Category: regulation

SCOTUS Rejects USDA’s Raisin Cartel

A couple years ago I posted (here) about a lawsuit progressing through the courts concerning the USDA’s raisin marketing order. The Raisin Administrative Committee (RAC) basically sets a quota on the amount of raisins that can be marketed in a given year as a way of maintaining high-priced raisins. The RAC requires producers to turn a portion of their crop over to the RAC, which then markets the “excess” raisins to other countries or uses.

Today, the US Supreme Court ruled in Horne v. Department of Agriculture that the USDA-sponsored Raisin Administrative Committee’s process amounts to an unconstitutional governmental “taking”. Apparently the decision is limited to the raisin program and it opens the doors to other ways for the USDA to control the raisin market, but the decision also raises questions about the constitutionality of other agricultural commodity programs.

Tesla, Dealer Franchise Laws, and the Politics of Crony Capitalism

About a year ago I posted a couple of pieces (here and here) related to auto dealers’ attempts in various states to shut down Tesla’s direct-to-consumer distribution system. Dan Crane (Michigan Law) has a recent paper on the issue available at SSRN. Below is the abstract:

Tesla Motors is fighting the car dealers’ lobby, aided and abetted by the legacy Detroit manufacturers, on a state by state basis for the right to distribute its innovative electrical automobiles directly to consumers. The Tesla wars showcase the important relationship between product innovation and innovation in distribution methods. Incumbent technologies may block competition by new technologies by creating legal barriers to innovative distribution methods necessary to secure market acceptance of the new technologies. While judicial review of such special interest capture is generally weak in the post-Lochner era, the Tesla wars are creating new alliances in the political struggle against crony capitalism that could contribute to a significant re-telling of the conventional public choice story.

A GMO Rose By Any Other Name?

An interesting article in today’s New York Times on how some companies are circumventing regulatory barriers in developing new plant varieties by using “genetic editing” rather than “genetic engineering,” which is often referred to as GMO. The difference? Not the outcome (a plant that’s DNA is changed to express different traits); just the way in which the genetic change is produced. From the article (emphasis added):

Regulators around the world are now grappling with whether these techniques are even considered genetic engineering and how, if at all, they should be regulated.

 

“The technology is always one step ahead of the regulators,” said Michiel van Lookeren Campagne, head of biotechnology research at Syngenta, a seed and agricultural chemical company.

The problem stems largely from defining (and regulating) genetically modified plants not based on the fact that they are genetically modified, but based on the technological process by which they are modified. Humans have been manipulating plant genes for millennia; more recently using (a growing number of) technologies in the lab rather than long, drawn-out, and less-precise processes in the field. That poses a problem for regulators and critics who need to carefully circumscribe what kind of genetic modifications are, and aren’t, considered acceptable.

Meanwhile, the real question is whether a (genetically modified) rose by any other name (or technology) would still smell as sweet.

 

Regulation and Contract Choice in the Distribution of Wine

That’s the title of a new working paper with one of my former students, Michelle (Mullins) Santiago. You can access the full paper here. The abstract follows:

The wine industry in the United States has grown tremendously over the past few decades, from fewer than 1,000 wineries in 1980 to upwards of 7,700 today. The growth has occurred over a period that has seen substantial changes in the structure of the wine industry, the modes of distribution available to wineries, and the regulations governing them, perhaps most notably the advent of direct-to-consumer shipping of wine across state boundaries. Most economic research, however, has focused on supply relations between wineries and wine grape growers rather than between wineries and their downstream markets. In this paper we examine wineries’ contracting behavior with downstream distributors and the effects of industry structure, winery organizational structure, and state laws regarding direct shipment and distribution franchise laws.

A Tilted Level Playing Field For Farmers

Yesterday, the World Trade Organization ruled in favor of the United States on claims that India had violated trade rules by prohibiting imports of US poultry, meat, eggs, and live pigs on “phytosanitary” (i.e., food safety) grounds. The WTO ruling is available here.

US farmer organizations were predictably thrilled by the ruling, since it may force India to open up it’s market to the tune of $300 million a year. I was particularly taken by this quote in the Des Moines Register by David Miller, director of research and commodity services for the Iowa Farm Bureau Federation:

“Iowa and U.S. farmers want a level playing field for international trade and we are confident that the WTO dispute resolution process provides an avenue for that to happen.”

I can only assume, then, that the Iowa Farm Bureau will also support removing the protectionist US sugar program, which restricts sugar imports and causes the price of sugar in the US to be 2 to 3 times higher than the world price of sugar. A recent study by Beghin and Elobeid published in the journal Applied Economic Perspectives and Policy suggests that eliminating the sugar quota would make US consumers better off to the tune of $2.9 to $3.5 billion per year and create as many as 20,000 new jobs.

Of course, that would come at a cost to Iowa corn farmers, who benefit greatly from inflated sugar prices that create a market opportunity for high-fructose corn syrup. Or perhaps what Mr. Miller meant is that Iowa and US farmers want a level playing field for international trade, as long as it tilts in their favor.

A Review of Occupational Licensing

This week the US Supreme Court is hearing arguments in the case of North Carolina Board of Dental Examiners v. Federal Trade Commission, addressing the questions of whether (or under what terms) state occupational licensing boards are immune from antitrust scrutiny. This is the case I referred to last week and linked to the preview of the arguments on SCOTUSblog.

Today I ran across a review of Morris Kleiner’s recent book, Stages of Occupational Regulation: Analysis of Case Studies, on Econ Journal Watch. Uwe Reinhardt (Princeton) provides a great overview of the general issue and Kleiner’s treatment of it. Below is the abstract of Reinhardt’s review:

The licensing of occupations—a very forceful intervention in markets—is pervasive and growing in modern economies. Yet the attention paid to it by economists and economics textbooks has been small. Highly welcome, therefore, has been the extensive and intensive work on this subject by Morris Kleiner. Kleiner’s latest book, titled Stages of Occupational Regulation: Analysis of Case Studies (2013), explores the progression of occupational regulation, from mere registration to certification to outright licensing—three distinct stages. Kleiner carefully selects for his analysis a series of occupations representing the stages of regulation, devoting a chapter to each occupation. He uses a variety of statistical approaches to tease out, from numerous databases, what the impact of mild to heavy regulation on labor markets appears to be.

Kleiner’s work leads him to call for a pervasive review of occupational regulation in the United States, with a view towards replacing occupational licensure, which introduces the most inefficiency and welfare loss, with mere certification of occupations. That recommendation gains plausibility in an age where cheap computation and data mining makes it possible to protect consumers from low-quality and possibly dangerous services by providing robust, user-friendly information on the quality of services delivered by competing occupations, such as doctors and nurse practitioners.

You can access the full article here. I may need to add Kleiner’s book to my list of fun-things-to-read-when-I-get-a-chance.

Occupational Licensing & Antitrust: Legal Licensing or Occupational Cartel?

Occupational licensing is an interesting phenomenon. Governments (state and local) create certification boards (typically made up of industry participants) that set licensing standards and qualifications for persons wanting to work in those occupations. Ostensibly, these restrictions are intended to correct for the information asymmetry between consumers and professionals, where consumers may not be able to assess the quality (or ability) of the professional independently before hiring them. Think medical associations for doctors and bar associations for lawyers at the state level, or licensing for plumbers and electricians at the local level.

But occupational licensing also serves as a way of restricting competition in a profession by limiting the number of people who are able to provide the goods or services under the board’s purview. And as we know, reducing supply in the market increases the prices consumers pay (and the professionals receive). For instance, a medical board may limit the number of doctors who will be “board certified” in a given year. A private investigator licensing board may set standards to reduce the number of licensed (and legal) PIs. Or a state dental board might prohibit non-dentists from performing teeth-whitening services in competition with dentists.

That last one is the basis of a case coming before the US Supreme Court next week. The US Federal Trade Commission (FTC) brought antitrust charges against the North Carolina Board of Dental Examiners for conspiring to restrain competition in the teeth whitening business. The Dental Examiners board asserts they are exempted from antitrust law under the “state action doctrine.” The Supreme Court is being asked to determine if–and under what circumstances–state occupational licensing boards are exempt from antitrust laws. Eric Fraser offers a nice preview of the arguments in the case over on SCOTUSblog.

This could be an important case for licensing boards across the country. It should be fun to watch and interesting to see how the Court delineates the lines of necessary government oversight and the degree to which an overwhelming public interest needs to be justified.