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  • The Government’s War on Pipelines Made Us Vulnerable to Attacks on Our Infrastructure

    Posted on by Azrael 1 Comment

    Vickie Phillips received an unpleasant surprise when she stopped in for a fill-up at the Pop Shoppe in Greensboro, North Carolina on Monday.

    There was no fuel.

    “I can’t believe that we’re here and can’t even get gas,” Phillips told a local TV station. “People are tired of sitting in the house and they just want to get out and try to resume something of normality with their life and they’re definitely going to need fuel and gas to do that.”

    Phillips was just one of thousands of people who saw their travel plans disrupted in the wake of a cyberattack on Friday targeting the Colonial Pipeline, a vital network of pipelines that run some 5,500 miles from the US Gulf Coast to New York Harbor.

    The New York Times reported that many stations in southeastern states have placed caps on the amount of fuel consumers can purchase, while many stations have run out of fuel altogether.

    In the wake of the disruption, North Carolina Gov. Roy Cooper declared a state of emergency, while Georgia Gov. Brain Kemp suspended the state’s gas tax. The Biden administration, meanwhile, lifted environmental regulations on the sale of gasoline in several states and the nation’s capital.

    Following the attack, fuel futures jumped to $2.217, a three-year high.

    There’s no question that the Colonial Pipeline is a key piece of infrastructure.

    Analysts have described the pipeline as one of the most vital energy arteries in the country, one capable of carrying up to 3 million barrels of fuel—gasoline, diesel and jet fuel—per day to the East Coast.

    “This is as close as you can get to the jugular of infrastructure in the United States,” Amy Myers Jaffe, research professor of the Climate Policy Lab, told Reuters. “It’s not a major pipeline. It’s the pipeline.”

    Still, the widespread disruption seemed to surprise even the hackers responsible for the cyberattack.

    “Our goal is to make money and not creating [sic] problems for society,” DarkSide, the group the FBI confirmed is responsible for the attack, wrote on its website.

    This invites an important question: how was a single cyberattack able to derail an entire region of the most prosperous country in the world, disrupting the lives of millions of Americans?

    One answer is that we simply don’t have enough oil pipelines. The Colonial Pipeline provides nearly half—45 percent—of the fuel consumed on the East Coast. As other astute commentators have noted, “one pipeline network shouldn’t be serving half of the East Coast’s fuel needs.”

    The reality is regulatory hurdles have made it all but impossible to build new pipelines, which has placed a great deal of pressure on existing energy infrastructure. And it’s getting worse. Indeed, politicians are now actively scrapping pipelines that are instrumental to meeting future energy needs.

    One of President Biden’s first initiatives was to scrap, by executive order, the Keystone Pipeline, a 1700-mile pipeline that could have carried roughly 800k barrels of oil each day from Alberta to the Gulf Coast. (Instead, the bulk of that fuel will be transported by railways, which are less environmentally friendly and more dangerous.)

    Biden’s scrapping of the Keystone Pipeline received a great deal of attention, but it’s worth noting the action was part of a trend that has been largely overlooked. Across the US, pipelines are being targeted by politicians, regulators, and courts with great zeal.

    A year ago, Michigan Gov. Gretchen Whitmer took legal action to force the shutdown of the Line 5 Pipeline, which links Lake Michigan and Lake Huron and carries about 500,000 barrels of crude each day.

    “Here in Michigan, the Great Lakes define our borders, but they also define who we are as people,” said Whitmer, who gave Enbridge Energy a deadline of May 2021 to stop the oil.

    As of Tuesday, with the deadline rapidly approaching, the oil was still flowing. And news reports say Enbridge Energy and the Michigan governor are likely heading for a legal showdown.

    Then there is the Atlantic Coast Pipeline. Last year Duke Energy and Dominion Energy announced the cancelation of the 600-mile project—which would have piped gas from West Virginia to eastern North Carolina—because delays and regulatory uncertainty had threatened “the economic viability of the project.”

    The 1,200 mile-long Dakota Access Pipeline, which has been flowing since 2017, currently carries hundreds of thousands of barrels of crude through the Dakotas to Iowa and Illinois. While the Biden administration has announced it will not shut down the pipeline, a US district court judge did in July 2020. That ruling was overturned by a federal appellate court, but the pipeline’s fate hangs in the balance pending an environmental review.

    For many, the lesson of the recent gas shortage is that we need more cybersecurity oversight.

    “This pipeline shutdown sends the message that core elements of our national infrastructure continue to be vulnerable to cyberattack,” Mike Chapple, a professor in University of Notre Dame’s Mendoza College of Business, told Reuters. “Securing our energy infrastructure is a national security issue that involves several different federal agencies and requires centralized leadership.”

    Anyone who understands the “knowledge problem” will be rightly skeptical of solutions based on “centralized leadership,” especially when it comes to a “national security issue that involves several different agencies,” given the track records of the NSA, the TSA, the CDC, etc. What we really need is, not more, but less government oversight getting in the way of more pipelines.

    The current disruption should serve as a reminder that fossil fuels are an essential part of human prosperity.

    No one has made this point better than Alex Epstein, the author of The Moral Case for Fossil Fuels, who noted that cheap, plentiful fossil fuels—when married with human ingenuity—allow humans to improve the world around them.

    “Fossil fuel technology transforms nature to improve human life on an epic scale. It is the only energy technology that can currently meet the energy needs of all 7+ billion people on this planet,” wrote Epstein. “Ultimately, the moral case for fossil fuels is not about fossil fuels; it’s the moral case for using cheap, plentiful, reliable energy to amplify our abilities to make the world a better place – a better place for human beings.”

    The other side of that coin is that when energy is made needlessly expensive, scarce, and unreliable—whether by cybercriminals or politicians—it makes the world a more frustrating and unhappy place for human beings, as Vickie Phillips and many other Americans discovered this week.


    Jon Miltimore

    Jonathan Miltimore is the Managing Editor of FEE.org. His writing/reporting has been the subject of articles in TIME magazine, The Wall Street Journal, CNN, Forbes, Fox News, and the Star Tribune.

    Bylines: Newsweek, The Washington Times, MSN.com, The Washington Examiner, The Daily Caller, The Federalist, the Epoch Times.

    This article was originally published on FEE.org. Read the original article.


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  • People Resent Businesses More In Highly-Regulated Industries

    Posted on by Azrael Comment

    There is a positive relationship between the amount of governmental interference in an economic arena, and the abuse and invective heaped upon the businessmen serving that arena.

    When I came across those words while reading Walter Block’s Defending the Undefendable, I was struck by the power of that under-appreciated insight (not to mention his great introduction to libertarianism opening the book).

    Block’s primary illustration was the rental housing market, where “the spillover effects of bureaucratic red tape and bungling” are blamed on landlords, rather than on the government policies and procedures that caused them. And he named rent control as a primary culprit, because it “changes the usual profit incentives, which put the entrepreneur in the service of his customers,” into incentives where “the landlord can earn the greatest return not by serving his tenants well.”

    Block’s conclusion applies far beyond just rent control. It describes many government interventions, not just those in the housing market. It characterizes price ceilings and price floors. It applies to taxes, particularly hidden ones. It extends to regulations that act like taxes or barriers to entry and competition. It also typifies inflation. And in each case, it is because the adverse effects of such government interventions, particularly reduced outputs and higher costs for the goods in question, set up providers to be incorrectly scapegoated as the cause.

    Rent control undermines landlords’ incentives to provide the services tenants want, because it denies landlords the ability to receive adequate compensation to make those efforts worthwhile. As a consequence, landlords not only get blamed for unwillingness to do what tenants want, but also for efforts to evade the controls, such as tying apartments to the simultaneous rental of furniture, parking or other goods, even though such evasions keep the available housing supply from falling as much as it would have otherwise. Other price ceilings follow the same script.

    Price floors such as minimum wage laws and “prevailing wage” requirements push prices up instead of down. The consequent higher prices and reduced wealth result from the coerced overpayment for inputs, rather than the fault of producers. But producers often end up getting blamed.

    Hidden taxes are another example. Government gets more resources and control, while those people directly deal with can be given the blame. The “employer half” of Social Security and Medicare is a prime example. Employers must pay 7.65 percent directly to the government, on top of the wages they pay employees. But since employers know they must bear those costs, they offer less pay for a given level of employee productivity. The consequence is fingering employers for not paying employees what they are worth, when that actually derives from government siphoning off compensation.

    Similar effects are triggered by employer-paid unemployment premiums, worker’s compensation insurance, and other non-wage forms of compensation. The resulting government rake-off from employees’ total compensation leaves them less to take home, triggering resentment at employers. But government claims credit for spending those dollars indirectly pickpocketed from workers.

    Even less hidden taxes, like sales and excise taxes (which can be better hidden as value-added taxes buried in the supply chain rather than added at the retail level, which is why so many politicians like a VAT), lead to scapegoating of suppliers. Those taxes place a wedge between what the customer pays including the tax and the smaller amount the seller receives net of taxes. But it is still all too easy for customers’ views of producers to reflect what they pay to their suppliers including taxes for services received, rather than the smaller amount sellers actually get net of taxes. To illustrate, when was the last time you actually looked at what your markets, gas stations, etc., actually received from you, apart from government’s take, even though that information is printed on your receipt?

    Government mandates and regulations also produce misaimed blame. Many regulations act like taxes (e.g., a producer doesn’t care whether a $100,000 burden of dealing with government is called a tax or a regulation), raising costs and prices to others, for which suppliers will largely be blamed. Regulations that create barriers to entry, like a cornucopia of licensing regulations, restrict supply and competition, leading to higher prices and shoddier performance, because they undermine the competition that is buyers’ most important protection against maltreatment.

    Inflation is another page from the same playbook of disguising the messenger as the cause. While it is caused by government expansion in the money supply, those in government can always point fingers at someone else: businessmen can be blamed for raising prices (and called monopolists or colluders in the process); workers and unions can be blamed for demanding higher wages; landlords can be blamed for raising rents; bankers can be blamed for charging higher interest rates, etc.

    The positive correlation between government involvement and the abuse and invective aimed at producers that Walter Block lays out holds across a wide swath of the economy. And that misaimed blame game is particularly to recognize, given how often politicians promise to unify us, but turn to techniques—price floors and ceilings, taxes, regulatory and entry restrictions, inflation, etc.—which guarantee the opposite effect. Such cognitive dissonance is an important red flag, because logical contradictions do not make for good policy.


    Gary M. Galles

    Gary M. Galles is a professor of economics at Pepperdine University. His recent books include Faulty Premises, Faulty Policies (2014) and Apostle of Peace (2013). He is a member of the FEE Faculty Network.

    This article was originally published on FEE.org. Read the original article.


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  • The FDA Can Only “Fast-Track” Medicine Because It Slow-Tracked It in the First Place

    Posted on by Azrael Comment

    In the midst of the COVID-19 crisis, tens of thousands of people within pharmaceutical companies are working hard on tests, on medicine and methods to save those who are ill, on antiviral drugs and on vaccines. Many of these efforts have been fast-tracked by regulatory bodies such as the FDA. This is all and well. But this is also a good time to ask ourselves why this fast-tracking was necessary. Why are medicine and equipment “slow-tracked” in more normal times? And what are the consequences of the normal procedure compared to what we see with regard to COVID-19?

    In late December, at the beginning of the COVID-19 epidemic, the non-crisis, standard slow-tracking process was in effect. It belonged to the CDC to develop tests for the virus and even the CDC needed an “emergency use authorization.” Already available tests from other countries would have required lengthy FDA approval and even when the sense of urgency increased, hospital labs were discouraged from quickly developing their own in-house tests. These labs also realized that the FDA application process was too complicated for them. Only on February 29 did the FDA fast-track the process.

    Fast-tracking is not unique to COVID-19. It is a common recourse in times of crisis. Normal procedures and regulations are set aside and we adapt to the exigencies at hand. Heroic feats of engineering were achieved during World War II. When faced with disruption, private companies form “skunkworks” to short-circuit their own, self-imposed bureaucracy and regulations.

    In modern times, we usually live in calm, safe, quite well-organized societies. This allows us to indulge in what seems an unstoppable human urge to regulate. When we apply this urge to risk management, we come up with government organizations such as the FDA. That the creation of a regulatory body is a problem in and of itself is a well-known fact; a regulatory body must keep regulating to justify its very existence.

    But leaving that aside, such regulatory organizations give us a warm and fuzzy feeling of order and of security. After all, these organizations are populated by thousands of government experts. Aren’t they fatherly figures who can make us safer? When a new risk is identified, we clamour for their intervention. After all, strict regulations, and the stricter the better, should provide us with security. If that were only the case…

    On the contrary, our risk aversion and our urge to regulate by means of government bureaucracies have devastating effects on our ability to make scientific and technological progress in any area that is regulated. This is something that Aaron Wildavsky discusses in his gem of a book, Searching for Safety.

    The reasons for this are at least fourfold, although they are intimately related. First of all, a rich society such as ours can afford to spend more on safety. But secondly, a society that instead accepts risks can pursue risk reductions through trial and error. In all fields, errors are essential. Without the possibility of error, innovation is blocked like a clogged drain. We commonly cannot “think our way forward.” Instead, much of the time we must actually try to see if something works or not.

    When we instead seek to avoid all risks, which is what modern regulatory bodies commonly do, we tend to pursue a strategy of trial without error; we try to guarantee beforehand what is impossible, that no new technology will ever produce any negative effects, and we therefore forego both the (often much larger) positive effects, as well as the learning we gain through errors. The method of trial without error is slow, prohibitively expensive, and wasteful with regard to risk mitigation.

    Thirdly, with trial and error, we only need to mitigate those risks that actually materialize. These will usually be only a fraction of those risks we would seek to mitigate using trial without error. And fourthly, as a consequence of lower costs, when accepting and even embracing the possibility of error, we can also explore a much larger range of options, instead of just the few we can afford to consider, and have time to consider, when we try to work out every last detail beforehand.

    Of course trial and error does not mean that risk avoidance goes out the window. But it becomes much less intrusive and much more flexible.

    On the positive side, because we have agencies such as the FDA that regulate the pharmaceutical industry, many trials and some often-deadly errors are prevented. But, on the negative side, precisely because we do not risk any error and harm, as a net result, tens, possibly hundreds of thousands of other people have their lives shortened each year in the USA due to the resulting slowing down of progress. Drugs are delayed, often by years. The number of trials of different drugs are much smaller. Getting FDA approval costs enormous amounts of money that only large pharmaceutical companies can afford, and we therefore also have much fewer but larger and less nimble pharmaceutical companies than we would otherwise have. The same goes for all other industries subject to government regulations.

    Without the existence of the FDA, and associated regulations, patients and doctors would still seek reassurance. We know, or should know what then happens. Private certifiers will find a market, and immediately step in to provide such reassurance for patients and doctors. Also, industry organizations will spring up to provide similar services, for example through careful vetting of members. And in the end, false claims can be pursued through the courts.

    One of the most celebrated features of the medical profession, the over 2,400-year-old Hippocratic Oath, that doctors swear in some form to this day, is an example of such a private-sector, confidence-generating device. It appeared precisely because doctors had to find some way to reassure patients in an unregulated market within 1200 to 1500 independent Greek city states.

    The abolition of the FDA would lead to medical research seeming messy and much less well-organized. But it would be far more vibrant. Just how much innovation would be sped up without the existence of FDA-like bodies, we simply cannot know; all we can say is that the effects will be very large. Usually, when markets are freed up in other areas, the effects are stupendous.

    Is it politically possible to abolish the FDA? Maybe, in particular if we take a hard look at what we are currently doing. As today’s sense of urgency shows, as soon as there are large risks to combat, such as the COVID-19 crisis, the warm and fuzzy, but misplaced feeling of having the FDA, is largely set aside. Not completely, but still. We abandon the usual slow-tracking and instead fast-track medicine with lower and/or more flexible regulatory demands. By extension, both in a time of crisis, and in times of calm, a world without the FDA would be a world in which progress is always fast-tracked.

    Erik Lidström


    Erik Lidström

    Author of Education Unchained—What it takes to restore schools and learning (Rowman & Littlefield 2015).

     

    This article was originally published on FEE.org. Read the original article.


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