regulation2point0

Economists Robert Stavins (Harvard) and Richard Schmalensee (MIT) make a key distinction between the substance of climate policy and the mechanisms for implementing it in the Boston Globe. In trashing efforts to pass a climate bill, Senate Republicans and a handful of Democrats sought to demonize cap-and-trade as an under-the-table tax. In fact, cap-and-trade was invented by conservatives in the 1970s as a less costly, market-based alternative to command-and-control regulation of pollution.

Were opponents genuinely ignorant of this? Or were they simply prepared to jettison a remarkably successful substitute for Big Brother in coping with a whole host of economic problems? Hard to say which interpretation is more depressing…

Everybody who cares about illicit drug regulation knows that, this November, Californians will get a chance to vote on a ballot proposition legalizing the possession of small amounts of marijuana. What nobody knows for sure is how legalization would affect the price and rate of use of the stuff. The non-profit Rand Corporation’s Drug Policy Research Center takes some highly educated guesses, predicting that the (pretax) retail price of an ounce could fall by 80 percent or more, and that consumption could rise to 1970s levels. There’s a lot more to their analysis, though: think tax revenues, drug law enforcement costs, tourism, gang violence – even the impact on innovation.

Countercyclical fiscal policy creates jobs, income and economic capacity during lean times. Could countercyclical regulatory policy be used to the same ends? In a policy brief released by the liberal Progressive Policy Institute, Michael Mandel, the former economics editor of Business Week who is now editor-in-chief of VisibleEconomy, notes that America’s most innovative industries have been losing jobs ever since 2007. He suggests that economic regulation of high-tech — in particular, the heavily regulated telecommunications industry — could be eased during the recession as a means of spurring investment when it’s most needed. We can think of more than a few objections to targeted regulatory holidays. But the idea of distracting the FCC from its new enthusiasm for network neutrality certainly has some appeal.

I’m of two minds about revenue-starved states that are taking on powerful bottled soda interests by proposing hefty taxes on calorically sweetened soft drinks. On the one hand, taxes on external costs may, in principle, increase efficiency rather than decrease it. On the other, while it is plausible that sweetened drinks have uniquely unhealthy properties, the argument doesn’t match the slam-dunk health externalities case against cigarettes. Nor do we have a solid estimate of how much tax would be needed to cover the externality, or whether imposing the tax on soft drinks alone would do the trick. It is worth remembering, in any event, that the taxes would almost certainly be highly regressive.

For a thoughtful discussion of these issues, check out Justin Fox’s column on Time’s blog.

The very modest (to say the least) achievements of the Copenhagen climate meeting last December raised the issue of whether a comprehensive global agreement on climate change was realistic. Or even desirable, if the only way to bring everybody on board was to water down the provisions so much that considerable warming would follow even if nobody cheated. Hence the new focus on a multi-track approach, allowing coalitions of the willing to lead the effort to contain emissions.

Dritan Osmani and Richard S.J. Tol, whose specialty is economic/energy modeling, flesh out the idea with considerable analytic rigor, using Scott Barrett’s work as a starting point. Of course, models are no better than the assumptions on which they are based. But it’s nice to see that somebody is still optimistic about containing climate change.

If Pres. Obama has his way, Washington will invest heavily in energy technology as part of a broader climate change initiative designed to wean us addicts from our daily (hourly? secondly?) carbon fix.  The Republicans will take the technology minus the climate regulation, thank you very much. Either way, though, it appears the feds will invest more in carbon-sparing technologies.

But how? Brookings, the Breakthrough Institute and the Information Technology and Innovation Foundation just laid out their own wish list. A nice starting point for thinking about ways to get maximum bang for the buck. (Actually, we’d settle for a nice, solid return on same…).

Earlier in the month, the former IMF chief economist Raghuram Rajan took a swipe at indirect housing subsidies, which gave Paul Krugman an excuse to pontificate on the relative innocence of Fannie Mae and Freddie Mac in creating the housing bubble. (Republicans, it seems, are more inclined to blame Fannie and Freddie and their liberal patrons for the financial crisis than Wall Street, K Street or themselves). Not to be outdone, Charles Lane, the veteran Washington Post columnist, gave Krugman’s argument a long cool look. We kinda think Lane won this round. But whatever you think, we’re guessing you’ll find it a pleasure to see these smart, well-informed policy nerds duking it out in public.

Writing in Legal Pulse, the conservative Washington Legal Foundation’s new blog, former deputy assistant attorney general Steven Bradbury points out that the National Football League shot itself in the foot by encouraging the Supreme Court to hear its antitrust licensing case, America Needle v. NFL [Download Here]. Fresh off wins in two lower court rulings, the NFL had hoped to get a blanket exemption from antitrust action in its commercial ventures. Instead, the Supremes split the baby (see our blog). Now the league will be stuck fighting “rule of reason” litigation in which courts will decide each restraint of trade lawsuit based on specific circumstances.

Yes, we know that, with the help of Google (or Bing), economic statistics are generally pretty easy to find. But it’s worth taking note of the latest Web-based stats from the OECD: the 2010 Factbook of Economic, Environmental and Social Statistics. The data sets, which cover OECD members (and often include OECD wannabes Chile, Estonia, Israel and Slovenia along with Brazil, China, India, Russia, Indonesia and South Africa), are also available free on iPhones and (soon) Blackberries. We’re especially struck by cross-country comparisons of fairly obscure numbers, including patents, R&D expenditures, fishery productivity, happiness, and the redistributional impact of taxes and government expenditures.

Tyler Cowen has an interesting response to Paul Krugman’s post on why the potential to sue for damages is an inadequate substitute for government regulation. (This, of course, is in the context of the oil spill in the gulf.) Judging by the interchange, it’s hard to conclude that either approach works very well as a means of inducing economically efficient outcomes.

For more on the general debate, check regulation2point0 here and here and here.