WEBVTT
00:00:05.280 --> 00:00:07.200
Welcome back to the Lawrence Larson show.
00:00:07.280 --> 00:00:12.160
If I'm honest with you, I'd have to admit that I like shopping for things in person.
00:00:12.320 --> 00:00:16.399
However, I would be the first to admit that do I buy some things online?
00:00:16.719 --> 00:00:17.679
Absolutely I do.
00:00:17.839 --> 00:00:24.399
And one of the real attractions to buying online, there's no tax advantage to doing it unless you're cheating overtly.
00:00:24.640 --> 00:00:31.039
But if you've got uh things you order online, an awful lot of the time people, customers, expect free shipping.
00:00:31.120 --> 00:00:34.799
But is the government's red tape about to kill free shipping for good?
00:00:34.960 --> 00:00:36.799
Patrick McLaughlin joins me now.
00:00:36.880 --> 00:00:44.880
He's a research fellow at the Hoover Institution down in Stan at Stanford and a visiting research fellow at the Pacific Legal Foundation.
00:00:45.039 --> 00:00:46.640
Patrick, welcome back to the program.
00:00:47.840 --> 00:00:49.759
Lars, it's my pleasure to join you again.
00:00:50.159 --> 00:00:56.079
So what is happening with federal and and it's a term of art I hadn't, I have to admit I haven't heard before.
00:00:56.320 --> 00:00:58.640
Federal regulatory accumulation.
00:00:58.799 --> 00:00:59.679
What is that?
00:01:01.520 --> 00:01:04.400
That is well, it's not unique to the federal government.
00:01:04.560 --> 00:01:12.879
This is something that occurs in a lot of different governments and Western democracies, but it basically is the buildup of regulations over time.
00:01:13.920 --> 00:01:16.400
A former student summarized it really well.
00:01:16.640 --> 00:01:21.840
He came to my office one day and he said, I've I know what I'm gonna title my uh thesis paper.
00:01:21.920 --> 00:01:24.480
I'm gonna call it regulators regulate.
00:01:24.719 --> 00:01:29.680
And at first I thought that was the stupidest thing I've heard, but then I realized, no, that's actually really smart.
00:01:29.840 --> 00:01:34.319
What he's saying is over time, Congress creates a bunch of different agencies.
00:01:34.480 --> 00:01:41.120
They populate these agencies with staffers who work towards one mission, make more regulations.
00:01:41.439 --> 00:01:44.719
And there's not a flip side to that mission typically.
00:01:44.879 --> 00:01:48.719
Uh they don't look back at old regulations and say, do we need these things?
00:01:48.879 --> 00:01:50.159
What are the effects of these things?
00:01:50.319 --> 00:01:51.359
Are they even working?
00:01:51.519 --> 00:01:53.519
They just make more and more regulations.
00:01:53.680 --> 00:01:57.920
And over time, the buildup becomes very obvious in its economic effects.
00:01:58.079 --> 00:02:03.840
It becomes even obvious if you just go to a law library and see how many books of regulations there are on the shelf.
00:02:04.000 --> 00:02:07.200
About 200,000 pages right now, Lars, at the federal level alone.
00:02:07.519 --> 00:02:07.920
Wow.
00:02:08.080 --> 00:02:10.240
Well, I'll tell you, I may have one better on you.
00:02:10.400 --> 00:02:17.120
An old acquaintance of mine, Mark Teeson, uh, he he liked to say, dogs bark, ducks quack, and regulators regulate.
00:02:17.280 --> 00:02:21.280
And and I I I guess for the f for for the life of me, it'd be hard to imagine.
00:02:21.439 --> 00:02:27.439
Every day when I get up, I usually wake up, get a cup of coffee, and think, what's happened overnight that's new?
00:02:27.599 --> 00:02:31.680
Because I'm in the news business and I'm in the commenting on the news business.
00:02:31.919 --> 00:02:39.520
But can you imagine getting in your car or firing up your computer every morning saying, Well, we wrote some really good regulations last week.
00:02:39.680 --> 00:02:41.439
I wonder what we can regulate today.
00:02:41.599 --> 00:02:46.639
It's hard for me to wrap my head around that kind of mindset, but I suppose there are people who do that.
00:02:47.599 --> 00:02:50.319
Yeah, you know, I I don't think it's an indictment of the people.
00:02:50.400 --> 00:02:52.080
It's just the job description, really.
00:02:52.159 --> 00:03:02.639
Uh I uh, you know, full disclosure, I once worked in a regulatory agency, and it was the Federal Railroad Administration, and I worked on different projects that involved making new regulations.
00:03:02.960 --> 00:03:10.800
Uh, there was one project I worked on where my cost-benefit analysis uh led the decision not to make a new regulation.
00:03:10.960 --> 00:03:11.120
Wow.
00:03:11.280 --> 00:03:13.039
And the other projects where we did make new regulations.
00:03:13.280 --> 00:03:15.199
Did you get fired for that, Patrick?
00:03:15.599 --> 00:03:17.280
Well, yeah, uh almost.
00:03:17.439 --> 00:03:26.159
What I didn't I didn't get a raise, I didn't even get a plaque to go on my wall for that one, but I did get plaques to go on my wall for every new regulation that we made.
00:03:26.240 --> 00:03:30.080
So it's just it's the incentives that are created in these agencies.
00:03:30.240 --> 00:03:35.039
People are rewarded for making new regulations and not rewarded for stopping them.
00:03:35.439 --> 00:03:48.560
Okay, let's talk about how this applies to shipping, because uh you've written that regulatory restrictions are associated with lower labor productivity in all four freight modes air, rail, truck, and water.
00:03:48.719 --> 00:03:56.080
So the more regulations you have, the more expensive and time-consuming it becomes to move goods from point A to point B, right?
00:03:57.039 --> 00:03:57.520
That's right.
00:03:57.680 --> 00:04:11.599
We looked across all of those those modes of shipping for the past 50 years, and we wanted to know what would happen if you had a substantive, not crazy, but substantive change in the level of regulations.
00:04:11.840 --> 00:04:13.759
We looked at 5% changes.
00:04:13.919 --> 00:04:24.639
And and as you said, we found that if you had a 5% increase in regulations, productivity growth goes down across the board, labor productivity, capital productivity.
00:04:24.800 --> 00:04:34.959
In other words, you have to you have to spend more in order to get the same amount of shipping from your network of trains.
00:04:35.199 --> 00:04:42.959
Uh the the other effect, and probably the more the more relevant one for your listeners, is uh the price effect.
00:04:43.120 --> 00:04:55.120
We found that same five 5% increase in regulations led to for rail shipping in particular, a pretty bad uh per unit cost of goods ship increase.
00:04:55.199 --> 00:04:56.959
Uh so it that was 2.3%.
00:04:57.439 --> 00:05:00.000
So again, 5% increase in regulations.
00:05:00.160 --> 00:05:04.800
We've seen 5% changes about 47 times over the past couple of decades.
00:05:04.959 --> 00:05:06.959
So it happens fairly frequently.
00:05:07.120 --> 00:05:13.600
Uh, and that leads to a 2.3% increase in the per unit cost of goods shipped by rail.
00:05:13.839 --> 00:05:19.279
That means your prices at the grocery stores will be going up as well.
00:05:19.519 --> 00:05:26.240
Maybe not 2.3%, but some of that's going to get passed along to you and we'll feel the pinch.
00:05:26.639 --> 00:05:32.240
Well, and one of the examples that I throw out to my audience all the time, I absolutely hate the Jones Act.
00:05:32.480 --> 00:05:45.839
And and an example that I ran across was in Western Europe, I don't often use Western Europe as a good example of things, but they apparently ship an awful lot of goods by water, you know, for those, especially for those countries that front on water.
00:05:46.000 --> 00:05:51.519
And so you'd say, well, how much how much do you have shipment of goods from up and down the west coast or up and down the east coast?
00:05:51.680 --> 00:05:52.800
You'd say, almost none.
00:05:52.959 --> 00:06:04.319
And you'd say, so what's your alternative to say putting hundreds of millions of pounds of cargo on a barge and pushing it from New Jersey to Florida or pushing it from Seattle to Los Angeles?
00:06:04.480 --> 00:06:06.879
And you'd say, that's about two percent of shipping.
00:06:07.040 --> 00:06:07.680
You'd say, why?
00:06:07.839 --> 00:06:08.959
Because of the Jones Act.
00:06:09.120 --> 00:06:10.879
So where does the shipping happen instead?
00:06:11.120 --> 00:06:19.439
We take each little 80,000-pound unit and put it on a truck with a driver and drive it down a highway and fill the highways full of trucks.
00:06:19.600 --> 00:06:21.199
And you say, is that a good idea?
00:06:21.600 --> 00:06:22.639
I don't think it's a good idea.
00:06:22.720 --> 00:06:29.120
I think it would be much more efficient to ship it by water, but you've got a Jones Act that basically says you can't.
00:06:30.319 --> 00:06:43.519
Yeah, and uh right now, as as you know and your listeners probably know, there's consideration in Congress for this uh Railway Safety Act, and this is going to make this problem even worse.
00:06:43.600 --> 00:06:56.319
So it's gonna it's gonna increase the level of regulations on the on the freight world, railroad world, uh, and particularly got some egregious examples of regulations that target a totally wrong margin.
00:06:56.480 --> 00:07:03.680
What I mean by that is there's regulations that, as the bill claims, the title of the bill claims would create safety.
00:07:03.839 --> 00:07:07.439
That's that's the ostensible goal, but they wouldn't do that at all.
00:07:07.600 --> 00:07:11.680
There's no so there's this minimum cruise size requirement in the bill.
00:07:11.839 --> 00:07:20.560
Uh, this was a requirement that every freight train, just about every freight train, would have to have at least two people in the cab of the locomotive.
00:07:20.800 --> 00:07:32.319
Now, most freight trains have that already, but going forward, we're going into a world where there's more and more autonomous vehicles, trucking's getting more uh more permission to do autonomous shipping.
00:07:32.480 --> 00:07:40.560
Uh, you would think that railroads would be allowed to do that too, but this bill would not allow them to go to a one-person or a zero-person crew.
00:07:40.639 --> 00:07:42.000
Instead, they're stuck at two.
00:07:42.160 --> 00:07:52.000
And the problem here is you know, not only is that costly, not only does that limit productivity growth potential, but also that doesn't lead to safety.
00:07:52.079 --> 00:07:54.079
There no, it doesn't lead to safety at all.
00:07:54.160 --> 00:07:59.199
That is Patrick McLaughlin, who's a research fellow at the Hoover Institution at Stanford.
00:07:59.360 --> 00:08:02.399
He's a visiting fellow at the Pacific Legal Foundation.
00:08:02.560 --> 00:08:04.160
Patrick, thanks so much for the time.
00:08:04.319 --> 00:08:06.480
Back in a moment on First Amendment Friday.
00:00:05.280 --> 00:00:07.200
Welcome back to the Lawrence Larson show.
00:00:07.280 --> 00:00:12.160
If I'm honest with you, I'd have to admit that I like shopping for things in person.
00:00:12.320 --> 00:00:16.399
However, I would be the first to admit that do I buy some things online?
00:00:16.719 --> 00:00:17.679
Absolutely I do.
00:00:17.839 --> 00:00:24.399
And one of the real attractions to buying online, there's no tax advantage to doing it unless you're cheating overtly.
00:00:24.640 --> 00:00:31.039
But if you've got uh things you order online, an awful lot of the time people, customers, expect free shipping.
00:00:31.120 --> 00:00:34.799
But is the government's red tape about to kill free shipping for good?
00:00:34.960 --> 00:00:36.799
Patrick McLaughlin joins me now.
00:00:36.880 --> 00:00:44.880
He's a research fellow at the Hoover Institution down in Stan at Stanford and a visiting research fellow at the Pacific Legal Foundation.
00:00:45.039 --> 00:00:46.640
Patrick, welcome back to the program.
00:00:47.840 --> 00:00:49.759
Lars, it's my pleasure to join you again.
00:00:50.159 --> 00:00:56.079
So what is happening with federal and and it's a term of art I hadn't, I have to admit I haven't heard before.
00:00:56.320 --> 00:00:58.640
Federal regulatory accumulation.
00:00:58.799 --> 00:00:59.679
What is that?
00:01:01.520 --> 00:01:04.400
That is well, it's not unique to the federal government.
00:01:04.560 --> 00:01:12.879
This is something that occurs in a lot of different governments and Western democracies, but it basically is the buildup of regulations over time.
00:01:13.920 --> 00:01:16.400
A former student summarized it really well.
00:01:16.640 --> 00:01:21.840
He came to my office one day and he said, I've I know what I'm gonna title my uh thesis paper.
00:01:21.920 --> 00:01:24.480
I'm gonna call it regulators regulate.
00:01:24.719 --> 00:01:29.680
And at first I thought that was the stupidest thing I've heard, but then I realized, no, that's actually really smart.
00:01:29.840 --> 00:01:34.319
What he's saying is over time, Congress creates a bunch of different agencies.
00:01:34.480 --> 00:01:41.120
They populate these agencies with staffers who work towards one mission, make more regulations.
00:01:41.439 --> 00:01:44.719
And there's not a flip side to that mission typically.
00:01:44.879 --> 00:01:48.719
Uh they don't look back at old regulations and say, do we need these things?
00:01:48.879 --> 00:01:50.159
What are the effects of these things?
00:01:50.319 --> 00:01:51.359
Are they even working?
00:01:51.519 --> 00:01:53.519
They just make more and more regulations.
00:01:53.680 --> 00:01:57.920
And over time, the buildup becomes very obvious in its economic effects.
00:01:58.079 --> 00:02:03.840
It becomes even obvious if you just go to a law library and see how many books of regulations there are on the shelf.
00:02:04.000 --> 00:02:07.200
About 200,000 pages right now, Lars, at the federal level alone.
00:02:07.519 --> 00:02:07.920
Wow.
00:02:08.080 --> 00:02:10.240
Well, I'll tell you, I may have one better on you.
00:02:10.400 --> 00:02:17.120
An old acquaintance of mine, Mark Teeson, uh, he he liked to say, dogs bark, ducks quack, and regulators regulate.
00:02:17.280 --> 00:02:21.280
And and I I I guess for the f for for the life of me, it'd be hard to imagine.
00:02:21.439 --> 00:02:27.439
Every day when I get up, I usually wake up, get a cup of coffee, and think, what's happened overnight that's new?
00:02:27.599 --> 00:02:31.680
Because I'm in the news business and I'm in the commenting on the news business.
00:02:31.919 --> 00:02:39.520
But can you imagine getting in your car or firing up your computer every morning saying, Well, we wrote some really good regulations last week.
00:02:39.680 --> 00:02:41.439
I wonder what we can regulate today.
00:02:41.599 --> 00:02:46.639
It's hard for me to wrap my head around that kind of mindset, but I suppose there are people who do that.
00:02:47.599 --> 00:02:50.319
Yeah, you know, I I don't think it's an indictment of the people.
00:02:50.400 --> 00:02:52.080
It's just the job description, really.
00:02:52.159 --> 00:03:02.639
Uh I uh, you know, full disclosure, I once worked in a regulatory agency, and it was the Federal Railroad Administration, and I worked on different projects that involved making new regulations.
00:03:02.960 --> 00:03:10.800
Uh, there was one project I worked on where my cost-benefit analysis uh led the decision not to make a new regulation.
00:03:10.960 --> 00:03:11.120
Wow.
00:03:11.280 --> 00:03:13.039
And the other projects where we did make new regulations.
00:03:13.280 --> 00:03:15.199
Did you get fired for that, Patrick?
00:03:15.599 --> 00:03:17.280
Well, yeah, uh almost.
00:03:17.439 --> 00:03:26.159
What I didn't I didn't get a raise, I didn't even get a plaque to go on my wall for that one, but I did get plaques to go on my wall for every new regulation that we made.
00:03:26.240 --> 00:03:30.080
So it's just it's the incentives that are created in these agencies.
00:03:30.240 --> 00:03:35.039
People are rewarded for making new regulations and not rewarded for stopping them.
00:03:35.439 --> 00:03:48.560
Okay, let's talk about how this applies to shipping, because uh you've written that regulatory restrictions are associated with lower labor productivity in all four freight modes air, rail, truck, and water.
00:03:48.719 --> 00:03:56.080
So the more regulations you have, the more expensive and time-consuming it becomes to move goods from point A to point B, right?
00:03:57.039 --> 00:03:57.520
That's right.
00:03:57.680 --> 00:04:11.599
We looked across all of those those modes of shipping for the past 50 years, and we wanted to know what would happen if you had a substantive, not crazy, but substantive change in the level of regulations.
00:04:11.840 --> 00:04:13.759
We looked at 5% changes.
00:04:13.919 --> 00:04:24.639
And and as you said, we found that if you had a 5% increase in regulations, productivity growth goes down across the board, labor productivity, capital productivity.
00:04:24.800 --> 00:04:34.959
In other words, you have to you have to spend more in order to get the same amount of shipping from your network of trains.
00:04:35.199 --> 00:04:42.959
Uh the the other effect, and probably the more the more relevant one for your listeners, is uh the price effect.
00:04:43.120 --> 00:04:55.120
We found that same five 5% increase in regulations led to for rail shipping in particular, a pretty bad uh per unit cost of goods ship increase.
00:04:55.199 --> 00:04:56.959
Uh so it that was 2.3%.
00:04:57.439 --> 00:05:00.000
So again, 5% increase in regulations.
00:05:00.160 --> 00:05:04.800
We've seen 5% changes about 47 times over the past couple of decades.
00:05:04.959 --> 00:05:06.959
So it happens fairly frequently.
00:05:07.120 --> 00:05:13.600
Uh, and that leads to a 2.3% increase in the per unit cost of goods shipped by rail.
00:05:13.839 --> 00:05:19.279
That means your prices at the grocery stores will be going up as well.
00:05:19.519 --> 00:05:26.240
Maybe not 2.3%, but some of that's going to get passed along to you and we'll feel the pinch.
00:05:26.639 --> 00:05:32.240
Well, and one of the examples that I throw out to my audience all the time, I absolutely hate the Jones Act.
00:05:32.480 --> 00:05:45.839
And and an example that I ran across was in Western Europe, I don't often use Western Europe as a good example of things, but they apparently ship an awful lot of goods by water, you know, for those, especially for those countries that front on water.
00:05:46.000 --> 00:05:51.519
And so you'd say, well, how much how much do you have shipment of goods from up and down the west coast or up and down the east coast?
00:05:51.680 --> 00:05:52.800
You'd say, almost none.
00:05:52.959 --> 00:06:04.319
And you'd say, so what's your alternative to say putting hundreds of millions of pounds of cargo on a barge and pushing it from New Jersey to Florida or pushing it from Seattle to Los Angeles?
00:06:04.480 --> 00:06:06.879
And you'd say, that's about two percent of shipping.
00:06:07.040 --> 00:06:07.680
You'd say, why?
00:06:07.839 --> 00:06:08.959
Because of the Jones Act.
00:06:09.120 --> 00:06:10.879
So where does the shipping happen instead?
00:06:11.120 --> 00:06:19.439
We take each little 80,000-pound unit and put it on a truck with a driver and drive it down a highway and fill the highways full of trucks.
00:06:19.600 --> 00:06:21.199
And you say, is that a good idea?
00:06:21.600 --> 00:06:22.639
I don't think it's a good idea.
00:06:22.720 --> 00:06:29.120
I think it would be much more efficient to ship it by water, but you've got a Jones Act that basically says you can't.
00:06:30.319 --> 00:06:43.519
Yeah, and uh right now, as as you know and your listeners probably know, there's consideration in Congress for this uh Railway Safety Act, and this is going to make this problem even worse.
00:06:43.600 --> 00:06:56.319
So it's gonna it's gonna increase the level of regulations on the on the freight world, railroad world, uh, and particularly got some egregious examples of regulations that target a totally wrong margin.
00:06:56.480 --> 00:07:03.680
What I mean by that is there's regulations that, as the bill claims, the title of the bill claims would create safety.
00:07:03.839 --> 00:07:07.439
That's that's the ostensible goal, but they wouldn't do that at all.
00:07:07.600 --> 00:07:11.680
There's no so there's this minimum cruise size requirement in the bill.
00:07:11.839 --> 00:07:20.560
Uh, this was a requirement that every freight train, just about every freight train, would have to have at least two people in the cab of the locomotive.
00:07:20.800 --> 00:07:32.319
Now, most freight trains have that already, but going forward, we're going into a world where there's more and more autonomous vehicles, trucking's getting more uh more permission to do autonomous shipping.
00:07:32.480 --> 00:07:40.560
Uh, you would think that railroads would be allowed to do that too, but this bill would not allow them to go to a one-person or a zero-person crew.
00:07:40.639 --> 00:07:42.000
Instead, they're stuck at two.
00:07:42.160 --> 00:07:52.000
And the problem here is you know, not only is that costly, not only does that limit productivity growth potential, but also that doesn't lead to safety.
00:07:52.079 --> 00:07:54.079
There no, it doesn't lead to safety at all.
00:07:54.160 --> 00:07:59.199
That is Patrick McLaughlin, who's a research fellow at the Hoover Institution at Stanford.
00:07:59.360 --> 00:08:02.399
He's a visiting fellow at the Pacific Legal Foundation.
00:08:02.560 --> 00:08:04.160
Patrick, thanks so much for the time.
00:08:04.319 --> 00:08:06.480
Back in a moment on First Amendment Friday.
