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Today, in Horne v. Department of Agriculture, the U.S. Supreme Court held that the Fifth Amendment requires that the Government pay just compensation when it takes personal property, just as when it takes real property, and that the Government cannot make raisin growers relinquish their property without just compensation as a condition of selling their raisins in interstate commerce. This decision represents a major victory for economic liberty, but it is at best the first step in the reining in of anticompetitive cartel-like government regulation by government. (See my previous discussion of this matter at Truth on the Market here and a more detailed discussion of today’s decision here.) A capsule summary of the Court’s holding follows.

Most American raisins are grown in California. Under a United States Department of Agriculture Raisin Marketing Order, California raisin growers must give a percentage of their crop to a Raisin Administrative Committee (a government entity largely comprised of raisin producers appointed by the Secretary of Agriculture) to sell, allocate, or dispose of, and the government sets the compensation price that growers are paid for these “reserved” raisins. After selling the reserved raisins and deducting expenses, the Committee returns any net proceeds to the growers. The Hornes were assessed a fine of $480,000 plus a $200,000 civil penalty for refusing to set aside raisins for the government in 2002. The Hornes sued in court, arguing that the reserve requirement violated the Fifth Amendment Takings Clause. The Ninth Circuit rejected the Hornes’ claim that this was a per se taking, because personal property is entitled to less protection than private property, and concluded rather that this should be treated as a regulatory taking, such as a government condition on the grant of a land use permit. The Supreme Court reversed, holding that neither the text nor the history of the Takings Clause suggests that appropriation of personal property is different from appropriation of real property. The Court also held that the government may not avoid its categorical duty to pay just compensation by reserving to the property owner a contingent interest in the property. The Court further held that in this case, the government mandate to surrender property as a condition to engage in commerce effects a per se taking, noting that selling raisins in interstate commerce is “not a special governmental benefit that the Government may hold hostage, to be ransomed by the waiver of constitutional protection.” The Court majority determined that the case should not be remanded to the Ninth Circuit to calculate the amount of just compensation, because the government already did so when it fined the Hornes $480,000, the fair market value of the raisins.

The Horne decision is a victory for economic freedom and the right of individuals not to participate in government cartel schemes that harm the public interest. Unfortunately, however, it is a limited one. As the dissent by Justice Sotomayor indicates, “the Government . . . can permissibly achieve its market control goals by imposing a quota without offering raisin producers a way of reaping any return whatsoever on the raisins they cannot sell.” In short, today’s holding turns entirely on the conclusion that the raisin marketing order involves a “physical taking” of raisins. A more straightforward regulatory scheme under which the federal government directly limited production by raisin growers (much as the government did to a small wheat farmer in Wickard v. Filburn) likely would pass constitutional muster under modern Commerce Clause jurisprudence.

Thus, if it is truly interested in benefiting the American public and ferreting out special interest favoritism in agriculture, Congress should give serious consideration to prohibiting far more than production limitations in agricultural marketing orders. More generally, it should consider legislation to bar any regulatory restrictions that have the effect of limiting the freedom of individual farmers to grow and sell as much of their crop as they please. Such a rule would promote general free market competition, to the benefit of American consumers and the American economy.

Food trucks must remain at least 200 feet away from restaurants under the new Chicago regulation (HT: Reason).  It also appears food trucks must carry a GPS that will allow detection of violations (parking within 200 feet of a restaurant — apparently, any restaurant) which carry a fine of up to $2,000.  Protection of restaurants is the obvious and apparently express rationale for the restraint imposed upon food trucks:

“We see no health or safety justification behind the 200-foot rule, and the city has never offered one,” says Kregor. “The only explanation for the rule is the restaurants’ demand for protectionism and the city government’s deference to those demands.”  That’s no exaggeration. Even supporters of the new regulations freely admit they’re designed to protect brick-and-mortar restaurants.  “We want food trucks to make money, but we don’t want to hurt brick-and-mortar restaurants,” says Alderman Walter Burnett.

Chicago’s Institute for Justice has more.

I continue to think, as I’ve mentioned here previously, the consumer welfare losses associated with local and city barriers to entry are greatly underestimated.

Welcome Baby 7B!

Thom Lambert —  31 October 2011

According to the United Nations, sometime around Halloween a newborn baby will push the world’s population above seven billion people.  Welcome to our spectacular planet, Little One!

I should warn you that not everyone will greet your arrival as enthusiastically as I.  A great many smart folks on our planet—especially highly educated people in rich countries like my own—have fallen under the spell of this fellow named Malthus, who once warned that our planet was “overpopulated.”  Although Mr. Malthus’s ideas have been proven wrong time and again, his smart and influential disciples keep insisting that your arrival spells disaster, that this lonely planet just can’t support you. 

Now my own suspicion is that modern day Malthusians, who are smart enough to know that actual events have discredited their leader’s theories, continue to parrot Mr. Malthus’s ideas because they lend support to all manner of governmental intervention into private affairs.  (These smarty-pants Malthusians, who are well-aware of their own intelligence, tend to think they can arrange things better than the “men and women on the spot” and are constantly looking for reasons to go meddling in others’ business!)  Whatever their motivation, Mr. Malthus’s disciples just won’t shut up about how our planet is overpopulated.

You should know, though, that this simply isn’t true.  The first time you hear one of Mr. Malthus’s followers decrying your very existence by insisting that our planet is overpopulated, you should ask him or her:  “Overpopulated relative to what?”  Modern Malthusians can never give a good answer to that question, though they always try.

Sometimes they say “living space.”  But that’s plain silly.  Our planet is really pretty huge.  Indeed, if all seven billion people on the planet moved to the state ofAlaska, each person would have 2,300 square feet of living space!  Now I realize lots of cities get crowded, but that’s because people choose to live in those areas—they’ve decided that the benefits of enhanced economic opportunity in a densely populated area outweigh the costs of close confines.  If they really wanted extra living space, they could easily find it in our planet’s vast uninhabited (or sparsely inhabited) regions.

Sometimes modern day Malthusians say the planet is overpopulated relative to available food.  Wrong again.  In the nations of the world where institutions have evolved to allow people to profit from coming up with new ideas that enhance welfare, individuals have developed all sorts of ways to get more food from less land.  Accordingly, food production has always outpaced population growth.  Now, modern day Malthusians will probably tell you that food prices have been rising in recent years — a sign that food is getting scarcer relative to people’s demand for it.  But that’s because governments, beholden to powerful agricultural lobbyists, have been requiring that huge portions of agricultural output be diverted to fuel production even though the primary biofuel (ethanol) provides no environmental benefit.  As usual, it’s actually bad government policy, not population growth, that’s creating scarcity.

In recent days, Mr. Malthus’s disciples have insisted that the world is overpopulated relative to available resources.  Nothing new here.  Back in the 1970s, lots of smart folks contended that the earth was quickly running out of resources and that drastic measures were required to constrain continued population growth.  One of those smarty pants was Stanford University biologist Paul Ehrlich, who, along with his wife Anne and President Obama’s science czar John Holdren, asked (in all seriousness): “Why should the law not be able to prevent a person from having more than two children?”  (See Paul R. Ehrlich, Anne H. Ehrlich & John P. Holdren, Ecoscience 838 (1977).)  (Ehrlich also proclaimed, in his 1968 blockbuster The Population Bomb, that “The battle to feed all of humanity is over. In the 1970s hundreds of millions of people will starve to death in spite of any crash programs embarked upon now. At this late date nothing can prevent a substantial increase in the world death rate.”)

In 1980, Prof. Ehrlich bet economist Julian Simon (a jolly fellow who would have welcomed your birth!) that the booming population would raise demand for resources so much that prices would skyrocket.  Mr. Simon thought otherwise and therefore allowed Prof. Ehrlich to pick five metals whose price he believed would rise over the next decade.  As it turns out, the five metals Prof. Ehrlich selected — chromium, copper, nickel, tin, and tungsten — fell in price as clever, profit-seeking humans discovered both how to extract more from the earth and how to substitute other, cheaper substances.  Mr. Simon was not at all surprised.  He recognized that the long-term price trend of most resources points downward, indicating that resources are becoming more plentiful, relative to human needs, over time.  (Modern Malthusians may point to some recent price trends showing rising prices for some resources, especially precious metals.  It’s likely, though, that those price increases are due to the fact that central banks all over the world have been creating lots and lots of money, thereby threatening inflation and causing investors to hold their wealth in the form of commodities.)

The fundamental mistake Mr. Malthus’s disciples make, Little One, is to assume that our planet is the ultimate source of resources.  That’s just not true.  Our planet does contain lots of useful “stuff,” but it’s human ingenuity — something only you and those like you can provide — that turns that stuff into “resources.”  Take oil, for instance.  For most of human history, messy crude oil was a source of annoyance for landowners.  It polluted their water and fouled their property.  But when whale oil prices started to rise in response to scarcity (or, put differently, when the world started to look “overpopulated” relative to whale oil), some clever, profit-seeking folks discovered how to turn that annoyance into kerosene, and eventually petroleum.  Voila!  A “resource” was created!

Just as people once worried about overpopulation relative to whale oil supplies, lots of folks now worry about overpopulation relative to crude oil.  Well I’m not that worried, and you shouldn’t be either.  As oil prices rise, more and more clever profit-seekers will turn their energies toward finding new ways to obtain oil (e.g., hydraulic facturing), new techniques for reducing oil requirements (e.g., enhanced efficiency), and new substitutes for oil (e.g., alternative fuels).  Mr. Malthus’s disciples will continue to fret about the limits to growth, but the historical record is clear on this one:  Human ingenuity — the ultimate resource — always outpaces the diminution in useful “stuff.”

And so, Little Resource, your arrival on our planet should be celebrated, not scorned!  As you and your fellow newborns flex your creative muscle, you’ll develop new sources of wealth for the world.  As you do so, birth rates will plummet, as they typically do when societies become wealthier, and the demand for a cleaner environment, demand that rises with wealth, will grow.  We therefore need not worry about “overpopulation.”

We do, though, need to ensure the survival of those institutions — property rights, free markets, the rule of law — that encourage resource-creating innovation.  I, for one, promise to do my best to defend those institutions so that you and your fellow newborns can add to our planet’s resource base.

Before concluding that “there ought to be a law” to remedy an unhappy situation, one should ask whether it’s really a law that’s causing the problem in the first place.  I was reminded of that principle this afternoon when I read some remarks by Michael Pollan, doyen of the “slow food” movement, in today’s New York Times Magazine.    

Responding to the question, “How can you tell if food is genetically engineered?,” Mr. Pollan answered:

You can’t, unless you’re willing to move to Europe or Japan, where the government requires that it be labeled.  Ours doesn’t, so there’s no way to tell.  This is despite the fact that 80 to 90 percent of Americans tell pollsters they want it labeled, and Barack Obama, as a candidate, once promised to make it happen.  But the industry is afraid you won’t buy genetically modified foods if they’re labeled – and they’re probably right.

Mr. Pollan is correct on a couple of matters here.  First, lots of people do want to know if they’re eating genetically modified food.  My own view is that this is silly.  Nearly all food products are, and for generations have been, “genetically modified” via hybridization, selective breeding, etc., and the scientific consensus is that there’s no increased risk when the modification occurs in a laboratory rather than the old-fashioned way.  Nevertheless, many consumers do care about whether their food is genetically modified in the newfangled manner, and who am I (or you, or the government) to tell them that their preferences are invalid.  Second, Mr. Pollan is correct in asserting that Big Ag doesn’t want to label GM food products, lest people refuse to buy them (or reduce the price they’re willing to pay for them).  Indeed, large agribusinesses have lobbied vociferously against mandatory GM labeling rules like those imposed in Europe and Japan.

But Mr. Pollan is wrong to insinuate that regulations mandating GM labeling are necessary if consumers are to know whether food products are genetically modified.  Given that a great many consumers disfavor genetic modification (of the newfangled variety, at least), one would expect entrepreneurs to produce non-GM foods and to tout the pedigree of their products.  By engaging in “voluntary negative” labeling (e.g., “GM Free”), producers could boost demand for their products and provide consumers with useful information about GM status.  Just as mandatory labeling of “Gentile” food isn’t necessary to enable observant Jews to fulfill their preferences for kosher options, the government need not mandate GM labeling in order to protect the interests of GM-phobes.

This assumes, though, that producers of non-GM products, like producers of kosher foods, are free to label their products as such.  Unfortunately for consumers who would prefer to avoid newfangled genetic modification (the old-fashioned type is ubiquitous and unavoidable), current regulations hinder the sort of voluntary negative labeling that could accommodate heterogeneous preferences.  Under an FDA Industry Guidance ostensibly aimed at fraud prevention (and drafted with significant input from Monsanto), sellers of non-GM foods are precluded from:

  1. Using acronyms such as “GM” or “GMO” (according to FDA, saying something is “non-GM” or “non-GMO” is misleading because people don’t understand these acronyms);
  2. Utilizing the term “genetically modified” (according to FDA, saying that a non-gene-transferred organism is not genetically modified is misleading because nearly all foods have been genetically modified through cross-breeding);
  3. Referring to “organisms” or “GMOs” (according to FDA, a food label touting the absence of GMOs is misleading because it implies that foods which are not GMO-free contain “organisms” — that is, living things);
  4. Claiming to be GMO “free” (according to FDA, a claim that a product is GM “free” implies a complete absence of GM material, and it’s very difficult to ensure that there are no trace amounts of GM material in a food item); and
  5. Asserting any implication of superiority (according to FDA, any label that implies that the food product is superior because it lacks GM material misleadingly implies that non-GM is superior).

In light of this guidance from a captured regulatory agency, sellers of non-GM foods are essentially forced to label their products as though they were playing the board game “Taboo,” in which players provide clues to their partners to identify a word but, in doing so, are forbidden to say any of the words one would most naturally use in conveying clues.  Given the laundry list of terms the FDA has declared to be “taboo,” it should not be surprising that producers of non-GM products have not been able to market their products effectively.  And if you can’t market them, why produce them in the first place?

At the end of the day, then, Mr. Pollan is wrong to place the blame for consumer ignorance of GM-status on governmental inaction.  It is affirmative government regulation – not its absence – that precludes consumers from telling if their food is genetically engineered.

We classical liberals are often criticized for undermining communitarian values by emphasizing individual liberties.  In reality, though, a liberal society (in the classical sense, not the welfare-state sense) fosters community by allowing people to associate in ways they find most meaningful.  Indeed, one of the great things about a liberal, live-and-let-live city is that it can accommodate so many communities that cater to different preferences and values:  Orthodox Jews, devout Muslims, evangelical Protestants, gays and lesbians, and various ethnic groups can create their own little communities to foster shared values.  As long as nobody injures the person or property of another, folks are free to commune as they will.

Unfortunately, the sort of liberalism that fosters the spontaneous formation of community groups can be tough to maintain, especially when governments create regulatory bodies charged with “protecting” people from improvident choices.  Those regulators, under constant pressure to “do something” in order to protect their turf, often impose rules that prevent people from communing as they will, even when they’re not hurting anybody else.

I was reminded of this point yesterday when I read that the Bloomberg administration, in the name of “public health,” is cracking down on bars that allow dogs (even in outdoor areas).  How sad for New York City.  Nothing builds community better than a collection of spaces — bars, coffeshops, diners, etc. — where neighbors can go to relax, converse, and share their lives.  And nothing is more likely to keep people coming back and to get them talking to each other than to allow them to bring their dogs.  If you don’t believe me, head down to your local dog park and watch people interact.  Nobody’s a stranger at the dog park. 

Of course, there are lots of people who are scared of dogs, or don’t like them, or believe that their mere presence renders a place unsanitary (even though millions of Americans have dogs in their homes — often in their beds — and seem to suffer no ill-effects).  Such dog phobes needn’t worry.  Profit-seeking entrepreneurs will cater to their preferences by creating dog-free spaces.  The rest of us, then, can head down to our canine-friendly pubs and bond with our fellow dog lovers.

As much as I hate to say it, the French are sometimes right.

As Harold Demsetz notes, “the problem of defining ownership is precisely that of creating properly scaled legal barriers to entry.”   Taxi medallions, meet food cart permits.  From the WSJ:

The city’s competitive street food culture has created a thriving black market for mobile food vending permits issued by the Department of Health and Mental Hygiene. The city charges a mere $200 for most food-cart permits, which must be paid every two years when they are renewed. But it only issues 3,100 year-round permits plus an additional 1,000 seasonal permits—not enough to satisfy demand. Transferring or renting these permits to another vendor is illegal but everyone, including the city’s Health Department, acknowledges, that it happens.

Meanwhile, demand for permits and their black-market prices continue to climb as street food’s popularity soars with blogs like Midtown Lunch chronicling vendors’ moves and some gourmet food trucks developing cult-like followings. Some permits fetch as much as $20,000 for two years, vendors say. In the case of Ms. Sultana, the Bronx food vendor, she says the permit holder told her someone else was willing to pay $15,000 for the permit she previously paid $7,000 for two years ago.

Mohammed Rahman, who has operated the popular Kwik Meal cart in midtown for 11 years, says he pays $15,000 every two years for his permit. “The city charges only $200, why should I have to pay $15,000? All the profits go to someone else.”

Obtaining a food cart or truck permit in one’s own name can take a decade or more, according to vendors. There are 2,080 people currently on the citywide waiting list for a two-year permit. The list is compiled of license holders and it’s not uncommon for families to get licenses for every member of their family—even if they don’t work at a cart—to increase their chances of obtaining a permit.

In a related story, the food carts in New York City now have a trade association (website here).

Even more closely related is the battle over green cart permits in NYC, and the competitive response from supermarkets:

The city started the green cart program almost three years ago to bring more fruits and vegetables to “underserved” neighborhoods with high rates of diet-related illnesses. Today, the city has issued about 450 permits to operate green carts in large swaths of the Bronx and upper Manhattan, as well as parts of Brooklyn, Queens and Staten Island. While most normal food carts can operate anywhere and tend to congregate in high-traffic neighborhoods like midtown Manhattan, green carts can sell only in designated zones.

Some lawmakers like Peter Koo, a City Council member who represents Flushing, thinks green carts shouldn’t be allowed within a certain distance from supermarkets.

The green carts have their fans in the community. George Wright recently walked up to the two carts a block from Ms. Kim’s store. “It’s cheaper than other stores,” he said, “and the fruit is very good.”

Ms. Kim says the monthly revenue in her store has dropped to $5,000 a month from $10,000 a month because of the carts, the tough economy and nearby construction. That’s before she shells out $3,500 for rent, buys the produce and pays an employee. The result is that she’s losing money each month.

She figures it’s going to get worse. Most of her customers pay with electronic food stamps and recently some green carts got portable devices so they can accept them as well.

“I have to go bankrupt,” she says.

Here is Yglesias on DC food cart deregulation.