10 ms·

This is the key problem right here: "They also found that lobbying expenditures in that industry are correlated with increased regulation, higher profits and l

This is the key problem right here: "They also found that lobbying expenditures in that industry are correlated with increased regulation, higher profits and lower entry. Unsurprisingly, they found that lobbying and regulation tended to keep out smaller companies to the benefit of larger ones."

lwb 7y ago
Very interesting. From the second to last paragraph: > They found that the higher the volume of new regulation in an industry -- measured by analyzing the text of the Code of Federal Regulation -- the less new entry is driven by high Q. Where Q "represents the ratio of a company’s market value to the book value of the company's assets."
- ABCLAW 7y ago
  Did the authors not consider the common causal variable? Many industries become more capital intensive as they grow, and higher capital thresholds for effective market entry make market entry harder. Additionally, as industries grow, the scale of their externalities grows, requiring regulation. The aggregation of capital in public capital markets supports this (Value of equities up, # of market participants down). The fact that the legislature has been gridlocked for years also doesn't support the hypothesis that regulatory action is the causal root of the lack of competition in the 2000s.
  - AnthonyMouse 7y ago
    > Many industries become more capital intensive as they grow, and higher capital thresholds for effective market entry make market entry harder. Additionally, as industries grow, the scale of their externalities grows, requiring regulation. None of that stuff is actually strongly correlated. Whether an industry's capital costs increase disproportionately with scale has little to do with whether that industry has significant externalities requiring more regulation as it grows. You can find major examples of every combination of those things. Moreover, if the increased capital costs are a result of increased regulatory compliance costs, that's not actually disproving the original point either. > The aggregation of capital in public capital markets supports this (Value of equities up, # of market participants down). That would be expected regardless because the lower amount of competition would be expected to result in higher profits and higher valuations regardless of the cause. > The fact that the legislature has been gridlocked for years also doesn't support the hypothesis that regulatory action is the causal root of the lack of competition in the 2000s Whatever gridlock existed hasn't stopped them adding some 40,000 plus new pages to the CFR in that time.
  - kortilla 7y ago
    Federal legislator being locked has no relationship to state legislators nor the executive branch. California has been legislating significantly without issue during all of the federal gridlock.
washedup 7y ago
Bingo! One reason why Campaign Finance Reform is so important. But even that’s probably not enough.
- munk-a 7y ago
  I think with Campaign Finance Reform and the abolition of FPP voting in favor of a ranked system (to end the two party system) would be enough if done together... American still need a decade or two to work the corporate politicians out of it's system though.
- api 7y ago
  I think it needs to be more radical. Paid lobbying is bribery, period. It's illegal to bribe a judge or a juror. It should be similarly illegal to bribe legislators. Outlaw the entire practice.
  - elliekelly 7y ago
    Imagine how outraged we’d be if we found out Federal Judges were going out to dinner with lobbyists and then having those lobbyists draft their judicial opinions for the Judge to just sign their name on without even reading it first. I don’t understand why it’s not equally outrageous that Congress does this on a daily basis. Equally nuts is the special interest group that Upcodes is battling. They draft regulations and then _charge_ the public to access the regulations that they’ve lobbied lawmakers to adopt claiming some sort of IP right over the law.
    - Spooky23 7y ago
      One might also be outraged if a Supreme Court justice was married to a lobbyist who was paid to advocate for positions relevant to matters on the court. https://www.opensecrets.org/news/2019/06/virginia-thomas-extends-her-conservative-reach-for-2020/ https://www.opensecrets.org/news/2019/06/virginia-thomas-ext...
- Shivetya 7y ago
  You are so off track it is frightening. First off the term " Campaign Finance Reform" is so loaded that it means different things to different people. Usually, shut down people they don't like. Far too many see Citizen United as an affront because they don't understand how bad it would be for everyone if the ruling had been the other way and they don't understand the 1st Amendment. In the US, two political parties control nearly all activity down to the county and city level. If you are in politics already you pretty much have to have permission to seek higher offices. If you are not you have to get past both parties even the one you wish to be part of. There is a reason why at the Congressional level reelection is almost a sure thing with most people losing their seat from retirement! So lets look at the national level, where CU and CFR bells are rung the most. Incumbent politicians have unlimited access to the media and to a point even use of the postal service. That is one hell of an advantage to an outsider to surmount. Then thrown in all the PACs they have friends and family in, all of which are protected by wonderfully named laws to protect the integrity of elections but really do only two things, protect incumbents and provide a legal means to make their friends and families rich. So lets drop back to CU and the 1A. The 1A says nothing about whose speech rights may not be infringed, it says speech may not be infringed. The CU ruling made it clear that it wasn't some fictional body having freedom of speech, it was the right of the people in any organizational form they choose will always have the right to free speech wherever they go. That is why you must resist all attempts to reform campaign financing. The established parties already have it all wrapped up and are merely feeding you nice market tested lies to prevent anyone from breaking their duopoly. Open the door to silencing one voluntary grouping of the public from entering politics by any means and you allow for any future grouping which is a threat to the established parties to be blocked as well.
JMTQp8lwXL 7y ago
A lot of lobbying kills regulation in its tracks. I think there's two kinds of regulation, and it's valuable to distiguish them: regulation that places onerous barriers to entry to entrench existing players (the type you mention), but also: regulation that prevents a truly free market. For example, Medicare being unable to negotiate drug prices, by law. The latter is a regulation that does nothing to deter new companies from entering the pharmaceutical industry, but we all suffer through higher federal expenditures, and ultimately, higher taxes.
- AnthonyMouse 7y ago
  > For example, Medicare being unable to negotiate drug prices, by law. This isn't a very good example because the health insurance market is dysfunctional for reasons independent of this and Medicare is the government, so "negotiating prices" really just means dictating prices. We already see this with Medicare in areas other than prescription drugs, where Medicare will set payouts below cost. Then many providers won't accept it (harming patients by reducing choice) and others, not wanting to turn away sick patients, will see them at a loss but then have to recover the money by charging more to patients with private insurance or paying out of pocket (harming them and reducing access to care due to higher prices). > The latter is a regulation that does nothing to deter new companies from entering the pharmaceutical industry Even if all it did was exactly what you expect it to (cause lower prescription drug prices), low margins are exactly what will deter new companies from entering a market. They can't recover their startup costs (which incumbents paid years ago), so they don't bother. With price controls that lower amount of competition may not raise prices, but you would certainly expect it to impact the amount of new R&D happening.
  - dv_dt 7y ago
    Dictating prices is better done from a government panel than a corporate board. Medicare sometimes sets payouts below "cost", but sometimes costs are out of control. The article below touches on this and goes through some data, and concludes that some segments of over-cost hospitals should maybe come down in price, while also suggesting that primary care physicians are underpaid via Medicare. Regardless of the over/under, that's a better discussion to have in the open publically, than behind closed negotiating doors - leading to systemic over costs (comparing between the US and other nations). http://voices.washingtonpost.com/ezra-klein/2009/07/does_medicare_pay_below_cost_w.html http://voices.washingtonpost.com/ezra-klein/2009/07/does_med...
AcerbicZero 7y ago
This is one of those unfortunate situations where the the problem is clear, but the solution isn't, and proposed solutions can always be attacked from either end of the extreme perspectives. So we get stuck with semi-dysfunctional regulatory bodies at best, and captured extensions of corporate interests passing anti-competitive regulations at worst.
- salawat 7y ago
  The solution is clear. Regulatory bodies need to take into consideration size, age, and frequency of violation by the regulated in terms of exacting punishment on new entrants. For instance; BigFin fintech company gets caught violating Anti-Money Laundering regulations. Big fine. SmallFin fintech gets caught: slap on the wrist, thou shalt make a remediation plan, and here are the milestones you have to meet. SmallFin continues doing business, but is on the regulators radar. SmallFin caught again? Fine. Now. Let's say SmallFin dissolves, but the key players move and incorporate as YetAnotherSmallFin (different Corp, mostly same people). Get caught? Regulators should look at the people who have been dinged before, and should know better, and regulation should be less forgiving based on that. The fact is, a great deal gets hidden under "the Corporate Veil" that probably shouldn't be so easily divested from by those looking to abuse the system. A regulator should by and large be a constructive guiding hand; not just ssmern as something to be worked around in the process of finding new and interesting ways to do shady things. The catch here is you need to be able to attract high quality people to run the regulator, and I really have no solution for that.
  - savant_penguin 7y ago
    The solution to excessive regulation is less regulation, not more. These things tend to backfire.
    - gumby 7y ago
      That may be true (I tend to agree) but it is just as hard to implement. It's not a magic bullet.
    - 7y ago
vishnugupta 7y ago
I've pondered about it in Indian context. India has amazing number of rules and regulations. The problem is that just about all of them are used as rails to collect money through corruption. Only those who can't pay the bribe end up getting punished. Interestingly each new rule (e.g., a new road traffic regulation) only acts as yet another avenue to collect money. I suppose lobbying is a legalised form of bribe so the passage you quoted makes perfect sense.
GordonS 7y ago
Brit here, so I don't really understand lobbying in the US, and how such huge sums of money can be involved without blatant corruption - googling reveals ~3.4 billion USD spent on lobbying during 2018. Let's say I'm Boeing and I pay a lobbying firm 15M USD - what happens next? Where does the money go?
- deleted 7y ago
  [deleted]
- Ididntdothis 7y ago
  A good lobbyist will help drafting laws or regulations and bring them in front of lawmakers. A lot of laws are written directly by lobbyists. They may also start a PR campaign for your case.
  - Monroe13 7y ago
    In many instances spending on PR campaigns does not necessarily need to be disclosed as a lobbying expense. Money spent on influencing policy greatly exceeds what’s reported on lobbying disclosure reports.
  - mattigames 7y ago
    The language we use tends to shape our views, having that in mind "good lobbyist" is an oxymoron, is like saying "good mass murderer", it's better say "effective lobbyist" or similar wording that can't be confused with a moral judgement.
    - Symmetry 7y ago
      So, I've donated money to the Nature Conservancy and the ACLU both with the intent that they would engage in lobbying on my behalf, both of which I consider to be "good lobbying".
      - mattigames 7y ago
        Nah, is good only in a very narrow specific sense but is still damaging in the big scheme of things; by perpetuating the "lobbying-based-democracy" instead of trying to achieve actual democracy (as in vote for nature conservancy, vote for better education, etc)
rjurney 7y ago
Regulation tends to exist because the market wasn't regulating itself and abuse was rampant. So there seems to be an underlying cause of dysregulation common to these markets.
- 100100010001 7y ago
  Sometimes the opposite is true. Jaywalking is a great example. Rich assholes didn’t like their new cars having dents because they wouldn’t stop for pedestrians. So they made it illegal to be a pedestrian by enacting jaywalking laws.
rayiner 7y ago
The causation could easily be reversed. High margin businesses get regulated, and lobbying ramps up to fight those regulations. You're seeing this happen before your very eyes with companies like Google and Facebook. Their lobbying expenditures have exploded as a response to increased treats of regulation.
- tathougies 7y ago
  And as they get regulated, they also become government monopolies, because the regulations effectively mean smaller competitors can no longer even enter the market.
- chongli 7y ago
  Does it really matter whose fault it is if the effect (entrenched companies collecting economic rents) is the same?
  - skybrian 7y ago
    Understanding causation is useful because it helps you understand how to change the system. If the pressures for increased regulation aren't coming from the companies themselves, where do they come from? What do we do about that?

lwb 7y ago

Very interesting. From the second to last paragraph: > They found that the higher the volume of new regulation in an industry -- measured by analyzing the text of the Code of Federal Regulation -- the less new entry is driven by high Q. Where Q "represents the ratio of a company’s market value to the book value of the company's assets."

ABCLAW 7y ago
Did the authors not consider the common causal variable? Many industries become more capital intensive as they grow, and higher capital thresholds for effective market entry make market entry harder. Additionally, as industries grow, the scale of their externalities grows, requiring regulation. The aggregation of capital in public capital markets supports this (Value of equities up, # of market participants down). The fact that the legislature has been gridlocked for years also doesn't support the hypothesis that regulatory action is the causal root of the lack of competition in the 2000s.
- AnthonyMouse 7y ago
  > Many industries become more capital intensive as they grow, and higher capital thresholds for effective market entry make market entry harder. Additionally, as industries grow, the scale of their externalities grows, requiring regulation. None of that stuff is actually strongly correlated. Whether an industry's capital costs increase disproportionately with scale has little to do with whether that industry has significant externalities requiring more regulation as it grows. You can find major examples of every combination of those things. Moreover, if the increased capital costs are a result of increased regulatory compliance costs, that's not actually disproving the original point either. > The aggregation of capital in public capital markets supports this (Value of equities up, # of market participants down). That would be expected regardless because the lower amount of competition would be expected to result in higher profits and higher valuations regardless of the cause. > The fact that the legislature has been gridlocked for years also doesn't support the hypothesis that regulatory action is the causal root of the lack of competition in the 2000s Whatever gridlock existed hasn't stopped them adding some 40,000 plus new pages to the CFR in that time.
- kortilla 7y ago
  Federal legislator being locked has no relationship to state legislators nor the executive branch. California has been legislating significantly without issue during all of the federal gridlock.

washedup 7y ago

Bingo! One reason why Campaign Finance Reform is so important. But even that’s probably not enough.

munk-a 7y ago
I think with Campaign Finance Reform and the abolition of FPP voting in favor of a ranked system (to end the two party system) would be enough if done together... American still need a decade or two to work the corporate politicians out of it's system though.
api 7y ago
I think it needs to be more radical. Paid lobbying is bribery, period. It's illegal to bribe a judge or a juror. It should be similarly illegal to bribe legislators. Outlaw the entire practice.
- elliekelly 7y ago
  Imagine how outraged we’d be if we found out Federal Judges were going out to dinner with lobbyists and then having those lobbyists draft their judicial opinions for the Judge to just sign their name on without even reading it first. I don’t understand why it’s not equally outrageous that Congress does this on a daily basis. Equally nuts is the special interest group that Upcodes is battling. They draft regulations and then _charge_ the public to access the regulations that they’ve lobbied lawmakers to adopt claiming some sort of IP right over the law.
  - Spooky23 7y ago
    One might also be outraged if a Supreme Court justice was married to a lobbyist who was paid to advocate for positions relevant to matters on the court. https://www.opensecrets.org/news/2019/06/virginia-thomas-extends-her-conservative-reach-for-2020/ https://www.opensecrets.org/news/2019/06/virginia-thomas-ext...
Shivetya 7y ago
You are so off track it is frightening. First off the term " Campaign Finance Reform" is so loaded that it means different things to different people. Usually, shut down people they don't like. Far too many see Citizen United as an affront because they don't understand how bad it would be for everyone if the ruling had been the other way and they don't understand the 1st Amendment. In the US, two political parties control nearly all activity down to the county and city level. If you are in politics already you pretty much have to have permission to seek higher offices. If you are not you have to get past both parties even the one you wish to be part of. There is a reason why at the Congressional level reelection is almost a sure thing with most people losing their seat from retirement! So lets look at the national level, where CU and CFR bells are rung the most. Incumbent politicians have unlimited access to the media and to a point even use of the postal service. That is one hell of an advantage to an outsider to surmount. Then thrown in all the PACs they have friends and family in, all of which are protected by wonderfully named laws to protect the integrity of elections but really do only two things, protect incumbents and provide a legal means to make their friends and families rich. So lets drop back to CU and the 1A. The 1A says nothing about whose speech rights may not be infringed, it says speech may not be infringed. The CU ruling made it clear that it wasn't some fictional body having freedom of speech, it was the right of the people in any organizational form they choose will always have the right to free speech wherever they go. That is why you must resist all attempts to reform campaign financing. The established parties already have it all wrapped up and are merely feeding you nice market tested lies to prevent anyone from breaking their duopoly. Open the door to silencing one voluntary grouping of the public from entering politics by any means and you allow for any future grouping which is a threat to the established parties to be blocked as well.

JMTQp8lwXL 7y ago

A lot of lobbying kills regulation in its tracks. I think there's two kinds of regulation, and it's valuable to distiguish them: regulation that places onerous barriers to entry to entrench existing players (the type you mention), but also: regulation that prevents a truly free market. For example, Medicare being unable to negotiate drug prices, by law. The latter is a regulation that does nothing to deter new companies from entering the pharmaceutical industry, but we all suffer through higher federal expenditures, and ultimately, higher taxes.

AnthonyMouse 7y ago
> For example, Medicare being unable to negotiate drug prices, by law. This isn't a very good example because the health insurance market is dysfunctional for reasons independent of this and Medicare is the government, so "negotiating prices" really just means dictating prices. We already see this with Medicare in areas other than prescription drugs, where Medicare will set payouts below cost. Then many providers won't accept it (harming patients by reducing choice) and others, not wanting to turn away sick patients, will see them at a loss but then have to recover the money by charging more to patients with private insurance or paying out of pocket (harming them and reducing access to care due to higher prices). > The latter is a regulation that does nothing to deter new companies from entering the pharmaceutical industry Even if all it did was exactly what you expect it to (cause lower prescription drug prices), low margins are exactly what will deter new companies from entering a market. They can't recover their startup costs (which incumbents paid years ago), so they don't bother. With price controls that lower amount of competition may not raise prices, but you would certainly expect it to impact the amount of new R&D happening.
- dv_dt 7y ago
  Dictating prices is better done from a government panel than a corporate board. Medicare sometimes sets payouts below "cost", but sometimes costs are out of control. The article below touches on this and goes through some data, and concludes that some segments of over-cost hospitals should maybe come down in price, while also suggesting that primary care physicians are underpaid via Medicare. Regardless of the over/under, that's a better discussion to have in the open publically, than behind closed negotiating doors - leading to systemic over costs (comparing between the US and other nations). http://voices.washingtonpost.com/ezra-klein/2009/07/does_medicare_pay_below_cost_w.html http://voices.washingtonpost.com/ezra-klein/2009/07/does_med...

AcerbicZero 7y ago

This is one of those unfortunate situations where the the problem is clear, but the solution isn't, and proposed solutions can always be attacked from either end of the extreme perspectives. So we get stuck with semi-dysfunctional regulatory bodies at best, and captured extensions of corporate interests passing anti-competitive regulations at worst.

salawat 7y ago
The solution is clear. Regulatory bodies need to take into consideration size, age, and frequency of violation by the regulated in terms of exacting punishment on new entrants. For instance; BigFin fintech company gets caught violating Anti-Money Laundering regulations. Big fine. SmallFin fintech gets caught: slap on the wrist, thou shalt make a remediation plan, and here are the milestones you have to meet. SmallFin continues doing business, but is on the regulators radar. SmallFin caught again? Fine. Now. Let's say SmallFin dissolves, but the key players move and incorporate as YetAnotherSmallFin (different Corp, mostly same people). Get caught? Regulators should look at the people who have been dinged before, and should know better, and regulation should be less forgiving based on that. The fact is, a great deal gets hidden under "the Corporate Veil" that probably shouldn't be so easily divested from by those looking to abuse the system. A regulator should by and large be a constructive guiding hand; not just ssmern as something to be worked around in the process of finding new and interesting ways to do shady things. The catch here is you need to be able to attract high quality people to run the regulator, and I really have no solution for that.
- savant_penguin 7y ago
  The solution to excessive regulation is less regulation, not more. These things tend to backfire.
  - gumby 7y ago
    That may be true (I tend to agree) but it is just as hard to implement. It's not a magic bullet.
  - 7y ago

vishnugupta 7y ago

I've pondered about it in Indian context. India has amazing number of rules and regulations. The problem is that just about all of them are used as rails to collect money through corruption. Only those who can't pay the bribe end up getting punished. Interestingly each new rule (e.g., a new road traffic regulation) only acts as yet another avenue to collect money. I suppose lobbying is a legalised form of bribe so the passage you quoted makes perfect sense.

GordonS 7y ago

Brit here, so I don't really understand lobbying in the US, and how such huge sums of money can be involved without blatant corruption - googling reveals ~3.4 billion USD spent on lobbying during 2018. Let's say I'm Boeing and I pay a lobbying firm 15M USD - what happens next? Where does the money go?

deleted 7y ago
[deleted]
Ididntdothis 7y ago
A good lobbyist will help drafting laws or regulations and bring them in front of lawmakers. A lot of laws are written directly by lobbyists. They may also start a PR campaign for your case.
- Monroe13 7y ago
  In many instances spending on PR campaigns does not necessarily need to be disclosed as a lobbying expense. Money spent on influencing policy greatly exceeds what’s reported on lobbying disclosure reports.
- mattigames 7y ago
  The language we use tends to shape our views, having that in mind "good lobbyist" is an oxymoron, is like saying "good mass murderer", it's better say "effective lobbyist" or similar wording that can't be confused with a moral judgement.
  - Symmetry 7y ago
    So, I've donated money to the Nature Conservancy and the ACLU both with the intent that they would engage in lobbying on my behalf, both of which I consider to be "good lobbying".
    - mattigames 7y ago
      Nah, is good only in a very narrow specific sense but is still damaging in the big scheme of things; by perpetuating the "lobbying-based-democracy" instead of trying to achieve actual democracy (as in vote for nature conservancy, vote for better education, etc)

rjurney 7y ago

Regulation tends to exist because the market wasn't regulating itself and abuse was rampant. So there seems to be an underlying cause of dysregulation common to these markets.

100100010001 7y ago
Sometimes the opposite is true. Jaywalking is a great example. Rich assholes didn’t like their new cars having dents because they wouldn’t stop for pedestrians. So they made it illegal to be a pedestrian by enacting jaywalking laws.

rayiner 7y ago

The causation could easily be reversed. High margin businesses get regulated, and lobbying ramps up to fight those regulations. You're seeing this happen before your very eyes with companies like Google and Facebook. Their lobbying expenditures have exploded as a response to increased treats of regulation.

tathougies 7y ago
And as they get regulated, they also become government monopolies, because the regulations effectively mean smaller competitors can no longer even enter the market.
chongli 7y ago
Does it really matter whose fault it is if the effect (entrenched companies collecting economic rents) is the same?
- skybrian 7y ago
  Understanding causation is useful because it helps you understand how to change the system. If the pressures for increased regulation aren't coming from the companies themselves, where do they come from? What do we do about that?