States – Technology Liberation Front https://techliberation.com Keeping politicians' hands off the Net & everything else related to technology Thu, 03 Apr 2025 23:20:10 +0000 en-US hourly 1 6772528 Dispatch from JMI’s “Tech & Innovation Summit” Panel on Progress Studies https://techliberation.com/2022/09/16/dispatch-from-jmis-tech-innovation-summit-panel-on-progress-studies/ https://techliberation.com/2022/09/16/dispatch-from-jmis-tech-innovation-summit-panel-on-progress-studies/#comments Fri, 16 Sep 2022 13:59:12 +0000 https://techliberation.com/?p=77044

It was my pleasure this week to participate in a panel discussion about the future of innovation policy at the James Madison Institute’s 2022 Tech and Innovation Summit in Coral Gables, FL. Our conversation focused on the future of Progress Studies, which is one of my favorite topics. We were asked to discuss five major questions and below I have summarized some of my answers to them, plus some other thoughts I had about what I heard at the conference from others.

  1. What is progress studies and why is it so needed today?

In a sense, Progress Studies is nothing new. Progress studies goes back at least to the days of Adam Smith and plenty of important scholars have been thinking about it ever since. Those scholars and policy advocates have long been engaged in trying to figure out what’s the secret sauce that powers economic growth and human prosperity. It’s just that we didn’t call that Progress Studies in the old days.

The reason Progress Studies is important is because technological innovation has been shown to be the fundamental driver in improvements in human well-being over time.  When we can move the needle on progress, it helps individuals extend and improve their lives, incomes, and happiness. By extension, progress helps us live lives of our choosing. As Hans Rosling brilliantly argued, the goal of expanding innovation opportunities and raising incomes “is not just bigger piles of money” or more leisure time. “The ultimate goal is to have the freedom to do what we want.”

  1. What don’t policymakers get about progress?

Policymakers often fail to appreciate the connection between innovation policy defaults and actual real-world innovation outcomes. Here is the biggest no-duh statement ever uttered: If you discourage innovation by default, you’ll get a lot less of it. In other words, incentives matters if you hope to create a positive innovation culture. Innovation culture refers to the various social and political attitudes, policies and entrepreneurial activities that, taken together, influence the innovative capacity of a particular region.

Thus, when policymakers make the Precautionary Principle the legal default for innovative activities, it means that government has put a red light in front of entrepreneurs and treated them and their innovations as guilty until proven innocent.  That’s a sure-fire recipe for stagnation.

The better approach is to make Permissionless Innovation our policy default and treat entrepreneurs and innovations as innocent until proven guilty. When our policy defaults offer entrepreneurs more green lights instead of red ones, it encourages more experimentation with new and better ways of doing things. In turn, this spurs business formation, job creation, new industries and products, and broad-based economic growth.

But policymakers consistently ignore this fundamental reality about the connection between policy and progress.

  1. Can you think of any states or governments that are doing a good job of putting the insights of progress studies into practice?

This summer, I co-authored an essay about, “How Arizona Is Getting Innovation Culture Right,” and highlighted the many important reforms undertaken over the past eight years by Gov. Doug Ducey and the Arizona Legislature. Arizona has advanced several reforms that have helped the state get its innovation culture right both broadly and narrowly. Broadly speaking, the state took steps to minimize red tape burdens and streamline permitting process and occupational licensing mandates. They also promoted “right to earn a living” and “right to try” initiatives to broaden worker and patient opportunities.

In terms of more targeted reforms, Arizona took steps to clear the way for greater broadband rollout and encouraged experimentation with commercial drones and driverless cars. The state also helped pioneer the use of “regulatory sandboxes,” which grant innovators a temporary safe space free of excessive regulatory burdens so they can experiment with new products and services.

And then there’s the city of Miami. At the JMI event, Miami Mayor Francis Suarez delivered a keynote address and he identified 3 keys to attracting talent and building opportunity: (1) Keep taxes low, (2) keep people safe, and (3) focus on innovation. He’s following that script and making Miami a hotbed of entrepreneurial opportunity.

Mayor Suarez spoke of how he is embracing emerging technologies like blockchain to compete with the traditional geographic Goliaths of tech, like San Francisco and New York. There’s been a massive inflow of companies and investors as a result. The city has become #1 in tech job growth and the inflow of tech entrepreneurs. “It turns out that if you welcome people… they come,” he said. “They want to migrate to places that are on the cutting edge of technology” and find “pathways to prosperity.”

Miami and Arizona offer great models that other cities and states could follow if they hope to improve their own innovation culture.

  1. What is the difference between progress studies and industrial organization, or industrial policy, or “government planning, but for innovation”?

Many policymakers foolishly believe there exists a precise technocratic cocktail that can immediately unlock innovation through highly targeted interventions and spending initiatives. In reality, achieving consistent growth and prosperity requires more than Big Government gimmicks. It’s a long game.

Many politicians and pundits are often fond of using machine-like metaphors and insisting that they have the ability to “fine-tune” innovative outcomes or “dial-in” economic development according to a precise formula. This is how we end up trillions in debt without much to show for it. Most recently, we’ve witnessed an “orgy of spending” on industrial policy schemes at the federal level.

The better metaphor for thinking about a nation’s innovation culture might be a plant or garden. Two of the great Progress Studies thinkers are F. A. Hayek and Joel Mokyr. Hayek once suggested that policymakers should aim to “cultivate a growth by providing the appropriate environment, in the manner in which the gardener does this for his plants.”  And Mokyr has argued that technological innovation and economic progress must be viewed as “a fragile and vulnerable plant, whose flourishing is not only dependent on the appropriate surroundings and climate, but whose life is almost always short. It is highly sensitive to the social and economic environment and can easily be arrested by relatively small external changes.”

Thus, the technocratic industrial policy mindset is always looking for “sexy” initiatives that capture a lot of short-term media attention, but typically fail to produce meaningful innovations or lasting growth. What’s more important to long-term prosperity is that policymakers get the “boring” stuff right.

The building blocks of the “boring” general approach economic development is a mix of broadly applicable tax, spending, regulatory and legal rules that help create a stable innovation ecosystem. Again, it’s like Mayor Suarez’s 3-prong approach of low taxes, safe communities, and a welcoming embrace of entrepreneurialism. That’s the secret sauce that fuels long-term progress and a sustainable prosperity.

  1. Is there a disconnect between the theories of progress and the practice – in other words, is it a problem of governance forms?

Indeed, I already mentioned the difference between the Precautionary Principle and Permissionless Innovation and it’s always interesting to me how my scholars ignore the importance of these governance forms when thinking about how to advance progress. There exists an unfortunate tendency among many to either ignore or repeat the mistakes of the past. Having made significant economic and societal gains thanks to past technological progress, many pundits and policymakers come to take much of it for granted. Thus, Progress Studies requires a process of constant re-education to remind each new generation of what helped raise our living standards so dramatically over the past two centuries.

The dramatic growth in incomes, life expectancy, and human welfare were not the product of sheer luck but of important policy choices. The freedom to think, to innovate, and to trade are the three freedoms that gave us our modern riches. If our governance forms limit those foundational freedoms, our current welfare and future prosperity will suffer. This is the great lesson of Progress Studies.

Additional Reading from Adam Thierer on Progress Studies

 

]]> https://techliberation.com/2022/09/16/dispatch-from-jmis-tech-innovation-summit-panel-on-progress-studies/feed/ 3 77044 Running List of My Research on AI, ML & Robotics Policy https://techliberation.com/2022/07/29/running-list-of-my-research-on-ai-ml-robotics-policy/ https://techliberation.com/2022/07/29/running-list-of-my-research-on-ai-ml-robotics-policy/#respond Fri, 29 Jul 2022 12:51:54 +0000 https://techliberation.com/?p=77020

[last updated 4/3/2025 – Check my Medium page for latest posts]

This a running list of all the essays and reports I’ve already rolled out on the governance of artificial intelligence (AI), machine learning (ML), and robotics. Why have I decided to spend so much time on this issue? Because this will become the most important technological revolution of our lifetimes. Every segment of the economy will be touched in some fashion by AI, ML, robotics, and the power of computational science. It should be equally clear that public policy will be radically transformed along the way.

Eventually, all policy will involve AI policy and computational considerations. As AI “eats the world,” it eats the world of public policy along with it. The stakes here are profound for individuals, economies, and nations. As a result, AI policy will be the most important technology policy fight of the next decade, and perhaps next quarter century. Those who are passionate about the freedom to innovate need to prepare to meet the challenge as proposals to regulate AI proliferate.

There are many socio-technical concerns surrounding algorithmic systems that deserve serious consideration and appropriate governance steps to ensure that these systems are beneficial to society. However, there is an equally compelling public interest in ensuring that AI innovations are developed and made widely available to help improve human well-being across many dimensions. And that’s the case that I’ll be dedicating my life to making in coming years.

Here’s the list of what I’ve done so far. I will continue to update this as new material is released:

2025

2024

2023

2022

2021 (and earlier)

]]> https://techliberation.com/2022/07/29/running-list-of-my-research-on-ai-ml-robotics-policy/feed/ 0 77020 Podcast: Why Ban Direct Electric Vehicle Sales? https://techliberation.com/2022/05/23/podcast-why-ban-direct-electric-vehicle-sales/ https://techliberation.com/2022/05/23/podcast-why-ban-direct-electric-vehicle-sales/#comments Mon, 23 May 2022 13:57:04 +0000 https://techliberation.com/?p=76989

Why is it illegal in many states to purchase an electric vehicle directly from a manufacturer? In this new Federalist Society podcast, Univ. of Michigan law school professor Daniel Crane and I examine how state protectionist barriers block choice and innovation for no good reason whatsoever. The only group that benefits from these protectionist, anti-consumer direct sales bans are local car dealers who don’t want the competition.

Additional Reading :

]]> https://techliberation.com/2022/05/23/podcast-why-ban-direct-electric-vehicle-sales/feed/ 1 76989 Can Government Reproduce Silicon Valley Everywhere? https://techliberation.com/2021/09/12/can-government-reproduce-silicon-valley-everywhere/ https://techliberation.com/2021/09/12/can-government-reproduce-silicon-valley-everywhere/#comments Sun, 12 Sep 2021 17:36:07 +0000 https://techliberation.com/?p=76903

Wishful thinking is a dangerous drug. Some pundits and policymakers believe that, if your intentions are pure and you have the “right” people in power, all government needs to do is sprinkle a little pixie dust (in the form of billions of taxpayer dollars) and magical things will happen.

Of course, reality has a funny way of throwing a wrench into the best-laid plans. Which brings me to the question I raise in a new 2-part series for  Discourse magazine: Can governments replicate Silicon Valley everywhere?

In the first installment, I explore the track record of federal and state attempts to build tech clusters, science parks & “regional innovation hubs” using state subsidies and industrial policy. This is highly relevant today because of the huge new industrial policy push at the federal level is building on top of growing state and local efforts to create tech hubs, science parks, or various other types of industrial “clusters.

At the federal level, this summer, the Senate passed a 2,300-page industrial policy bill, the “United States Innovation and Competition Act of 2021,” that included almost $10 billion over four years for a Department of Commerce-led effort to fund 20 new regional technology hubs, “in a manner that ensures geographic diversity and representation from communities of differing populations.” A similar proposal that is moving in the House, the “Regional Innovation Act of 2021,” proposes almost $7 billion over five years for 10 regional tech hubs. Meanwhile, the Biden administration also is pitching ideas for new high-tech hubs. In late July, the Commerce Department’s Economic Development Administration announced plans to allocate $1 billion in pandemic recovery funds to create or expand “regional industry clusters” as part of the administration’s new Build Back Better Regional Challenge. Among the possible ideas the agency said might win funding are an “artificial intelligence corridor,” an “agriculture-technology cluster” in rural coal counties, a “blue economy cluster” in coastal regions, and a “climate-friendly electric vehicle cluster.”

In my essay, I note that the economic literature on these efforts has been fairly negative, to put it mildly. There is no precise recipe for growing tech clusters, as most economists and business analysts note.

“Despite several attempts, Silicon Valley has not been successfully copied elsewhere,” notes Mark Zachary Taylor, author of “The Politics of Innovation: Why Some Countries Are Better Than Others at Science and Technology.” Judge Glock, a senior policy adviser with the Cicero Institute, offers a more blistering assessment of such efforts: “Almost every American state has tried to fund the creation of biotech clusters, projects that almost inevitably end with weeds growing through the parking-lot pavement and a trail of corrupt bargains.”

I then highlight the key findings from several major studies of these efforts, all of which make it clear that, as cluster scholars by Aaron Chatterji, Edward Glaeser and William Kerr noted in 2014 after gathering all the research conducted on the topic: existing evidence “suggests that the regional foundation for growth-enabling innovation is complex and that we should be cautious of single policy solutions that claim to fit all needs.” Furthermore, “even if clusters of entrepreneurship are good for local growth, it is less clear that cities or states have the ability to generate those clusters.”

I also highlight research from my Mercatus Center colleagues on “The Economics of a Targeted Economic Development Subsidy” documenting costs of state-level planning & case study of Foxconn fiasco. They summarize the fairly miserable track record of state and local mini-industrial policy efforts. As they note, the extensive economic literature on this matter finds that “the net effect of targeted economic development subsidies is likely to be negative” because “the taxes funding the subsidies will discourage more economic activity than will be encouraged by the subsidies themselves.” Similarly, Harvard Business School economist Josh Lerner evaluated dozens of similar targeted development efforts from around the globe in his 2009 book Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed—and What to Do About It. He concluded that “for each effective government intervention, there have been dozens, even hundreds, of failures, where substantial public expenditures bore no fruit.”

In my essay, I also discuss the astonishing array of federal efforts to promote the geographic spread of high-tech sectors and jobs since 2000. Throughout Bush, Obama, Trump & Biden admins, there’s been a lot of spending, but not a lot of success. Just lots of new laws and bureaucracies:

In 2012, the Obama administration launched the multiagency Rural Jobs and Innovation Accelerator Challenge and Advanced Manufacturing Jobs and Innovation Accelerator Challenge. This occurred at roughly the same time President Obama was launching his Startup America initiative. He also signed the JOBS Act (Jump-start Our Business Startups) in 2012. All these efforts included various measures to support the spread of advanced manufacturing and high-tech startups across the U.S. But none of these efforts have borne much fruit so far.

In the second installment of this series, I explore better ways to encourage regional tech innovation and economic development without doubling down on failed programs of the past. Specifically, I explain why, when it comes to economic development efforts, policymakers would be wise to avoid the costly, ineffective “fun stuff” and refocus on time-tested “boring” strategies:

The boring approach to economic development seeks to promote an open innovation culture that is conducive to risk-taking, investment and growth without the need to extend targeted privileges to particular firms or industries. Such a culture comes down to a classic mix of simplified and equally applied taxes, streamlined permitting processes and sensible regulations, limits on frivolous lawsuits, and clear protection of contracts and property rights. As Matt Mitchell and I argued previously, policymakers need to resist the urge to go for broke with splashy policies and programs. They need to appreciate the benefits of generalized economic development policy (a.k.a. the boring approach) as opposed to far riskier targeted development efforts.

I also highlight recent research explaining how perhaps the simplest way to strengthen existing clusters, or give rise to new ones, is to make sure America’s immigration policies are hospitable to the best and brightest minds from across the globe.

And I note how, due to the problems associated with many other forms of government-sponsored R&D assistance, many scholars and policymakers are increasingly turning to the idea of government-sponsored competitions and prizes as a superior way to distribute R&D assistance.

With competitions, governments can set broad goals to help facilitate the search for important societal needs. The prizes then create a powerful incentive for innovators to pursue those goals, not only to win money, but also to gain recognition from peers and the public. Another alternative is just using lotteries to distribute R&D money instead of having agencies target grants. That at least avoids political shenanigans and paperwork delays, although it may not be a particularly effective approach.

There is also some good news is overlooked in today’s rush to make big industrial policy gambles: Venture capitalists and new startups are already spreading out naturally.

A 2021 study on “The State of the Startup Ecosystem” by Engine, a research and advocacy organization supporting startups, revealed that “as Series A funding grew over the last fifteen years, more of that growth has started to shift to areas located outside of the largest ecosystems.” Series A funding refers to the initial round of outside venture capitalist investment in startups. The report looked at Series A deals from 2003 to 2018 and found that “Series A rounds outside of the top five ecosystems grew nearly 900 percent, while the number of rounds outside of the top nine grew nearly tenfold.” Whereas Series A fundings outside of the top five ecosystems stood at 38% in 2003, they had jumped up to 43% in 2018. “The increase in deal location diversity over this period reflects an increasing spread in venture capital investment across the country and less centralization of investment in areas like Silicon Valley,” the report concluded.

Meanwhile, tech innovators and investors are increasingly engaging in innovation arbitrage as they move to cities and states across the nation that are more hospitable to entrepreneurial activities. Firms and investors are voting with their feet (and dollars) by flocking to areas where tech clusters can more naturally sprout because the general policy environment is sound.

But government efforts to artificially try to create regional innovation hubs in a top-down, technocratic fashion will almost certainly persist. As they do, some will argue that this time will be different! Perhaps, but it is more likely that the past is prologue; these new hubs will likely cause federal politicians to jockey for position to have their regions named one of the winners and get a big cut of all the new high-tech pork being served up by Washington. We can do better.

Jump over to  Discourse to read both installments here and here.

Also, down below I list several other things I have written recently on industrial policy efforts more generally.

]]> https://techliberation.com/2021/09/12/can-government-reproduce-silicon-valley-everywhere/feed/ 1 76903 Reforming Licensing Rules to Help Fight the Pandemic https://techliberation.com/2020/03/23/reforming-licensing-rules-to-help-fight-the-pandemic/ https://techliberation.com/2020/03/23/reforming-licensing-rules-to-help-fight-the-pandemic/#comments Mon, 23 Mar 2020 13:19:12 +0000 https://techliberation.com/?p=76682

In a new essay in The Dallas Morning News (“Licensing restrictions for health care workers need to be flexible to fight coronavirus“),  Trace Mitchell and I discuss recent efforts to reform occupational licensing restrictions for health care workers to help fight the coronavirus.  Trace and I have written extensively about the need for licensing flexibility over the past couple of years, but it is needed now more than ever. Luckily, some positive reforms are now underway.

We highlight efforts in states like Massachusetts and Texas to reform their occupational licensing rules in response to the crisis, as well as federal reforms aimed at allowing reciprocity across state lines. We conclude by noting that:

It should not take a crisis of this magnitude for policymakers to reconsider the way we prevent fully qualified medical professionals from going where they are most needed. But that moment is now upon us. More leaders would be wise to conduct a comprehensive review of regulatory burdens that hinder sensible, speedy responses to the coronavirus crisis.

If nothing else, the relaxation of these rules should give us a better feel for how necessary strict licensing requirements truly are. Chances are, we will learn just how costly the regulations have been all along.
]]> https://techliberation.com/2020/03/23/reforming-licensing-rules-to-help-fight-the-pandemic/feed/ 1 76682 Congress as a Non-Actor in Tech Policy https://techliberation.com/2020/02/04/congress-as-a-non-actor-in-tech-policy/ https://techliberation.com/2020/02/04/congress-as-a-non-actor-in-tech-policy/#comments Tue, 04 Feb 2020 19:28:42 +0000 https://techliberation.com/?p=76658

ImageCongress has become a less important player in the field of technology policy. Why did that happen, and what are the ramifications for technological governance efforts going forward?

I’ve spent almost 30 years covering technology policy. There was a time in my life when I spent almost all my time as a policy analyst preoccupied with developments in the federal legislative arena. I lived in the trenches of Capitol Hill and interacted with lawmakers and their staff morning, noon, and night.

In recent years, however, I have spent very little time focused on the Legislative Branch because it has effectively become a non-actor on technology policy. It is not that congressional lawmakers stopped caring about tech policy. Interest actually remains quite high—perhaps higher than ever before. Congress also continues to introduce lots of bills, host plenty of hearings, and issue mountains of press releases related to tech policy issues.

Nonetheless, all that interest and activity has not really translated into much important legislation. While it is hard to track tech-oriented legislative trends statistically because of the complication of defining “technology policy” over time, judged by substantive output, Congress has largely checked out of technological policymaking.

Think about digital privacy. How many years now have people been predicting a comprehensive “baseline” privacy bill would pass in each legislative session? It never happens. Perhaps it will this year, but if you would like to place a wager on it, I will take that bet.

Speaking of bets, for several years now, I have been wagering with friends that Congress will not pass federal legislation creating a national autonomous vehicles framework. Each session I win that bet. Keep in mind, a framework for driverless cars is far less controversial than privacy policy. Still, nothing substantive ever gets done in Congress.

Same goes for cybersecurity with lots of calls for big measures, but no final action. Folks are now also telling me to expect a big artificial intelligence bill one day soon. I sincerely doubt it. Again, I’ll bet on it if you’d like to lose some money!

Let me be clear, there may actually be some very good reasons why Congress should implement a national framework for privacy, driverless cars, and some AI policy issues. But all the wishful thinking in the world will not magically make it happen.

We need to entertain the possibility that Congress has largely checked out of the world of substantive tech policymaking and isn’t coming back. We may get a few big surprise measures here and there, as we did with clumsily-drafted FOSTA-SESTA. If anything, it is more likely that we instead see misguided legislative riders attached to non-germane measures during late night negotiations. But even haphazard efforts like those will be extremely rare. The days of Congress passing big bills like the Telecom Act of 1996 or the Cable Act of 1992 appear mostly over.

Why Congress Is No Longer the Major Player It Once Was

I think there are probably many obvious explanations for why Congress has checked out of tech policymaking, but let me try to boil it down to a couple of interrelated trends:

The “pacing problem” has intensified: The pacing problem refers to the inability of legal or regulatory regimes to keep adjust to the intensifying pace of technological change. There are just more emerging technologies than ever, and they are evolving faster than ever, too. “New technologies that used to have two-year cycle times now can become obsolete in six months, and the pace of change is not slowing,” says consulting firm Deloitte.

A growing multiplicity of technologies means more tech policy issues to cover. And those issues grow more complicated each year. As soon as lawmakers wrap their heads around one technology (if they do at all), another innovation pops up that complicates things further or crowds out their attention.

Technological convergence and blurring governance boundaries: Technology policymaking increasingly involves metaphysical questions about the underlying nature of things. For example, what is a “phone,” a “medical device,” or an “aerial vehicle”? These things used to be relatively easy to define and had well-understood meanings in federal statutes and regulations. But those concepts evolved rapidly in an age of widespread technological convergence and rapid-fire “combinatorial innovation,” with new technologies multiplying and building on top of one another in the symbiotic fashion. Basically, almost as soon as new tech laws or regulations are enacted, they are confronted with new marketplace realities and technological changes that call into question legal classifications or regulatory distinctions.

For example, today’s smartphones combine dozens of different functions that were previously quite distinct, including health tracking capabilities, mobile payment systems, and video distribution, all of which remain heavily regulated by an assortment of federal laws and agencies. But the convergence of all these capabilities in a single device that we can carry in our pockets creates massive governance challenges, not only for archaic legislative frameworks, but even for newer semantic distinctions that may seem current one moment only to be obliterated the next. These factors also make it harder to figure out who in Congress should be driving policy because technological convergence blurs previously distinct governance categories among legislative committees and the laws they have crafted.

Legislative dysfunctionalism: Policymaking processes move slowly by design. Constitutional constraints and other legal requirements demand it. But things move even slower today because of what Jonathan Rauch calls “demosclerosis,” or the “government’s progressive loss of the ability to adapt.” “[A]s layer is dropped upon layer,” he argued, “the accumulated mass becomes gradually less rational and less flexible.”

Inadequate resources are also part of the problem with Congress facing a complex, rapidly-evolving set of issues but devoting only limited resources to technical staff or studies to better understand these developments. This combined with the factors cited above has led to a never-ending “competency trap,” with lawmakers and their staffs seemingly always one step behind technological developments and societal demands or expectations.

Meanwhile, partisanship increases and the work load on many other fronts grows alongside it. There’s just a lot more on Congress’s plate than ever before. Plus, tech policy matters seemingly always take a back seat to tax, budget, entitlements, defense, and other issues.

Many people hope that boosting technology assessment efforts might help correct these problems. Perhaps better technical advice could help lawmakers ask less ignorant questions at tech-oriented congressional hearings, which have become showcases for the staggering lack of congressional understanding of modern technologies. But just adding new technology assessment capacity, such as in the form of a revived Office of Technology Assessment, won’t likely move the needle much in terms of actual legislative output. More serious structural reforms will be required.

Globalization: Many modern technologies “are truly global and call out for policy approaches that do not respect traditional national borders,” note former NITA officials Lawrence E. Strickling and Jonah Force Hill. Congress only has so much control over technologies that defy national boundaries, further complicating tech governance questions.

Yet, one would think that when America’s global competitive advantage was on the line, Congress would have greater reason to assert itself and craft frameworks to ensure US firms are not disadvantaged by a lack of policy clarity. That has not proven to be the case, however. Congressional lawmakers do plenty of huffing and puffing about the tech governance choices made by Europe, China, and other governments, but they then leave the field wide open to them (as well as lower levels of government) to craft policies that govern national markets throughout the United States.

Endless delegation: Speaking of passing the buck, Congress has been doing it for decades on tech policy by delegating massive and quite amorphous authority to technocratic administrative agencies. Over the past half century, scholars from various disciplines—economics, law, political science, history, and others—have explored the growth of what has been alternatively called the “interest group society,”  “receivership by regulation,”  “iron triangles,” and “client politics.” This literature identifies the way Congress has increasingly abdicated its constitutional role as lawmaker by shifting hard policy questions to regulatory agencies and then hoping that bureaucrats could figure out all the answers.

Delegation is even more common for the most technical policy matters, and that trend has only accelerated in recent years as the complexity increases and overwhelms lawmakers and their staff.

Ramifications for Tech Governance Going Forward

If Congress remains largely incapable of ever getting the ball over the goal line on important tech policy matters, what are some of the ramifications? There are many, but I will identify just a few of the most obvious ones:

  • More tech-oriented legislative activity will shift to the states: In fact, it already has. For each of the tech policy issues I identified earlier (privacy, driverless cars, cybersecurity, and even some AI-related issues like facial recognition), states are—for better or worse—picking up the slack. We should expect that trend to accelerate. This will create an increasingly confusing patchwork of policies that will potentially raise serious barriers to entry and innovation. Nonetheless, I can’t see this trend reversing anytime soon. Perhaps Congress will finally act on privacy or driverless cars legislation if for no other reason than to preempt a crazy-quilt of contradictory policies. Of course, that’s what people have been predicting for years, and it never happens.
  • “Soft law” becomes the dominate governance force for tech: Again, it already has. Soft law refers to informal, collaborative, and constantly evolving governance mechanisms that differ from hard law in that they lack the same degree of enforceability. Soft law can include things like multi-stakeholder processes, industry best practices and standards, agency workshops and guidance documents, and educational efforts. But that just scratches the surface of soft law mechanisms. For better or worse, soft law is becoming the dominant modus operandi for most modern technological governance. We can expect that trend to accelerate to fill the governance gap left by Congressional inaction. For example, we don’t have any formal “rules of the road” for driverless cars, but we do now have four iterations of Department of Transportation guidance on driverless cars. Version 4.0of the DoT guidance for automated vehicles was just released this month. Expect the “soft law-ization” of technological governance to expand considerably in coming years because it is really the only way for agencies to cope with the pacing problem and those metaphysical issues identified earlier. Because soft law is not boxed in by rigid preconceptions of what a particular technology or technological process is or entails, it is often better able to address new marketplace realities. Soft law can adapt as technologies do. With Congress out of the picture, it will have to.
  • The congressional tech policy death spiral accelerates. Some may think (or at least hope) that the situation described here can’t get any worse. To the contrary, it can get radically worse. With our politics increasingly infected with bitter partisanship and rancor, what are the chances that lawmakers can work together to craft comprehensive tech policy measures? I’d say the odds are approaching zero. The Cable Act, the Telecom Act (and Sec. 230), and the Internet Tax Freedom Act all enjoyed broad, bipartisan support when they passed in the 1990s. People reached across the aisle to get things done. It didn’t always work, and sometimes it resulted in misguided policies (like the Communications Decency Act’s provisions trying to censor internet “indecency”). But bipartisan lawmaking scenarios like those seem almost unthinkable now. To the extent many lawmakers even show up at tech-oriented congressional hearings anymore, it is mostly to score points in front of the cameras for Team Red or Team Blue back home. Serious legislative oversight and policymaking is dead; it’s mostly just show-trials and media circuses at this point.

Should I Care about Congress Anymore?

If you believe this miserable thesis is correct but continue to focus on the Legislative Branch for a living, you may be asking yourself: Am I wasting all my time here? Not necessarily. Congress is still actively interested in tech policy matters. For those who hope to limit that damage Congress might do by hastily passing ham-handed, crisis-driven policy measures, your efforts in the trenches will continue to be important in curbing the worst instincts of some lawmakers. In many instances, preserving a perpetual stalemate may go down as a tremendous victory.

For example, as the debate over Section 230 intensifies—with politicians of all stripes looking to gut the most important of all Internet freedom policies—it is vital that smart people work with lawmakers and their staff to beat back misguided and destructive measures. Hopefully this becomes another instance of legislative gridlock winning out! And I think it will.

More realistically, your role will not be to stop Congress from doing insanely destructive things, it will be to just stop them from saying those things. In fact, that seems to be what a lot of people who work with Congress already do today. When I chat with various inside-the-Beltway policy advocates and industry reps today, they usually acknowledge that the prospects for actual legislation on any given issue are quite slim. They will, of course, continue to try to work with lawmakers, their committees, and their staff to either advance or stop legislative measures. Yet, they all seem to accept the utter futility of it all.

Why do they persist? Most obviously, they want to at least preserve the legislative stalemate and not cede the ground to their enemies who might succeed in getting lawmakers to do something if only one side was communicating with Congress.

But the other thing these policy advocates are hoping to achieve is better messaging. Regulatory advocates want lawmakers to use the power of the bully pulpit to put pressure on various people or groups to change behavior, even in the absence of any legislative action. By contrast, many in industry want to make sure that their technologies are understood and not endlessly demonized. Bad press isn’t good for business, even if all the congressional threats never result in final legislation. Also, those defending innovation more generally will want to make sure that even if lawmakers aren’t making any actual laws, they still better understand and appreciate the importance of new technological capabilities for improving human welfare.

Those are all good reasons not to give up your legislative advocacy. For some of us, however, the personal cost-benefit analysis just doesn’t add up. Our focus has shifted to where the real action is at: federal administrative agencies, statehouses and state administrative agencies, the courts, and the growing world of multi-stakeholder governance and other soft law efforts. Congress has checked out, but technological governance lives on in many other forms and venues.

]]> https://techliberation.com/2020/02/04/congress-as-a-non-actor-in-tech-policy/feed/ 1 76658 The Case for Sanctuary Cities in Many Different Contexts https://techliberation.com/2020/01/02/the-case-for-sanctuary-cities-in-many-different-contexts/ https://techliberation.com/2020/01/02/the-case-for-sanctuary-cities-in-many-different-contexts/#respond Thu, 02 Jan 2020 22:09:42 +0000 https://techliberation.com/?p=76644

[Cross-posted to Medium.]

The spread of “sanctuary cities”—local governments that resist federal laws or regulations in some fashion, and typically for strongly-held moral reasons—is one of the most interesting and controversial governance developments of recent decades. Unfortunately, the concept receives only a selective defense from people when it fits their narrow political objectives, such as sanctuary movements for immigration and gun rights.

But there is broader case to be made for sanctuaries in many different contexts as a way to encourage experiments in alternative governance models and just let people live lives of their choosing. The concept faces many challenges in practice, however, and I remain skeptical that sanctuary cities will ever scale up and become a widespread governance phenomenon. There’s just too much for federal officials to lose and they likely will crush any particular sanctuary movement that gains serious steam.

Sanctuary Cities as Political Civil Disobedience

First, let’s think about what local officials are really doing when they declare themselves a sanctuary. (Because they can be formed by city, county, or state governments, I will just use “sanctuaries” as a shorthand throughout this essay.)

Academics use the term “rule departure” when referencing “deliberate failures, often for conscientious reasons, to discharge the duties of one’s office.” [Joel Feinberg, “Civil Disobedience in the Modern World,” in Humanities in Society, Vol. 2, No. 1, 1979, p 37.] In this sense, sanctuary cities could be viewed as a type of collective civil disobedience by public officials because these governance arrangements are typically defended on moral grounds and represent an active form of resistance to policies imposed by higher-ups.

Rule departure and political civil disobedience can be carried out by individual government officials or entire governing bodies. Back in the 1970s, for example, some judges refused to convict Vietnam-era “draft dodgers,” even though laws made it clear that they were supposed to be punished. And, although it is rare, juries have sometimes nullified laws that they find unconscionable.

When a legislature engages in rule departure, it is often in opposition to federal policies that local officials feel is unfair or unethical. They may even declare themselves in a sort of open rebellion against a very specific directive and steadfastly refuse to acknowledge the legitimacy of the policies being imposed from above. This is how modern sanctuaries developed. In my forthcoming book, Evasive Entrepreneurs & the Future of Governance, I discuss a couple of prominent recent examples.

When state lawmakers refuse to enforce federal marijuana restrictions because officials in those states favor decriminalization that represents rule departure between levels of government. Similarly, in May 2018, Vermont became the first state to legalize the importation prescription drugs from Canada in an attempt to gain access to lower-priced drugs for its citizens. That policy departed from federal law, which tightly controls the importation of drugs into the US.

Rule departures by city and county governments can be even more daring and far-reaching in effect.  After the Trump Administration took office and announced more restrictive immigration policies, many mayors and local officials promptly announced that they would become sanctuary cities and not follow federal immigration reporting requirements. The number of immigration-related sanctuary cities, counties, and even entire states has grown steadily since then. [The Center for Immigration Studies keeps a running list.]

Even more controversial is the rise of the “Second Amendment sanctuary” movement that resists state or federal firearm restrictions. Virginia cities and counties have been particularly aggressive in declaring themselves gun sanctuaries, but the movement is nationwide and growing fast. Interestingly, the leaders of this movement include many local officials, including some sheriffs, who actively oppose immigration-related sanctuary cities. Conversely, most of the local officials who favor immigration sanctuaries oppose Second Amendment sanctuaries. The only thing unifying officials on either side is a commitment to engage in rule departure for moral reasons.

But here’s the question I want to explore: Why not give both these sanctuary movements (and many others) a chance, regardless of what motivates them?

A Sanctuary for Me, But Not for Thee

Of course, there are few issues that divide the Left and the Right more bitterly these days than immigration and guns, and neither side will accept the moral case for rule departure when the other side is promoting it. Stated differently, while each side will make strong moral claims in favor of rule departure for their pet issue, their defense will not extend to the underlying act of rule departure or political civil disobedience more generally.

And that’s a shame. There is a good case to be made not just for greater localized decision-making and policy experimentation, but also for letting people lives of their own choosing in different governance arrangements.

The idea that we could ever have of one single utopia has always been a silly notion for a simple reason: People are just very different. What would make more sense, the late philosopher Robert Nozick once argued, is a governance arrangement that was truly fit for a pluralistic society. In his 1974 book, Anarchy, State, and Utopia, Nozick made the case for a regime in which citizens could potentially take advantage of many different utopias to better fit their preferred governance arrangements. “Utopia is a framework for utopias, a place where people are at liberty to join together voluntarily to pursue and attempt to realize their own vision of the good life in the ideal community but where no one can impose his own utopian vision upon others,” he said.

I’ve always found this “utopia of utopias” vision enormously compelling in theory but somewhat unrealistic in practice. It is appealing precisely because it rejects any effort to define utopia in a monolithic fashion. A true utopia would reject one-size-fits-all governance schemes and instead promote a framework for optimizing an individual’s ability to choose their preferred governance arrangement (hopefully among many options). “There is no reason to think that there is one community which will serve as ideal for all people,” Nozick noted, “and much reason to think that there is not.”

Indeed, it is likely that my preferred utopia is not yours. What’s my particular sanctuary look like? Adam Smith argued in 1755 that all that was needed for lifting civilization up “from the lowest barbarism” to “the highest degree of opulence” is “peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things.” More recently, Emily Chamlee-Wright, president of the Institute for Humane Studies, elaborated on this vision when she identified the core elements of a good society as, “a pluralistic and tolerant society in which intellectual and economic progress are the norm, and where individuals and communities flourish in a context of openness, peaceful and voluntary cooperation, and mutual respect.”

That pretty much sums up the utopia or sanctuary I’d like to live in. More concretely, my perfect sanctuary would combine elements of all the real-world sanctuary cities described above. It would give immigrants safe haven and allow everyone to carry firearms openly while also ignoring federal marijuana restrictions and drug importation rules! Moreover, drones would zip through the air delivering goods (regardless of what the FAA said), driverless cars would occupy the roads (regardless of what the DOT said), and citizens with serious illnesses would be more free to try alternative treatments (regardless of what the FDA said).

Of course, I also appreciate that many other people would prefer to live in sanctuaries where government plays are a far more active role. Might it be possible for us all to agree to live peacefully in our separate utopias, yet also remain part of some loosely unified federation? What would help make that model work, Nozick argued, was some sort of minimal state above all the utopias that ensured peace and free movement of people, goods, and information among them. So, you pick your utopia and I’ll pick mine, but let us agree to be free to trade with each other and move to other utopias if we are not satisfied.

That remains a beautiful governance vision to me, and, if nothing else, I hope others would appreciate the potential benefits associated with experimentation in government administration. In his 1970 book, Exit, Voice and Loyalty, the economist and political theorist Albert Hirschman discussed the interplay between “voice” and “exit”—for businesses, organizations, and even governments—and argued that, “exit has an essential role to play in restoring quality performance of government, just as in any organization.”

Sanctuaries represent a form of localized collective voice (opposing specific policy choices made by higher-ups) combined with the implicit threat of some sort of exit. “The chances for voice to function effectively as a recuperation mechanism,” Hirschman argued, “are appreciably strengthened if voice is backed up by the threat of exit, whether it is made openly or whether the possibility of exit is merely well understood to be an element in the situation by all concerned.” I doubt any cities, counties, or states are going to try to completely exit the American republic over the issues that led them to form sanctuaries. Nonetheless, sanctuaries— and even the very threat to form one—can still act as a sort of relief valve that allow citizens to push back against over-zealous edicts from above, while also potentially giving citizens the chance to “shop around” for better jurisdictional governance arrangements.

Haven’t We Already Tried This?

Practically speaking, however, a utopia of utopias must have some limits or else it breaks down under the weight of endless splintering, border disputes, and even the threat of violence. As the Wall Street Journal editorial board argued in a recent essay about sanctuary cities, an atomistic patchwork of breakaway sub-governments could lead to discord and “lawlessness.” And that was in an editorial about Second Amendment sanctuary cities, which the Journal is more ideologically predisposed to favor!

But this is not a completely unfounded concern. Think about American history. Many people forget that America’s current constitution is not our nation’s first. The Articles of Confederation were formulated by the 13 original colonies as they fought for their independence from Great Britain. The Articles were a dismal failure, however, and did not even last a decade. America’s Founders abandoned the Articles because the sole governing agent—Congress—lacked any real power. It couldn’t do much to sustain itself or an army to defend the new nation, which the Articles treated as more of just a collection of territories in “a firm league of friendship with each other.”

More importantly, because states retained all the real power under the Articles, trade skirmishes broke out among them and Congress was virtually powerless to do anything about it. The so-called “league of friendship” threatened to degenerate into endless commercial and political conflicts among loosely joined state sovereigns. The situation grew intolerable and by 1789 the Articles were discarded in favor of a new Constitution that opted for a more tightly integrated union, which would guarantee some basic rights and also help ensure that commerce and people could move freely across state borders.

The durability of this framework remains a remarkable achievement and, in some ways, could be viewed as a more workable “utopia of utopias” than what the Articles of Confederation proposed. Yet, while plenty of people still play up the benefits of devolution and local control, American federalism has been increasingly neutered over the past century. The federal government came to take on more and more authority over even the most trivial parochial matters. States and localities must now beg for freedoms from federal restrictions, but they usually cave fairly quickly and fall in line with federal demands at the mere threat of federal lawmakers just denying them a few grants. Political kickbacks, it turns out, is a remarkably simple way to get subordinate bodies to fall in line and comply with top-down edicts.

Does a Broader Sanctuary Movement Have Any Hope?

Which is why it is remarkable that the sanctuary city movement is still alive at all. It might be because, as George Mason University law professor Ilya Somin has suggested, many Democrats fell back in love with federalism following the election of Donald Trump. Devolution and local control suddenly sounds a lot more appealing to many Dems when it becomes a way to resist federal restrictions on immigration and marijuana decontrol, among other issues.

It could still be the case that these sanctuary movements will be brought to heel in coming years. Current sanctuary efforts provide a good litmus test for just how much real-world policy experimentation federal officials are willing to tolerate. To the extent any particular sanctuary effort gained meaningful momentum and posed a serious challenge to federal power in some fashion, I believe it would likely be crushed eventually. While plenty of politicians provide lip service to the idea “reinventing government” and enhancing local decision-making, the reality is that if we ever had anything approximating actual entrepreneurial government administration in this country, the feds would likely move quickly to snuff it out.

If the Supreme Court took action to limit semi-rebellious efforts like these, it would also discourage future sanctuary city experiments. But it is more likely that, as suggested above, federal officials would just double-down on the “power of the purse” to intimidate state officials into complying—and then presumably force governors and state legislatures to do the dirty work of cracking down on cities and counties that won’t comply with federal demands. President Trump has already tapped this playbook to threaten immigration sanctuaries with Executive Order 13768 of January 25, 2017, which sought to “[e]nsure that jurisdictions that fail to comply with applicable Federal law do not receive Federal funds.” Lower courts have pushed back, however, and a bit of a stalemate has ensued.

If things got really ugly, one could imagine President Trump or a future Democratic president calling in the National Guard to deal with sanctuaries that really pushed the limits on immigration, guns, or anything else disfavored by the powers that be. God help us if we get to that point. Hopefully cooler heads will prevail.

A Dream Deferred

In the meantime, I will persist in making the case for sanctuaries and other forms of experimental government—including charter cities and special economic zones—more generally. I remain a bit of a dreamer and will continue to defend alternative governance visions based on the benefits associated with political decentralization, policy experimentation, and citizen choice. I continue to long for Nozick’s noble vision of, “a society in which utopian experimentation can be tried, different styles of life can be lived, and alternative visions of the good can be individually or jointly pursued.”

Alas, I am also a political realist and I recognize it is highly quixotic to believe that this governance framework will carry the day in the short-term. Selective morality will prevail instead. That is, most people will loudly proclaim the moral imperative of sanctuaries only when it fits their ideological priors, while equally vociferously decrying creative governance alternatives when they do not align with their political values. In the end, both sides will only succeed in crushing the broader dream of more decentralized communities of common interest, simply because a lot pf people just cannot tolerate giving others a little zone of freedom in this world.

And so a “utopia of utopias” will likely remain a dream deferred.

]]> https://techliberation.com/2020/01/02/the-case-for-sanctuary-cities-in-many-different-contexts/feed/ 0 76644 Occupational Licensing Reform is Not a Partisan Issue https://techliberation.com/2019/09/26/occupational-licensing-reform-is-not-a-partisan-issue/ https://techliberation.com/2019/09/26/occupational-licensing-reform-is-not-a-partisan-issue/#comments Thu, 26 Sep 2019 19:01:59 +0000 https://techliberation.com/?p=76599

by Adam Thierer and Trace Mitchell

This essay originally appeared on The Washington Examiner on September 12, 2019.

You won’t find President Trump agreeing with Hillary Clinton and Barack Obama on many issues, but the need for occupational licensing reform is one major exception. They, along with many other politicians and academics both Left and Right, have identified how state and local “licenses to work” restrict workers’ opportunities and mobility while driving up prices for consumers.

Of course, not everybody has to agree with high-profile Democrats and Republicans, but let’s at least welcome the chance to discuss something important without defaulting to our partisan bunkers.

This past week, for example, ThinkProgress published an article titled “Koch Brothers’ anti-government group promotes allowing unlicensed, untrained cosmetologists.” Centered around an Americans for Prosperity video highlighting the ways in which occupational licensing reform could lower some of the barriers that prevent people from bettering their lives, the article painted a picture of an ideologically driven, right-wing movement.

In reality, it’s anything but that.

Occupational licensing has expanded significantly in the past several decades. It began as a relatively uncommon regulatory approach aimed at ensuring public safety and reserved for only those occupations that pose the greatest risk of harm or abuse. Now, it’s a fairly standard means of regulating all kinds of industries.

In the 1950s, around 5% of workers needed a license to perform their jobs. Today, it’s over 30%. This drastic change has raised concerns from people at virtually every point along the political spectrum.

In fact, one of the most crucial reports on occupational licensing was created by the Obama administration. It found that while occupational licensing can lead to higher quality services for consumers, “by making it harder to enter a profession, licensing can also reduce employment opportunities and lower wages for excluded workers, and increase costs for consumers.”

Last year, the independent Federal Trade Commission followed suit, releasing a report highlighting the negative effects of occupational licensing and proposing ways to combat them by making worker licenses more portable across state lines.

Hillary Clinton has also expressed support for targeted occupational licensing reform. In 2016, she released a set of policy proposals aimed at helping small businesses which included a goal to “streamline unnecessary licensing to make it less costly to start a small business.”

Fellow Democrat Joe Biden has talked about overly burdensome occupational licensing. In his words, “They’re making it harder and harder in a whole range of professions, all to keep competition down.”

In addition, groups across the ideological spectrum, including the Brookings Institution and the American Civil Liberties Union, have expressed concern over the costs of burdensome work requirements.

President Trump, a critic of the Koch brothers, has also shown support for occupational licensing reform. He recently praised Arizona Gov. Doug Ducey for his state’s new approach, saying, “We hope that other states are going to follow Arizona’s lead.”

Why are all of these people and organizations, with fairly distinct perspectives and goals, concerned about the same issue? Because occupational licensing is really costly, and those costs often fall upon the most vulnerable and disadvantaged Americans.

The report issued by the Obama administration found that occupational licensing serves as a hidden tax on consumer goods and services, increasing prices by anywhere between 3 and 16%. The report went on to assert that these costs fall disproportionately on certain segments of the population: immigrants, military spouses, and reformed convicts. Other research supports these findings.

Economist Morris Kleiner found that “restrictions from occupational licensing can result in up to 2.85 million fewer jobs nationwide, with an annual cost to consumers of $203 billion.” Once again, these costs are not evenly distributed: Our colleague Matt Mitchell looked at the effect of occupational licensing on the poor and disadvantaged, finding that it can “disparately affect ethnic minorities and other specific populations.” Forcing barbers to obtain a license “reduces the probability of a black individual working as a barber by 17.3%.”

Propelled by the weight of the evidence, policymakers are starting to work together. It isn’t ideological; it’s just good policy. Isn’t that what we want?

]]> https://techliberation.com/2019/09/26/occupational-licensing-reform-is-not-a-partisan-issue/feed/ 3 76599 Addressing the Growing Problem of Regulatory Accumulation https://techliberation.com/2019/05/28/addressing-the-growing-problem-of-regulatory-accumulation/ https://techliberation.com/2019/05/28/addressing-the-growing-problem-of-regulatory-accumulation/#comments Tue, 28 May 2019 20:06:23 +0000 https://techliberation.com/?p=76492

[This essay originally appeared on the AIER blog on May 23, 2019 under the title, “Spring Cleaning for the Regulatory State.”]

Spring is in full blossom, and many of us are in the midst of our annual house-cleaning ritual. A regular deep clean makes good sense because it makes our living spaces more orderly and gets rid of the gunk and grime that has amassed over the past year.

Unfortunately, governments almost never engage in their own spring-cleaning exercise. Statutes and regulations continue to accumulate, layer by layer, until they suffocate not only economic opportunity, but also the effective administration of government itself. Luckily, some states have realized this and have taken steps to help address this problem.

Mountains of Regulations

First, here are some hard facts about regulatory accumulation:

  • Red tape grows: Since the first edition of his annual publication Ten Thousand Commandments in 1993, Wayne Crews has documented how federal agencies have issued 101,380 rules. Other reports find agency staffing levels jumped from 57,109 to 277,163 employees from 1960 to 2017, while agency budgets swelled in real terms from $3 billion in 1960 to $58 billion in 2017 (2009$).
  • Nothing ever gets cleaned up: A Deloitte survey of U.S. Code reveals that 68 percent of federal regulations have never been updated and that 17 percent have only been updated once. If a company never updated its business model, it would fail eventually. But governments get away with doing the same thing without any fear of failure. “If it were a country, U.S. regulation would be the world’s eighth-largest economy, ranking behind India and ahead of Italy,” Crews notes.
  • The burden of regulatory accumulation is getting worse: “The estimate for regulatory compliance and economic effects of federal intervention is $1.9 trillion annually,” Crews finds, which is equal to 10 percent of the U.S. gross domestic product for 2017. When federal spending is added to regulatory costs are added to federal spending, Crews finds, the burden equals $4.173 trillion, or 30 percent of the entire economy. Mercatus Center research has found that “economic growth in the United States has, on average, been slowed by 0.8 percent per year since 1980 owing to the cumulative effects of regulation.” This means that “the US economy would have been about 25 percent larger than it actually was as of 2012” if regulation had been held to roughly the same aggregate level it stood at in 1980.

In sum, the evidence shows that the red tape is growing without constraint, hindering entrepreneurship and innovation, deterring new investment, raising costs to consumers, limiting worker opportunities/wages, and undermining economic growth.

Regulations accumulate in this fashion because the administrative state is on autopilot. Legislatures pass broad statutes delegating ambiguous authority to agencies. Bureaucrats are then free to roll the regulatory snowball down the hill until it has become so big that its momentum cannot be stopped.

The Death of Common Sense

Policy makers enact new rules with the best of intentions, of course, but we should not assume that the untrammeled growth of the regulatory state produces positive results. There is no free lunch, after all. Every regulation is a restriction on opportunities for experimentation with new and potentially better ways of doing things. Sometimes such restrictions make sense because regulations can pass a reasonable cost-benefit test. It would be foolish to assume that all regulations on the books do.

Spring cleaning for the regulatory state, therefore, should be viewed as an exercise in “good governance.” The goal is not to get rid of all regulations. The goal is to make sure that rules are reasonable and cost-effective so that the public can actually understand the law and get the highest value out of their government institutions.

Philip K. Howard, founder and chair of the nonprofit coalition Common Good and the author of The Death of Common Sense, has written extensively about how regulatory accumulation has become a chronic problem. “Too much law,” he argues, “can have similar effects as too little law.” “People slow down, they become defensive, they don’t initiate projects because they are surrounded by legal risks and bureaucratic hurdles,” Howard notes. “They tiptoe through the day looking over their shoulders rather than driving forward on the power of their instincts. Instead of trial and error, they focus on avoiding error.”

In such an environment, risk-taking and entrepreneurialism are more challenging and economic dynamism suffers. But regulatory accumulation also hurts the quality of government institutions and policies, which become fundamentally incomprehensible or illogical. “Society can’t function when stuck in a heap of accumulated mandates of past generations,” Howard concludes. This is why an occasional regulatory house cleaning is essential to unleash economic opportunity and improve the functioning of our democratic institutions.

Regulatory House Cleaning Begins

Reforms to address this problem are finally happening. In a series of new essays, my colleague James Broughel has documented how several states — including Idaho, Ohio, Virginia, and New Jersey — are undertaking serious efforts to get regulatory accumulation under control. They are utilizing a variety of mechanisms, including “regulatory reduction pilot programs” and “red tape review commissions.” Recently, Idaho actually initiated a sunset of its entire regulatory code and will now try to figure out how to clean up its 8,200 pages of regulations containing 736 chapters of state rules.

Meanwhile, other states are undertaking serious reform in one of the worst forms of regulatory accumulation: occupational licenses. The Federal Trade Commission notes that roughly 30 percent of American jobs require a license today, up from less than 5 percent in the 1950s. Research by economist Morris Kleiner and others finds that “restrictions from occupational licensing can result in up to 2.85 million fewer jobs nationwide, with an annual cost to consumers of $203 billion.” And many of the rules do not even serve their intended purpose. A major 2015 Obama administration report on the costs of occupational licensing concluded that “most research does not find that licensing improves quality or public health and safety.”

Arizona, West Virginia, and Nebraska are among the leaders in reforming occupational-licensing regimes using a variety of approaches. In some cases, the reforms sunset licensing rules for specific professions altogether. Other proposals grant workers reciprocity to use a license they obtained in another state. Finally, some states have proposed letting most professions operate without any license at all but then requiringall, but then require them to make it clear to consumers that they are unlicensed.

The Need for a Fresh Look

Sunsets are not silver-bullet solutions, and the recent experience with sunsetting and “de-licensing” requirements at the state level has been mixed because many legislatures ignore or circumvent requirements. Nonetheless, sunsets can still help prompt much-needed discussions about which rules make sense and which ones no longer do.

Sunsets can be forward-looking, too. I have proposed that when policy makers craft new laws, especially for fast-paced tech sectors, they should incorporate a clause that what we might think of as “the Sunsetting Imperative.” It would demand that any existing or newly imposed technology regulation should include a provision sunsetting the law or regulation within two years. Reforms like these are also sometimes referred to as “temporary legislation” or “fresh look” requirements. Policy makers can always reenact rules that are still relevant and needed.

By forcing a periodic spring cleaning, sunsets and fresh-look requirements can help stem the tide of regulatory accumulation and ensure that only those policies that serve a pressing need remain on the books. There is no good reason for governments not to clean up their messes on occasion, just like the rest of us have to.

]]> https://techliberation.com/2019/05/28/addressing-the-growing-problem-of-regulatory-accumulation/feed/ 1 76492 Doomed to fail: “net neutrality” state laws https://techliberation.com/2018/02/20/doomed-to-fail-net-neutrality-state-laws/ https://techliberation.com/2018/02/20/doomed-to-fail-net-neutrality-state-laws/#comments Tue, 20 Feb 2018 14:31:38 +0000 https://techliberation.com/?p=76235

Internet regulation advocates lost their fight at the FCC, which voted in December 2017 to rescind the 2015 Open Internet Order. Regulation advocates have now taken their “net neutrality” regulations to the states.

Some state officials–via procurement contracts, executive order, or legislation–are attempting to monitor and regulate traffic management techniques and Internet service provider business models in the name of net neutrality. No one, apparently, told these officials that government-mandated net neutrality principles are dead in the US.

As the litigation over the 2015 rules showed, o ur national laissez faire policy towards the Internet and our First Amendment guts any attempt to enforce net neutrality.  Recall that the 1996 amendments to the Communications Act announce a clear national policy about the Internet:

It is the policy of the United States . . . to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or State regulation.

In fact, that 1996 law was passed in order to encourage ISPs to filter objectionable content.

Further, regulators cannot prevent ISPs from exercising their First Amendment rights to curate the Internet. As Prof. Stuart Minor Benjamin wrote for the Harvard Law Review Forum in 2014,

If we really want to prevent Internet access providers from being speakers, we are going to have to radically reshape the Supreme Court’s First Amendment jurisprudence and understandings.

No radical reshaping of the First Amendment has occurred. For all these reasons, the Obama FCC attorney was forced to concede that

If they [that is, ISPs] filter the Internet . . . the [2015 Open Internet] rules don’t apply to them. 

Even Title II supporters EFF and the ACLU acknowledge in their FCC joint filing that ISPs are speakers who can filter content and escape Title II regulation.

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At the end of the day, net neutrality, having lost its original definition, is simply a re-branding of Internet regulation.

State Internet regulations, therefore, are at odds with federal law and policy.  Let’s set aside federal preemption for the moment (Seth Cooper explained why preemption likely kills most of these state Internet regulations). There are other arguments for why states can’t impose baby “net neutrality” bills. 

Net neutrality bills likely violate the law

The state “net neutrality” bills and executive orders represent common carriage regulation. State officials make no attempt to hide this since they largely copy-and-paste the nondiscrimination obligations directly from the 2015 Open Internet Order. Here’s the problem for states: regulators can’t impose common carrier obligations on non-common carriers.

When nondiscrimination principles deprive operators of control of content, that amounts to common carriage. This was established in a 1979 Supreme Court case, Midwest Video II. In that case, the Supreme Court struck down common carriage obligations on cable operators, who are non-common carriers. The Court said ,

With its access rules, however, the Commission has transferred control of the content of access cable channels from cable operators to members of the public who wish to communicate by the cable medium. …The access rules plainly impose common-carrier obligations on cable operators.

The FCC, the Court said, had no authority to transform them into common carriers.

In fact, this is why the 2010 Open Internet Order was struck down in Verizon v. FCC. There, relying on Midwest Video II, the DC Circuit held that the net neutrality principles couldn’t be enforced on non-common carriers. As the DC Circuit said of the FCC’s common carrier obligations for ISPs: “Midwest Video II is indistinguishable.”

State “net neutrality” regulations will likely fail for the same reason.  The 2015 rules were upheld because “broadband Internet access service” was classified as a Title II common carrier service. “Broadband Internet access service” providers will no longer be common carriers once the 2017 Restoring Internet Freedom Order takes effect. By imposing common carrier rules on non-common carriers, states run afoul of Midwest Video II and Verizon.

Net neutrality bills balkanize the Internet

State-based Internet regulation is also bad policy, and many who support net neutrality principles–like Google–oppose this legal regime. Internet regulation advocates, by encouraging regulation state-by-state and city-by-city, have finally dispensed with the fiction that “net neutrality” is about the “open Internet.” In their eagerness to have someone, anyone regulate the Internet, these advocates are willing to balkanize the US Internet into dozens, or even hundreds, of splinternets, each with a different local or state regulator.

The Montana governor, for instance, encouraged every state and city to regulate the Internet, even providing a customizable template:

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Further, net neutrality rules are not easy to apply and interpret, particularly the “catch-all” Internet conduct standard. Net neutrality supporters take vastly different stances on identical ISP conduct.

One illustration: the common practice of zero rating by mobile providers. One prominent net neutrality supporter (then-FCC chairman Tom Wheeler) said T-Mobile’s zero rating was “highly innovative and highly competitive.” Another (Prof. Susan Crawford) said it is “anti-competitive,” “dangerous,” and “malignant” and should be ended immediately. There were many advocates in both camps and everywhere in between.

Given the wide divergence of views on a single issue, dozens of “net neutrality” laws would create innumerable contradictions about what is allowed and disallowed online. The fragmented Internet and legal uncertainty would be particularly damaging to small app companies and competitive ISPs, who don’t have hallways of lawyers to ensure compliance, and who use or plan to use traffic priority techniques for gaming, disability services, VoIP, and driverless cars.

For the global, stateless Internet, having state and city CIOs create their own custom Internet regulation interpretations would destroy what made the Internet transformative–a permissionless, global network free of legacy regulations. State legislatures and governors, by ramming through “net neutrality,” are committing to waste countless taxpayer dollars in battling the federal government and telecom companies in (probably unwinnable) litigation. Their “best-case” scenario: a few states win in court and splinter the Internet.

Hopefully cooler heads will prevail and put state energies and treasure into doing something constructive about broadband, like urging reform of the $8.8 billion universal service fund or improving permitting processes and competition.

]]> https://techliberation.com/2018/02/20/doomed-to-fail-net-neutrality-state-laws/feed/ 1 76235 Film Industry Tax Incentive Race to the Bottom Continues https://techliberation.com/2014/01/30/film-industry-tax-incentive-race-to-the-bottom-continues/ https://techliberation.com/2014/01/30/film-industry-tax-incentive-race-to-the-bottom-continues/#respond Thu, 30 Jan 2014 18:30:16 +0000 http://techliberation.com/?p=74212

The war among the states to see who can lavish the film industry with more generous tax credits in their attempt to become “the next Hollywood” continues, and it is quickly descending into a classic race to the bottom. A front-page article in today’s Wall Street Journal notes that the tax incentive bidding war has gotten so intense that it is hollowing out the old Hollywood labor pool and sending it on a road trip across the America in search of tax-induced job activity:

As film and TV production scatters around the country, more workers…  are packing up from California and moving to where the jobs are. Driving this exodus of lower-wage workers — stunt doubles, makeup artists, production assistants and others who keep movie sets humming — are successful efforts by a host of states to use tax incentives to poach production business from California. […]  Only two movies with production budgets higher than $100 million filmed in Los Angeles in 2013, according to Film L.A. Inc., the city’s movie office. In 1997, the year “Titanic” was released, every big-budget film but one filmed at least partially in the city. The number of feature-film production days in Los Angeles peaked in 1996 and fell by 50% through last year, according to Film L.A. Projects such as reality television and student films have picked up some of the slack. But overall entertainment-industry employment has slid. About 120,000 Californians worked in the industry in 2012, down from 136,000 in 2004, according to the U.S. Bureau of Labor Statistics. The labor migration has arisen in part because California hasn’t competed aggressively on the tax-break front, officials and executives say, while states like Georgia have made efforts to grab a sizable chunk of the industry. More than 40 states and 30 foreign countries are offering increasingly generous and creative tax incentives to lure entertainment producers.

On one hand, hooray for labor mobility! But seriously, this stinks because this labor shift is taking place in a wholly unnatural way, with a complex and growing web of tax inducements leading to massive distortions in this marketplace. While proponents will insist these programs are job creators for the communities that win, in reality, they are really just job reshufflers that net limited jobs at that. Meanwhile, the costs to their taxpayers grows as more and more state and local governments jump in this game. It’s classic “smokestack chasing” activity, except in this case the firms probably didn’t even create that many jobs while they were there and then you don’t even have a factory left when the firms leave town!

If things continue like this, it probably won’t be long before some “innovative” state or local government leader gets the idea of actually just paying some film producers cold hard cash to come set up shop in their area. Hey, at least that way the programs would be on-budget and nominally more accountable!

Anyway, I’ve documented the cost of this ruinous race to the bottom in my essay, “State Film Industry Incentives: A Growing Cronyism Fiasco,” which documents the economic evidence about just how inefficient these programs are in practice.  I later expanded that essay and included in my massive paper with Brent Skorup, “A History of Cronyism and Capture in the Information Technology Sector.” Warning: It makes for miserable reading if you care about fiscal accountability and good government. Maybe somebody will make a movie about this racket someday! (But don’t hold your breath.)

P.S. For more on the corrupting influence of cronyism on American capitalism, please visit this Mercatus Center page for a comprehensive set of studies on the issue. Also, check out this outstanding paper by my colleague Matt Mitchell (“The Pathology of Privilege: The Economic Consequences of Government Favoritism“) and this excellent recent book on cronyism by Randall G. Holcombe and Andrea Castillo. And here’s a little slide show I put together on the costs of cronyism.

]]> https://techliberation.com/2014/01/30/film-industry-tax-incentive-race-to-the-bottom-continues/feed/ 0 74212 Jack Schinasi on global privacy regulation https://techliberation.com/2014/01/21/schinasi/ https://techliberation.com/2014/01/21/schinasi/#respond Tue, 21 Jan 2014 15:01:15 +0000 http://techliberation.com/?p=74128

Jack Schinasi discusses his recent working paper, Practicing Privacy Online: Examining Data Protection Regulations Through Google’s Global Expansion published in the Columbia Journal of Transnational Law. Schinasi takes an in-depth look at how online privacy laws differ across the world’s biggest Internet markets — specifically the United States, the European Union and China. Schinasi discusses how we exchange data for services and whether users are aware they’re making this exchange. And, if not, should intermediaries like Google be mandated to make its data tracking more apparent? Or should we better educate Internet users about data sharing and privacy? Schinasi also covers whether privacy laws currently in place in the US and EU are effective, what types of privacy concerns necessitate regulation in these markets, and whether we’ll see China take online privacy more seriously in the future.

Download

Related Links

]]> https://techliberation.com/2014/01/21/schinasi/feed/ 0 74128 State Film Industry Incentives: A Growing Cronyism Fiasco https://techliberation.com/2012/12/05/state-film-industry-incentives-a-growing-cronyism-fiasco/ https://techliberation.com/2012/12/05/state-film-industry-incentives-a-growing-cronyism-fiasco/#comments Wed, 05 Dec 2012 15:14:35 +0000 http://techliberation.com/?p=43088

Someone should consider making a movie about wasteful state-based film industy subsidies. It has become quite a cronyist fiasco in a very short period of time.

Some background: State and local tax incentives for movie production have expanded rapidly over the past decade. These inducements include tax credits, sales tax exemptions, cash rebates, direct grants, and tax or fee reductions for lodging or locational shooting. In 2002, only five states offered such inducements for movie production. By the end of 2009, forty-five states had some sort of incentives in place to lure film producers.

In 2010, the film industry received an estimated $1.5 billion in financial commitments from these programs. Unsurprisingly, these incentives have proven very popular with movie studios. Of the nine motion pictures that were nominated for Best Picture at the Academy Awards in 2012, five had received taxpayer-funded rebates, tax credits, and subsidies by state governments. “The Help” received a Mississippi spending rebate of $3,547,780 and “The Tree of Life” received $434,253 from Texas. In February 2012, Best Picture-nominee “Moneyball” received as much as $5.8 million from the state of California. It had grossed over $75 million at the box office. More recently, the biopic “Lincoln” received roughly $3.5 million in tax incentives from the Virginia Film Office.

Many state and local governments offer these inducements in the hope of attracting new jobs and investment; other simply seek to bill themselves as “the new Hollywood.” As William Luther of the Tax Foundation notes, “From politicians’ point of view, bringing Hollywood to town is the best of all possible photo opportunities—not just a ribbon-cutting to announce new job creation but a ribbon-cutting with a movie or TV star.” But it seems as if the glamor and prestige associated with films and celebrities have trumped sound economics since there is no evidence these tax incentives help state or local economies.

“Based on fanciful estimates of economic activity and tax revenue, states are investing in movie production projects with small returns and taking unnecessary risks with taxpayer dollars,” noted a 2010 Tax Foundation study. “In return, they attract mostly temporary jobs that are often transplanted from other states.” Studies of specific state incentive programs confirm this finding, almost universally finding miniscule revenue gains for every dollar of film subsidies offered. The adjoining table, derived from a meta-survey of film incentives studies by the Center on Budget & Policy Priorities, illustrates how much revenue was lost per net job created by film tax credits as well as how little revenue each program generated for every dollar of state revenues awarded.

  State Net Revenue Foregone per Net Job Created by Film Tax Credit Revenue Gained from Feedback Effects per  Dollar of Film Subsidy Claimed($)
Massachusetts $88,000 $0.16
Connecticut $33,400 $0.07
Louisiana $16,100 $0.13
Louisiana $14,100 $0.18
Michigan $44,561 $0.11
New Mexico $13,400 $0.14
New Mexico ($400) $1.50
Pennsylvania $13,000 $0.24
New York ($2,000) $1.90
Arizona $23,676 $0.28

The only two studies that have revealed positive results for such film incentive programs were both conducted by Ernst and Young on behalf of the New York and New Mexico film offices. All others have shown consistent negative returns. (If you exclude those two Ernst and Young studies that were done for the film offices, the average revenue gained across those other programs is just 16 cents for every dollar of subsidy granted to the film industry. Stated differently, that’s an 84% net loss for these programs. Truly astonishing numbers.)

Recently, some states have begun abandoning or limiting film incentive programs or at least taking a hard look at their effectiveness. Iowa, for example, suspended its film program in 2009 after an investigation revealed a scandal involving much waste and abuse. Ten criminal cases were brought and seven people were eventually convicted. Michigan Governor Rick Snyder has also started reining in its film program as evidence has mounted that it has failed to create local jobs and has cost the state a great deal of tax revenue. Check out yesterday’s excellent New York Times article by Louise Story for all the gory details.

In sum, film tax credit cronyism puts taxpayers at risk without any corresponding benefits to them or the state.  Glamor-seeking and state pride seem to be the primary motivational factors driving state legislators to engage in such economically illogical behavior. It’s like “smokestack-chasing” for the Information Age, except in this case you don’t even have a factory left in town after your economic development efforts go bust. This cronyist activity benefits no one other than film studios. States should end their film incentive programs immediately.

Additional Reading:

]]> https://techliberation.com/2012/12/05/state-film-industry-incentives-a-growing-cronyism-fiasco/feed/ 2 43088 The Alternative to the Speier-Womack Internet Tax Proposal https://techliberation.com/2011/10/14/the-alternative-to-the-speier-womack-internet-tax-proposal/ https://techliberation.com/2011/10/14/the-alternative-to-the-speier-womack-internet-tax-proposal/#comments Fri, 14 Oct 2011 14:09:15 +0000 http://techliberation.com/?p=38680

Reps. Jackie Speier (D-Calif.) and Steve Womack (R-Ark.) have introduced “The Marketplace Equity Act,” which would open the floodgates to anything-goes State-based taxation of the Internet and interstate commerce. The bill essentially sacrifices constitutional fairness at the alter of “tax fairness.” Building on concerns raised by state and local officials as well as “bricks-and-mortar” retailers, Speier and Womack claim that, as “a matter of states’ rights” and “leveling the playing field,” Congress should bless state efforts to impose sales tax collection obligation on interstate (“remote”) companies.The measure would allow States to do so using one of three rate structures: (1) a single blended state/local rate; (2) a single maximum State rate; or (3) the actual local jurisdiction destination rate + the State rate (so long as the State “make(s) available adequate software to remote sellers that substantially eases the burden of collecting at multiple rates within the State.”)

This builds on a long-standing effort by some States to devise a multistate sales tax compact to collude and impose taxes on interstate transactions. In the Senate, Sen. Dick Durbin (D-IL) has floated legislation (“The Main Street Fairness Act”) that would bless such a state-based de facto national sales tax regime for the Internet.

There is a better way to achieve fairness without sacrificing tax competition or opening the doors to unjust, unconstitutional, and burdensome state-based taxation of interstate sales. In a new Mercatus Center essay,”The Internet, Sales Taxes, and Tax Competition,” Veronique de Rugy and I argue that:

Apart from getting chronic state overspending under control, a better solution to the states’ fiscal problems than a tax cartel that imposes burdensome tax collection obligations on outof-state vendors would be tax competition.  Congress should adopt an “origin-based” sourcing rule for any states seeking to impose sales tax collection obligations on interstate vendors. This rule would be in line with Constitutional protections for interstate commerce, allow for the continued growth of the digital economy, and ensure excessive, inefficient taxes do not burden companies and consumers.

Vero and I have detailed this alternative plan in much greater detail in this 2003 Cato white paper, “The Internet Tax Solution: Tax Competition, Not Tax Collusion.” As we explain in our new paper:

In this system, states would tax all sales inside their borders equally, regardless of the buyer’s residence or the ultimate location of consumption. Under that model, all sales would be “sourced” to the seller’s principal place of business and taxed accordingly. This is, after all, how sales taxes have traditionally worked. A Washington, DC, resident who buys a television in Virginia, for instance, is taxed at the origin of sale in Virginia regardless of whether he brings the television back into the District. Each day in America, there are millions of cross-border transactions that are taxed only at the origin of the sale; no questions are asked about where the buyer will consume the good. Policy makers should extend the same principle to crossborder sales involving mail order and the Internet. Under this approach, Internet shoppers would pay the sales tax of the state where the online retailer is based.

An origin-based sourcing rule has several advantages over the destination-based system States favor.

  1. It would eliminate constitutional concerns because only companies within a state or local government’s borders would be taxed.
  2. An origin-based system would do away with the need for prohibitively complex multistate collection arrangements because states would tax transactions at the source, not at the final point of consumption.
  3. An origin-based system also would protect buyers’ privacy rights, eliminating the need to collect any special or unique information about a buyer and to use third-party tax collectors to gather such information.
  4. It would also preserve local jurisdictional tax authority whereas a harmonization proposal would create a de facto national sales tax system that would exclude local governments.
  5. Finally, because it is more politically and constitutionally feasible, an origin tax may actually maximize the amount of tax collected for states by making compliance easier and incorporating currently untaxed activities.

In closing, it is important to address the misguided claim at the heart of the Speier-Womack bill that this is a “states’ rights” issue. Let’s be clear what real federalism is all about. Federalism is not about “states’ rights.” States have powers and responsibilities, and under the Constitution — at least the proper interpretation of it — they have wide-ranging flexibility to purse different governance approaches. But that power is not unlimited. America abandoned its first constitution, The Articles of Confedertion, after just 14 years in part because untrammeled state authority was discouraging interstate trade and commerce. In their wisdom, the authors or our present Constitution made sure to include Article 1, Sec. 8, Clause 3 — the so-called “Commerce Clause” — which created and protected what might best be thought of as the world’s first free trade zone – The United States of America. It remains one of the greatest achievements in constitutional and commercial history.

Thus, properly understood, federalism is about a healthy tension among competing units of government. Each has a different role and set of responsibilities, and this tension bolsters the checks and balances at the heart of our constitutional republic. [I outline all this in far more detail my 1999 book, The Delicate Balance: Federalism, Interstate Commerce and Economic Freedom in the Technological Age.]

In the context of Internet tax policy, this means that the tax power of the States can be legitimately constrained by the federal government to ensure that the interstate market is not unduly burdened with unjust levies. States certainly retain the power to impose whatever levies they wish on those actors who have a substantial physical presence in their geographic confines. That is, they can tax their own exports. Taxing imports from another State, however, is an entirely different matter, and one the necessarily requires some degree of federal oversight to ensure America’s free trade zone is preserved and protected.

An origin-based sourcing rule accomplishes that goal while also leaving States the discretion to impose taxes on their own exports if they so choose. The fact that this system would lead to heated tax competition among the States is a feature, not a bug.

]]> https://techliberation.com/2011/10/14/the-alternative-to-the-speier-womack-internet-tax-proposal/feed/ 7 38680 Guest Post: The Case against Taxing Cell Phones https://techliberation.com/2011/06/02/guest-post-the-case-against-taxing-cell-phones/ https://techliberation.com/2011/06/02/guest-post-the-case-against-taxing-cell-phones/#comments Thu, 02 Jun 2011 20:34:12 +0000 http://techliberation.com/?p=37116

[The following essay is a guest post from Dan Rothschild, Managing Director of the State and Local Policy Project at the Mercatus Center at George Mason University.]

As cell phone ownership has tripled in the United States over the last decade, policymakers have increasingly seen mobile devices as a cash cow. In some states, consumers now pay as much as a quarter of their cell phone bills in taxes. And while state revenues are beginning to tick back up from their low point during the recession, Medicaid costs are fast on their tails. So it’s likely that over the coming years, states will be looking to find taxes to hike or new taxes to create — all without calling them tax hikes, of course.

Policy makers may be tempted to hike taxes on cell phones, or to create (or “equalize”) taxes on untaxed (or “under taxed”) parts of wireless telephony, such as cell phone data plans or e-readers with cellular connections. As I argue in a recent issue of Mercatus on Policy, this is a bad idea for a number of reasons.

First, it’s bad economics. Having special taxes on cell phone violates the well-established principle of tax neutrality, which holds that taxes should treat all economic activities similarly. The purpose of taxes is to raise funds for necessary government services; when taxes treat different activities unequally, it distorts consumer behavior. Empirical evidence suggests that, at the margin, consumer spending on wireless service is elastic. This makes it a particularly poor choice for excise taxation.

There are two economic justifications for a tax that singles out a particular good or service for a higher tax: if it’s something that policymakers deem “sinful” (a so-called “sin tax”), or if it causes negative externalities that the tax corrects (a Pigouvian tax). In both of these cases, policymakers enact these taxes explicitly to discourage the use of the object of the tax; think cigarettes and alcohol. Neither of these rationales apply to cell phones, and (hopefully) no policymaker believes it’s a worthy policy to reduce consumer access to this technology. Nobody seriously argues that cell phones are sinful, nor that cell phones create net negative externalities.

Second, it runs counter to a number of other policy goals. On the national level, politicians are tripping over themselves to extoll the virtues of broadband internet access and its almost magical effects on everything from health outcomes to urban entrepreneurship. But taxing wireless service, which is frequently bundled with wireless broadband, runs counter to that goal (as would any attempts to “equalize” taxes between the voice and data sections of a bill by applying voice tariffs to data services). Similarly, the FCC’s universal service fund is meant to, inter alia, support telephone access in low-income and rural households. The most efficient way to increase take-up of telephony in these households is to lower the price rather than relying on notoriously inefficient subsidies.

Third, it’s a regressive tax. In all likelihood, cell phones are taxed at a higher rate because not so long ago they were seen as toys of the wealthy. This is obviously no longer the case. The marginal consumers today are largely lower-income, and high taxes keep them from adopting technologies.

On the federal level, the Wireless Tax Fairness Act would prohibit states and localities from “imposing a new discriminatory tax on cell phone services, providers, or property.” This is probably a step in the right direction, though it still leaves (from my reading) loopholes for states. For instance, states could argue that they are not imposing a new tax if they applied the same taxes on wireless voice products to wireless data products. This could allow them to easily slap monthly fees on Kindles, iPads, and other devices that use cellular networks. In many ways, this would be more pernicious than raising taxes on voice products.

The bottom line is that taxes on cell phones are inefficient, inequitable, and run counter to other public policies. They likely cost more in lost consumer welfare than they collect in revenues. There’s no reason for them, and states looking to improve their tax structure could do well by eliminating them altogether.

Read the whole thing here.

]]> https://techliberation.com/2011/06/02/guest-post-the-case-against-taxing-cell-phones/feed/ 1 37116 List of Recent of State Cyberbullying Measures https://techliberation.com/2009/09/14/list-recent-of-state-cyberbullying-measures/ https://techliberation.com/2009/09/14/list-recent-of-state-cyberbullying-measures/#comments Tue, 15 Sep 2009 01:19:26 +0000 http://techliberation.com/?p=21516

Cyberbullying constitutes one of the largest growth categories of recent cyberlaw legislative proposals, and many state legislatures have already enacted measures aimed at combating this problem using a variety of approaches.  Those attempting to monitor ongoing developments in this field might find it useful to examine this National Conference of State Legislatures (NCSL) compendium of recent state cyberbullying bills.

In June, Berin Szoka and I published a PFF white paper, “Cyberbullying Legislation: Why Education is Preferable to Regulation.”  That paper mostly address federal legislation and, in particular, we contrasted the approaches set forth in Rep. Linda Sánchez’s (D-CA) “Megan Meier Cyberbullying Prevention Act,” versus the “School and Family Education about the Internet (SAFE Internet) Act,” which was introduced in the Senate by Sen. Robert Menendez (D-NJ) and in the House by Rep. Debbie Wasserman Schultz (D-FL).  Whereas the Sánchez bill would create a new federal felony to address these problems, the SAFE Internet Act proposes an education-based approach to the issue.

Generally speaking, Berin and I favor the latter approach, to the extent federal legislators feel the need to act. But we argued that state experimentation on this front may be the better way to go at this time.  As the NCSL survey suggests, states are pursing a variety of strategies and will continue to do so.  In light of that, I’m not sure why any federal legislation is needed at this time.  If the feds are really eager to push something at the national level, perhaps a generic public awareness / PSA campaign would make the most sense while more tailored state-based experimentation continues.  This is rare example of where state-based experimentation with a cyberlaw issue actually makes a lot of sense.

]]> https://techliberation.com/2009/09/14/list-recent-of-state-cyberbullying-measures/feed/ 10 21516 Transcript of 7/27 PFF Event on Child Safety, Privacy, and Free Speech https://techliberation.com/2009/08/18/transcript-of-727-pff-event-on-child-safety-privacy-and-free-speech/ https://techliberation.com/2009/08/18/transcript-of-727-pff-event-on-child-safety-privacy-and-free-speech/#comments Tue, 18 Aug 2009 18:41:21 +0000 http://techliberation.com/?p=20461

On July 27th, The Progress & Freedom Foundation hosted a Capitol Hill panel discussion entitled “Online Child Safety, Privacy, and Free Speech: An Overview of Challenges in Congress & the States.” The event featured remarks from:

  • Parry Aftab, Executive Director, WiredSafety.org
  • Todd Haiken, Senior Manager of Policy, Common Sense Media
  • Jim Halpert, Partner, DLA Piper
  • Berin Szoka, Senior Fellow, The Progress & Freedom Foundation

We’ve just released the transcript of the event, which I have also pasted down below the fold in a Scribd document reader. Also, the audio for this event can be heard by clicking below:

Download mp3

Here is the full event description:

Online child safety, privacy, and free speech remain hotly debated issues at both the federal and state level. Bills introduced in Congress to address cyberbullying concerns propose either educational initiatives or a criminalization approach. Access to objectionable content also remains a concern and a new, government-mandated task force is looking into those issues. Meanwhile, state officials, including many state attorneys general, continue to explore age verification mandates for social networking sites and some have considered building on the federal Children’s Online Privacy Protection Act (COPPA) to expand “parental notification” mandates. The Federal Trade Commission (FTC) has recently announced an expedited review of COPPA to see if it is keeping up with new developments. The FTC is also exploring child safety in virtual worlds. New concerns about “sexting,” or the sending of sexual explicit images over mobile devices, has also raised new concerns led some lawmakers to ponder penalties.

How serious are these concerns? Is legislation or regulation needed to address them? What free speech issues are at stake? Should Congress take the lead or leave it to the States to experiment with different models? These and other issues were discussed by a panel of leading experts in the field of online safety and privacy policy.

Transcript PFF Online Child Safety Privacy Hill Event (7-27-2009) http://d.scribd.com/ScribdViewer.swf?document_id=18756666&access_key=key-1blb7az1ag406howibuk&page=1&version=1&viewMode=

]]> https://techliberation.com/2009/08/18/transcript-of-727-pff-event-on-child-safety-privacy-and-free-speech/feed/ 5 20461 Upcoming July 27th Event on Online Safety, Privacy & Free Speech https://techliberation.com/2009/07/13/upcoming-july-27th-event-on-online-safety-privacy-free-speech/ https://techliberation.com/2009/07/13/upcoming-july-27th-event-on-online-safety-privacy-free-speech/#comments Mon, 13 Jul 2009 15:31:13 +0000 http://techliberation.com/?p=19433

Just a heads up for those of you in the DC-area… On Monday, July 27th, PFF will be hosting a Hill event on “Online Child Safety, Privacy, and Free Speech: An Overview of Challenges in Congress & the States.” I will be moderating the discussion and we will be joined by Parry Aftab, Executive Director of WiredSafety.org, Jim Halpert a Partner with the law firm of DLA Piper, Todd Haiken, Senior Manager of Policy for Common Sense Media, and my colleague Berin Szoka also of PFF.

The event will focus on the intersection of online child safety, privacy, and free speech issues at both the federal and state level. Bills introduced in Congress to address cyberbullying concerns propose either educational initiatives or a criminalization approach. Access to objectionable content also remains a concern and a new, government-mandated task force is looking into those issues. Meanwhile, state officials, including many state attorneys general, continue to explore age verification mandates for social networking sites and some have considered building on the federal Children’s Online Privacy Protection Act (COPPA) to expand “parental notification” mandates. The Federal Trade Commission (FTC) has recently announced an expedited review of COPPA to see if it is keeping up with new developments. The FTC is also exploring child safety in virtual worlds. New concerns about “sexting,” or the sending of sexual explicit images over mobile devices, has also raised new concerns led some lawmakers to ponder penalties.

How serious are these concerns? Is legislation or regulation needed to address them? What free speech issues are at stake? Should Congress take the lead or leave it to the States to experiment with different models? These and other issues will be discussed by the panelists at our July 27th event.

The logistical details are below and you RSVP here.

“Online Child Safety, Privacy, and Free Speech: An Overview of Challenges in Congress & the States” July 27, 2009 12:00 p.m. to 1:30 p.m. Room SVC-208 Capitol Visitor Center 1st Street and East Capitol Street, NE (entrance across from Supreme Court)

]]> https://techliberation.com/2009/07/13/upcoming-july-27th-event-on-online-safety-privacy-free-speech/feed/ 5 19433 COPPA 2.0: The New Battle over Privacy, Age Verification, Online Safety & Free Speech https://techliberation.com/2009/05/24/coppa-20-the-new-battle-over-privacy-age-verification-online-safety-free-speech/ https://techliberation.com/2009/05/24/coppa-20-the-new-battle-over-privacy-age-verification-online-safety-free-speech/#comments Sun, 24 May 2009 21:49:52 +0000 http://techliberation.com/?p=18481

Adam Thierer & I have just released a detailed examination (PDF) of brewing efforts to expand the Children’s Online Privacy Protection Act of 1998 to cover adolescents and potentially all social networking sites—an approach we call “COPPA 2.0.”

As Adam explained on Larry Magid’s CNET podcast, COPPA mandates certain online privacy protections for children under 13, most importantly that websites obtain the “verifiable consent” of a child’s parent before collecting personal information about that child or giving that child access to interactive functionality that might allow the child to share their personal information with others. The law was intended primarily to “enhance parental involvement in a child’s online activities” as a means of protecting the online privacy and safety of children.

Yet advocates of expanding COPPA—or “COPPA 2.0″—see COPPA’s verifiable parental consent framework as a means for imposing broad regulatory mandates in the name of online child safety and concerns about social networking, cyber-harassment, etc. Two COPPA 2.0 bills are currently pending in New Jersey and Illinois. The accelerated review of COPPA to be conducted by the FTC next year (five years ahead of schedule) is likely to bring to Washington serious talk of expanding COPPA—even though Congress clearly rejected covering adolescents age 13-16 when COPPA was first proposed back in 1998.

We’ll discuss some of the key points of our paper in a series of blog posts, but here are the top nine reasons for rejecting COPPA 2.0, in that such an approach would:

  • Burden the free speech rights of adults by imposing age verification mandates on many sites used by adults, thus restricting anonymous speech and essentially converging—in terms of practical consequences—with the unconstitutional Children’s Online Protection Act (COPA), another 1998 law sometimes confused with COPPA;
  • Burden the free speech rights of adolescents to speak freely on—or gather information from—legal and socially beneficial websites;
  • Hamper routine and socially beneficial communication between adolescents and adults;
  • Reduce, rather than enhance, the privacy of adolescents, parents and other adults because of the massive volume of personal information that would have to be collected about users for authentication purposes (likely including credit card data);

  • Would likely be the subject of massive fraud or evasion since it is not always possible to definitively verify the parent-child relationship, or because the system could be “gamed” in other ways by determined adolescents;
  • Do nothing to prevent offshore sites and services from operating outside these rules;
  • Present major practical challenges for law enforcement officials in the face of such evasion by both domestic users and offshore sites;
  • Could destroy opportunities for new or smaller website operators to break into the market and offer competing services and innovations, thus contributing to consolidation of online content and services by erecting barriers to entry; and
  • Violate the Commerce Clause of the U.S. Constitution, since Internet activity clearly represents interstate commerce that states have no authority to regulate.
http://d1.scribdassets.com/ScribdViewer.swf?document_id=15686870&access_key=key-1cbfqkwyx8t9rzdjgr8m&page=1&version=1&viewMode=list]]> https://techliberation.com/2009/05/24/coppa-20-the-new-battle-over-privacy-age-verification-online-safety-free-speech/feed/ 33 18481