Out of Control

The LA Times really digs down into the pros and cons of DNA evidence in this feature article.

DNA is a huge help in forensic science. But the system creates strong incentives to push DNA evidence too far. The biggest problem in the court room is that the prosecution often misrepresents the odds of a DNA match, making it appear much more likely to be a match than it really is. As the article says:

Two national scientific committees, including the FBI's DNA advisory board, have recommended portraying the odds more conservatively. But interviews with expert witnesses and DNA analysts from crime labs across the country show that few if any have adopted that approach. The FBI lab, which oversees the nation's offender databases, has disregarded the recommendation of its own advisory board, bureau officials acknowledged.

Roger Koppl in this study for Reason shows the problems that come from having the forensic labs work for one side of justice system--the prosecution. He makes a great case and lays out how to make the forensic system more objective, and points out that the key to fixing the way DNA evidence is presented in court is ensuring that the defense can tap into forensic expertise.

You can almost set you watch by it. Once again, members of Congress is calling for regulation of marketing and customer service rules in the wireless industry.

Here’s a report from Friday’s Chicago Tribune:

The latest draft legislation is a wireless consumer protection act from Rep. Edward Markey (D-Mass.) who proposes, among other items, requiring operators to offer a service plan with no early termination fee and letting consumers cancel their contracts within 30 days without penalty.

Sen. Mark Pryor (D-Ark.) has also floated legislation to set up uniform requirements for wireless customer service.

The cell phone industry, a category that includes service and equipment, generates the most complaints out of the roughly 3,800 industries tracked by the Council of Better Business Bureaus. However, according to BBB data, the wireless industry has a higher rate of resolving consumer complaints than the overall rate for all businesses.

The industry says it's open to light national regulation, though it emphasizes that operators already respond to consumer and competitive pressures.

Regulations should protect customers from false or intentionally misleading service offers and pricing plans, but legislators should of careful of sweeping rules that address anecdotal problems. With millions of people using their cell phones on daily, sometimes hourly basis, it’s no surprise that service, pricing and quality problems occur. Yet overall, usage continues to grow, prices have declined measurably, companies that have failed to meet competitive standards have been punished by loss of market share. Many Americans are comfortable enough with the reliability of wireless service that it’s the only phone service they use.

The problem with large-scale customer service regulations, such as a “Wireless User’s Bill of Rights,” however well-intended, is that government, not the marketplace, ends up setting the customer service standard. If the law mandates cell phone companies offer a 30-day service cancellation window, or reduce on-hold waiting time to no more than five minutes, that’s the requirement every service provider will meet. Go light on regulation, and competition will force service providers to make quality a differentiator. Pro-rated service contracts, pre-paid phone accounts and more flexible service bundling all emerged due to competition, not regulation, as service providers sought more ways to one-up the other.

Though perhaps a less frequent target than Wal-Mart, whiny do-gooder types love to slam Starbucks as a vampiric predator preying on mom-n-pop stores to sustain its global expansion. Problem is it's not true, according to researcher Taylor Clark:

Ever since Starbucks blanketed every functioning community in America with its cafes, the one effect of its expansion that has steamed people the most has been the widely assumed dying-off of mom and pop coffeehouses. Our cities once overflowed with charming independent coffee shops, the popular thinking goes, until the corporate steamroller known as Starbucks came through and crushed them all, perhaps tossing the victims a complimentary Alanis Morrisette CD to ease the psychic pain. In a world where Starbucks operates nearly 15,000 stores, with six new ones opening each day, isn't this a reasonable assumption? How could momma and poppa coffee hope to survive? But [L.A. Coffee Bean and Tea Leaf storeowner Herb] Hyman didn't misspeak—and neither did the dozens of other coffeehouse owners I've interviewed. Strange as it sounds, the best way to boost sales at your independently owned coffeehouse may just be to have Starbucks move in next-door.
That's certainly how it worked out for Hyman. Soon after declining Starbucks's buyout offer, Hyman received the expected news that the company was opening up next to one of his stores. But instead of panicking, he decided to call his friend Jim Stewart, founder of the Seattle's Best Coffee chain, to find out what really happens when a Starbucks opens nearby. "You're going to love it," Stewart reported. "They'll do all of your marketing for you, and your sales will soar." The prediction came true: Each new Starbucks store created a local buzz, drawing new converts to the latte-drinking fold. When the lines at Starbucks grew beyond the point of reason, these converts started venturing out—and, Look! There was another coffeehouse right next-door! Hyman's new neighbor boosted his sales so much that he decided to turn the tactic around and start targeting Starbucks. "We bought a Chinese restaurant right next to one of their stores and converted it, and by God, it was doing $1 million a year right away," he said.

. . . .

[...] In its predatory store placement strategy, Starbucks has been about as lethal a killer as a fluffy bunny rabbit. Business for independently owned coffee shops has been nothing less than exceptional as of late. Here's a statistic that might be surprising, given the omnipresence of the Starbucks empire: According to recent figures from the Specialty Coffee Association of America, 57 percent of the nation's coffeehouses are still mom and pops. Just over the five-year period from 2000 to 2005—long after Starbucks supposedly obliterated indie cafes—the number of mom and pops grew 40 percent, from 9,800 to nearly 14,000 coffeehouses. (Starbucks, I might add, tripled in size over that same time period. Good times all around.) So much for the sharp decline in locally owned coffee shops. And prepare yourself for some bona fide solid investment advice: The failure rate for new coffeehouses is a mere 10 percent, according to the market research firm Mintel, which means the vast majority of cafes stay afloat no matter where Starbucks drops its stores. Compare that to the restaurant business, where failure is the norm.

Like the common Wal-Mart refrain, here's yet another case where the conventional wisdom is way off base.

The CEO of a privately-held broadband company called on the federal government to end low-interest loans for broadband to rural phone companies that face competition from cable companies and other service providers using alternative technologies.

Amy Tykeson, head of BendBroadband, a cable company serving rural Oregon, told a House subcommittee hearing yesterday the federal government had to stop providing loans to broadband providers interested in offering service to consumers who already have access to high-speed Internet access.

Here’s how Multichannel News reported the story:

Tykeson, echoing concerns raised by cable officials for several years, took aim at a Rural Utilities Service (RUS) program, claiming that funds intended for areas truly unserved were flowing to companies that compete with cable competitors. The RUS is an arm of the U.S. Department of Agriculture.

“Subsidizing competition is a waste of scarce RUS loans funds that should instead be targeted to areas where a market-based solution has not developed,” Tykeson said, noting that cable’s broadband lines pass about 94 million U.S. homes.

Tykeson, whose Oregon-based company is privately held, appeared before the House Appropriations Subcommittee on Agriculture, Rural Development, Food and Drug Administration and Related Agencies.

The RUS, Tykeson said, made a loan to a company within BendBroadband’s own 60,000-home service area, which is also served by two other broadband providers, Qwest and wireless provider Clearwire.

“Notwithstanding this information, the RUS granted the application for a loan to offer subsidized service there,” she said.

No mincing words here. Professor and libertarian thinker Tibor R. Machan weighs in on how the European economic history colored Monday’s ruling against Microsoft by the European Court of First Instance.

“Given the history of how most people in Europe had gained their wealth and economic dominance, namely, through politically and militarily backed conquest of and expropriation of resources from millions of subjects—the real exploitation of the feudal, not capitalist, era that gave credibility to Karl Marx’s theory of exploitation—it is perhaps understandable that many in Europe and elsewhere around the globe believe all wealth comes from malfeasance…
“The achievement of wealth through market processes is relatively new in human history and only taken to be the norm by most people in the United States of America and a few other places.”

Read the full comment here.

Given the title and subhead of this blog, here’s something that fits right in.

In Trends in Telecommunication Reform 2007: The Road to Next-Generation Networks, The International Telecommunication Union reports that since 1990, 123 ITU member countries had a private or privatized national incumbent, and several other countries have announced their intention to privatize.

Count this as one of the legacies of the late Milton Friedman. Just 25 years ago, the conventional wisdom was that telephone service was a natural monopoly. Even in Western European democracies, governments ran the phone company. In the U.S., AT&T operated for profit, but it operations were heavily regulated and its monopoly was largely preserved by policy. Long distance competition was just opening up back in 1980, when I was a cub reporter, but competition with a local telephone incumbent was still unimaginable.

The graph below, taken from the report, shows the percentage of ITU countries that have competition for various services.

ITU2 Competition graph.gif

The gradual introduction of long distance and wireless competition in the U.S., coming at a time when Friedman’s free market ideas were being sparked worldwide via the Reagan and Thatcher policies, showed the world the innovation and growth that could occur when government steps aside. Ironically, the latest political fad has been to re-nationalize: witness Hugo Chavez, current darling of the progressive set, whose government took over Venezuela’s CANTV after more than a decade of success in private hands. Guess it will be back to the days of five-year waits for phone lines.

For its part, the ITU report credits much of the expansion of next generation telecom services to privatization and competition.

“The objectives of privatization are to improve efficiency, productivity, and service quality, as well as to raise capital, improve management expertise and further develop the network,” the report states. “In addition, many countries have found that competition is often more fair when the state avoids being both a market player (as owner or part-owner of the incumbent) and a referee at the same time. Privatization sends the signal that policy decisions and regulations will be fair to all players.”

The entire report is available for SF 100 ($84). The executive summary and a sample chapter can be found here.

It took a few weeks, but someone finally broke the code that locks Apple’s iPhone to the AT&T Network.

MSNBC is reporting that Greg Hotz, a 17-year-old New Jersey resident, working in collaboration with four Russians, used some software and soldering skills to crack the iPhone network locking code. The upshot is that non-AT&T customers who use GSM networks, which would include those in most of Europe and Asia as well as T-Mobile in the U.S., will be able to use the iPhone if they follow Hotz’s directions, now presumably available somewhere on the Internet.

It was only a matter of time before someone managed this, yet that did not stop the hue and cry about the Apple-AT&T exclusivity, which drew fire on the floor of Congress from the likes of Rep. Ed Markey (D-Mass.), who found it appalling that the iPhone only worked with AT&T's network. Oddly enough, he seemed to view this as a symptom of a monopoly mindset, even though the very nature of his complaint, that non-AT&T customers must change wireless service providers to get the iPhone, speaks to the fact of competition.

Hotz, a high school kid, seems to understand the mechanics of competitive market a little better. Asked if his hack may spawn a small industry that may buy U.S. iPhones, unlock them and send them overseas, Hotz replied, “That’s exactly, like, what I don’t want. I don’t want people making money off this.”

Although the it may be difficult to get the genie back in the bottle at this point, unlike Markey, Hotz does seem to grasp that there is value in differentiation, and that commercial freedom to create exclusive marketing agreements is what incents the development of cool products like the iPhone.

In the text of the Farm Bill - (HR 2419) The Farm, Nutrition and Bioenergy Act of 2007 - the US House of Representatives has called for yet another mandate restricting the use of private sector solutions like competitive sourcing. This time the mandate effects the administration of the Food Stamp Program within state-operated health and human services programs. This blatant attack on the authority and rights of Governors and state legislatures would prohibit access to the latest technologies and most cost-effective manners for administering the program not to mention the fact that it would also put an end to numerous modernization contracts which are already in place.
Will the Senate pass a comparable provision this fall? If so, the existing programs that have utilized non-profit and/or private sector contracts would cease, thus pulling the rug out from under efforts which are crucial to updating technology and increasing the level of service to the program’s recipients. Multiple states have integrated the administration of their Food Stamp Program with their welfare system so there is sure to be a breakdown there as well.

We here at Reason know that competitive sourcing determines the most efficient and effective source for providing services. Not only has it been shown time after time to save money; it also increases accountability on the part of the private bidder and the government employees. The flexibility that the states have been able to engage in by integrating, streamlining and consolidating the wide array of health and human services has benefited taxpayers. Currently, many health and human services structures at the state level allow for resources to be shifted to core areas of the program resulting in a more effective and efficient system overall but, that can all change with this legislation.

Each state has different financial and governmental structures. It is the Governor and state legislatures who have been elected to research, develop, debate and deliver services to the citizens who voted to provide that right to them. It is not the job of Congress to dictate federal unfunded mandates in state administration but they are doing it anyway. If this bill passes in its current form, the flexibility that states currently enjoy will be taken away, health and human services will crumble and fall apart in many states, and taxpayers will be left holding the bill.

For more on Reason's government reform efforts, click here.

Given the almost eerie popularity of CSI in all its incarnations the stuff Roger Koppl is doing with his Institute for Forensic Science Administration is fascinating.

Forensic science isn't quite the magic portrayed on CBS, surprise, surprise. In fact, error is still a significant problem in the real world of forensic science. The Institute is about research on best practices and means of improving the administration of crime scene investigation and the rest. Some good survey work and research papers etc. Reason will be publishing a study by Roger in the coming months.

It’s 11 days until Thanksgiving and neither Time Warner Cable nor Cablevision Systems, representing some 49 million homes, have signed deals to carry the NFL Network. The Wall Street Journal today has an article about the ticking clock, as the fledgling network, owned by the National Football League, will launch a series of weekly live game broadcasts beginning Turkey Day.

That means unless the NFL and cable companies come to terms, fans in cities like San Antonio, a Time Warner market, or the New York City area, Cablevision territory, won’t get to watch the Denver Broncos battle the Kansas City Chiefs over a second piece of pumpkin pie. Or will they?

Reports the Journal, “Indeed, the league will be counting on those regional fans, those in NFL-less cities as large as Los Angeles and gambling and fantasy aficionados….Much will depend on how angry those fans get, and how much that anger translates into calls to congressional representatives and attorneys general.”

But the author forgets that in San Antonio, thanks to statewide video franchise reform in Texas, NFL fans have a choice. So do customers in Cablevision’s New York City markets, where Verizon competes with its FiOS service (not in every suburban municipality, however, because New York State has yet to take up franchising reform). Quick visits over to AT&T’s U-Verse and Verizon’s FiOS sites confirm that the NFL Network is available as part of lower-end channel packages. So consumers in these markets don’t have to spend time navigating the government’s complaint bureaucracy; they can simply change providers. Ain’t that grand?

In the past, negotiations between programmers and cable companies could go on at length, as was the case when George Steinbrenner moved his New York Yankees to the Yes Network and then sought a higher fee from Cablevision. My gut tells me that the presence of competition, the cable companies will settle a lot faster, maybe not by Thanksgiving, but before the end of the current season. That’s good for consumers everywhere and another example of how competition and franchise reform improves cable service and value.

Here's what happens all too often when a county employee commits gross incompetence at work: He or she is recommended for firing or suspension. Then, after an appeal before the Civil Service Commission, the disciplinary action is overturned and the employee returns to work, incompetence forgotten.

According to a Daily News review, the commission overturned or reduced discipline recommended by various county departments in nearly half of all cases between 2001 and 2004. That's hundreds of people whose bosses consider them incompetent, yet remain on the public payroll.

What is most disturbing is the number of sheriff's deputies whose discipline has been reduced. For example, nearly one-third of the discharges were reversed in 2003. The reversals concern county Inspector General Michael Gennaco, who says it's possible that officers who have abused the public are still on the street.

More here.

Are people finally growing weary of their trendy Sideway's inspired pinot binge? Are nostalgic 30-somethings indulging in their cravings for that goes-down-easy sensation of a cool Natty Ice from the frat days of old? Are the Twins finally winning over more than just teenage boys?

Perhaps; though it's much more likely that the shift in alcoholic preferences reflects the beer industry's keen eye for market based solutions to their flagging business that reflect the appetites of a health conscious, flavor craving society in need of greater choice in the libation market.

The AP reports:

Now, brewers are pitching their beer as cooler, classier and healthier, trying to do for their beverage what Starbucks has done for coffee. ...From fruity malt drinks to organic pale ale and lager, new beer products are on display this week in Chicago at the Food Marketing Institute Show, the supermarket industry's annual trade show. ... Basically, wine seemed to have gotten more fun. So beer companies started thinking about how to do more with their brews.

Thank goodness for the free-market and competition; without which, we wouldn't be able enjoy the relaxing yet invigorating punch of what can only be called the mother of all beverages (and yes, if it has coffee in its name you can definitely drink it in the AM).

The pre-State-of-the-Union mill was rife with rumors that President Bush was going to make expanded Medical Savings Account the centerpiece of his domestic reform agenda. Alas, health care reform got barely two grafs in his hour-long address.

In these, Bush lamented the sky-rocketing cost of entitlements – conveniently ignoring that he himself ushered in the biggest increase in entitlement spending in the past four decades by pushing for free prescription drug coverage for Medicare seniors.

Be that as it may, Bush touted the wonders of MSAs because, like corporations, they would allow individuals to purchase health coverage from their pre-tax dollars, thereby leveling the playing field between individuals and companies. In addition, MSAs would attach coverage to individuals, not employers, making it more portable.

But there is a better way – to use the words of Virginia’s Governor Tim Kaine – to achieve these objectives: Abolish the health care tax breaks for employers and give them to employees or individuals instead.

Arguably, competition between insurance companies will be even more intense if they have to compete for the business of individuals – as opposed to companies – simply because there are so many more of them. Also, individuals are likely to be more prudent shoppers than corporations that have too much money and too little purchasing accountability (anybody who has worked at a large corporation knows that $1,000 toilet seats and hammers are not just a Pentagon phenomenon). More savvy shoppers will bring down health insurance costs for all and control national health care spending.

So how about it Rebel-in-Chief? A man who can plant democracy in a centuries-old dictatorship abroad can certainly fix ridiculous distortions in his own country’s tax code? Why settle for half-measures like MSAs when you can conquer the whole messed-up health care system?

Quick, patent the process of putting on pants one leg at a time. You just might get rich.

Seriously, recent excesses with patent's, from Amazon trying to patent its "one-click" method for bringing up stored customer information when orderin online and beyond--see here and here.

The latest! Some yob wants to patent the idea of selling cereal at a restaurant. Story here.

Patents make sense as a way to secure property rights for something recognizable as an invention. But thanks to entrepreneurial lawyers they are becoming a get-rich quick scheme or a means of eliminating legitimate competition. The incredible stretch by the cereal restaurant guy tells the story. They assert a patent for their "methods and system" of selling cereal. These included: "displaying and mixing competitively branded food products" and adding "a third portion of liquid."

Enough to make you toss your Cheerios.

Reason's Shikha Dalmia reports how private schools are rescuing kids in New Orleans from a dysfunctional public school bureaucracy.

During the recent high gas prices a lot hot air rose from state capitols about price fixing and restraint of trade by oil companies and gasoline retailers. Daren Bakst of the John Locke Foundation points out that "If the state is serious about reducing unfair trade practices," he concluded, "then it should start eliminating its own anticompetitive laws."

Check out "Government Trade Restraints: How N.C. Hurts Consumers by Restricting Competition."

Defenders of the public school monopoly fight charter schools, often with a viciousness only exceeded by that leveled at vouchers. But just as vicious are the attacks by non-profit charter schools on those dastardly for-profit charter schools. Latest round in the battle is via federal funding, and Arizona, which has the most charter schools per capita in the nation, is up in arms about it.

OMB has rolled out its its requirements that federal agencies analyze their purchasing habits and use it to shop smarter--what they call "strategic sourcing". While this may seem a no brainer, but it has been long coming for federal agencies. It's a new leg to the President's Management Agenda (which we have been tracking--see here and here, for example.)

Following up on Adrian and Ted's posts yesterday regarding the Supreme Court decision on direct consumer purchases from out-of-state wineries (see here and here), UCLA law professor Steven Bainbridge is less than sanguine about the outcome. As he writes on Tech Central Station today:

If the states chose to change their laws so as to ban direct-to-consumer sales by both out-of-state and in-state wineries, those laws almost certainly would be upheld as within the states' powers under the 21st Amendment. Given the considerable power wielded in most of those 24 by the wholesalers and retailers who benefit from bans on direct-to-consumer shipments, as well as lingering Prohibitionist sentiment in some of the more Southern and rural of them, I expect many of the 24 will enact nondiscriminatory bans on direct-to-consumer shipments. At least now, however, their in-state wineries will be on the side of those who favor "freeing the grapes." In states like New York, where there is an important in-state wine industry to counter-balance the power of Ken Starr's "booze boys," direct-to-consumer sales may yet prevail.

Read the whole article here. If this analysis is correct, then wine afficionados may want to go ahead and place their orders now before their state legislatures crash the party.

Here's yet another example of the benefits of competition from GovExec.com:

"The Office of Management and Budget is set to report that savings from job competitions between federal employees and private workers grew to about $1.25 billion in 2004 from $1.1 billion in 2003, according to people who have seen figures provided by the agency. Those figures represent the projected savings over three to five years for the competitions held in each fiscal year.

In an off-the-record meeting with contracting groups last week, David Safavian, head of OMB's Office of Federal Procurement Policy, said 80 to 90 percent of competitions are still being won by in-house teams. He provided preliminary estimates of the savings OMB is expected to announce officially on Saturday.

The roughly $1.25 billion in savings translates into about $20,000 per full-time equivalent employee. The savings were likely from a combination of restructuring and eliminating positions, as well as other factors."

Obviously this is great news for taxpayers. And with over 80% of competed jobs staying in-house, one would hope that this would send a message to public employees unions that their fears and rhetoric about competition are overblown.

Of course, Reason has been on top of this issue. Check out this recent policy brief for some perspective on competitive sourcing, and drop by Reason's Federal Government Reform Resource Center for more of our work on the topic.