Debate topics change from year to year, but economic principles stay the same.
Political economy looks at the intersection of politics and economics, and every debate resolution has such an intersection.
Established companies and industries sometimes seek subsidies from government, and usually form associations to advance and protect their interests. So steel producers form associations to lobby for lower electricity rates, relaxed pollution controls, and most of all, protection against steel imported from other countries. (A recent example from May 2015, this WSJ article: “U.S. Steel CEO Says Tariffs Could Be Needed On Chinese Imports“).
For NCFCA debaters researching the federal court system reform topic, the question is what role the federal courts should take in applying Constitutional principles to economic subsidies and regulations that appear to violate individual rights and Constitutional protections. There are many examples for students to research and debate. Below are links to eminent domain and occupational licensing cases. In both, reformers argue the federal courts should systematically protect people from such legislation and regulation.
Local governments take private homes and transfer ownership to other private owners. This 60 Minutes segment from 2003 looks at an Ohio mayor’s effort to use eminent domain to seize a private home to transfer to builders of “upscale” condominiums.
From taking and transferring homes to restricting livelihoods, we turn to hair-braiders battling state occupational licensing. Here is a story from Washington state that is now in federal court: “Untangling Entrepreneurs from Washington’s Illogical: Restrictions on African Hair Braiding.” Institute for Justice lawyers argue that the federal courts should step in to protect people from arbitrary state regulations:
The Constitution protects the right to earn an honest living without unreasonable government interference. The government cannot license something as safe and common as braiding hair, especially when cosmetology training may not teach or test braiding, but instead requires hundreds of hours of instruction that is completely unrelated to braiding. That is why on June 17, 2014, Salamata, represented by the Institute for Justice (IJ), filed a lawsuit in the United States District Court for the Western District of Washington to challenge Washington’s interpretation of the state’s cosmetology laws and to demand that Washington keep its word and stop playing games with braiders’ livelihoods.
Braiding Freedom looks at the regulatory battle over similar regulations in Mississippi. Here is the trailer for the documentary:
Below is a post from July 4, 2014 that focuses on regulatory “rent-seeking” across the Middle East, and argues these same economic interventions are an ongoing injustice in the United States.
Arriving back in Seattle at midnight last Saturday, I was unable to request Lyft with my location set at airport Arrivals. The notice from Lyft (at right) was that “Sea-Tac Airport prohibits Pickups.” So I walked with my luggage across terminals, through the parking garage and across the light-rail station and overpass to reach International Blvd., where I called Lyft. The driver had trouble finding me though, because he was at Arrivals, along with other Lyft and Uber drivers. Apparently people just need to set their location off the airport, then the driver calls and asks where you are and arrives in a few minutes.
This makes the service more complicated for users like me, and means that I would apparently be violating Seatac airport regulations, along with others using Lyft and Uber.
At Cincinnati airport, where I am heading for an October 8th Economic Thinking workshop, Uber drivers can’t pick-up at the airport without paying a $625 annual airport fee. I am renting a car one-way from Cincinnati to Indianapolis for another workshop on October 10. Renting a car when I arrive Wednesday and turning in Saturday after the Indianapolis workshop would cost a hundred dollars more than renting noon on Thursday for the afternoon-evening workshop (thanks to discounted weekend rates). So… I plan to save money by staying at an inexpensive hotel near the airport and going back to the airport Thursday to rent a less-expensive car. Needed next is a hotel with free shuttle service from airport. Well, good luck with that. Because of the $625 annual fee each driver needs to pay to gain access to the airport, inexpensive hotels don’t provide shuttle service to and from the airport. So, no Uber, no shuttle. I’m left with the option staying at an expensive hotel (which can afford shuttle service) or taking a taxi. How much will that cost? What quality of service can I expect? Who knows.
I don’t mean to overtax readers with travel complaints. Actually, I very much appreciate United Award tickets (using frequent flyer miles) for flights, and inexpensive one-way car rental from Cincinnati to Indianapolis airports.
Even with modest $148 cost for 4-day standard size one-way car rental, the taxes and fees are $91.80 and Thrifty receives just $57. I could pick up on Thursday when I arrive, but similar car is $266. Or I could rent a micro-size car one-way for $160, but that’s less safe and less comfortable.
Taxes and regulations are a significant burden on everyday people (those without expense accounts when they travel), and the time spent trying to figure out how to reduce costs takes time away from researching and writing on the economics of debate topics (with the happy exception of when I claim to find economics and rent-seeking lessons in travel adventures).
Though costs and aggravations are relatively minor for middle and upper income Americans, these are major problems for the poor who end up working much of their lives in the informal economy (or end up in jail).
These economic regulations are a gigantic issue and a source of poverty and violence in the Middle East, North Africa, and the developing world. Hernando de Soto discusses these problems the linked video below.
Uber, Lyft, and Middle East Rent-Seeking
In this 2012 interview Hernando de Soto explains how his ILD team was drawn into economic research in the Middle East. DeSoto’s discussion of legal institutions and elites and how they obstruct economic reform and development in the Middle East is key for students researching the NCFCA topic: Resolved: The United States should significantly reform its policy toward one or more countries in the Middle East.
The interviewer starts by commenting that most news stories about the Arab Spring focused on voting and political parties. Poverty, unemployment, and Islamists are mentioned, but news stories usually paint elections and political changes as the goal rather than economic and legal reforms.
Yet voting plays a limited role in peaceful and prosperous societies across the developed and in the transformed Asian countries of Taiwan, Hong Kong, Singapore and South Korea (the Four Tigers), to Vietnam, Malaysia, and Thailand. In commercial republics, voting is for choosing who will run the government but not so much for what powers government officials will have over the economy.
Constitutions, which are documents defining and limiting state power, are approved in extra-democratic processes. The U.S. Constitution was passed through a separate ratification process, not by federal or state legislatures.
Journalists seem not to appreciate the key role of legal institutions for economic development, and the dynamics of elites resisting reforms that threaten to reduce their power. One could argue that the biggest source of poverty and inequality in the U.S. are the regulatory barriers that make it difficult and sometimes impossible for less educated and connected people to start and run a business.
On the Institute for Justice website, short videos tell the stories of state regulations making life hard for new businesses, from entrepreneurs in food trucks and carts to hair braiders, dentists cleaning teeth, to people trying to keep their homes from being seized.
Another example in the U.S. can be seen with local taxi and bus monopolies urging politicians and transportation regulators to ban Uber, Lyft, and other smartphone transportation services. Across the Middle East, India, Africa and Latin America are thousands of similar stories of local established firms using government regulations to protect their enterprises. Economists call this rent-seeking.
Occupational licensing is a rent-seeking similar story of raising barriers for people trying to enter various professions. Certification is the market alternative for consumer protection. It is harder though for people without much money and few connections to start careers or businesses where regulatory barriers to entry are high. This protects people and firms already established in those businesses and allows them to charge higher prices.
How could U.S. government policy toward Middle East countries do more to encourage economic freedom reforms? U.S. politicians and bureaucrats pass and enforce similar top-down regulations protecting favored firms so they are a poor influence on politicians and regulators in other countries.
Understanding the central role that dysfunctional legal systems play in hampering economic development is key to understanding the Middle East. Again, I highly recommend the 2012 interview with Hernando de Soto.
Any questions, comments, or corrections and suggestions are welcome… (Greg Rehmke: grehmke@gmail.com)
The interviewer starts by commenting that most news stories about the Arab Spring focused on voting and political parties. Poverty, unemployment, and Islamists are mentioned, but news stories usually paint elections and political changes as the goal rather than economic and legal reforms.
(For more on the ratification of the U.S. Constitution, I recommend Pauline Maier’s Ratification: The People Debate the Constitution. Constitutional scholar Randy Barnett discusses the book here.)
On the Institute for Justice website, short videos tell the stories of state regulations making life hard for new businesses, from entrepreneurs in food trucks and carts to hair braiders, dentists cleaning teeth, to people trying to keep their homes from being seized.
Occupational licensing is a rent-seeking similar story of raising barriers for people trying to enter various professions. Certification is the market alternative for consumer protection. It is harder though for people without much money and few connections to start careers or businesses where regulatory barriers to entry are high. This protects people and firms already established in those businesses and allows them to charge higher prices.