App stores act like a filter for software products by setting security, privacy, financial, and performance standards. Developers must adhere to these standards if they want to sell their software through an app store. This ensures compatibility with devices and protects consumers from malware or other intrusive software. App store owners typically charge a commission to developers who offer paid apps or in-app purchases through the store. 

Recent litigation and the introduction of a federal bill, the Open App Markets Act (OAMA), demonstrates public concern regarding the power of app store marketplaces. Georgia, Hawaii, Illinois, Minnesota, and New York have seen bills similar to OAMA introduced at the state level.  

The regulations proposed by OAMA, which won’t pass in this Congress but may be taken up again by the next Congress, are intended to apply exclusively to platforms with more than 50 million U.S.-based users and would require access to all app stores from covered platforms, referred to as “interoperability.” Therefore, OAMA would require covered platforms to provide access to third-party app stores, essentially meaning that users should be able to access any app store from a covered device. The bill also requires covered platforms to allow for “sideloading,” the practice of installing apps from places other than an official app store.

Federal legislation like OAMA (or whatever comes out of the next Congress) seems to intend to create a more open market with greater competition among app store marketplaces. Unfortunately, it would likely fail to do so while creating additional problems. The following are four considerations and concerns about the requirements that would come with the potential passage of OAMA and similar legislative proposals. 

For the purposes of this piece, terms will be simplified. Within Apple systems, iOS is the operating system and Apple App Store is the app marketplace. Within Google systems, Android is the operating system and Google Play Store is the app marketplace. To simplify, wherever possible, these unique systems will simply be referred to as “Apple” or “Android” to identify two unique operating systems and app stores. 

Security

App store legislation could create major changes to data security and privacy practices. Every day, app stores handle a tremendous amount of web traffic. Apple’s App Store had more than 143 billion app downloads and processed over $85 billion in revenue in 2021. Google’s Play Store had more than 111 billion app downloads in 2021 while processing some $12 billion in revenue. 

Because these platforms process app purchases, sensitive financial and personal identification data must be protected. Even for free apps, each download is connected to an individual’s name, email address, device ID, and IP address. Firms have taken different approaches to data protection, which offers consumers choices between different app store data security practices.

For example, Apple differs from Android in that it has created an “ecosystem” in which Apple controls all aspects of the product from device manufacturing to the operating system. At most, there are five different hardware configurations for the iPhone and they all use the same iOS operating system (unless the user elects not to update to more recent versions). Apple then manually verifies each app using a three-layered security system to prevent malware from entering devices through the app store, the most common route for hackers.

Apple has deliberately chosen a closed approach because, among other reasons, they believe that it is more secure. While there are multiple ways to measure security, the Nokia Annual Threat Intelligence Report studies how often harmful malware targets different devices and software. The 2020 report shows that devices running Android were infected with malware at 15 times the rate of iPhones. 

This is likely due to the fact that android is an open-source project, meaning that anyone can use and modify the system without any fees. As a result, there is greater diversity in both devices and software. There are at least 3,000 different hardware configurations and at least a dozen different versions of the Android OS. Android deploys a proprietary anti-malware system that reviews every app in its ecosystem to the tune of over 100 billion apps a day to prevent malware.

Consumers have choices between closed and open systems and can evaluate the strengths and weaknesses of each approach. Android has more hardware options at more prices and has over a million more apps in its store than Apple does. This suggests that an open-source approach provides greater choice in terms of price, devices, and the total number of apps. However, there appears to be a greater malware risk in running Android. Consumers can opt for Apple if they value more security but do not mind losing access to certain apps. But under OAMA, federal law would effectively make every device subject to the open-source nature of the Android project, thereby limiting consumer choice and perhaps increasing security risk. 

OAMA would also require that covered platforms provide access to “OS interfaces, development information, and hardware and software features” to developers. App stores already provide necessary information for app development, often called a software development kit (SDK). Mandating developer access in this manner could be detrimental to certain business operations. Operating systems are extremely complex and disclosing major portions of code could give malicious actors the information they need to infect devices with malware. Technology companies are left with little regulatory clarity as to what information they can protect and what must be shared, thereby making app security more difficult to the detriment of consumers.  

Another area of potential security and privacy violations involves payment systems. Current law maintains that platforms are entitled to set the publishing, purchasing, and payment processing terms of app access and in-app purchases. However, they must allow app developers to provide links to payment processing systems outside of the app store. App store legislation would force app stores to let publishers handle payment in the app with any payment system they desire. 

Both Apple and Android allow users to add certain verified payment methods for secure checkout such as Apple Pay, Google Wallet, and PayPal. These services invest heavily in anti-malware software as part of their offering.  Allowing developers to choose any payment method they like and integrate it into the app would introduce a security gap by adding software that has not been vetted.

If app stores are unable to review, approve, and deny app submissions based on payment system compliance, consumers could be subject to fraud and information theft. Even if an application developer acted in good faith in accepting these forms of alternative payment, malicious hackers could still steal consumer information by encouraging payment systems that are insecure.  

Any changes to app store ecosystems should continue to allow companies to protect consumers from non-secure software. Platforms must be able to review apps that developers submit before publishing them, choose which specifications to release, and vertically integrate to offer in-house solutions. 

TAKEAWAYS

App store legislation looking to protect consumer security and privacy should:

• Allow for both open and closed approaches to App Store operations
• Allow platforms to review apps before publishing them and set the terms of publication
• Give platforms control over what hardware and software specifications they choose to publicly release
• Protect a platform’s ability to require secure payment methods for app purchases

Competition 

App store legislation aims to promote competition by requiring access to all apps in covered app stores so that no apps can be blocked from customers, but it fails to account for existing competition to app stores that already offer consumers these choices. Rather than promote competition, app store legislation would burden app store operators relative to their competitors. 

Progressive web apps (PWAs) have emerged as major competitors to native apps sold through app stores. Native apps take up hard drive storage on devices and need to be custom designed to work on the operating system for which they are intended. PWAs function like traditional websites in that they use their web-based structure to store necessary data, meaning that they are not downloaded to your phone. PWAs have surged in popularity because they are mostly device- and OS-agnostic, making them popular with developers who want to build a single app and make it available for any device. 

PWAs, like any application on the internet, should only be used from trusted sources because of the greater security risks they carry. However, there has been no shortage of trusted software developers and companies bringing PWAs to the market. Popular services such as Tinder, Lyft, Facebook, and many more have invested in PWAs as an alternative to conventional apps. Even Epic Games’ popular game Fortnite, which was pulled from the iOS store while a legal dispute with Apple ensued, is playable on iOS through several cloud options. PWAs may never match native apps in terms of performance, but provide a solid alternative to users seeking to use apps not found in specific app stores.  

Apple and Google app stores also face more direct competition from other popular app stores like the popular gaming marketplace Steam, Microsoft Store, and the Amazon App Store. These competitors seek to offer a functional device connected to the internet with a marketplace for applications, just like iOS and Android.  

OAMA would also arbitrarily distinguish “general purpose computing devices” (GPCDs), such as computers, laptops, and smartphones, from apparent non-GPCDs, such as gaming consoles and smartwatches. Non-GPCDs would be exempt from app store legislation regulations, yet the bill provides no reasoning as to why such similar devices should be regulated so differently. Microsoft boasts that the graphics processing unit in the new Xbox Series X is equivalent in power while being faster than many desktop PCs. Usage statistics reflect these capabilities. Only 55% of the total time spent on the Xbox is spent gaming. Roughly 30% of all time spent on Xbox is on Netflix and YouTube while another 15% is spent on other non-gaming activities. Even though nearly half of all activities on the Xbox are spent using the device as a computer more than a gaming console, it would not be subject to app store legislation regulations.

In the smartwatch market, OAMA could favor hardware makers such as Garmin over the Apple Watch and Samsung Galaxy Watch. While Garmin offers apps such as Spotify through a third-party app store, OAMA  would not classify it as a GPCD because it may lack an operating system sufficient to conduct general computing operations. Apple Watch, Galaxy Watch, and other GPCD smartwatches would be subject to more regulation only because they have a larger reach and more capabilities. Devices such as gaming consoles and smartwatches share enough capabilities with GPCDs that it makes little sense to create this distinction. The GPCD determination would not be able to keep up with the complex and rapid pace of technological innovation, and it may discourage future innovation and the development of more powerful smartwatches that could be subject to OAMA regulations as a GPCD.

While OAMA would seek to provide consumers with alternatives to Apple and Android, it fails to consider that consumers can already choose between app stores, PWAs, and other alternative software sources. These options may be gaining in popularity. In 2021, Apple saw downloads decrease year-over-year for the first time. In the long run, competition and negotiations between app stores and app developers will serve customers better than federal micromanagement of app store operations.

TAKEAWAYS

• Innovations like PWAs make “blocking” an app from a device difficult, providing consumers with options no matter their operating system or device
• App stores come in a variety of forms. Regulations should not target by size but instead focus on consumer harm, no matter how large the store
• Most modern devices share basic computing capabilities. Arbitrary distinctions codified in statute will serve neither consumers nor innovation

Self-Preferencing and Verification 

OAMA would aim to prevent app store operators from “self-preferencing” their apps over competitors’ apps. To do so, it would prohibit ranking algorithms from considering ownership as a factor in where the app appears in search results. As a result, if a consumer searches for “maps” on an Android, Google Maps cannot be at the top of the list simply because the user is on Android’s Google Play Store. But the bill also states that application preferencing via advertising is allowed as long as the platforms disclose advertisements. Thus, it is unclear whether from potential OAMA language as to whether app store operators can place their products at the top so long as they disclose that it is advertised.

Another scenario is that the app organically rises to the top of search but without full algorithmic transparency, it may be impossible to avoid self-preferencing charges. In response, firms may choose to intentionally lower their placement in search. But doing so could lead to artificially suppressed application downloads, which could cause consumer deception and unrealized economic gains. A similar law banning self-referencing in Europe has shown that this has degraded consumers’ experience. A 2013 report from the Federal Trade Commission concluded that rather than using self-preferencing for excluding competitors, the changes Google made to its search engine were to “improve the quality of its search results and that any negative impact on actual or potential competitors was incidental.” 

Since self-preferencing is so common, it suggests that consumers find some kind of value in it. When customers search Google, they may expect to see Google Maps first because they are searching using Google. If they search Amazon, they may expect to see Amazon’s white-label products in the same way that Walmart promotes its private-label brands. However, this practice does not prevent customers from simply scrolling another inch or two to another mapping service or walking past the private label rack to choose another product. Self-preferencing is not a method for excluding competition, but rather a way for companies to provide cheaper and customer-friendly solutions for common adjacent products, something that consumers often value. 

App store legislation would also require app store platforms to provide end users with “the technical means to verify the authenticity and origin of third-party apps or app stores.” Ironically, this is what app store operators already do for consumers when an app is submitted to the store, which is often a technically difficult undertaking. For certain apps that intentionally obscure personal or identifiable information, such as Web3 and cryptographic technologies, it may be impossible for firms to verify the origin or authenticity. 

This could stifle innovation and discourage more innovative privacy app developers to forgo submissions to app stores. Under OAMA, firms could be forced to spend a large amount of time trying to track down a developer’s location or identity, diverting resources to a task that may be impossible. It is ultimately unclear what is meant by providing the “technical means” and this could open up platforms to litigation if they do not provide enough technical information and capabilities to consumers.  

TAKEAWAYS

• Banning “self-preferencing” will likely create regulatory confusion and result in negative outcomes for consumers
• Self-preferencing is widely practiced in the rest of the economy, from grocery stores to car dealerships, and is recognized by consumers
• Most consumers cannot technically verify apps. This is a service that app stores already provide to consumers as part of the normal business operations

Consumer Preference 

Future passage of OAMA would signal a view of the app distribution models of Apple and Android as terms dictated by smartphone behemoths to leverage power in vertical markets and extract the profits of third-party app developers. But decades of competition by smartphones (alongside competition from laptop and desktop computers) suggest the native app distribution channels observed today emerged as value propositions offered by Apple and Android to consumers.

Before the 2008 origins of the app store, there were no formal software filtering services for mobile or desktop and consumers were forced to rely on third parties or word of mouth to determine if websites were safe. This resulted in major viruses taking down nearly 10% of the internet and causing billions of dollars in damage. Cyberthreats have evolved into malware, phishing, and other techniques in order to get around the tight security of app stores, but such security still provides a valuable bulwark against malware.  

Over the years since app stores debuted, there have evolved a variety of approaches to app store operations which give consumers choices in terms of price and security. The closed nature of Apple is part of an overall strategy and value proposition for consumers that is fundamental to the Apple brand. Apple consumers often cite the ease, security, and user-friendliness of this closed approach as reasons for selecting the products, and these features are central to Apple’s iconic brand.

But, relative to Apple, Android is a more open ecosystem that still exercises some central control over versions of the operating system licensed to multiple hardware manufacturers. The result is more flexibility in cost, usage, and software–often cited by Android users as a superior balance in features and flexibility than that offered by Apple. Once again, this model mirrors long-standing and ongoing competition in the market for laptop and desktop consumers.

Web apps provide users with ease of use, security, and flexibility on both iOS and Android. Unofficial but widely available products such as “jailbroken” phones are also available. Continued innovation and consumers’ ability to switch or use multiple devices and channels for apps provide a degree of competitive pressure and market discipline on both Apple and Android devices, including their channels for distributing native apps.

Neither ecosystem is static, and continued innovation and competition between the two ecosystems shape the way they distribute native apps. Both Apple and Android ecosystems have adapted to, and sometimes fueled, further changes such as in-app purchases, whose central role in gaming was likely not foreseen in the early years of touchscreen smartphones.

It would be incorrect to assume that app store legislation would result in greater third-party native app competition while leaving Apple and Android’s security features and user experiences unchanged. Apple and Android’s ecosystems would likely find other ways to maintain their market-tested approaches, albeit less efficiently, at higher costs, and possibly with higher prices to end-consumers. These unintended consequences would reduce, and potentially eclipse, any potential benefits from increased openness in the market for native third-party smartphone apps.

TAKEAWAYS

• App stores are an innovation that protects consumers from malicious software
• Consumers have a choice in the market between open systems and closed systems, each with accompanying strengths and weaknesses. 

Conclusion 

App stores serve a valuable function to consumers by vetting software applications before they gain access to consumer devices and information. Before this, users were at much greater risk of contracting viruses on their computers and phones. While the service has been mostly offered by a handful of firms, there is nothing inherent about the app store service itself which would preclude other competitors from entering the market. Each app store has a unique approach to its offerings which gives consumers choice about what kind of app store they want to use, typically involving a tradeoff between openness and security. 

Using policy to force all major app stores onto devices could reduce consumer choice while creating major issues for security. Until there is significant and demonstrable consumer harm, not just a perceived lack of consumer choice, policymakers should continue to let app stores innovate and evolve without policy intended to force them into certain practices. 

The post The pitfalls of regulating app stores appeared first on Reason Foundation.

Despite this rare bipartisan agreement in an increasingly polarized political climate, Congress has failed to pass such a data privacy law. Earlier this year, Rep. Frank Pallone (D-RI) introduced the American Data Privacy and Protection Act (ADPPA), which has serious flaws but is the closest Congress has ever come to enacting a federal data privacy policy.

House Speaker Nancy Pelosi (D-CA) refused to bring the bill to the floor because it did “not guarantee the same essential consumer protections” as California’s California Consumer Privacy Act (CCPA), the state’s 2018 harmful data privacy law. The ADPPA would not solve the developing state patchwork issue because it only acts as a floor for minimum required regulations where states could add additional regulations. California’s law is an example where the state regulations are heavier than the federal standard would be if ADPPA is passed. The federal standard for data privacy should instead act as a ceiling and should not be as extensive as the CCPA.

In the Senate, the ADPPA faced an equally hostile reception, with Sen. Maria Cantwell (D-WA), chair of the powerful commerce committee, refusing to hold a hearing because of her concerns surrounding “enforcement holes.” The ADPPA would require annual algorithmic assessments, which would create recurring compliance costs for firms and would also require considerable federal resources to enforce. These enforcement difficulties suggest that an entity like the government may not be in the best position to regulate something as dynamic and technical as algorithmic decision-making.

This begs the question of whether a data privacy law is needed at all. If it is, it would ideally be a bill that would address all these issues and create a reasonable data privacy standard for the country that solves the patchwork problem. But without that standard, more states may feel compelled to address privacy concerns and should be aware of pitfalls to avoid.

Since the implementation of California’s Consumer Privacy Act in 2020, four states—Colorado, Connecticut, Utah, and Virginia—have enacted their own privacy laws. Complying with a regulatory system in which data laws vary from state to state is the least efficient method for the economy. Most businesses have an online presence and more and more operate in all 50 states. The costs of regulatory compliance in this type of environment stifle competition—only businesses with sufficient capital can comply, and many smaller upstarts can’t.

For several years, it looked like Florida would join the growing number of states passing data privacy laws. Florida Gov. Ron DeSantis supported a data privacy bill in 2021, but the state legislature was split over a private right of action, which would have granted Floridians the right to sue and receive financial compensation for violations. With Florida’s 2023 legislative session approaching, it’s time to consider what a data privacy bill in Florida should look like, especially if Florida lawmakers want to avoid the mistakes of CCPA and Europe’s General Data Protection Regulation.

The most serious mistake would be including a private right of action in legislation. On the surface, allowing individuals to bring lawsuits against violators may seem like it would help hold firms accountable, but the unanticipated reality is much different. Even laws that govern more serious and personal information, such as the Health Insurance Portability and Accountability Act (HIPAA), do not include a private right of action. In other laws, like the Americans with Disabilities Act (ADA), a private right of action exists but has been significantly curtailed to reduce the number of “serial” cases abusing the ADA. If Florida passes a data privacy law with a private right of action, it would inevitably feed a cottage industry of frivolous lawsuits that trap businesses in litigation cycles, suppressing innovation and raising costs.

Burdensome data privacy regulations also stagnate innovation. For example, a Cato Institute study of the Fair Credit Reporting Act (FCRA), which regulates how credit bureaus manage consumer data, argues that because of data privacy requirements, the industry has become so tightly regulated and costly that innovation has stagnated and new entrants cannot enter the market. It is likely that only large and resource-rich firms will have the continued ability to comply with complex laws like data privacy.

Evidence from the European Union (EU) may support this claim. Two months after the EU implemented the General Data Protection Regulation (GDPR), 30% of US news sites blocked EU access due to an inability to comply. An HEC Paris study of 6,286 EU websites found a general 10 percent reduction in internet traffic, resulting in millions of lost dollars. The study also found that GDPR’s rules hurt smaller websites (10-21% drop) more than larger ones (2-9% drop), suggesting that similar to credit score regulation, data privacy regulation may help entrench current large websites while deterring entrants.

Policymakers may also consider that many consumers’ ‘rights’ commonly included in data privacy bills could eventually become regulations that negatively impact consumers. For example, the right to opt-out of the sale and sharing of data sounds simple but becomes a prescription for how websites earn revenue and handle data. Websites share consumer data with advertisers and data processing companies to generate revenue. Florida lawmakers should note that allowing users to opt-out of this transaction, the primary form of revenue for many websites, would alter the fundamental business model at the internet’s core. Some websites may shut down if forced to accept users but cannot monetize their data through advertising because users have opted out. In other cases, they may have to charge these users for previously free websites to keep servers running. Policymakers should consider these downstream impacts on consumers as they decide what data rights consumers may have.

In addition, there is certain to be confusion around what constitutes the sharing of data. For example, if a website provides a temporary interface for advertisers to determine which data segment they want to market, that could reasonably be considered sharing. However, there is no industry-accepted definition of sharing data. Therefore, when considering data privacy legislation, Florida policymakers must provide clear guidelines for what constitutes data sharing.

Data privacy can happen without such burdensome regulations. Other rights, such as the right to correction and deletion, as long as they are given appropriate curing periods, such as 90 days, can be of minimal impact. Privacy notices with continued opt-in, which prevent users from having to accept cookies every time they visit a site, can smooth the experience while providing consumers with a transparent and understandable privacy contract available at any time. Distinguishing between personally identifiable data and de-identified data can also prevent needless regulations on non-personal data.

As people increasingly move their lives into the digital world, demands will inevitably grow for greater data protection rules and more restrictions on what private companies can do with this information. However, crafting data privacy rules that balance individuals’ demands and the needs of businesses is a perilous task that either risks providing too few protections or overregulating the digital space, ultimately harming Floridians. While perilous, if the Florida state legislature pushes forward on a data privacy law, it can start to strike this balance by excluding a private right of action, limiting the right to opt-out, and providing clear guidelines for data sharing with an open and transparent privacy agreement.

Florida can do better than California and Europe’s data privacy laws, but only if lawmakers recognize the promise and perils.

The post Florida should learn from the mistakes of California and European privacy laws appeared first on Reason Foundation.

First, the paper by Art Laffer and John Barrington Burke suggests that monopoly claims against firms like Amazon, Google, Facebook, Netflix, Apple, Amazon, and more could be overblown as measured by the level of firm concentration in the economy. The two measurements it cites to assess concentration are the Herfindahl–Hirschman Index (HHI) and the concentration ratio of the top four firms (CR4). 

The HHI and CR4 aren’t just theoretical concepts of market competition analysis—the Department of Justice has employed both to investigate the impacts of merger applications. Both measures do have major flaws. Concentration is not the same as monopoly power. The HHI typically measures general concentration among all firms while the CR4 measures the sales of the top four firms as a percentage of total sales in the industry. HHI shows how competitive an industry is overall, while the CR4 shows how much of an industry’s output the top four firms are responsible for. 

Between 2002 and 2017, a period of major growth for technology firms, the concentration ratio of the top four firms meaningfully shifted among tech firms. Using the North American Industry Classification System (NAICS) business code system, the concentration ratio of the top four firms in the category of software publishers and data processing, hosting, and related services decreased from 39.5% in 2002 to 35.4% in 2017. Meanwhile, other business categories, like the consumer lending industry, for example, had their CR4 go from 60% to 50% over the same time period. Thus, the consumer lending CR4 was still nearly 15% more concentrated than the information technology C4.  

U.S. Census data shows that the HHI for information technology is far below monopoly concerns and also in line with most other industries. An HHI score of around 1,500 is generally considered to represent a monopoly.  As of 2017, the latest available Census data for this report, the information technology industry had an HHI score of 239. This indicates that while tech may be more concentrated than other industries, it is far from being a market share monopoly as measured by either the CR4 or HHI.  

The most valid criticism of the study is that the NAICS code system used to track industry concentration and sales is flawed and does not capture actual market dynamics. For example, there is no NAICS code for search engines that accurately captures the shape of the market. Critics argue that if NAICS was more detailed then the data would reveal that the industry is more concentrated than the current data suggest. The two categories the study cites as being less concentrated, software publishers and data processors, contain firms like Salesforce, popular video game makers Electronic Arts, and Activision, and less known companies like Perspecta. Critics argue that the real monopolists are in other data categories such as internet publishing, information services, e-commerce, and other categories not broken out in the Laffer analysis, which hides their true market dominance. 

However, another study that used a proprietary method to stitch together NAICS data from 2002-2017 found that even other NAICS categories which contain electronic shopping, search, music publishing, taxi services, and video distribution have only seen slight increases in concentration and are still below many other industries. 

A monopoly cannot be judged by market share alone. The Laffer paper emphasizes that U.S. antitrust is judged by the consumer welfare standard, meaning that antitrust hinges on whether prices can be increased or product quality can be decreased without competition. This has not been the case in the market for digital advertising and search. The price of digital advertising has fallen by almost 30% since 2009 while online search engines have remained free. If digital advertising customers really had nowhere else to go, Google would likely be raising prices on digital advertising but that is not what the data show. In 2009, a typical digital ad would have cost $100 but in 2021 that same ad would only cost $75. This means that it costs less for most companies to connect with customers in a more efficient or cost-effective way due, in part, to improvements in services that Google has invested in. 

In 2019, Google invested $26 billion in research and development, roughly 14% of total non-manufacturing research and development private sector spending. Google has cumulatively invested over $171 billion in research and development since 2013. This research has resulted in performance output for its search product which then directly translates into more ad revenue for the company. While Google’s strong brand and market prominence in the industry would likely dissuade some potential competitors, nothing in an antitrust sense precludes investors and competitors from entering this search and advertising space.

If Google truly had monopoly status and felt no pressure from the competition, we would expect to see them invest less in research and products, raise prices, and allow their products’ quality to decrease without consequence. In terms of search, Google has maintained its market share by continually improving the product while keeping the price charged to search engine users at zero, not by using any coercive power to block out competition. 

Google has recently faced criticism and pressure for tracking user data. They have also seen competition from firms like DuckDuckGo, which promise not to track users’ data. With a fraction of Google’s money, approximately $172 million in investment, DuckDuckGo has achieved a 2.5% of search engine market share.  

The Laffer paper goes on to invoke both Moore’s law, which says that transistor capacity should cost half as much to produce every two years, and Wright’s law, which says that for every cumulative doubling of units produced, the cost to produce is reduced by about 15%. Both of these phenomena contribute to tech companies being able to produce better machine learning models and algorithms at lower and lower costs.  

Faster computer chips can process more data at one time while smarter machine learning models can make the data more intelligible and profitable. Laffer explains how artificial intelligence has improved business processes, “AI can also go beyond traditional A/B testing to make predictions about how creative will perform…by using historical data to determine what kind of colors and messaging will connect with consumers and drive sales.”  

These techniques have improved digital advertising effectiveness and also improve customer experience through better personalization and more relevant ads.  Laffer argues that this happened because internet businesses need less real estate or physical goods than traditional businesses and therefore can invest more into software applications like machine learning which continually improve efficiency at a lower cost of operation. While this has produced historically valuable companies, Laffer emphasizes that this is because they have brought equivalent value to their customers and partners.  

The paper concludes by analyzing the rise of Amazon’s Marketplace seller fees through the framework of the Laffer Curve. The Laffer Curve theory states that there is an optimal tax rate that will produce the most revenue for the government. If the rate is set at 0%, the government did not recover as many funds as it could have. But as the rate approaches 100%, at some point it will go beyond equilibrium and discourage economic activity by making business unprofitable, ultimately reducing government revenues.  

The antitrust bills in Congress claim that Amazon is leveraging monopoly power to increase marketplace seller fees to unreasonable rates. By applying the Laffer Curve theory, Laffer and Burke argue that if fees were too high we would see sellers jumping to other, more profitable options such as Shopify, Etsy, eBay, and others.  As a result, they claim, we should see Amazon’s revenue decrease because it would be “overtaxing” its economic participants. However, the study finds that this is not the case; as Amazon marketplace revenues have steadily increased over the last decade, marketplace sellers have increased, and total sales have increased, demonstrating that participants still find value despite the increased marketplace fee rate.  

In other words, the price of selling on Amazon was likely too low and Amazon is slowly discovering the true value of its service, steadily increasing it until it finds resistance and loses revenue. If Amazon continues to increase the rate, at some point sellers will find another way to sell those goods and we should see Amazon’s revenues decrease.

Contrary to the narratives used to argue against big tech companies like Google and Amazon in proposed antitrust legislation, the Laffer-Burke paper argues that these companies are the largest and most profitable companies we have ever seen, in large part, because they have innovated ways to deliver high-value products at relatively low costs by leveraging advances in digital technology. 

The size of these companies alone should not automatically subject them to antitrust claims. Lawmakers should consider the benefits that businesses and consumers enjoy as well as the ongoing competition in the technology industry. Antitrust law should be reserved for cases where clear monopoly status can be shown to harm consumers in the form of higher prices and lower quality products.

The post Report says big tech monopoly claims are overblown appeared first on Reason Foundation.

This issue recently reappeared when, as the New York Post reported, “Twitter locked the account of a right-leaning parody site The Babylon Bee after it awarded Rachel Levine, the transgender Biden administration official, the title of ‘man of the year.’ The Babylon Bee story was a reaction to USA Today’s naming of Levine, who is US assistant secretary for health for the US Department of Health and Human Services, as one of its ‘women of the year’ last week.”

Social media companies are free to set their terms of service and moderate content as they choose. It doesn’t mean their policies are smart. In this case, Twitter’s suspension of the Babylon Bee makes Twitter appear to be oblivious to satire and comedy. We can think a social media platform’s decision is wrong and misguided — the Bee suspension is — but private companies are free to get things wrong as they try to do what they think is best for their platforms.

The best way for customers to respond to businesses that have policies we don’t like is to take our business elsewhere. One of the worst responses is to call for government regulations to force those business owners to toe our preferred lines.

The last thing anyone who cares about free speech should want are politicians and government bureaucrats deciding what can and cannot be on social media platforms. Bureaucrats and regulators would be worse at finding an appropriate balance of content moderation than private firms, and their mistakes would likely apply to all platforms. The right doesn’t want people chosen by President Joe Biden regulating all social media platforms and the left doesn’t want people chosen by former President Donald Trump choosing what social media content is and isn’t acceptable. And none of us want content rules that change whenever the political party in power changes.

Like any private business, social media platforms are based on mutually beneficial exchanges where both business and customers benefit. If either the business or a customer does not feel they’ll benefit from the exchange, they have the right to walk away. Just as we can all decide we don’t want to use a company’s services, that company can also decide it doesn’t want to provide us services. A Christian baker has the right to refuse to make a wedding cake for a gay couple. And any customers who don’t like the baker’s decisions are free to take their business elsewhere.

Indeed our own organization, Reason Foundation, has had some of its news and analysis content wrongly flagged by social media platforms. While we certainly disagreed with the platforms, we entirely support their right to choose what goes on and is shared on their platforms. And, yes, companies like Twitter, Facebook, and YouTube have developed great influence in our society, but social media companies aren’t the government. They aren’t required by the Constitution to let us speak on their platforms.

These companies face a complex task trying to figure out what customers want, how to provide it, and how to make a profit. They certainly get things wrong, as in the case of Twitter’s Babylon Bee suspension. But the gloomy alternative is the government regulating speech, which would also produce a chilling effect whereby social media companies would likely forgo any kind of controversial content to avoid regulatory sanction.  This would be a tragedy given the diversity of conversations occurring on the internet.

Beyond pleasing customers and making a profit, it is also a private business’s First Amendment right to promote whatever speech it wants to. In 1974, the Supreme Court struck down a “right of reply” law that forced newspapers to publish the response of political candidates whose records they wrote about. The law would have forced private newspapers to print speech against their will.

Similarly, in 1995, the Supreme Court struck down a law requiring a private parade to include a gay rights group because it violated “the fundamental First Amendment rule that a speaker has the autonomy to choose the content of his own message.”

Whether it is a parade, a tweet, or a Facebook post, the constitutional principle is that users have no right to force platform providers to host their speech. Rather than calling for government regulation forcing social media companies to do what politicians or certain groups want, media consumers should develop skills at evaluating the merits of information we see online and making good decisions about what social media platforms and news sources we can trust. It is up to us to determine where we go to read, view, and learn things we don’t already know and we’re free to choose which news sites and social media platforms we want to be customers of.

A version of this column previously appeared in the Daily Caller.

The post Social media companies are free to make bad decisions appeared first on Reason Foundation.

“As a governor, you have to look at a unanimous vote every step of the way and then say, how do I disagree with every single member of the Senate and the House?” State Sen. Annette Taddeo told the Miami Herald after the governor’s veto last year.

In response to Gov. Desantis’ claims, the new state bill, House Bill 195, clearly excludes forcible felonies from being expunged. This more cautious bill to expunge juvenile records passed unanimously in the Florida House of Representatives last month and the State Senate unanimously passed it today.

According to the new bill’s lead author, State Rep. David Smith, some 26,000 juveniles in Florida could be eligible to have their records cleared if the new legislation becomes state law.  

Juvenile arrest rates have steadily declined over recent decades and reached an all-time low in 2020. Yet thousands of Floridians are saddled with the burden of having a criminal record for life due to mistakes they made when they were minors.

Obstructing the post-release lives of minors who were convicted of crimes backfires, preventing them from re-establishing themselves as productive members of society and leaving few legitimate paths to self-sufficiency. Data and experience show us that misdemeanor criminal records can keep rehabilitated offenders who have served their punishments from finding work and places to live, establishing credit, and more. A criminal record can preclude other important steps—like attending college or joining the military—that would improve these young people’s chances at putting past transgressions behind them while reducing the likelihood of recidivism.

“They would have the ability to look that college recruiter in the eye, that employer, to say they have never had an arrest,” State Rep. Smith said, describing how the bill could help young people attend college and gain employment.

Research shows that increasing access to expungement reduces the likelihood that a person will recidivate or return to criminal behavior. One of the largest empirical studies ever conducted on expungement found that only 0.6% of expungement recipients were later reconvicted for violent crimes.

In 2017, the United States Sentencing Commission concluded that when people re-enter society after serving their sentences having criminal records increases recidivism rates even when controlling for other factors. This counters the idea that harsh sentences and penalties reduce the incentives to commit crimes. In fact, the barriers that having a criminal record creates often amplifies the disruption to life, work, and family—ultimately putting society at greater risk.

By reducing recidivism, well-designed expungement programs improve public safety by giving minor offenders a better chance to successfully reintegrate into society. And with one of the most restrictive adult and youth expungement regimes in the country currently in place, Florida is in desperate need of this expungement reform relative to other states.

The proposed state legislation does not change the expungement process, it simply opens up more offenses to be eligible for expungement. Giving young people more avenues to potentially change their lives for the better, without any disadvantages to society. To receive expungement under this new bill, minors in Florida must complete a diversion program that includes rehabilitation, training, and restoration.

This more cautious legislation, designed to address Gov. DeSantis’ concerns, is a common-sense approach that benefits not just minor offenders, but society at large. It’s time to fix a broken system that is denying far too many young people a fair chance to rehabilitate themselves and start a normal life.

The post Florida bill to expunge juvenile records headed to Gov. DeSantis’ desk, again appeared first on Reason Foundation.

Most notably, House Bill 9 would likely reduce consumers’ access to platforms and drive companies to change business models or create a paid category of social media. Social media platforms and apps often use the data collected from users to sell advertisements. For example, around 97 percent of Facebook’s revenue comes from advertising that is based on data that its customers have voluntarily opted into sharing in exchange for using Facebook for free. If companies were forced to give free access to customers who completely blocked the sharing of that data, some platforms would have to shift to other business models and find other revenue sources to cover their costs.  

Users are already free to choose which apps they use. The large number of consumers who willingly share their data or consider viewing ads as the “price” of using and benefiting from free digital services shows most users don’t consider themselves harmed by the data they share. It is a trade-off they are willing to make. Most people are choosing to trade some of their data for digital services, knowing they can end that relationship whenever they choose.  

House Bill 9 tries to create a space for people who want to use digital services but don’t want to share their data, but this space is already developing and evolving without state legislation. Many popular web browsers, for instance, already contain features that allow users to set tracking and privacy preferences, such as cookie retention and deletion.

Different apps and platforms choose different approaches to data privacy, which is a good thing because users can select the apps they want to use based on how much data the respective app wants from the user.  This variation and innovation is better for consumers and businesses than a state law that mandates how firms are allowed to handle data. 

Importantly, HB 9 also fails to adequately distinguish between privacy and security by including a requirement that companies must “implement reasonable security procedures” to protect data.  Privacy refers to how the data is shared legally with other companies and security addresses illegal breaches of that data or other improper releases related to technical failures and hacks.  There are already laws governing security requirements for companies that collect data, plus a robust regime of civil liability if firms negligently treat consumer data.   

Hence, most digital companies already have security protocols in place. HB 9, however, adds the new twist of a private right of action, which would allow any individual consumer to bring a lawsuit against a company for perceived data privacy harms. 

In the event of actual online data breaches, it is rarely one single individual who is harmed by a data breach but, rather, like in the Equifax breach that exposed the private information of over 100 million people, a class action is created that lets all the harmed consumers seek redress. 

The provisions in HB9 would allow lawsuits by individuals claiming violations of any of a host of very minor procedural requirements regardless of whether or not there are actual consumer harms. This could unleash a ridiculous flood of lawsuits from individuals who are trying to force digital service companies to change their policies. 

For example, the bill requires that users’ requests to opt-out or be deleted be completed in less than 10 days. Thus, users could frequently opt-in and out of data sharing with the hope that the firm does not comply with one of these requests in time, giving grounds for a suit. 

HB 9 is ripe for abuse and would greatly increase compliance and litigation costs for companies, which would likely increase the cost of using digital services for consumers. Rather than enabling lawsuits through HB 9, lawmakers should want unhappy customers to seek out other digital service companies that offer the policies they prefer. 

Rather than reducing the products available to consumers and increasing the costs of doing business in Florida, a better path forward would be for the state to take a consumer-focused approach. That approach would start by recognizing that consumers already have a choice in whether or not to use any free digital services that require data in return. Most consumers overwhelmingly do choose to do so—viewing what they gain from the apps and platforms to be as valuable as the data they’re providing. 

At the same time, Florida could work with industry standards groups to identify best practices in determining how data is collected and protected, who it is shared with, and in ways that allow online firms to maintain their current and future business models while also addressing the concerns of consumers. Any consumer privacy law should focus on creating proportional remedies for actual consumer harms when they do occur instead of mandating requirements and actions. 

The post Florida’s proposed data privacy law would hurt consumers and businesses appeared first on Reason Foundation.

Reason Foundation opposes government action that would unduly stifle the development and use of innovative technologies. This proposed rule change is an example of such an action:

RIN 3235-AM45
Amendments to Exchange Act Rule 3b-16 Regarding the Definition of “Exchange”;
Regulation ATS for ATSs That Trade U.S. Government Securities, NMS Stocks, and Other
Securities; Regulation SCI for ATSs That Trade U.S. Treasury Securities and Agency
Securities
AGENCY: Securities and Exchange Commission.
ACTION: Proposed rule.
SUMMARY: The Securities and Exchange Commission (“Commission”) is proposing to
amend a rule which defines certain terms used in the statutory definition of “exchange” under
Section 3(a)(1) of the Securities Exchange Act of 1934 (“Exchange Act”) to include systems that
offer the use of non-firm trading interest and communication protocols to bring together buyers
and sellers of securities.

The proposal would expand the definition of a securities exchange so much that it would likely capture many forums, smart contracts, and other communications platforms that are not securities exchanges within the conventional meaning of the term but would nonetheless be exposed to reporting requirements and other regulations. This could inhibit important innovations in a dynamic and highly competitive market without providing commensurate benefits to investors or consumers. 

Previously, in order to be considered a securities exchange, a platform had to provide some way for buyers and sellers to match orders and provide firm trading interest. The Securities and Exchange Commission (SEC) defines such orders as “any firm indication of a willingness to buy or sell a security, as either principal or agent, including any bid or offer quotation, market order, limit order, or other priced order.” 

The proposed rule change would require any communications protocol for buyers and sellers that is used to express “non-firm, trading interest” to register as an exchange or a broker-dealer. This could include things like forums where sellers may post information about a security being offered for sale and where others can effectively communicate and bid on that offer, but not execute a trade; in order to execute a trade, the buyer and seller would have to use an actual exchange. Indeed, the new regulation could even impact eBay, which started facilitating transactions of Non-Fungible Tokens last year.

The SEC claims that the securities market has become “more electronic” and that communications systems have become “a preferred method for market participants to discover prices, find a counterparty, execute a trade…” while skirting all the regulations typically surrounding these types of transactions. 

To the extent that this rule change has a legitimate target, it is likely communications relating to “dark pools” of securities, where sellers and buyers can interact anonymously. Dark pools may indeed pose some risks, but they also serve a valuable market function for knowledgeable accredited investors (especially those that are large buyers and sellers), for whom open discussion of a particular security could impact the price of that security. As such, and as noted above, this is a complex securities issue and should be given much more time and attention before being changed. 

More concerning is that this rule change will capture many technologies such as forums, decentralized finance, and smart contracts which are likely not in the intended scope of the rule change. It does exclude “Web Chat Providers” because “such providers are not specifically designed to bring together buyers and sellers of securities or provide procedures or parameters for buyers and sellers to interact.”

However, it follows up by noting that if the program is designed for buyers and sellers to agree to terms of a trade, it would have to be regulated as an exchange. However, it is unclear what constitutes “specifically designed” for buyers and sellers.

This rule may have the effect of transferring what it considers “dark pool” conversations from platforms designed to handle those conversations to more general communications technologies. It is unclear why this would improve investor safety or market efficiency. 

If technologies such as decentralized finance and smart contracts were intended to be captured by the rule change, they should be explicitly considered. Since they are not, they should be explicitly excluded. If they are not excluded, the rule change will likely capture many smart contract applications that have little to do with securities and much to do with cryptography. It could entail software engineers and hobbyist developers being required to register with the FCC and to track massive amounts of data on their platforms. This would effectively put many of these people out of business, thereby stifling experimentation and innovation in a novel market. 

Furthermore, technologies like smart contracts do not always have the kinds of data the SEC reporting would require, such as the personal identity of each party. Apart from anything else, smart contracts are not actually contracts, they are rules governing the relationships between two or more computers that self-execute under specified conditions, so it would not be possible to specify the “personal identity” in most cases. Pseudonymity is often a desired characteristic of cryptography and smart contracts (a recent example would be privacy-preserving contact tracing apps).

It is unclear what legality or reporting requirements smart contracts would have under this rule change. There are also many intermediating technologies required to make smart contracts work and which would technically be captured by this rule but have nothing to do with securities, such as automated market makers. This uncertainty could become a strong disincentive for investors, developers, and firms to pursue smart-contract technology. 

There is also a first-amendment concern because the rule is so encompassing in the types of communications that it captures. It may be unconstitutional for the federal government to require such extensive tracking of free speech about speculative investments into cryptocurrency or other related technologies. 

This concern even applies if the regulation is only applied to government securities alternative trading system (ATS) providers such as BrokerTec and DealerWeb, the proposed rule has large implications necessitating a longer review. Publicly held Treasury Debt now exceeds $23.6 trillion dollars and is expected to surpass $30 trillion in 2028. Reduced liquidity in this enormous market could result in higher Treasury interest rates which would have substantial budgetary implications. 

The proposal in question is roughly 650 pages long, soliciting comments on 220 different areas. The ramifications of so many changes are likely not well understood by all parties involved and could alter the market in unpredictable or unhealthy ways. 

The post The SEC’s proposed exchange rule change would stifle innovation and technology growth appeared first on Reason Foundation.

The following principles and legislative checks from Reason Foundation and the International Center for Law and Economics seek to help legislators and stakeholders narrowly tailor state consumer privacy policy to address concrete consumer harms while preventing disproportionately punitive responses that obstruct market performance.

The post Guiding principles and a legislative checklist for consumer privacy regulation appeared first on Reason Foundation.

A federal judge on Wednesday blocked a Texas law that seeks to restrict how social media companies moderate their content and was championed by Republicans who say the platforms are biased against conservatives.

The law, signed by Gov. Greg Abbott on Sept. 9, would ban platforms with more than 50 million monthly users in the U.S. from removing a user over a “viewpoint” and require them to publicly report information about content removal and account suspensions.

It was set to take effect Dec. 2. In his ruling, U.S. District Judge Robert Pitman wrote that the First Amendment protects social media platforms’ right to moderate content and rejected the defendants’ argument that such companies are “common carriers.” Pitman also ruled that some aspects of the law were “prohibitively vague.”

“This Court is convinced that social media platforms, or at least those covered by [House Bill] 20, curate both users and content to convey a message about the type of community the platform seeks to foster and, as such, exercise editorial discretion over their platform’s content,” Pitman wrote.

This marks the second successful First Amendment lawsuit by the internet freedom association NetChoice in the last six months as a similar law in Florida was also blocked by a federal judge in June.

The main thrust of the Texas law passed by Republicans in the state legislature earlier this year would prevent social media companies from “censoring” a user based on their “viewpoint.”  It defines a user as anyone that can create a profile and make a post. This effectively means that social media companies would not be allowed to engage in any form of content moderation on their platforms. 

The court expressed concern that the law was being passed because some legislators perceived social media as, “too large and too liberal,” in their ability to exclude certain viewpoints from the most popular media platforms on the internet today. The federal judge presiding over the case also said the law’s “prohibitions on ‘censorship’ and constraints on how social media platforms disseminate content violate the First Amendment.”

NetChoice’s first lawsuit against legislation limiting content moderation by social media companies involved a similar bill passed in Florida and led a District Court to declare, “Balancing the exchange of ideas among private speakers is not a legitimate government interest. And even aside from the actual motivation for this legislation, it is plainly content based.” 

In other words, the court rightly recognized that the government has no legal authority to interfere with the way a private company decides to curate content that it presents to its customers, especially when their interference is politically motivated. 

The key legal reason the Texas law fails is the way it misapplies the First Amendment to different types of content providers.  So-called “common carriers” of content like telecommunications companies and postage services, whose sole purpose is to transmit information, are regulated without First Amendment concerns and are not legally allowed to filter out any kind of content.  These companies don’t present content to customers, they simply “carry” it to them, usually without seeing the content themselves, and are legally not allowed to screen content and refuse to carry it if they disagree with it. 

This is in contrast to an editorial platform that curates content designed to attract and appeal to users. Anything posted on the platform by users is entirely at the discretion of the host primarily because they are providing a service to users/readers and are seeking to make a profit by providing what customers want. A content feed clogged with spam and violence would immediately turn away customers, but finding just the right mix of content is harder than it sounds.  

The COVID-19 pandemic has created an important debate about the science of viruses and the efficacy of vaccines.  YouTube initially suspended the Ron Paul Institute’s channel due to concerns about misinformation regarding the virus but later reinstated it.  This suggests an obvious internal struggle at YouTube to keep up with developing science, uphold its internal standard of information quality, respond to complaints from other users, and be fair to individual accounts on appeal.

Social media companies face a complex task deserving of flexibility, the kind that comes with trying to figure out what customers want, how to provide it, and make a profit. The gloomy alternative is a “chilling” effect whereby social media companies would forgo any kind of controversial content to forgo liability.  This would be a tragedy given the diversity of conversations occurring on the internet and would reduce total business output in the United States. 

Beyond pleasing customers and making a profit, it is also a private business’s First Amendment right to promote any kind of speech they want without government coercion.  In Miami Herald Publishing v Tornillo, the Supreme Court struck down a “right of reply” statute that forced newspapers to host the reply of a political candidate if they attacked their record. The law would have forced privately-owned newspapers to print speech against their will.

Similarly, Hurley v Irish struck down a law requiring a private parade host to include a gay rights group in their parade because it resulted in the government forcing people to host speech against their will.  A unanimous decision stated that forcing the parade to host the gay rights group would, “violate[s] the fundamental First Amendment rule that a speaker has the autonomy to choose the content of his own message.”  Whether the forum is a parade or a Facebook post, the constitutional principle is that users have no right to force platform providers to host their speech. 

Social media companies can certainly improve their policies and transparency around content moderation, but market forces are already creating this pressure, raising doubt about the government’s compelling interest. 

Long before the internet, politicians leveled similar complaints about content in newspapers as “the dominant features of a press that has become noncompetitive and enormously powerful… in its capacity to manipulate popular opinion and change the course of events.”

This sounds exactly like the complaints levied today against big tech and, thankfully, the courts are seeing it that way and once again ruling against political interference in free speech issues.  Prohibiting social media companies from engaging in content moderation on their own platforms would harm consumers, clutter the internet or ultimately destroy social media companies and such regulations should remain unconstitutional.

The post Texas social media law violates the First Amendment appeared first on Reason Foundation.

A number of states with large populations and busy highways performed well in the overall rankings, including Virginia (2nd overall), Missouri (3rd), North Carolina (5th), Georgia (14th), and Texas (16th).

Nationally, the study finds America’s highway system is incrementally improving in almost every category. However, a 10-year average indicates the nation’s highway system problems are concentrated in the bottom 10 states and, despite spending more and more money, these worst-performing states are finding it difficult to improve.

For example, 43% of the urban arterial primary mileage in poor condition is in six states—California, Massachusetts, New York, New Jersey, Nebraska, and Rhode Island. Approximately 25% of the rural Interstate mileage in poor condition is in just three states (Alaska, Colorado, and Washington). While a majority of states reduced their percentages of structurally deficient bridges, five states—Rhode Island, West Virginia, Iowa, South Dakota, and Pennsylvania—still report more than 15% of their bridges as deficient.

For total spending, three states—Massachusetts, New York, and New Jersey—spent more than $250,000 per lane-mile of highway. In contrast, five states—Missouri, South Carolina, West Virginia, North Dakota, and South Dakota—spent less than $30,000 per mile of highway.

Introduction

Reason Foundation’s 26^th Annual Highway Report rates state highway systems on cost versus quality using a method developed in the early 1990s by David T. Hartgen, Ph.D., emeritus professor at the University of North Carolina at Charlotte and since been refined by Hartgen, M. Gregory Fields, Ph.D., Baruch Feigenbaum, and Spence Purnell.

Since states have different highway budgets, system sizes, and traffic and geographic circumstances, their comparative performance depends on both system performance and the resources available. To determine relative performance across the country, state highway system budgets (per mile of responsibility) are compared with system performance, state-by-state. In this report, states with high overall ratings typically have better-than-average highway system conditions (good for road users) along with relatively efficient spending in per-mile categories (good for taxpayers).

The following table shows the overall highway performance of the state highway systems using 2019 and 2020 data. This year’s leading states are North Dakota, Virginia, Missouri, Kentucky, and North Carolina. At the other end of the rankings are New Jersey, Rhode Island, Alaska, Hawaii, and New York.

The top-performing states are a mix of large and small states as well as more urban and more rural. In the report’s overall rankings, some very rural states may have a slight advantage (see Tables 1, 2, 3, 4, and Figure 1). But a number of states with large urban areas also rank highly in the overall rankings, including: Virginia (2^nd), Missouri (3^rd), North Carolina (5^th), Tennessee (10^th), Georgia (14^th), and Texas (16^th).

A careful review suggests that numerous factors— terrain, climate, truck volumes, urbanization, system age, budget priorities, unit cost differences, state budget circumstances, and management/maintenance philosophies, just to name a few—are all affecting the overall highway system performance in each state.

26th Annual Highway Report: Each State’s Highway Performance Ranking By Category

The post Annual Highway Report: Ranking each state’s highway conditions and cost-effectiveness appeared first on Reason Foundation.

The States Reform Act (SRA), introduced this week by Rep. Nancy Mace (R-SC), would correct this by automatically expunging all non-violent federal cannabis crimes and releasing anyone from prison still serving on these charges. The proposed legislation would also make the possession of any amount of marijuana legal under federal law, as long as that marijuana is not related to a foreign drug cartel. 

The main goal of the States Reform Act is to decriminalize cannabis and create a functional multi-state marketplace without any of the current federal conflicts, like marijuana businesses being denied banking services or patients being denied federally-assisted housing due to their state-licensed medical cannabis use.  But decriminalization and legalization of marijuana should go hand-in-hand with expunging past cannabis-related criminal records, as it does in this newly introduced federal legislation.   

A criminal record of any kind can be devastating to someone’s life. Decades after the failed drug war began, a record-high majority of the public has decided that cannabis should be legal. Those who engaged in cannabis activities before it was legal deserve what Mace’s bill aptly calls “a second chance” at complete re-integration into American society. Under the proposed law, the federal government would determine which cases are eligible and swiftly deliver justice to those people without charging them a fee.  

Expungement is available in most states and the federal government for certain crimes. But the current expungement process for many states and the federal government can cost applicants up to $4,000, requires a lawyer, and often takes several months and a court hearing.  

Research from Michigan, a state that requires an application and a fee for expunging records, finds just 6.5% of convicted individuals pursue expungement. The study found that similar states never had an uptake rate higher than 10%. This could be because many applicants are low-income and hesitant to interact with the criminal justice system that they feel has wrongly marked them as criminals.  

The States Reform Act addresses this problem by automatically expunging all eligible marijuana-related records with no application or financial commitment from the defendant. This is the correct process for expungement because eligibility requirements imply that the government can determine from criminal records who is either eligible or not eligible for expungement. It no longer makes sense to have defendants line up one by one before a judge and have their cases formally dismissed. 

The States Reform Act would only clear federal records and any state charges an individual obtained would still be present. States that have legalized cannabis should follow suit and automatically expunge all relevant records for activities that are now considered legal. This would deliver justice to the most people most effectively. 

Determining which cases are eligible for automatic expungement is a delicate process because it is important that serial, violent criminals do not have their records erroneously expunged. The States Reform Act excludes any cannabis offenders who were agents of a cartel or have any other violent offenses, including driving under the influence infractions. These provisions deny expungement to anyone with an exclusionary designation as a threat to public safety. This winnowing process leaves defendants with only cannabis records who were doing activities that are now made legal or “would have resulted in a lesser offense” as eligible for automatic expungement.  

As true laboratories of democracy, states across the country have legalized a wide range of activities related to cannabis use for years. Most states only allow for 28 grams of cannabis possession but others, like Michigan, allow 72 grams, and some states are still increasing their limits. Roughly 20 states now allow some form of limited home grow of 6-12 cannabis plants and most of those same states also have a “gift” law that allows for transfer but not for profit or commercial purposes. To enter into commercial sales requires obtaining a license, which can be extremely expensive, difficult, and unfortunately corrupt, depending on which state you are in. 

Despite these facts, neither growing nor distributing cannabis was legal before 2012 when Colorado legalized it for the first time. Therefore many citizens engaged in activity that was at the time illegal but would now either be considered legal for private purposes or could occur in a commercial setting. It’s impossible to know how many of these people would have chosen to work in the cannabis industry or conduct a small legal small home grow, yet now have serious cannabis felonies on their records. 

The process outlined in the States Reform Act would not be perfect and there will be many borderline cases in some eyes. Both prosecutors and citizens should reserve the right to appeal any case they feel was mishandled.  But the default should be that all cannabis-related offenses are automatically expunged unless an exclusionary charge is found, and that is the standard the States Reform Act sets.

The States Reform Act would only apply to federal cases, but the bill would also lay the important legal groundwork for states that have been reluctant to engage in large-scale expungement operations even after legalizing a wide range of cannabis activities.  

The post States Reform Act would automatically expunge federal criminal records for marijuana offenses appeared first on Reason Foundation.

Some politicians have called for the breakup of Amazon, as well as other big tech companies like Google and Facebook because there is a perceived market dominance by these online giants. In reality, however, Census data reveal online sales still only make up about 15% of total retail sales. That number may have peaked around 17% during the COVID-19 pandemic, but at no point have online purchases overpowered traditional storefronts.

In fact, in the last few years, online sales have become a complement to both small and large businesses, creating dynamism and competition in the retail industry that is far from being dominated by monopoly. The NetChoice report finds that the nation’s top five retailers (combined physical and online sales) only account for about 25% of total retail sales each year.

Experience reveals that through third-party marketplaces, small businesses have been able to form up and make sales with much more ease than before. A small business model that has become popular in recent years, for example, is for sellers to create a retail website with template services like Shopify, market the brand with social media, sell on Amazon, and eventually try to land a deal with a physical retail location like Walmart or another retailer that focuses on a specific niche. Popular Etsy stores are just one example of this phenomenon.

The opening of third-party online sales platforms has generated competition and small business creation because it takes away many of the logistical and infrastructure concerns small shop owners face. This allows them to focus on their products and increase revenue. 

For years, Bed Bath and Beyond (BBBY) refused to engage in third-party online sales and consequently saw its stock price dwindling over the last few years. Upon the recent announcement that the company would open a digital marketplace for third-party online sellers, its stock jumped 70%. The company hopes this move will help them compete with other online marketplaces, like Amazon and Etsy, which are more generalized and have few physical locations. 

Despite the rise in popularity of online shopping, physical retail locations still play an important role for many industries. In-person sales make up 85% percent of all retail and a survey included in the NetChoice report found that 77% of consumers feel it is somewhat important that a retailer offers a physical location.   

Stores like Bed Bath and Beyond continue to test business models and retail offerings that match a highly dynamic consumer market that values online and physical sales. This suggests that companies like Amazon which have seen success in generalizing online sales may have competition from retailers who have the advantage of having physical locations for customers to see and touch products.

The retail market is far from being stagnant or overly dominated by one company. Innovations in online sales will continue to generate a swath of competition for producers and sellers.  Companies like BBBY are a good example of traditional retailers that may have been slow to the game o balancing their physical and online presences but are adapting and may be able to represent serious competition to retail giants like Walmart and Amazon. 

The emergence of new competitors and the ease of entry for small businesses is on its face evidence the market is working well for consumers. Amazon has innovated and grown itself into an e-commerce giant, but it is far from the monopoly that some politicians make it out to be. Congress and states should avoid stifling the dynamic and competitive online marketplace with unnecessary anti-trust interventions.

The post Online retail sales haven’t grown as fast as you may think, report says appeared first on Reason Foundation.

Federal law designates any person who uses marijuana, even for medical purposes, as an “unlawful” user of drugs and therefore someone who is not legally eligible to purchase or possess firearms in any context. The federal government has yet to legalize or decriminalize marijuana but has, for the most part, essentially given the green light to states to run legal marijuana programs, recreational and medical, so long as they place reasonable regulations on the market. But the threat of federal action is real and because cannabis is still considered a Schedule 1 drug, the federal government is essentially forcing medical marijuana uses to choose between legally obtaining a firearm or using their legal medication.

A new paper from Ohio State University and Reason Foundation explores how this is a violation of medical marijuana users’ constitutional rights. Helen Sudhoff, the brief’s author, writes:

The federal government prohibits users of Schedule I drugs from purchasing or possessing a firearm. Despite most states having enacted legal medical marijuana programs, marijuana is still federally illegal and designated as a Schedule I substance with no medical value. Individuals who use medical marijuana in accordance with their state’s licensed programs are nevertheless prohibited from purchasing or possessing a firearm under federal law. As such, the onus is placed on medical marijuana patients to either disclose their marijuana use, which disqualifies them from purchasing a firearm and requires they relinquish possession of all firearms, or misrepresent their status as a medical marijuana user, risking fines or imprisonment.

The restrictions that prevent medical marijuana users from using firearms could be leading to injuries and lives lost. A 2012 report by the Obama Administration found that a reasonable estimate for the defensive use of guns per year could be 300,000.  While that number remains controversial and no firm quantitative method for obtaining that number exists, there is no disputing that guns are used defensively and that those uses often prevent injury and death. 

Restricting gun ownership, therefore, restricts a person’s right to self-defense embedded in the 2nd amendment.  In the 2008 Supreme Court case, District of Columbia v. Heller, the high court defended individuals’ right to gun ownership. Heller remains a significant Supreme Court decision because it solidified self-defense as the “core” or “central component” of the Second Amendment. Practically, being able to use a gun for self-defense is the primary purpose of the Second Amendment and any law which infringes upon that right should face scrutiny.

The current legal framework leaves medical marijuana users completely unable to defend themselves in any situation and should be subject to the highest level of court scrutiny. Sudhoff, in the Reason policy brief, argues that the Heller decision rendered unconstitutional the requirement that guns be unloaded, disassembled, or bound by a trigger lock because it “made it impossible for citizens to defend themselves, even in their own homes.” Assembling a gun or removing a trigger lock in a heated moment when the weapon was needed would render it practically useless and therefore infringes upon the core right of self-defense. Yet a requirement that gun owners register their guns was kept constitutional because it did not directly impact an individual’s ability to defend themselves, it simply made gun purchase and ownership a bit more strenuous. 

There is no loophole of any kind in the existing web of drug and gun laws that would allow legal medical marijuana users to legally use or own a gun in any circumstance.  If a medical marijuana patient did use a gun in self-defense, they could still be charged with an offense, which suggests existing laws would fail the test administered by the Heller precedent and should be ruled unconstitutional.

The current legal situation undermines the constitutional rights and potentially risks the health and safety of the 5.4 million medical marijuana users all across the country.  To this point, medical marijuana users have been forced to make a terrible choice of forgoing their prescribed medicine or forgoing their Second Amendment rights.  

With 36 states having legalized medical marijuana, it is far past time for the federal government to rectify this constitutionally flawed situation by recognizing medical marijuana users as lawful citizens who have Second Amendment rights. 

The post Medical marijuana users have Second Amendment rights, deserve the right to self-defense appeared first on Reason Foundation.

Contee didn’t offer any evidence connecting marijuana to violent crime in the city, but the police chief added, “When you have something where people get high reward—they can make a lot of money by selling illegal marijuana—and the risk is low, the risk for accountability is very low, that creates a very, very, very, very, very bad situation.”

Contee went on to complain it is difficult to catch marijuana dealers with illegal amounts and that local prosecutors aren’t seeking to prosecute low-level drug charges:

“What’s the risk for people? Is there a prosecution that is going to happen? Really? Is there a prosecution that’s going to happen of a guy with marijuana? I’ve heard from some community members that say these guys are keeping scales on them where they’re measuring out their marijuana … so that the police are not able to lock them up. That’s something we have to look at as a community. I know, again, marijuana, not a big issue — but it’s tied to violent crime, some of the violent crime, we are seeing in our city.”

If Contee really thinks marijuana sales are causing the problems, the answer isn’t more arrests and police enforcement of non-violent drug possession or sales, the answer is to finally enable a legal marijuana market in the city.

Washington, D.C.’s voters long-ago—in 2014—approved the legal adult-use and possession of marijuana. Although the possession of marijuana is legal in the city, Congress consistently prevents Washington, D.C., from actually enacting a market to enable the legal sale of marijuana.

Congress’ so-called “Harris rider,” named after anti-marijuana Rep. Andy Harris (R-MD), effectively blocks retail legalization of marijuana by denying the city the ability to use federal funds or to create its own tax and regulatory system for a legal, retail marijuana market. Rep. Harris attaches the rider to the annual federal spending bill each year. President Joe Biden included the rider in his budget this year, which drew the ire of a variety of progressive, pro-legalization, and criminal justice reform groups. Marijuana Moment reported:

“It’s seriously concerning that the will of District of Columbia residents who voted to legalize cannabis years ago continues to be ignored, despite immense support in the city,” Queen Adesuyi, policy manager for the Drug Policy Alliance’s (DPA) Office of National Affairs, told Marijuana Moment, adding that local officials should be allowed to “deliver on the promises of equity and justice for those disproportionately impacted by racially-biased enforcement of cannabis laws in the District.”

The inconsistency with which Biden’s budget approaches D.C. is all the more interesting given that while the president has said repeatedly that states should be empowered to make their own decisions regarding adult-use legalization—and he also supports statehood status for the District—he wants to prevent it from having that same right.

“The president’s budget is simultaneously positive and concerning. On one hand, unlike his predecessors from both parties, he is the first sitting president to call for continued protections for medical cannabis programs,” NORML Political Director Justin Strekal told Marijuana Moment. “But on the other hand, unlike President Obama, this budget denies the right of self-determination to D.C. citizens when it comes to the overwhelming desire of the public and local government to regulate cannabis for adults.”

Mayor Muriel Bowser (D) said in April that local officials are prepared to move forward with implementing a legal system of recreational cannabis sales in the nation’s capital just as soon as they can get over the final “hurdle” of congressional interference.

A legal marijuana market would help the city on a variety of fronts. For most products and services, buying and selling in a legal and properly regulated market is magnitudes safer than buying things on a black market. For consumers, there is assurance the product meets quality standards and that the transaction will be safely executed, helping reduce crimes like assaults and robberies that are often associated with black markets.

According to a Reason Foundation analysis of marijuana activity, most data show that legalizing marijuana reduces crime in various categories:

From this evidence, it is clear that, while legalization does not necessarily eliminate illegal production, distribution and sale of marijuana, it tends to diminish it dramatically. As a result, it relieves the burden placed on courts, law enforcement, and prisons, allowing for greater focus on violent crime. It also appears to have reduced use of marijuana by minors.

Unfortunately, Rep. Harris continually makes flawed arguments against marijuana legalization, including his claim that legal marijuana markets provide cover for organized crime groups. Medical cannabis is already legal in a majority of states and 18 states have legalized the recreational use of marijuana. In fact, Washington, D.C.’s neighbors, Harris’ home state of Maryland along with Virginia, have legalized medical marijuana and taken steps to decriminalize its recreational use so it’s not clear how Harris blocking the district’s regulatory efforts stops organized crime.

Rather, preventing a legal market from operating ensures more illegal operations exist and keeps the black market thriving. For most people in the Washington, D.C., area, fully legalizing cannabis would means they no longer need to buy it from a friend or larger-scale enterprises. 

Running a small-scale illegal grow makes both cannabis growers and buyers targets for robberies because they accumulate product and cash. Drug cartels are also frequently associated with violent tactics and robberies to increase their financial gain.  The data from states with legal marijuana show that purchasing from a legal cannabis dispensary is far safer than either of these options.

Legalizing cannabis also helps free police from investigating low-level, non-violent drug offenses to violent crimes and criminal operations. In fact, data showing an increase in criminal arrests for growing marijuana in legalized states seems to be a direct result of police no longer prioritizing petty marijuana offenses. Instead, police are spending more time and resources finding true criminals. The Reason Foundation brief noted:

A recent study found that legalization of marijuana for recreational use in Colorado and Washington was associated with an improvement in the rate of clearance of cases relating to violent crimes, reversing a previously worsening trend. This may be evidence that legalization has led to an improvement in the prioritization of police resources.

Police Chief Contee and the district’s police officers don’t need to make more marijuana-related arrests, they need Congress and the Biden administration to stop blocking the city from fully legalizing marijuana sales. Experience from a growing number of states shows that a functioning, legal cannabis market would make the city a safer place for everyone.

The post Congress Needs to Stop Blocking Legal Marijuana Sales in Washington, D.C. appeared first on Reason Foundation.

The federal Gun Control Act (GCA) of 1968 states that no “unlawful user” of a controlled substance, such as cannabis, shall be allowed to purchase or own firearms. The Bureau of Alcohol, Tobacco, and Firearms (ATF) has reaffirmed several times that it still considers medical cannabis to be an illegal substance, as defined by the Controlled Substances Act (CSA) of 1970, and therefore designates anyone with a medical marijuana card as ineligible to purchase or own firearms.  

This restriction falls more sharply on medical marijuana users than recreational users since they are registered in a government database that can be easily cross-referenced.  Recreational marijuana users, by contrast, can effectively purchase marijuana anonymously and are therefore not subject to this scrutiny, although they would be forced to lie on the firearm background check form 4473 in order to complete a purchase.

Shortly after Michigan legalized medical marijuana, the ATF directed state officials to cease using a certain background check system because it didn’t include medical marijuana registrations and reminded them they needed to include “unlawful” medical users in all firearm background checks.

Pennsylvania responded to a similar message received from the ATF saying that the GCA and CSA lacked the authority to coerce a state into taking an administrative action to facilitate federal scrutiny and surveillance by joining its medical marijuana database with a commonly used criminal justice database called JNET.

The Missouri bill signed into law this month provides an even bolder response to the issue. The new law challenges the constitutionality of the CSA and GCA by pointing to the Second and 10th Amendments. The 10th amendment says states have legal jurisdiction over any policy not explicitly enumerated by the U.S. Constitution for federal jurisdiction. For example, national security and taxes are explicitly assigned to federal authority, but the Constitution provides no direct textual support for marijuana prohibition or policies.

The Missouri legislation, House Bill 85, implicitly argues that the state—not the federal government—should determine whether citizens who possess marijuana are legally defined as “law-abiding citizens.”  The bill text states:

“[R]eserving for the state governments the power to legislate on matters concerning the lives, liberties, and properties of citizens in the ordinary course of affairs… the term ‘law-abiding citizen’ shall mean a  person who is not otherwise precluded under state law from possessing a firearm.”

Missouri is clearly saying that the state has the sole ability to determine who is a law-abiding citizen in matters concerning “liberties” and “properties.”   Additionally, the Second Amendment provides broad firearms protections.  Missouri has already chosen to designate medical marijuana patients as legal under state law and this bill asserts Missouri’s 10th Amendment constitutional right to make that designation over the federal government. 

The Controlled Substances Act even contains a 10th Amendment-like clause which says when in “positive conflict” between state and federal law where both cannot stand, that state law should take precedence in areas that would  “otherwise be within the authority of the state.” 

Missouri’s designation of medical marijuana users as law-abiding citizens, therefore, takes precedence over the federal government’s designation.

The new Missouri law acknowledges the federal constitution as a compact among the states, and as such is subject to judgment by each party as to whether it is executing its assigned duties properly. It says, “each party (state) has an equal right to judge for itself as to whether infractions of the compact (Constitution) have occurred, as well as the right to determine the mode and measure of redress (Author’s additions).” 

In this case, the mode of redress is to deny a federal designation of “unlawful” status to anyone who possesses marijuana via the 10th Amendment, effectively re-establishing their 2nd Amendment rights to purchase and possess firearms in the process.

With 36 states having legalized medical marijuana, it becomes easy for some to forget that marijuana’s federal status continues to create serious legal questions without clear answers.  Missouri’s HB 85 offers a compelling 10th Amendment argument that states may have rightful jurisdiction in this area. 

In essence, the entire marijuana legalization movement has embodied the ideal of ardent federalism.  The Missouri law could lay the groundwork for other states that have legalized medical marijuana to extend their rejection of federal marijuana law. States can re-assert their authority to designate medical marijuana cardholders as law-abiding citizens within their jurisdiction via the 10th Amendment and stop the injustice of legal medical marijuana patients being banned from gun ownership.

The post Missouri Law Restores Medical Marijuana Users’ Second Amendment Rights appeared first on Reason Foundation.

Biden’s career certainly isn’t one of a criminal justice reformer. He infamously co-authored the 1994 crime bill, which he called the “Biden crime bill” as he bragged about its harsher prison sentences and the thousands of additional prison cells needed to house Americans who would be jailed due to the law. To this day that legislation contributes to overcriminalization and mass incarceration plaguing the country.

And even now, Biden is still wrong on the solutions. He says people arrested for drug-related offenses should be forced to go to rehab. “We should be in the position where we change the sentencing system to one that relates to a notion of making sure you focus on making sure there is rehabilitation,” Biden said during a CNN town hall recently.

Nevertheless, it is extremely important for the president of the United States to tell people that using and possessing drugs shouldn’t land anyone in jail. Likewise, Vice President Kamala Harris, who also contributed to the war on drugs in her roles as California’s attorney general and as a prosecutor, has undergone somewhat of a transformation on the issue. “We will decriminalize marijuana and we will expunge the records of those who have been convicted of marijuana,” Harris said during her 2020 vice presidential debate with Mike Pence.

Hopefully, Harris can convince Biden that’s the way to go. Last year, the House of Representatives passed a bill to decriminalize marijuana at the federal level, but the Senate refused to take it up. Now, with Democrats in control of the Senate, they may be ready to put legislation on Biden’s desk.

“The War on Drugs has been a war on people — particularly people of color,” wrote Senate Majority Leader Chuck  Schumer and Democratic Sens. Cory Booker and Ron Wyden in a recent statement. “Ending the federal marijuana prohibition is necessary to right the wrongs of this failed war and end decades of harm inflicted on communities of color across the country,” they continued.

Fourteen states have now legalized recreational marijuana and 35 states have some kind of legal medical marijuana program. And another 10 states have already started to push for marijuana legalization in 2021. Politicians are increasingly embracing the legalize-and-tax approach to marijuana.

Since legalizing marijuana in 2018, California has generated over $1.8 billion in cannabis-related tax revenues. Colorado and Washington net roughly $300 million to $400 million per year in legal cannabis tax revenues. It is estimated that the national total for all state tax revenues generated from legal marijuana sales is roughly $6.9 billion.

The post President Biden Says Drug Users Shouldn’t Go To Jail appeared first on Reason Foundation.

Democrats taking control of the White House and Senate likely improves the odds of decriminalization of marijuana or other federal cannabis reforms.

A recent YouGov poll shows that roughly 70 percent of Americans support the expungement of non-violent cannabis crimes, with 81 percent of Democrats, 69 percent of independents, and 57 percent of Republicans in support of expungements.

California cities that ban marijuana dispensaries should still allow cannabis deliveries from the municipalities that do allow marijuana sales, argues Reason Foundation’s Matt Harrison.

In its response to the opioids lawsuit the Drug Enforcement Administration and Department of Justice filed against Walmart, the company said, “It is outrageous the Department [of Justice] is trying to shift blame for DEA’s own well-documented failures” related to the opioid crisis. Reason’s Jacob James Rich outlines how the government’s own opioid policies helped cause the crisis.

The Boston Globe tells the story of two men finding redemption in cannabis entrepreneurship and seeking to help others who have been hurt by unfair drug laws.

“By making local officials the gatekeepers for million-dollar businesses, states created a breeding ground for bribery and favoritism” connected to the regulation of the legal marijuana industry, Politico explains.

Oklahoma is quietly transitioning from prohibition to being one of the nation’s hottest legal marijuana markets.

The American Medical Association approved a statement saying that cannabis is a dangerous drug and should not be legalized.

Legislation, Regulation, and Markets

A deal that would have set penalties for underaged marijuana use in New Jersey fell through this month, but lawmakers and the governor say they’re still hoping to reach a compromise.

Illinois expunged nearly 500,000 marijuana-related records in possibly the largest cannabis expungement event in U.S. history.

Virginia’s governor is asking for funding in the state budget that would be used process expungements for misdemeanor marijuana convictions.

A new Virginia law prevents police from stopping, searching, or seizing any person or place solely on the basis of the smell of marijuana, including during traffic stops.

One Missouri legislator is trying to reform the state’s drug laws to make any amount of cannabis possession, and other drugs, a low-level misdemeanor.

Opponents of cannabis legalization are attempting to overturn voter-approved ballot measures in South Dakota. Marijuana Moment reports on similar attempts in Montana and Mississippi.

In November’s elections, citizens in the District of Columbia voted to decriminalize psilocybin, the psychoactive chemical in mushrooms, and voters in Oregon approved a measure that will eventually legalize the substance.

Cannabis officials from 19 states are forming a regulators association.

Mexico is delaying its marijuana legalization efforts due to “mistakes” in the text of the legalization bill.

The United Nations Commission on Narcotic Drugs has removed cannabis from its “particularly dangerous” status on the Schedule IV Drugs list. The move could give cover to nations that may be considering cannabis decriminalization or legalization.

Evidence

A study in the Journal of Adolescent Health looks at state-level cannabis prohibition laws between 1999 and 2017 and finds no association between marijuana legalization and increases in youth use of the drug.

The post Drug Policy Newsletter: Federal Marijuana Reform, Expunging Cannabis Convictions, and More appeared first on Reason Foundation.

Of the nation’s most populous states, Ohio (ranked 13^th overall), North Carolina (14^th)—which manages the largest state-owned highway system, and Texas (18^th)—with the second-largest amount of state mileage, are doing the best job of combining road performance and cost-effectiveness. In contrast, New York (ranked 44^th overall), California (43^rd), and Florida (40^th) are in the bottom 10 overall.

The 25^th Annual Highway Report finds the general quality and safety of the nation’s highways has incrementally improved as spending on state-owned roads increased by 9 percent, up to $151.8 billion, since the previous report.  Of the Annual Highway Report’s nine categories focused on performance, including structurally deficient bridges and traffic congestion, the country made incremental progress in seven of them.

However, the pavement condition of the nation’s urban Interstate system worsened slightly. Over a quarter of the urban Interstate mileage in poor condition is in just three states: California, New York, and, perhaps surprisingly, Wyoming.

The study also finds drivers in 11 states spent more than 50 hours per year in traffic congestion, with commuters in the three most-congested states—Delaware, Illinois, and Massachusetts—spending over 100 hours per year in traffic congestion in 2019.

Most states—35 out of 50 —reduced their overall traffic fatality rates. Massachusetts, Minnesota, and New Jersey reported the overall lowest fatality rates while South Carolina, Mississippi, Louisiana, and Arizona had the highest fatality rates.

In the report’s spending categories, Missouri, Mississippi, South Carolina, North Dakota, and Tennessee reported the lowest expenditures per mile. New Jersey, Massachusetts, Alaska, Delaware, and Maryland had the highest costs most per-mile. In total, the 50 states disbursed $151.8 billion for state-owned roads, a 9.2 percent increase from $139 billion in 2016, the previous data available.

The condition of the nation’s bridges improved slightly in 2019. Of the 613,517 highway bridges reported, 46,771 (7.6 percent) were rated deficient. The best rankings go to three states where less than two percent of their bridges are structurally deficient: Texas, Nevada, and Arizona. Meanwhile, Rhode Island reported a whopping 23 percent of its bridges as structurally deficient.

Five states made double-digit improvements in their overall performance and cost-effectiveness rankings:  Arkansas improved from 32^nd to 9^th  overall; Mississippi moved from 25^th to 8^th; Wisconsin went from 38^th to 22^nd; South Carolina jumped from 20^th to 6^th; and Iowa improved from 31^st to 20^th overall.

25th Annual Highway Report Overall Performance and Cost-Effectiveness Rankings

Click a state name for detailed information about its results.

“Although it is tempting to ascribe these ratings to geography or population, a more careful review suggests that numerous factors, including terrain, climate, truck traffic volumes, urbanization and congestion, system age, budget priorities, and management and maintenance practices all significantly impact state highway performance,” says Baruch Feigenbaum, lead author of the report and managing director of transportation policy at Reason Foundation. “The states with the three largest highway systems—North Carolina, Texas, and Virginia—all rank in the top 21 this year. Meanwhile, states with the smallest amount of mileage to manage, like Hawaii, Rhode Island, and New Jersey, are some of the worst-performing states. Prioritizing maintenance, targeting and fixing problem areas, and reducing bottlenecks are among the successful strategies states can use to improve their quality and efficiency.”

Reason Foundation’s Annual Highway Report measures the condition and cost-effectiveness of state-controlled highways in 13 categories, including pavement condition, traffic congestion, structurally deficient bridges, traffic fatalities, and spending (capital, maintenance, administrative, overall) per mile.  The Annual Highway Report is based on spending and performance data submitted by state highway agencies to the federal government for 2018 as well as 2019 urban congestion data from INRIX and bridge condition data from the Better Roads inventory for 2019.

25th Annual Highway Report: Each State’s Highway Performance Ranking By Category

Editor’s Note (Jan. 12, 2021): The Federal Highway Administration (FHWA) has identified an “error in the 2018 HM-64 Highway Statistics table” that it is still in the process of correcting. This FHWA error in the 2018 HM-64 table negatively impacted Wyoming’s pavement condition figures and rankings in the 25h Annual Highway Report. And, as a result, the FHWA data error would have also played a role in Wyoming’s overall ranking falling from 11th overall in the previous report to 36th overall in the 25th Annual Highway Report. 

The post 25th Annual Highway Report appeared first on Reason Foundation.

There are several qualifying measures to the legislation, such as requiring the crime to be non-violent, or not in combination with certain other crimes, but the measure is broad in terms of the crimes that it expunges automatically without requiring a citizen application.

These measures will undoubtedly improve the lives of Michiganders by alleviating many of the collateral consequences that come from a criminal record, such as increased difficulty securing employment and housing. Recent research has shown that even a misdemeanor can have devastating impacts throughout the course of one’s life.

There is some special treatment for marijuana crimes in the bill, as citizens can apply to have their marijuana records expunged. The state is directed to default into accepting the applications for expungement and only deny ones that the prosecution flags as problematic. Yet, it is curious that some crimes, like petty theft, will be eligible for automatic expungement but marijuana-related crimes will not.

There is a massive backlog of marijuana records that will never be eligible for the automatic expungement process because they occurred before the state legalized marijuana. These marijuana-related crimes deserve automatic expungement because the violation on record is no longer criminal according to state law. Michigan needs to “clean house” of marijuana crimes ready for expungement, whereas it does not need to do so for crimes that remain illegal.

Additionally, there are major problems with the manual application for expungement process that the state has set up. Michigan academics testified during the bills’ committee process that, historically, only 6.5 percent of those eligible for expungement have applied for and received it. The reasons for this are varied but mostly involve the cost, complications, and intimidation of dealing with the criminal justice system. Most of these factors will remain in place even after this legislation becomes law, undermining the intent of these criminal justice reforms.

If the state intends to accept a large majority of applicants anyway, what purpose does forcing people with low-level marijuana convictions to apply for expungement accomplish?

It is arguably a violation of the 14th Amendment right to equal protection under the law, as those with more time and resources are much more likely to receive expungement while those with limited resources may struggle. An equal application of justice would mean the state takes the onus of reviewing each case expeditiously and expunging those eligible.

Luckily, Code for America has developed open-source software that can identify eligible records and automatically expunge them at little to no cost to the state. California has already run a “Clear My Record” pilot program, clearing some 85,000 records and is now implementing the program statewide. There is little reason why Michigan should not use this, or a similar, program as well.

Overall, the new set of laws makes major strides towards reforming expungement practices. Michigan becomes just the sixth state to enact this sort of ‘clean slate’ legislation. Having nonviolent misdemeanor crimes automatically “fall off the books” after a designated number of years is a reliable and effective method of promoting economic opportunity and justice.

Still, Michigan should deal more effectively with the large backlog of marijuana cases that are no longer be considered criminal activity due to recent marijuana legalization measures. There is little sense in forcing a manual application process for the hundreds of thousands of records that deserve relief.

These criminal justice reforms are good steps, but now Michiganders should demand the state consider a cheap and reliable method of automatically expunging low-level marijuana convictions so it promotes equal treatment under the law.

The post New Michigan Law Will Automatically Expunge Some Criminal Records appeared first on Reason Foundation.

Summary:

Maryland’s Question 2 would legalize betting on sports and events at licensed facilities including race tracks, casinos and Robert F. Kennedy Memorial Stadium.

Fiscal Impact:

Assuming that the current table games tax rate of 20 percent is applied, legislative analysis estimates the state’s share of gross revenues from taxes on sports gambling in fiscal 2022 would be $18.2 million.

Proponents Arguments For:

Proponents argue that legalizing sports betting through Question 2 would bring much-needed revenue for the state from activities that already happening in the black market. There is already a thriving online and underground sports betting market in Maryland, and it would be better for all parties if this market became legal and regulated, supporters note. More than 18 states have already legalized sports betting, including many of Maryland’s neighbors.

Opponents Arguments Against:

There are no formal or published arguments against Question 2 at this time.  But some commentators have pointed out that Question 2 is a referendum asking voters yes or no on sports betting while not providing any details on how sports betting would actually work. Those details are left to the legislature to enact if Question 2 is approved. There are concerns with giving legislators the ability to regulate the activities without giving voters a voice.

Discussion:

For most of American history sports gambling, with the exception of horse racing, has been illegal at the federal level. In 1949, the state of Nevada became the only state to fully legalize sports betting. Federal legislation against sports gambling continued until 2018 when the Supreme Court struck down the 1992 Professional and Amateur Sports Protection Act (PASPA), at that time the main federal law banning sports wagering. This ruling meant states were allowed to approve sports gambling if they chose. So far 22 states have done so.

There are many benefits to this change. Close to a third of Americans say they have bet on sports to a tune of an estimated $155 billion each year—97 percent of it illegally. Legalizing sports betting nationwide could increase GDP by over $12 billion, create over 125,000 jobs, and around $5 billion in tax revenue in the place of the costs of enforcing prohibition.

A study conducted in 2016 compared the prevalence of games of chance and gambling addictions from 1999 to 2013. The authors found that games of chance increased in prevalence with states legalizing lotteries, some casinos, electronic gambling machines, and racetracks. However, rates of addiction and problem gambling remained relatively stable, suggesting that legalized games of chance do not increase the number of problem gamblers.  This is likely because of the extensive nature of the black market, where those who wish to gamble excessively can already do so quite easily. A major benefit of legalizing sports betting would be increased awareness of gambling problems and likely less societal stigma attached to dealing with gambling problems. And in well-regulated legal markets, such as those in the U.K. and Australia, sports betting companies offer consumers ways to manage their betting in order to reduce compulsive gambling. (Many U.S. casinos already do this for other forms of gaming.)

The passage of the 1992 Professional and Amateur Sports Protection Act was intended to curb the abuse of game-fixing. However, the passage of this act appears to have done little to slow down the $150 billion dollar black market of sports gambling, the illicit nature of which undoubtedly contributes to corruption and price-fixing. A legalized industry would be much more transparent and easier to track game fixing because leagues can work directly with bookmakers to track questionable activity. This would improve the integrity of sports and encourage safer participation.

Consumer welfare may also benefit from a legal sports betting industry, as all of the data that are used to set and make bets would no longer be operated on illegal sites but be verified by the sports league and hosted on more-secure websites. These data are vital to the industry because bookmakers use them to set odds and consumers use them to make decisions about gambling.

It is true that Question 2 does not include the details of how legalized sports gambling would be regulated, taxed, licensed, etc, in the state. Those details are left to follow up legislation. Other state ballot measures to legalize sports betting—in California, Colorado and Arkansas—included implementation details so voters knew how legalized betting would be regulated. However, the central question is really whether sports gambling should be legal or not, and Maryland has a mature gaming market and existing rules that can easily be applied to sports betting.

Voters Guides to Other Consumer Freedom 2020 Ballot Initiatives 

Voters’ Guides to 2020 Ballot Initiatives on Other Policy Topics

The post Maryland Ballot Initiative Analysis: Question 2 (2020) appeared first on Reason Foundation.