Walls Street Journal Agrees with Me on Problems of Charging Electric Cars

On July 15, I published a post on the weaknesses of al the forecasts about electric car growth -- the inability of many to but cars because of lack of access to chargers.  Today, the Wall Street Journal had an interesting article on another aspect of the problem -- the lack of public charging locations and the immense strain that  might be placed on the electricity network if electric car users try to charge at the wrong time.  It also refers to an article in the MIT Technology Review about the problems that electricity utilities will have with high speed chargers that may overwhelm neighborhood grids.  I am glad to see that some of the practical problems with electric cars are being aired.

DC Circuit Ignores Economics in Ordering FAA to Reconsider Denial of Rulemaking on Seat Pitch.

On July 28, the DC Circuit ruled on the denial by the FAA of a request by a non-profit to promulgate rules governing the minimum requirements for seat sizes and spacing  (seat pitch) on passenger aircraft.  It used colorful language that implied some sympathy with the petitioner's arguments, and rejected the FAA's argument that the case should be dismissed.  However, it also rejected the petitioners' request that FAA be required to institute a rulemaking proceeding.  It is unlikely that, in the end, the court will require the FAA to regulate seat size and spacing.  The Court did not, as some alarmist headlines proclaimed, order the FAA "to solve the case of the incredible shrinking airline seat."

The petition argued that over 20 years, seat pitch had decline from 35 inches to 31, or even, in some cases, 28 inches, that seats had narrowed from 18 1/2 to 17 inches, and that passengers had grown heavier.  The FAA did not argue about passenger weight -- in fact, over 20 years, average weights had increased by 15-17 lbs.  However , it did claim that the petitioners' concerns did not warrant action because the issues raised related to passenger health and comfort, and did not raise an immediate safety or security concern.  It noted that seat pitch numbers were not directly comparable with earlier data because modern, thinner seats at lower seat pitch provided more space than older seats at higher pitch, and that the emergency evacuation tests it had conducted showed that reduced seat pitch did not affect safety.

However, the court found that the FAA did not provide acceptable evidence on evacuation tests because it had relied on confidential, non-public information.  The Agency had, therefore, relied materially on information it had not disclosed and had pointed to that information as the basis for affirmance.  It remanded the case to the FAA "for a properly reasoned disposition of the petition's safety concerns".  However, it did not require the Agency to undertake a rulemaking proceeding.

Thus, the remaining work on this case is basically a lawyer's job -- write a better opinion.  Put some emergency evacuation evidence into the public record.  Emphasize that narrower seats invalidate comparison of historic seat pitch changes.  And make the economic argument that the petitioner's proposed rule would reduce seats on the aircraft, requiring higher prices for the remaining seats.  This would, in turn, divert some passengers to lower cost forms of transportation which have poorer safety records than airlines.

An aside -- in researching I found a very useful aviation website.  Seat Guru has seat maps, seat pitch and width,by aircraft type for almost all the major airlines in the world.

The Push for Electric Cars -- the biggest folly of all

The Wall Street Journal had an excellent  article this week on the future of electric cars without massive subsidies .  Basically it noted that, without subsidies, such cars are simply not competitive with gas-powered vehicles.  It also noted the results when subsidies are eliminated,  Thus:

1.  When Hong Kong eliminated subsidies, Tesla sales in the following quarter fell to Zero.

2.  In Georgia, electric vehicle sales plummeted 80% the month after a $5,000 tax credit was repealed.

In order to become competitive with gasoline engines, electric battery costs will have to decline substantially and gasoline prices would have to increase substantially.  Battery costs have decreased substantially -- from $1,000 per kilowatt hour in 2010 to $273 per kwh in 2016 -- but they still have a long way to go to match the advantage of gasoline.  A typical electric battery adds $20,000 to the cost of a car. One article estimates that. at the current battery cost of $270 per kwh, oil would have to cost more than $300 per barrel to make electric and gasoline equally attractive.

 I have always thought that one basic problem with the idea of electric cars is that a substantial portion of possible purchasers don't have garages in which to charge them.  I must admit that I haven't seen any literature on this, but it seems logical that electric cars will not be able to compete for a significant portion of the market.  I live in a 85 year old house with a garage that was built for Model -Ts.  Modern cars do not fit in it.  Many other people may use garages primarily for storage, and park cars in their driveways.  Many other American live in apartments -- 17% of the population.   Most of these are served by parking lots, and those in multi-story garages are unlikely to have access to electric plugs.  And many apartment dwellers in cities simply park on the street.   None of these people are candidates for electric car ownership.


An interesting blogpost this week discussed real world issues in electric vehicle driving -- for example that the range of electric cars is substantially reduced in cold weather.  Also, to maximize range, drivers really can't go over 60 mph.  Try doing this in Texas.

Resuming publication

It has been three years since I last posted in this blog.  Much has happened since,  In particular, President Trump has been making  major changes in the structure of regulation.  I find that I now have the time and the interest to start publishing this blog again.  I have started to accumulate material and hope to post my first article of substance within the next two weeks.

Steven Pearlstein column on Net Neutrality gets close to real issues in debate.

Steven Pearlstein, a professor at George Mason University, has published a column in the Washington Post Sunday that penetrates the phoney issues in the current debate.  All the noise at present is about neutrality, with claims that Internet Service Providers (ISPs)are discriminating and that they will destroy the Internet as we know it.  Pearlstein's column, entitled " Shades of complexity dominate the debate over "net neutrality", turns the debate to economics. which is where it belongs.

Pearlstein says:

"This is a debate that has come to be dominated by hypocrisy, half-truths and impenetrable complexities.  At one level, net neutrality is a solution to a problem that, for the moment, doesn’t exist.  ... At another level, what the net neutrality debate is really about is deciding who will pay the considerable costs of building out the infrastructure to handle all those bandwidth-hogging videos and games that we’ll be downloading from the Internet. The content providers and start-up app creators, naturally, think they shouldn’t have to pay because that would discourage their economy-disrupting innovation. The ISPs, naturally, think they will only have the money and incentive to expand their network if they can levy an extra charge on the Netflixes and the Googles who have sucked most of the value out of the Internet."

Pearlstein is correct that the fundamental issue is economic.  However, it is not merely related to the cost of building out additional infrastructure.  Rather, it relates to the manner in which the cost of the entire Internet will be recovered.  Like many other networks, the Internet is a joint product in economic terms – it has substantial fixed costs which must be recovered either from suppliers of information, or from consumers.  At present such costs are recovered from consumers.  However, there are proposals to recover some of those costs from suppliers in the form  of higher charges for greater speeds.  These are certainly reasonable proposals, but, obviously, shifting part of the burden to suppliers who had a free ride has generated opposition.  To win the argument, suppliers have camouflaged their economic interest with claims about equity, unfairness to small vendors, etc.  But remember, underneath all the propaganda is the fundamental economic issue of who should pay for the Internet.


25 years ago, I was involved in antitrust litigation with respect to how the cost of airline computerized reservation systems would be recovered.  The CRSs were the essential link between travel agents and the airlines upon which they made reservations.  The vendors, who were all airlines themselves at that time, initially recovered the costs from travel agents, but competition among the airline vendors reduced charges to them.  Therefore, with the help of government regulation requiring nondiscrimination in booking fees, they imposed substantial fees on other airlines.  Outraged, other carriers sued for over $4 billion, claiming that each CRS was a monopoly  After a three-month trial, a jury rejected this claim.

The current debate has many similarities that long-ago controversy.  I will write more about net neutrality and joint products in the future.  I may also devote another post to Pearlstein's bizarre solution to the problem – he  proposes to grant local monopolies to ISPs based upon competitive bidding.  The winning ISPs would then be able to charge monopoly prices.

Washington Post Columnists Attack Jonathan Gruber

I don't know if the Washington Post has taken an official position on the veracity of Jonathan Gruber, but its columnists are having a field day attacking President Obama and the entire Obamacare structure,  They rely on Gruber's straightforward, cynical explanations of what the administration was doing to get the bill passed.  Yesterday's newspaper (November 17) contain an interesting column by Marc Theissen, entitled "Thanks to Jonathan Gruber for Revealing Obamacare Deception."   He suggests that "The reason Democrats are running from Gruber is the same reason conservatives should be thanking him: Gruber has exposed what liberals really think of the American people".   Last week, Charles Krauthammer wrote on "The Gruber Confession."  His view was that"Gruber's admission that, in order to get it passed, the bill was made deliberately obscure and deceptive constitutes the ultimate vindication of the charge that Obama care was sold on a pack of lies".

On the other hand, the New York Times in an editorial yesterday entitled "The Impolitic Jonathan Gruber" laments the ammunition he has provided opponents of Obamacare, and claims that he really wasn't that important, and his frank statements are "largely wrong".  Its basic point is don't believe him, even if what he says was correct.  However, it is very difficult for it to show that we shouldn't believe our "lying eyes."

The Gift that Keeps on Giving: Gruber tells the truth about the Cadillac Tax

For the last couple of weeks, debate about Obama care has been inflamed by revelations about comments by Professor Jonathan Gruber of MIT, an architect of the Affordable Care Act, who gave several speeches disclosing details about the creation of Obama care.  The latest information that has come out involve the "Cadillac" tax that will start in 2017 upon more expensive healthcare plans. This is well covered in an article today on the opinion pages the Wall Street Journal – Another Obamacare Deception, by Tevi Troy, president of the American Health Policy Institute and a former deputy secretary of Health and Human Services.  I will let you read it, rather than summarize it myself.

Obama Proposes Regulation of the Internet to Achieve Net Neutrality

On November 10, President Obama called on the FCC to adopt regulations that would require net neutrality, or non-discrimination, in the operation of the Internet.  The Wall Street Journal today has an interesting column by Andy Kessler suggesting that this proposal would result in full-scale traditional utility-style regulation of the entire Internet.  According to Kessler, the President's call to regulate under Title II of the Federal Communications Act would give the FCC the power to regulate all aspects of Internet service, including prices.

My initial reaction was that this was an exaggeration –  in order to achieve net neutrality, all that is  required are anti-discrimination regulations.  For example, when airlines were deregulated in 1978, the statute eliminated pricing regulation for domestic air transportation, but retained the statute permitting discrimination in air transportation.  I would suggest that this is probably the goal of the administration – not full-scale regulation of the Internet.

However, it seems clear that regulation under Title II would encompass much broader forms of regulation than those required to achieve net neutrality.  This was explained in an excellent brief summary of the issue in Time Magazine.  Mr. Kessler may have a point.

The Blog Resumes

For several reasons, I have done nothing with this blog for almost two years.  I have no great excuses – I just was busy on a lot of other things and it not see much benefit from publishing a blog that had few readers.  However, things have slowed down a bit, which is to be expected at my age, and I have decided to resume publishing.

This time around, I will limit the areas I cover, both to give me a focus, and to perhaps attract readers who are particularly interested in those areas.  For now, those areas will be regulation of the Internet, and the medical regulatory issues enveloped in Obamacare.  President Obama announced yesterday that he fully supports "net neutrality", and this week's news reports that the actual sign-ups for Obamacare are far less than reported.  I am certain there will always be something of interest to post, and I hope readers will find Regulatory Follies a useful resource.

Obama's false claims on savings in New York

It's time to start on this blog again. I've just been too busy most of the last year on other projects, including serving as President of a service club, to devote any time to the blog. However, that project is winding down, and the Obama administration provides more and more examples of disastrous regulatory policies.

I will ease into this by simply bringing attention to an excellent Wall Street Journal editorial today about the Obama administration's misleading claim that insurance premiums for New Yorkers will actually be reduced by 50%, compared to last year.  This may be correct, but the reason is that New York insurance rates are so heavily regulated that Obama care will actually deregulate some of the rates.  20 years ago, New York adopted regulations for "community rating" which eliminated the ability of insurance companies to adjust rates on basis of the risk presented by individual insurance candidates. As a result, New York rates are so absurdly high that there is almost no personal insurance market. Under Obamacare, the administration is proposing to transfer much of the New York system to the other 49 states, resulting in increased premiums for individual medical insurance all over the country.

Medicare Is Too Good a Deal

I have had two experiences this week that suggest that the government is providing too much subsidy for Medicare. In one case, I received my 2013 plan materials from my Medicare Advantage plan. In the other, I had a medical episode that required extensive testing with high-technology equipment, and consultation with professional medical staff, for which I paid $20.

Under my Medicare Advantage plan, the amounts I pay for various services will actually be reduced. The maximum “out-of-pocket” amount that I will pay for all hospital and doctor services during the year is $3900 – a reduction of $1000 from this year’s $4900. For visits to my primary care physician, I now have a copayment of $5.00. Next year they will be free – no copayment. The cost of visits to specialists will be reduced from $35 to $20, and numerous other medical services will have a similar reduction.

In the other episode, I had to visit a hospital for a barium swallow test after a pill I swallowed went into my lungs rather than my esophagus. The test required a speech therapist to feed me various foods and watch the course of the foods through my throat on a very expensive looking x-ray machine. She will later write a report that will be sent to my specialist doctor. The process took 40 minutes, used expensive equipment, and included a detailed conversation with the speech therapist about what I could do to avoid further episodes. The hospital charge for the test was $180, there was an insurance discount (required by Medicare) of $80, the hospital billed Medicare for $80, and I paid $20.

These prices are ridiculous because I can easily afford to pay more.  It may be reasonable to provide highly discounted prices to low-income persons who really don’t have money to pay for medical care (many of whom would be on Medicaid), but any reasonably affluent person could afford to pay more than I paid above for important medical services. The problem is not just that I am getting away with a cheap price; it is that other people are subsidizing that price through their taxes. With a one trillion dollar annual deficit, in order to save me $1000 in my annual medical costs, the government will be forced to borrow money from China.

Subsidization by the government of such routine medical expenditures as doctor visits or lab tests subverts the purpose of insurance, which should be to protect against the costs of major medical events. Earlier in the year, I had a knee replacement operation, in which I spent three nights in the hospital. The hospital billed the government $108,000; Medicare disallowed $96,000, but paid $12,000 for the services provided to me. The initial bill obviously overstates the hospital’s costs, but the net amount seemed reasonable, if not a little bit less than what I had expected. The savings to me were substantial and an appropriate subject for insurance.

The price reductions imposed by Medicare also have unfortunate economic consequences. The marginal cost of a visit to my primary care physician is now zero. Now, anyone with a sniffle can go to the doctor for free, while previously, the minimal expenditure of five dollars would have dissuaded many people from bothering to go. I suspect there will be a substantial increase of patients in  doctors’ waiting rooms. This, of course, imposes a noneconomic cost in terms of waiting time that is probably the equivalent of the five dollar fee. But the fee is much more efficient as a market clearing mechanism.

There has been political discussion about means testing Medicare, with even President Obama supporting the concept. However, these discussions seem to have focused on increasing premiums for wealthier Americans. I suspect there would be more impact on Medicare expenditures if we means tested payments by the individual for medical services. A more affluent person might not be dissuaded from a doctor visit by a $20 co-pay, but might decide that $100 co-pay makes the visit not worth the expense. Whichever way it goes, there ultimately should be some form of means-testing.

A Clear Explanation of the Budget Deficit Problem

I received from a friend in California a link to a YouTube video posted by a retired IBM accountant. Since he actually focuses on the columns in the federal budget, it is very simple, but clear, with the conclusion that Congress can never close the budget deficit. It is worth watching.

Obama's Logical Fallacy on Entrepreneurship

          President Obama's statement last week attacking entrepreneurship has received more notoriety than anything else by any candidate so far in the selection. In case you have been on vacation in Antarctica, he made two ridiculous statements that he has been trying to explain away ever since. These were "look, if you've been successful, you didn't get there on your own" and "if you got a business – you didn't build that. Somebody else made that happen." Numerous commenters have noted that these demonstrate President Obama's lack of understanding of American business and his disdain for people who work hard to create their own enterprises.

             Obama and the Democrats have been trying to walk these words back ever since, complaining that they have been taken out of context, and that he was really talking about the investments made by the government that benefit everybody. So you can decide on your own, I quote the whole two paragraphs:

“There are a lot of wealthy, successful Americans who agree with me -- because they want to give something back.  They know they didn’t -- look, if you’ve been successful, you didn’t get there on your own.  You didn’t get there on your own.  I’m always struck by people who think, well, it must be because I was just so smart.  There are a lot of smart people out there.  It must be because I worked harder than everybody else.  Let me tell you something -- there are a whole bunch of hardworking people out there.” 

    “ If you were successful, somebody along the line gave you some help.  There was a great teacher somewhere in your life.  Somebody helped to create this unbelievable American system that we have that allowed you to thrive.  Somebody invested in roads and bridges.  If you’ve got a business -- you didn’t build that.  Somebody else made that happen.  The Internet didn’t get invented on its own.  Government research created the Internet so that all the companies could make money off the Internet.”

But Obama's explanations fail to explain why some people become entrepreneurs and others are not successful. Rather, he has engaged in the "Post Hoc, Ergo Propter Hoc” fallacy. Because someone becomes a successful entrepreneur after the government has built the roads or the Internet, it does not follow he became successful because of those roads. The roads or the Internet did not make entrepreneurs successful – they succeeded because their own individual initiative.

 The roads or the Internet are a common good, available to everybody. If they are what is necessary for someone to become an entrepreneur, then anybody could become successful.  Obviously, it is some other reason than the availability of government resources, or even the benefit of a great teacher, that enabled individuals to create success. Most Americans recognize that their success depends on their own individual ability and initiative; President Obama's language establishes that he does not believe this.

Charles Krauthammer, in his column this week, also recognizes that Obama's argument is fallacious, although he points to a different fallacy. He states "to say all individuals are embedded in and the product of society is banal. Obama rises above banality by means of fallacy: equating society with government, the collectivity with the state. Of course we are shaped by our milieu. But the most formative, most important  influence on the individual is not government. It is civil society, those elements of the collectivity that lie outside government:… The voluntary associations that Tocqueville understood to be genius of America have the source of its energy and freedom."

 By the way, Obama's claim that government research created the Internet generated rebuttal in an interesting Wall Street Journal column.

Republicans Start to Attack Obama Public Equity Record

I am glad to see that the Republicans have started to attack Pres. Obama's record on public equity investments – tit-for-tat for Democratic attacks on private equity. Karl Rove's American Crossroads group has published an excellent commercial, to which I was going to link. However, the Powerline Blog beat me to it, and also included an advertisement from the Romney campaign on the same subject. Therefore I will link to Powerline.

How Does Obama's Public Equity Record Compare to Romney's Venture Capital Record?

Yesterday, two major newspapers published columns looking at President Obama's public equity record in light of his attacks on Gov. Romney's record at Bain Capital. In the Wall Street Journal, Kimberly Strassel published "Vulture capitalism? Try Obama's Version". In the Washington Post, a column by Marc A. Theissen was entitled "Forget Bain – Obama's Public - Equity record is the Real Scandal."


Ms. Strassel suggests "Like Mr. Romney, Mr. Obama has presided over bankruptcies, layoffs, lost pensions, run-ups in debt. Yet unlike Mr. Romney, Mr. Obama's C-suite required billions in taxpayer dollars and subsidies, as well as mandates, regulations, union payoffs and moral hazard. Don't like "vulture" capitalism? Check out the form the president's had on offer these past three years: "crony" capitalism."  Ms. Strassel focuses on Solyndra and General Motors, particularly the $82 billion put into the car industry, which seemed primarily designed to protect union pensions.


Mr. Theissen's Article provides a more comprehensive list of the Obama administration's public equity failures – including at least eight major investments in green energy that have become failures. In fact, his column will make a good reference tool for future discussions of Obama's failures. He concludes: "Now the man who made Solyndra a household name says Mitt Romney’s record at Bain Capital “is what this campaign is going to be about.” Good luck with that, Mr. President. If Obama wants to attack Romney’s alleged private equity failures as chief executive of Bain, he’d better be ready to defend his own massive public equity failures as chief executive of the United States."


The irony is that while Obama has been throwing money at uneconomic green energy projects, the entire economics of energy in the United States have been transformed. The development of the Barnett Shale and other major shale developments elsewhere in the country has enormously increased the availability of natural gas, and dropped its price from $12 to $2. Competition between oil and gas is more intense than ever. It is clear that the free market has produced a result far superior to President Obama's attempts to force feed new types of energy sources to us at substantial government expense. 

Republicans Need to Focus on Size of Deficit

I have been concerned over the past several months that the Republicans are not adequately explaining the problem of the federal deficit. It is not just that the deficit exists, but that it is so enormous. While the deficit itself may not be the sole or most important issue (that is obviously the economy), it is of vital importance that Republicans clearly explain how large it is, compared to the federal budget, and what it will take to get it under control.

The Congressional Budget Office does an excellent job of issuing monthly reports on the federal budget, showing changes in revenue and expenses, and providing detailed information on the deficit. This month, it also issued a separate report showing that the federal deficit for the first seven months amounted to $721 billion.  The latest monthly report shows that, during the first seven months of the fiscal year, the deficit amounted to 34.25% of all federal expenditures. Thus, more than one third of all federal outlays were paid for with borrowed money.  During that time period, the US spent 52.1% more than it took in.

No country can continue indefinitely with these gaps.  Under current federal policies, the deficit will only increase and become an even greater proportion of gross national product.

When talking about this, I often ask people for their estimate of the size of the deficit, compared to federal expenditures. The general estimate is that it is about 20%, and they are shocked when I tell him that it is over one-third of all federal outlays. It seems to me that discussion of the deficit has a much greater impact when people understand how enormous it is, compared to federal expenditures. I believe the Republican should pound this home every time that they discuss the issue.

The Pan Am Bomber – a Side Effect of his Treatment

The recent death of Abdel Baset al Megrahi, the convicted Lockerbie bomber, three years after his release from prison in Scotland has drawn an interesting Wall Street Journal editorial explaining why he lived so long after the initial prognosis that he only had three months to live.

According to the Journal, the doctor who made the initial estimate explained that his estimate was based upon the National Health Service medical treatment in Scotland, where certain standard chemotherapy treatments were not available because of their cost. In contrast, Mr. Megrahi undoubtedly obtained excellent treatment in Libya, where he could receive better chemotherapy.

The Journal draws the obvious conclusion that, unconstrained by government conclusions on cost-effectiveness, Mr. Megrahi lived almost 3 years longer than he would have in the Scottish, highly regulated, medical environment. The potential for similar results to occur in the United States under Obama care is obvious.

Romney "Gaffe" Should Strengthen Support for Him

In talking about health insurance yesterday, Governor Mitt Romney commented that "I like being able to fire people who provide services to me."  Of course, this was was immediately proclaimed a gaffe by the political reporters and jumped on by his opponents. 

However, those who realize that there will have to be substantial cuts in government expenditures in order to control the deficit should welcome such an attitude.  We can only hope that, when elected President, he will be enthusiastic in chopping government programs, even it it means firing people.  We need a hard-hearted budget hawk who will not be dissuaded from making the necessary cuts, and who will not be swayed by the certain howls of outrage from those whose jobs will be lost.  We can only hope that Romney truly means it.

Companies Fined for not Using a Biofuel that Doesn't Exist

Here is a true regulatory gotcha.  The 2007 Energy Independence and Security Act required, inter alia, the use of diesel fuel made from biomass, setting a goal of 250 million gallons in 2011 and 500 million gallons in 2012.  However, such cullulosic fuel does not exist.  It has  never been made commercially.  Nevertheless, the EPA will fine refiners for failing to include this product in their gasoline.  The New York Times has covered this folly in detail in today's paper.

Good Video on Deficit

I have previously blogged about the enormity of the deficit and the national debt, noting that the deficit in fiscal 2011 was 36% of total federal expenditures and that the government spent 57% more than it took in.  Now comes a short video that transposes these figures to the context of a single family.  You will like it.