The Obama Administration Is Helping Raise Your Airfares

Last week American Airlines took two extraordinary actions that confirm that the airline industry has become an entrenched oligopoly.  First, American Airlines began a bizarre new advertising campaign. Its message: be a good flyer by showing consideration to your seatmates and maintain equanimity in the air. This advertisement makes little sense in a competitive industry. It does not tout low prices or any distinctive amenities of American that might help it gain market share.   An industry that implicitly coordinates on price and amenities, however, might benefit from the such an advertisement, if it got more people to fly generally.

Second, American Airlines gave a $13 million severance payment to its President even though he was joining a rival, United Airlines.  And the severance was not a matter of legal obligation but at its discretion. It is wholly against usual business practices to give gifts to a high level executive who goes to work for a rival. The more frequent reaction is to sue the official for endangering trade secrets. But again this course of action makes sense if American, United and other airlines are engaging in the implicit coordination made possible by oligopoly.  The President of American would then still working for a common cause. Why not maintain goodwill in those circumstances?

Read More

Burke and Burkinis

Marks-Spencer-PPI1

Albert Camus adored swimming in the Mediterranean Sea. It would be fascinating to know how this great philosopher, who was acutely aware of France’s complicated relationship with the Arab world, would have reacted to the burkini ban on the French Riviera.

Read More

Federalism and Consensus: The Contrasting Cases of Gay Marriage and Medical Marijuana

One common way of thinking about the possibility of federal reforms – in both the legislature and the Supreme Court – is that they are more likely to occur as the number of states that enact those reforms at the state level grow.  For example, Ruth Bader Ginsburg once argued that the Supreme Court had stepped in too quickly in the abortion issue.  When Roe v. Wade was decided in 1973, only 4 states allowed abortion “in nearly all cases before the fetus was viable.”  But support for abortion was growing.  Ginsburg’s point was that the Supreme Court’s early and decisive action had prevented the country from continuing to change its mind gradually on the issue.  After such a development and a large number of states supporting abortion, a Supreme Court decision constitutionalizing abortion would have been less controversial.  By contrast, Griswold v. Connecticut, which recognized a constitutional right for married couples to have contraception, was a far less controversial decision in part because it struck down laws in only one or two states.

Ginsburg’s analysis of Roe recently came up when the issue of gay marriage was being debated in the country and decided by the courts.  It was commonly thought that the Supreme Court would wait until a large number of states actually had decided in favor of gay marriage before announcing it as a constitutional requirement.  And in 2015, when Obergefell was decided, 36 states allowed same sex marriage (although the process had ended up moving more quickly than many people expected).

Although 36 states allowed same sex marriage, the great majority of these states did so only because of court decisions.  A rough and quick count indicates that only 10 states legalized same sex marriage by legislative decision, with the remainder being required to do so based on judicial decisions.  Thus, while a significant elite supported same sex marriage, legislatures and the voters were much less supportive.

Read More

The Same May Happen

LONDON, ENGLAND - Theresa May enters 10 Downing Street.  (Photo by Karwai Tang/Getty Images)

It is difficult to say what politicians in modern democracies stand for—other than themselves, that is. At best they seem to be the representatives, or perhaps the lightning-conductors, of the various strains of resentment by which advanced societies are now riven.

Read More

A Labor Day Program for Freeing Labor

Operaio

Nothing is more central to human flourishing than work.  Other animals expend energy to survive. But man evolved to make conscious toil for food and shelter. This aspect of our heritage is reflected in a psyche that for most still requires work for contentment.  Sigmund Freud was not right about everything, but he was certainly correct that love and work are the necessary conditions of a satisfied life.

While modern America has cleared out obstacles to love, however unconventional, it has put up more and more impediments to work.  Begin with the tax code. It raises most income from labor, not consumption. As a result, the government discourages work more than is required to run its operations. Nor can the decision to tax labor heavily be justified by concern about inequality.  For those who want their taxes progressive, a consumption tax can be made as progressive as an income tax.

Second, minimum wage laws prevent the least talented and able among us from participating in work.

Read More

Our Big Picture Problem

The Book of Mormon, a musical by Trey Parker, Robert Lopez, and Matt Stone.

Cultures show their substance by what they make easier and what they make more difficult.

Read More

The Causes of the EpiPen Problem

The EpiPen has been much in the news. The product, which provides an immediate dose of adrenalin to address an anaphylactic reaction, has risen in price by 400 percent over the last several years. For Hillary Clinton and left wing sites like Vox, this is an argument against drug companies and the free market.  What is needed is more government regulation in the form of price regulation.

But it turns out that the problem is the result of bad regulation. When a company sells a product at excessive prices, the normal reaction in free markets is for a competitor to enter the market, which then reduces the prices. But this has not happened in this market due to the FDA.

Various companies have attempted to market competitors to the EpiPen. One, Teva Pharmaceuticals, had their product rejected by FDA based on claimed deficiencies.  But the FDA apparently has not made clear what those deficiencies are. Another, Adamis, was rejected by the FDA on the ground that additional studies were needed, even though the company had already done several studies supporting the product.

Read More

When Graft Is the System

I love the Wall Street Journal—the daily diary of American despair. Even if some of the stuff isn’t exactly news, or news of the “I told you so” variety.

The Manhattan Institute’s excellent Steven Malanga reports that states and their hangers-on have tried to cover up the state pension crisis.

Read More

Squandering the Post-Cold War Peace Dividend

US Marines withdraw from the Camp Bastion-Leatherneck complex at Lashkar Gah in Helmand province on October 26, 2014. (WAKIL KOHSAR/AFP/Getty Images)

During the 1990s, victory in the Cold War seemed more than just a triumph over the Soviet Union.

Read More

The Party of Limited Government is Naturally the Party of “Obstruction”

From my many friends who are Democrats, I hear a common complaint: the Republican Party is a party of obstruction while the Democratic party is much more accommodating.   Of course, the first reaction of most Republican would be to note the many not so accommodating actions of Democrats, from the attempt to filibuster Justice Samuel Alito to the refusal to negotiate any reforms in social security with the newly reelected George W. Bush. But such back and forth is pretty fruitless and may miss a more fundamental point.

It is not at all clear that it is rational for parties to engage in the same amount of obstruction.  The rational amount of obstruction depends on how easy it is to repeal the policy being obstructed. If it is easy to repeal the policy, it does not make sense to pay the political price for obstruction, because the policy can be  readily ended when the party comes to power.   But if the policy is hard to repeal, obstruction becomes a more natural course.

Thus, the real question on the rationality and justification for obstruction is whether the Republican and Democratic parties face the same political terrain for repealing the legislation they oppose.  And I do not believe they do, particularly when it comes to the creation or expansion of entitlements.

Read More