They’ve done this even as the rise of intermodal has limited trip length:
Shorter trip lengths are associated with lower fuel efficiency; they involve more stops and starts, more idle time, and a higher percentage of time spent off of the interstates. So the cost containment has happened in spite of this.
It’s also happened despite the fact that class 8 trucks have no CAFE standards at all (although class 8 truckers probably have cafe standards of their own, mostly involving coffee & pie).
If anything, as we’ve seen, the government has made fuel efficiency more difficult by choosing emissions control over it. This choice may or may not be justified; that isn’t the point. The point is that, left to fend for themselves, with the government having made policy decisions that placed other priorities above fuel efficiency, trucking companies have been able to improve their own processes, and to demand better mileage from their suppliers.
More than that, it’s a little “I, Pencil” microcosm. These decisions are the result of a long chain of cost-benefit calculations stretching from engine manufacturer to trucker through customer to consumer. Each of these relationships has its own set of elasticities of supply and demand, which affect how much of the fuel cost can be pushed downstream. The amount that can’t be passed on to each customer provides the incentive for fuel economy.
It also provides the ceiling for how much each is willing to pay for it. Including the engine manufacturer. The government could probably demand higher fuel efficiency out of tractor engines, and the result would be greater inefficiency overall, because the cost of producing that engine would be greater than the system is currently willing to pay.
You could justify those expenses as externalities, say, the national security cost of keeping the Saudi pipeline safe and operating. But then you’re stuck arguing that the political & regulatory systems are as efficient in balancing interests as the economy is in balancing costs, which I think is, at best, an unproven assumption.
Note: Naturally, the opinions expressed here are entirely my own, and do not in any way represent Werner.
The Wyoming High-Flow Toilet Scam
Posted by Joshua Sharf in Business, Colorado Politics, Economics, PPC, Regulation on September 13th, 2011
Hat-Tip to Amy Oliver for this. According to the Denver Post, utility managers are pushing to outlaw at a state level that which is already outlawed at a federal level: your normal, regular, works-with-one-flush toilet. You wouldn’t actually have to trade it your working toilet for the hobbled version, but according to the proposed law, “manufacturers could not sell” regular toilets.
The water savings wouldn’t be trivial, but are mostly notional: two generations from now it could amount to enough for 88,000 families of four. What population and use numbers went into that estimate, the Post doesn’t say. Even now, that’s barely 5% of the population, when home water use accounts for less than half of total consumption. And while the article notes that Denver’s sewage system functions less efficiently with lower flow, the operating costs of that inefficiency (both monetary and aquiferous), and the capital expense required to mitigate, go unmentioned.
Aside from the article’s shoddy economics, there’s also the incentive system it sets up. There’s already quite a grey market in regular toilets from housing projects (friends of mine were careful to preserve theirs when they remodeled a few years ago), and this will only make it worse. The ban would apply to manufacturers, not individuals or remodelers, so no doubt, there will soon be calls to “close the Home-Fixtures Show Loophole.” And at least until the big boys move in, and add another layer of middle-men to the process, you’ll see wild-eyed dreamers thinking up schemes like this.