I was speaking at a virtual conference recently and was discussing my life’s work, which for 30 years has been focused on the importance of innovation and intellectual battles over what we mean progress. I whipped up a short list of some things I have written over just the past 5 years on this topic and thought I would just re-post them here:

UNDERSTANDING THE CHALLENGE WE FACE:

HOW WE MUST RESPOND = “Rational Optimism” / Right to Earn a Living / Permissionless Innovation

Continue reading →

Cheers to Post-Yoga BeersFew things unify people in America more than beer and liquor regulations. On one side you have the forces of repression, who either favor strong liquor taxes and regulations on moralistic grounds, or because they favor curtailing competition and choice for a variety of reasons. On the other side you have those of us looking to end the insanity of quasi-Prohibitionary rules that do nothing to boost public health but do plenty to annoy the living hell out of us (and cost us plenty). And the really interesting thing is that these two groups contain plenty of people of radically different political persecutions. Liquor regulations are the greatest destroyer of political partisanship ever!

For those of us who favor liberalization, as I write in my latest AIER column:

The good news is that evasive entrepreneurs and an increasingly technologically-empowered public will keep pushing back and hopefully whittle away at the continuing vestiges of Prohibition Era stupidity. Where there’s a will, there’s a way, and when people want a drink, crafty entrepreneurs will usually find a way to deliver.

I talk a walk back through history and discuss how efforts to evade ridiculous liquor controls have been a longstanding feature of the American experience. People can be remarkably creative when seeking to circumvent silly rules–both before, during, and after Prohibition. Continue reading →

ImageI was very sad to learn that James Gattuso passed away this week. James was a friend and a wonderful mentor to me. I actually took his position at the Heritage Foundation in the early 1990s, which he had vacated a few years prior to go to work in the White House. But after I left Heritage in 2000, James returned shortly thereafter to take back essentially the same position. We often joked that Heritage should just name the position after us and let us play musical chairs there forevermore! 

I learned so much from James through the years and regularly sought his advice on matters. In fact, when I first started this blog in 2004, James was one of the first three people I reached out to and asked to join. He contributed dozens of essays here. His entries read like newspaper dispatches from the frontlines of a battle. I always thought James would have made a terrific reporter, but his love of liberty made him want to fight for a cause. Hence, his life-long devotion to policy advocacy and the freedom to innovate in particular. 

But the most important thing I learned from working with James was how to properly conduct myself as an analyst and a human being. James was such a kind soul, and he always had time for everyone. Most importantly, he treated them with enormous respect, even when he violently disagreed with them. He listened carefully, digested arguments, and addressed them with a cool tenor, but also a powerful wit.

James famously developed a set of “10 Rules for Policy Analysts” that reflected much of that wisdom. His first rule: If the answer looks easy, you’ve missed something. There’s probably a reason no one has thought of it before.” His third: “Don’t assume everyone has read your paper, even if it is really, really good. Most people didn’t get past the first paragraph. Most of those only read the title.” There are many other gems like that in his Top 10 list. 

But his second rule is perhaps the most important piece of advice he ever gave me: “Don’t assume the other guy is evil. He may be, but will be on your side later.” That’s great advice because so many young people in the world of public policy (and it included me for awhile) tend to look at their opponents as nefarious-minded dimwits who are without hope or a moral compass.

As you age, you realize that’s nonsense, of course. But James taught me early on to avoid falling into this trap. I used to be pretty hot-headed in my early years as an analyst, but James would gently caution me about why I might be better off considering my intellectual opponents in a different light and granting them the same measure of respect that I hoped to garner from them myself. It’s a simple but powerful notion that is too often ignored–in all aspects of life. But James lived by that rule and everyone I know respected him enormously as a result. His advice and his example provide us with a model to live by.     

Thank you for everything you taught me, James. You will be missed, but never forgotten. 

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My research focus lately has been studying and encouraging markets in airspace. Aviation airspace is valuable but has been assigned to date by regulatory mechanisms, custom, and rationing by industry agreement. This rationing was tolerable decades ago when airspace use was relatively light. Today, regulators need to consider markets in airspace–allowing the demarcation, purchase, and transfer of aerial corridors–in order to give later innovators airspace access, to avoid anticompetitive “route squatting,” and to serve as a revenue stream for governments, much like spectrum auctions and offshore oil leases.

Last month, the FAA came out in favor of “urban air mobility corridors”–point-to-point aerial highways that new eVTOL, helicopter, and passenger drones will use. It’s a great proposal, but the FAA’s plan for allocating and sharing those corridors is largely to let the industry negotiate it among themselves (the “Community Business Rules”):

Operations within UAM Corridors will also be supported by CBRs collaboratively developed by the stakeholder community based on industry standards or FAA guidelines and approved by the FAA.

This won’t end well, much like Congress and the Postmaster General letting the nascent airlines in the 1930s divvy up air routes didn’t end well–we’re still living with the effects of those anticompetitive decisions. Decades later the FAA is still refereeing industry fights over routes and airport access.

Rather, regulators should create airspace markets because otherwise, as McKinsey analysts noted last year about urban air mobility:

first movers will have an advantage by securing the most attractive sites along high-traffic routes.

Airspace today is a common-pool resource rationed via regulation and custom. But with drones, eVTOL, and urban air mobility, congestion will increase and centralized air traffic control will need to give way to a more federated and privately-managed airspace system. As happened with spectrum: a demand shock to an Ostrom-ian common pool resource should lead to enclosure and “propertization.”

Markets in airspace probably should have been created decades ago once airline routes became fixed and airports became congested. Instead, the centralized, regulatory rationing led to large economic distortions:

For example, in 1968, nearly one-third of peak-time New York City air traffic–the busiest region in the US–was general aviation (that is, small, personal) aircraft. To combat severe congestion, local authorities raised minimum landing fees by a mere $20 (1968 dollars) on sub 25-seat aircraft. General aviation traffic at peak times immediately fell over 30%—suggesting that a massive amount of pre-July 1968 air traffic in the region was low-value. The share of aircraft delayed by 30 or more minutes fell from 17% to about 8%.

This pricing of airspace and airport access was half-hearted and resisted by incumbents. Regulators fell back on rationing via the creation of “slots” at busy airports, which were given mostly to dominant airlines. Slots have the attributes of property–they can be defined, valued, sold, transferred, borrowed against. But the federal government refuses to call it property, partly because of the embarrassing implications. The GAO said in 2008:

[the] argument that slots are property proves too much—it suggests that the agency [FAA] has been improperly giving away potentially millions of dollars of federal property, for no compensation, since it created the slot system in 1968.

It may be too late to have airspace and route markets for traditional airlines–but it’s not too late for drones and urban air mobility. Demarcating aerial corridors should proceed quickly to bring the drone industry and services to the US. As Adam has pointed out, this is a global race of “innovation arbitrage”–drone firms will go where regulators are responsive and flexible. Federal and state aviation officials should not give away valuable drone routes, which will end up going to first-movers and the politically powerful. Airspace markets, in contrast, avoid anticompetitive lock-in effects and give drone innovators a chance to gain access to valuable routes in the future.

Research and Commentary on Airspace Markets

Law journal article. The North Carolina JOLT published my article, “Auctioning Airspace,” in October 2019. I argued for the FAA to demarcate and auction urban air mobility corridors (SSRN).

Mercatus white paper. In March 2020 Connor Haaland and I explained that federal and state transportation officials could demarcate and lease airspace to drone operators above public roads because many state laws allow local and state authorities to lease such airspace.

Law journal article. A student note in a 2020 Indiana Law Journal issue discusses airspace leasing for drone operations (pdf).

FAA report. The FAA’s Drone Advisory Committee in March 2018 took up the idea of auctioning or leasing airspace to drone operators as a way to finance the increased costs of drone regulations (pdf).

GAO report. The GAO reviewed the idea of auctioning or leasing airspace to drone operators in a December 2019 report (pdf).

Airbus UTM white paper. The Airbus UTM team reviewed the idea of auctioning or leasing airspace to UAM operators in a March 2020 report, “Fairness in Decentralized Strategic Deconfliction in UTM” (pdf).

Federalist Society video. I narrated a video for the Federalist Society in July 2020 about airspace design and drone federalism (YouTube).

Mercatus Center essay. Adam Thierer, Michael Koutrous, and Connor Haaland wrote about drone industry red tape how the US can’t have “innovation by regulatory waiver,” and how to accelerate widespread drone services.

I’ve discussed the idea in several outlets and events, including:

Podcast Episodes about Drones and Airspace Markets

  • In a Federalist Society podcast episode, Adam Thierer and I discussed airspace markets and drone regulation with US Sen. Mike Lee. (Sen. Lee has introduced a bill to draw a line in the sky at 200 feet in order to clarify and formalize federal, state, and local powers over low-altitude airspace.)
  • Tech Policy Institute podcast episode with Sarah Oh, Eli Dourado, and Tom Lenard.
  • Macro Musings podcast episode with David Beckworth.
  • Drone Radio Show podcast episode with Randy Goers.
  • Drones in America podcast episode with Grant Guillot.
  • Uncommon Knowledge podcast episode with Juliette Sellgren.
  • Building Tomorrow podcast episode with Paul Matzko and Matthew Feeney.
  • sUAS News podcast episode and interview.

Does anyone remember Blockbuster and Hollywood Video? I assume most of you do, but wow, doesn’t it seem like forever ago when we actually had to drive to stores to get movies to watch at home? What a drag that was!

Yet, just 15 years ago, that was the norm and those two firms were the titans of video distribution, so much so that federal regulators at the Federal Trade Commission looked to stop their hegemony through antitrust intervention. But then those firms and whatever “market power” they possessed quickly evaporated as a wave of Schumpeterian creative destruction swept through video distribution markets. Both those firms and antitrust regulators had completely failed to anticipate the tsunami of technological and marketplace changes about to hit in the form of alternative online video distribution platforms as well as the rise of smartphones and robust nationwide mobile networks.

Today, this serves as a cautionary tale of what happens when regulatory hubris triumphs over policy humility, as Trace Mitchell and I explain in this new essay for National Review Online entitled, “The Crystal Ball of Antitrust Regulators Is Cracked.” As we note:

There is no discernable end point to the process of entrepreneurial-driven change. In fact, it seems to be proliferating rapidly. To survive, even the most successful companies must be willing to quickly dispense with yesterday’s successful business plans, lest they be steamrolled by the relentless pace of technological change and ever-shifting consumer demands. It is easy to understand why some people find it hard to imagine a time when Amazon, Apple, Facebook, and Google won’t be quite as dominant as they are today. But it was equally challenging 20 years ago to imagine that those same companies could disrupt the giants of that era.

Hopefully today’s policymakers will have a little more patience and trust competition and continued technological innovation to bring us still more wonderful video choices.

[OC] Blockbuster Video US store locations between 1986 and 2019 from r/dataisbeautiful

America’s small towns are underpopulated, while big cities of plague, protests, and panic are overpopulated, overpriced, and overpopularized. We could start by ensuring rural spaces high-speed internet (still unavailable as I can attest in the rural center of supposedly high-tech California)…. Victor Davis Hanson

proposal by Congressman G.K. Butterfield of North Carolina could be a big step in the right direction of opening up rural spaces to full participation in the modern economy.  

His proposal would expand the eligibility of who can receive Federal support for building infrastructure in unserved areas, making it easier for cable operators, satellite providers and others to complete with traditional telecommunications carriers. 

The Butterfield vision is gaining bipartisan support and may possibly be included in a stimulus package.  It certainly should be.  

The proposal would simply eliminate the requirement that a competitor must receive designation as an Eligible Telecommunications Carrier (ETC) from a state public utility/service commission as a prerequisite for receiving Federal support.

This requirement harkens back to a bygone era when cable, wireless and satellite services were not substitutes for landline telephone service.  At that time, small rural telephone providers worried that a competitor would “cherry pick” or “cream skim” their most lucrative (enterprise) customers—such as the local hospital—and strand the small rural telco in a potential death spiral serving only the barely profitable (or even unprofitable) consumer segment.

Now that cable, satellite and wireless services are a substitute for many consumers, the requirement for ETC designation does nothing to protect small rural telcos from competition.  It is an anachronism.  However, it does create an unnecessary hurdle for cable, wireless and satellite providers to qualify for Federal support to help close the digital divide—which is an urgent priority.

Originally intended to prevent the loss of telecommunications services in rural areas, the requirement now serves to prevent the necessary expansion of those services to keep up with the modern world economy.  

As awful as this horrible pandemic is, at least we are driving less and spending more time with our families.  Many have learned that a daily commute may not be necessary.  Broadband seems to be boosting productivity and reducing air pollution at the same time.  Hopefully broadband can also help facilitate a revival of rural America.  

Here’s a new episode of the James Madison Institute “Policy Gone Viral” podcast in which my former Mercatus Center colleague Andrea O’Sullivan and I discuss the future of technological innovation and the public policies governing it. The video is embedded below or you can listen to just the audio here.

This week, it was my pleasure to be interviewed by Eric Peterson of the Pelican Institute on their “PeliCast” live video podcast. We discussed potential futures for permissionless innovation and, more importantly, what my favorite beer in Louisiana is. Tune in to find the answer!

 

Teacher pay raise funding passes House | Local | idahostatejournal.comWhy can’t governments ever clean up their messes? Occasional spring cleanings are essential not only for keeping our own homes tidy and in good working order, but also for keeping our government systems functioning effectively. What can be done? In a new essay with my Mercatus Center colleagues Patrick McLaughlin and Matthew Mitchell, we note that Idaho Governor Brad Little has just issued a smart Executive Order that aims to clean house by bringing state rules in line with common sense. Specifically, the governor’s order addresses what to do with the 150-plus regulations that Idaho state agencies waived in response to the COVID-19 outbreak. This is a great model for other states, and it tracks a proposal that Patrick, Matt, and I floated in a white paper just a few months ago. The entire essay, which originally ran on The Bridge, is reprinted below.

_________

Idaho “Spring Cleaning” Order a Model for Other States

by Patrick McLaughlin, Matthew D. Mitchell & Adam Thierer

Regulations tend to accumulate endlessly. Today there are over 1 million restrictive words (think “shall” or “must”) in the Code of Federal Regulations. Some states, like California and New York, layer on hundreds of thousands of additional regulatory restrictions. Fewer than 1 percent of these rules have been subjected to rigorous cost-benefit analyses. And once regulations are on the books, it is fairly rare to see them subjected to any sort of retrospective review to see how they have performed. Continue reading →

By Brent Skorup & Connor Haaland

We think drones are exciting technology with the potential to improve medical logistics, agriculture, transportation, and other industries. But drones fly at low altitudes and, to many Americans, drones represent a nuisance, trespasser, or privacy invasion when they fly over private property. This is why we think the FAA and states should work together to lease airspace above public roads—it would free up millions of miles of low-altitude airspace for operations while avoiding many lawsuits from public and private landowners.

In the meantime, states and landowners are pushing back on certain drone activities. Per Prof. Stephen Migala, about 10 states have created “no-fly zones” for drones, prohibiting flights over government property, state forests, or sensitive areas. Most state airspace rules prohibit drones at low-altitudes over “critical infrastructure” like nuclear, gas and electric facilities, bridges, dams, and communication networks. Some states prohibit drones over jails, prisons, and schools.

In Texas, in fact, there is litigation over a state ban on photography drones above critical infrastructure, sports venues, and prisons. One of the legal issues is whether state police powers over trespass, nuisance, and privacy allow states to exclude drones from low-altitude airspace. As we’ve pointed out in a GovTech piece, this is a festering issue in drone regulation—no one knows at what altitude private property (and state police powers) begins.

For private property owners who don’t want drones flying over their property, they might be able to bring a trespass lawsuit under existing state law. Around 20 states expressly vest air rights with landowners. However, many states also recognize a privilege of non-disruptive flight, so it’s unclear if a landowner would win a lawsuit in those states. We’re unaware of the issue being litigated.

Unfortunately, many landowners and annoyed neighbors are taking matters into their own hands and shooting drones out of the sky. We’ve identified over a dozen such encounters in the past eight years, though there are likely some near-misses and unreported cases out there.  (Don’t shoot a drone–it’s dangerous and, as the cases below show, you risk being arrested and convicted for criminal mischief or some other crime.)

  1. In November of 2012, unknown shooters in Bucks County, Pennsylvania shot down a drone that was flying over their hunt club. The drone was flown by an animal rights group to bring scrutiny to pigeon shooting and this was the fourth time the activists’ drone had been shot down. No criminal charges appear to have been filed.
  2. In October of 2014, a man shot down a drone in Lower Township, New Jersey. It’s unclear if the drone was hovering over his property or a neighbor’s. The man plead guilty to criminal mischief. 
  3. In November 2014 in Modesto, California, a man allegedly instructed his minor son to shoot his neighbor’s drone out of the sky, and the drone was destroyed. The neighbor claims the drone was not over the man’s property and won $850 in small claims court from the man for damages and costs.
  4. In July of 2015 in Bullitt County, Kentucky, William Meredith,  annoyed at a drone flying over his backyard while grilling with friends, shot the drone when it flew over his property. The drone’s owner, a neighbor, called the police upon discovering his destroyed drone. Meredith was arrested and charged under local law for firing a gun in a populated area. At the highly publicized trial in state court, the judge dismissed the charges with a brief statement that Meredith was justified in shooting because of the invasion of privacy.
  5. In April of 2016, an unnamed woman shot down a drone in Edmond, Oklahoma. The drone was flown by a construction company employee who was inspecting gutters in the neighborhood. It’s unclear if the drone was flying over the woman’s property. The case was investigated by the police, who said that they did not expect to file charges
  6. An unknown shooter in Aspen, Colorado shot down a drone during 4th of July fireworks in 2016. It’s unclear if the drone was over the shooter’s property. The pilot of the fallen drone filed a report with local police and the FAA but the shooter remains a mystery.
  7. In August of 2016, a woman allegedly shot down a drone in The Plains, Virginia with her 20-gauge shotgun. The woman alleged that the drone hovered 25 to 30 feet above her property and she believed it was being used to spy on her movie-star neighbor, Robert Duvall. The two men flying the drone left the scene when she told them she was calling the police. No charges were filed. 
  8. In April of 2017, an unknown person in Morgan County, Georgia shot down a drone with a .22 rifle. It’s unclear whose property the drone was flying over. The drone owner filed a report but a suspect was never identified.
  9. In October of 2017, a man allegedly shot down a drone in Jackson County, Oregon with his pellet rifle and later turned himself in for arrest. The photography drone was flying over a state recreation area. The local prosecutor charged the shooter with first degree criminal mischief, a felony in Oregon. (The drone’s owner feels that a felony charge is excessive. With a Google search, it’s unclear whether the man was convicted.)
  10. In May of 2018, a man allegedly attempted to shoot down a drone with his handgun in Bradenton, Florida. It was a neighbor’s drone and the man claims it was on his property, hovering a few feet above the ground. Police were called and warned the man about the danger and legal risk of shooting drones. No charges were filed.
  11. In February of 2019, a man allegedly shot down a drone in Long Island, New York with a shotgun. The drone was being used by an animal rescue group to find a lost dog. It’s unclear if the drone was flying over the man’s property. He was charged with third-degree criminal mischief and prohibited use of a weapon.
  12. In May of 2020, a man allegedly shot down a drone flying over a chicken processing plant in Watonwan County, Minnesota. The drone operator was apparently taking video of the plant as a citizen-journalist. The man was charged with two felonies: criminal damage to property and reckless discharge of a firearm in city limits. 
  13. In June 2020, someone shot a drone flying somewhere in western Pennsylvania at 390 feet above the ground. Despite being grazed and damaged, the drone managed to safely operate and land. It’s unclear if the drone was over the shooter’s property. The shooter is unknown and the drone operator contacted state police but has not filed a complaint.

As you can see, the legal penalties for shooting a drone vary based on the circumstances and the prosecutor. Some got off with warnings but a few were charged with a felony under state law. Arguably, someone shooting a drone violates federal law, which imposes penalties on anyone who

willfully . . . damages, destroys, disables, or wrecks . . . any civil aircraft used . . . in interstate . . . commerce.

Federal penalties for willfully damaging an aircraft are stiff—fines and up to 20 years’ imprisonment. We’re unaware of federal prosecutors bringing a case against someone for shooting a drone. Perhaps federal prosecutors feel it’s excessive to use this statute, which was written with passenger planes in mind. Further, it’s unclear when drones are used in interstate commerce. As one federal judge said in a 2016 drone regulation case, Huerta v. Haughwout:

the FAA believes it has regulatory sovereignty over every cubic inch of outdoor air in the United States. . . . [I]t is far from clear that Congress intends—or could constitutionally intend—to regulate all that is airborne on one’s own property and that poses no plausible threat to or substantial effect on air transport or interstate commerce in general.

Hopefully lawmakers will clear up the ambiguity and demarcate where property rights end. As we pointed out in our recent 50-state drone report card, creating drone highways would prevent many issues. Congress should also consider drawing a federal-state dividing line in the sky, much like it drew a dividing line in the ocean in the Submerged Lands Act for energy development. For now, landowners, drone operators, the FAA, and state governments are all trying to determine the limits of their authority.