Tag Archives: France

Do We Need Speed Limits to Drive Safely?

A recent RegBlog post discussed a paper by van Benthem, which suggested that the social costs of higher speed limits outweigh their benefits. The paper examines the data from a natural experiment – the repeal of National Maximum Speed Law in 1995 that led many states to increase speed limits – to make its point. Yet, both the RegBlog post and the paper miss the larger question: lower driving speeds may be safer, but do we need the government-imposed speed limits to drive at safe speeds?

In the study, van Benthem finds that “a 10 mph speed limit increase on highways leads to a 3-4 mph increase in travel speed, 9-15% more accidents, 34-60% more fatal accidents.” Thus, he concludes that the difference between private benefits and social costs of faster driving provide a strong rationale for speed limits (while the paper looks at both traffic fatalities and increasing pollution levels, I focus on traffic safety. As the RegBlog post points out, there are alternatives to speed limits to deal with pollution, e.g. emission standards).

However, there is a natural experiment that van Benthem does not discuss: only a third of highways in Germany (mostly around urban areas) have permanent speed limits. On the remaining portion of highways, drivers choose their own speed. The data indicate that there is little difference between traffic fatality rates on highways with and without speed limits. In fact, over the last 20 years, the number of highway traffic fatalities in Germany decreased by 71% despite a 17% increase in number of vehicles on the road and a 25% increase in traffic flow. At 5.6 deaths per billion vehicle-kilometers driven, Germany’s traffic fatality rate is lower than the US rate (6.83) or even France’s (7.01). Apparently, German drivers are able to choose safe driving speeds even without government prodding.

Entrusting drivers with responsibility for their own safety and safety of those around them is behind another natural experiment adopted in several European cities – the concept of shared spaces. These cities are doing away with a thicket of street signs, streetlights and in some cases even sidewalks on some busy intersections. Instead, cars and pedestrians share the road, negotiating their ways as they go. While this may sound like a disaster waiting to happen, the cities report fewer accidents and increased foot traffic in businesses along the roads. The key to the concept’s success comes from drivers’ psychology; drivers compensate for lack of predictable traffic rules by paying attention to their surroundings and being more considerate to others. As Hans Monderman, a proponent of shared spaces, points out “The many rules strip us of the most important thing: the ability to be considerate… The greater the number of prescriptions, the more people’s sense of personal responsibility dwindles.”

For social regulation proponents, stringent rules are the go to response to all social ills. Yet, as European experiences with traffic demonstrate, regulation is not the only and may not even be the best alternative. Crazy as it may sound to some, treating people as responsible adults and trusting them to make the right choices may in fact lead to better social outcomes for all.

Behold the Savage Austerity

If you are a journalist or a commentator and you have ever uttered or written the word “austerity,” I hope you spend some time with this chart:

Vero offers some excellent comments here:

These countries still spend more than pre-recession levels

France and the U.K. did not cut spending.

In Greece, and Spain, when spending was actually reduced — between 2009–2011 — the cuts have been relatively small compared to the size of bloated European budgets. Also, meaningful structural reforms were seldom implemented.

As for Italy, the country reduced spending between 2009 and 2010 but the data shows [an] uptick in spending 2011. The increase in spending represents more than the previous reduction.

New Public Choice Papers

Last week I attended the annual Public Choice Societies conference in Miami, Florida. Among the most interesting papers were:

Does Economic Freedom Foster Tolerance?” by Niclas Berggren and Therese Nilsson:

Tolerance has the potential to affect both economic growth and wellbeing. It is therefore important to discern its determinants. We add to the literature by investigating whether the degree to which economic institutions and policies are market-oriented is related to difference measures of tolerance. Regression analysis of up to 65 countries reveals that economic freedom is positively related to tolerance towards homosexuals, especially in the longer run, while tolerance towards people of a different race and a willingness to teach kids tolerance are not strongly affect by how free markets are….We furthermore find indications of a causal relationship and of social trust playing a role as a mechanism in the relationship between economic freedom and tolerance and as an important catalyst: the more trust in society, the more positive the effect of economic freedom on tolerance.

Governance, Bureaucratic Rents and Well-Being Differential Across U.S. States” by Simon Luechinger, Mark Schelker and Alois Stutzer:

We analyze the influence of institutional restrictions on bureaucratic rents. As a measure for these rents, we propose subjective well-being differentials between workers in the public administration and workers in other industries. Based on data for the U.S. states, we estimate the extent to which institutional efforts to strengthen bureaucratic accountability affect differences in well-being. We find that the differences are smaller in states with high transparency, elected auditors, and legal deficit carryover restrictions. These findings are consistent with limited rent extraction under these institutional conditions. No effect is found for performance audits and regulatory review.

Economic Performance and Government Size” by António Afonos and João Tovar Jalles

Our results, consistent with the presented growth model, show a negative effect of the size of government on growth. Similarly, institutional quality has a positive impact on real growth, and government consumption is consistently detrimental to growth. Moreover, the negative effect of government size on growth is stronger the lower institutional quality, and the positive effect of institutional quality on growth increases with smaller governments. The negative effect on growth of the government size variables is more mitigated for Scandinavian legal origins, and stronger at lower levels of civil liberties and political rights. Finally, for the EU, better overall fiscal and expenditure rules improve growth.

Leaders, Institutions and Fiscal Discipline” by Heiner Mikosch:

In particular, I find evidence that pure career politicians are fiscally more disciplined than politicians with working experience outside of politics. This contradicts a popular claim that people who have been working in the “real world” outside of politics, are better politicians.

Institutions, Lobbying, and Economic Performance” by Jac Heckelman and Bonnie Wilson:

They find that economic freedom improves growth but that lobbying detracts from it. Moreover, there may be an interaction between the two. It might be that in economically free societies, lobbying is particularly bad for growth whereas in less-free societies it actually enhance growth. This lends support to their basic hypothesis that:

while economic freedom that emerges spontaneously may be growth promoting, economic freedom that emerges as a result of costly lobbying efforts may be less fruitful.

And here’s one that made me smirk:

The Right Look: Conservative Politicians Look Better and Voters Reward It” by Niclas Berggren, Henrik Jordahl and Panu Poutvaara:

Political candidates on the right are more beautiful or are seen as more competent than candidates on the left in Australia, Finland, France, and the United States. This appearance gap gives candidates on the right an advantage in elections, which could in turn influence policy outcomes. As an illustration, the Republican share of seats increased by an average of 6% in the 2000–2006 U.S. Senate elections because they fielded candidates who looked more competent. These shifts are big enough to have given the Republicans a Senate majority in two of the four Congresses in the studied time period. The Republicans also won nine of the 15 gubernatorial elections where looks were decisive. By using Finnish data, we also show that beauty is an asset for political candidates in intra-party competition and more so for candidates on the right in low-information elections. Our analysis indicates that this advantage arises since voters use good looks as a cue for conservatism when candidates are relatively unknown

This last one reminded me of this famous paper from a few years ago showing that inferences based solely on appearance predicted 68.8 percent of U.S. Senate races in 2004. (It isn’t good to have a baby face).

Is There Room for Compromise on Unemployment Insurance?

Last night the Senate allowed unemployment insurance benefits to lapse for those Americans who have been receiving such benefits for 99 weeks or more. What will happen to the unemployment rate? Let’s look at it in the short-run and in the long-run.

Short Run:  

I would argue that in the short-run, it is unclear. On the one hand, Keynesians believe that unemployment insurance is one of the more effective forms of fiscal stimulus: by putting money in the hands of those who are likely to spend it, the Keynesian multiplier can work its magic, rippling throughout the economy leaving prosperity in its wake. That is, unless the estimates of the Keynesian multiplier are widely off-target. And there are some reasons to believe they are.

But even if we grant the Keynesians this argument, we have to consider the countervailing evidence. There are numerous studies that show that extensions in potential benefit duration are correlated with longer unemployment spells. Moreover, other studies show that the probability of finding employment rises just prior to the lapse of benefits.

Of course, aside from the macroeconomic effects, we have to consider the fact that unemployment checks help people. And maybe we should be willing to harm the economy at-large for the sake of helping those who are out of work.

Long Run:

The long run story is clearer. From 2000 to 2004, the U.S. unemployment rate averaged about half that of France, Germany, Italy and Spain.


In 2004, among the unemployed, the U.S. fraction that was unemployed for more than a year was about one-fourth that of other nations.


So compared with other nations, we have an extremely healthy labor market and we all benefit from this. As I have noted before, numerous studies attribute our relatively low long-term unemployment rate to our more competitive labor market. Compared with other nations, U.S. labor taxes are lower, labor regulations are less-burdensome, and unemployment insurance benefits are less-generous. Because of this, employers are more likely to hire and employees are more likely to accept offers. This is an incredible advantage. And we should not take it for granted.

Reconciling the Short with the Long Run:

So in the short run, unemployment insurance may help the economy while it undoubtedly helps those who find themselves unemployed. But how do we achieve this short-term aim without jeopardizing the competitive labor markets that have benefitted all Americans?

Perhaps there is room for compromise. One option may be to agree to extend benefits now in exchange for reform of the system. As Eileen has noted, we would do well to consider systems such as that of Chile. They have two systems that work side-by-side: one is a social insurance system that is similar to our own unemployment insurance program; the other is an Unemployment Insurance Savings Account (UISA) program in which workers are required to save a fraction of their earnings in a personal account. Workers have an incentive to get back to work quickly because whatever amount they leave in the account becomes theirs when they retire. Former Clinton Administration economist and Nobel laureate Joseph Stiglitz has made a similar proposal for the U.S. that would integrate unemployment insurance with retirement insurance. Maybe now is the time to give it a thought?

Preservation Overload

Since the European’s Union establishment in 1993, the organization has taken steps to protect local and traditional culinary traditions.  This practice has reached a new heights in the United Kingdom, where the town of Stilton is challenging a ban against producing the cheese named after it.

The Wall Street Journal reports:

The EU’s protected list of more than 800 foods and drinks includes famous names like Champagne and Parma as well as lesser-known delicacies such as Moutarde de Bourgogne, Munchener Bier and a Spanish chili pepper called Asado del Bierzo. It even covers Foin de Crau, a hay for animals from the fields of Bouches-du-Rhône in southern France.

But to the chagrin of locals, no cheese made here can be branded as Stilton. That’s because a group of outsiders, called the Stilton Cheesemakers Association, raised a formal stink.

The association, whose members have been making the cheese for more than a hundred years, in 1996 sought to protect the “Stilton” name by applying for a Product Designation of Origin from the EU. In its application, the group wrote that “the cheese became known as Stilton because it was at the Bell Inn in this village that the cheese was first sold to the public.” The 17th-century inn, which still stands in the main street, is the village’s oldest.

In recent memory, Stilton cheese has been produced outside of the village, but the Journal explains, a historian recently found evidence of the cheese being made within the eponymous municipality in the 18th century. The record failed to sway current cheese producers who assert that the recipe has most likely changed since then. This suggests the question — in their effort to preserve historical practices, how far back should bureaucrats look?

Advocates of limiting food production suggest that it protects gastronomic quality and heritage. The darker, unseen consequences, however, are government-sponsored monopoly food production and quantity restriction.  Paradoxically, earlier this spring, the EU increased enforcement of its antitrust regulations. The international governing body is becoming increasingly involved in the private sector by taking it upon itself to decide politically acceptable business practices.

Chasing French Chefs out of France

The French bureaucracy is notorious for being one of the most onerous and challenging to navigate of developed countries. Those in favor of the current system explain that it helps to maintain tradition and the French way of life, known for its emphasis on fine wine and food — the country where the Slow Food movement was instituted.

However, in the ultimate of unintended consequences, Susan Stamberg on Morning Edition reports that the complex legal environment may be pushing many of France’s best chefs and restaurateurs to take their services to countries that are more hospitable toward businesses. Author Michael Steinberger explains:

Bread, wine and cheese makers have all faced problems, and high taxes and bureaucracy make running a restaurant so difficult that many of Paris’s top young chefs have defected to London or New York.

Instead of the traditional haute cuisine for which French chefs are known, many of the country’s entrepreneurs are instead moving toward bistronomy in restaurants that serve quality food in a more casual and affordable setting. Rather than protecting the French way of life, bureaucrats may be helping their traditions spread to other parts of the world and creating opportunities for new, less “French” businesses at home.

Assorted Links

UK artist Tracey Emin may flee Britain for France to save on taxes.

Will California be the first US state to fail?

Austerity on the Strip: Las Vegas casinos cut back on expansion plan, and in New York City: Conde Nast closes Gourment, Modern Bride, and Elegant Bride.

The Asbury Park Press20 point plan for property tax reform in New Jersey.

D.C. students skip class to protest teacher layoffs.