Restaurant Econ 101

The economic logic in Friday’s NYT op/ed about restaurant service charges was a little off, but it’s nothing compared to the crazy thinking in the only letter they published in response to it:

Waiters need a strong union to negotiate with restaurant owners for a realistic pay scale and other benefits. Diners should not pay for them.

Eating in a quality restaurant costs four or five times as much as cooking at home. The food itself isn’t expensive. It costs more because it is cooked for us and served. The bill includes those costs. Therefore, a tip or a service charge is redundant, asking diners to pay a second time for service costs that are already included in the price of their meal.

Instead of changing the name from tip to service charge, the diner should not pay either.

People, restaurants are businesses. They pay their employees by receiving money from customers. They can get that money through tips, by adding a service charge, or by working it into the cost of a meal, but ultimately it’s all coming from the same place. If you’d prefer that restaurants operate as charities for creative types in need of a day job, please, just come out and say so!

[Would it be petty to mention that the letter writer lives in Berkeley? Yes, it probably would!]


NYT gets Big Tobacco wrong… again

The New York Times editorial page leads today with a screed against tobacco companies for their lawsuit challenging advertising restrictions in the new FDA law. The board alleges that the companies are challenging the law so that they can surreptitiously market to minors. Leaving aside the authors’ cavalier dismissal of First Amendment rights, this is yet another example of how the board completely misunderstands the current state of tobacco regulation.

It’s easy to test whether the Times‘ charge has merit since there are basically just two reasons that firms pay for advertising. One is to introduce new consumers to a product they don’t currently use, which is what the Times believes Big Tobacco wants to do with young people and cigarettes. The other is to lure existing consumers of a product away from competing producers. This lets us make different predictions based on which motive we think is dominant.

If the Times is right and it’s the former, all tobacco companies would benefit from overturning the advertising restrictions and would present a united opposition to the law. If it’s the latter, only the smaller tobacco companies would challenge it; the largest firm would favor the law as a means of restricting competition.

Is the Times right? Bloomberg provides the answer:

Reynolds, the second-largest U.S. cigarette maker, and third-biggest Lorillard Tobacco Co. sued after opposing the legislation that gives the U.S. Food and Drug Administration oversight over tobacco products. […] Altria Group Inc.’s Philip Morris USA, which makes half of the cigarettes sold in the U.S., supported FDA regulation and endorsed the law.

This doesn’t mean that the smaller companies don’t want to target youth too or that Philip Morris won’t eventually join in, but Philip-Morris’ ambivalence is telling. The anti-competitive effects of the law were clearly one of the main factors at work in its passage.

Reading the Times’ editorial you would never know that the nation’s single largest producer of cigarettes isn’t part of the current lawsuit. This is the same error of omission they made with their opposition to Senator Kirstin Gillibrand, discussed at length here. Time and again the board’s anti-tobacco zealotry has caused them to misunderstand how tobacco regulation has changed after the Master Settlement Agreement. Big tobacco companies, and Philip Morris especially, now view the government as a partner they can use to protect their market share. By consistently misconstruing the effects of new regulations and neglecting to mention the industry’s hand in writing them, The New York Times has become the best mouthpiece Philip Morris could ever hope for.


What is the New York Times smoking?

Today’s New York Times devotes a long editorial to questioning the ethics of new senator Kirsten Gillibrand. The main thrust of the editors’ argument is that Gillibrand represented Philip Morris when she worked as an attorney and, inexcusably, advocated fiercely on behalf of her client. In short, she was a good lawyer.

Even so, it’s reasonable to bring up that relationship when evaluating a new senator, especially with major tobacco bills currently working their way through Congress. What’s not reasonable is failing to mention that the bill giving regulatory power to the FDA that is headed to the Senate right now is backed enthusiastically by Philip Morris. The editors strive to give the opposite impression:

She was privy to unsuccessful efforts to dissuade a smaller tobacco company, the Liggett Group, from breaking ranks and cooperating with prosecutors — a move, it was feared, that could result in the release of incriminating internal documents and a strengthening of Food and Drug Administration efforts to regulate the marketing and sale of cigarettes, including to children.

That was prior to the Master Settlement Agreement. As anyone with even the slightest knowledge of the industry knows, the MSA marked a sea change in big tobacco companies’ strategy for dealing with the government, especially with regard to Philip Morris/Altria. Pre-MSA they generally opposed unrelentingly every regulatory encroachment. Post-MSA their strategy has been to partner with regulators to preserve the Big Tobacco oligopoly. The FDA bill is an especially egregious attempt to secure Philip Morris’ market share and eliminate competitors.

The Times’ understanding of contemporary tobacco policy strikes me as superficial at best and deliberately misleading at worst. They support the FDA bill because it represents “real power to regulate tobacco products,” but I’m not convinced they’ve really thought through its unintended consequences. They believe Philip Morris is a villain but refuse to acknowledge that the villain and the government have been teaming up for years now. They do their readers a disservice by ignoring this changed regulatory landscape.


More lazy tobacco reporting

I know, I know, you guys don’t come here just to read posts about tobacco regulation. We’ve got some non-smoking content coming soon. But first, this:

Parents who smoke often open a window or turn on a fan to clear the air for their children, but experts now have identified a related threat to children’s health that isn’t as easy to get rid of: third-hand smoke.

That’s the term being used to describe the invisible yet toxic brew of gases and particles clinging to smokers’ hair and clothing, not to mention cushions and carpeting, that lingers long after second-hand smoke has cleared from a room. The residue includes heavy metals, carcinogens and even radioactive materials that young children can get on their hands and ingest, especially if they’re crawling or playing on the floor.

Doctors from MassGeneral Hospital for Children in Boston coined the term “third-hand smoke” to describe these chemicals in a new study that focused on the risks they pose to infants and children. The study was published in this month’s issue of the journal Pediatrics…

Dr. Philip Landrigan, a pediatrician who heads the Children’s Environmental Health Center at Mount Sinai School of Medicine in New York, said the phrase third-hand smoke is a brand-new term that has implications for behavior.

“The central message here is that simply closing the kitchen door to take a smoke is not protecting the kids from the effects of that smoke,” he said. “There are carcinogens in this third-hand smoke, and they are a cancer risk for anybody of any age who comes into contact with them.”

Among the substances in third-hand smoke are hydrogen cyanide, used in chemical weapons; butane, which is used in lighter fluid; toluene, found in paint thinners; arsenic; lead; carbon monoxide; and even polonium-210, the highly radioactive carcinogen that was used to murder former Russian spy Alexander V. Litvinenko in 2006. Eleven of the compounds are highly carcinogenic.

Are blankets in your home killing your baby? Is your jacket radioactive? These sound like the kind of hyped teasers you’d see on local TV news, but this is from New York Times reporter Roni Caryn Rabin. Note that, as usual, there’s no source in the article to counter that these researchers might be going a bit overboard in their claims. But worse is that the article gives so much credence to the study itself. How was it conducted?

The study reported on attitudes toward smoking in 1,500 households across the United States… The data was collected in a national random-digit-dial telephone survey done between September and November 2005. The sample was weighted by race and gender, based on census information.

That’s right, the study did no epidemiological research whatsoever. It consisted entirely of phoning up random people and asking them what they believe about the dangers of tobacco smoke. For this they received completely uncritical coverage in one of the nation’s best newspapers and a chance to repeat their sweeping claims about “third-hand smoke.” As long as scientists say bad things about tobacco, it seems that they can literally just make stuff up and expect compliant reporters to hype their findings.

The authors do cite one other study that claims a link between exposure to ambient chemicals from tobacco smoke and lower cognitive performance in children, though there are reasons to doubt the results. And good parents probably shouldn’t swaddle their babies in blankets that reek of tobacco smoke. But given that smokers spend decades inhaling cigarette smoke directly into their lungs before major health problems set in, it’s going to require very rigorous findings to conclude that simply having smoky clothing in the same room as a child is harmful. The study here doesn’t even make an attempt.

The worst aspect of these doctors’ propaganda is that it will be used to further demonize smokers. Just as non-smokers who used to view brief exposure to secondhand smoke as a mere annoyance now believe it takes years off their lives, casual readers of this article will believe that being caught in an elevator with a person who smells like smoke is going to turn them into Alexander Litvinenko. Mothers and fathers who take the utmost care to smoke only far away from their children will be shunned as bad parents for smoking at all. It will no longer be enough for smokers to stand outside in the cold and rain 25 feet from any door or window; the mere aromatic evidence that one has been smoking will become an affront to civilized society.

I’m going to go ahead and complete the circle by coining my own term: fourth-hand smoke. That’s the first-hand smoke you’re exposed to when you’re so annoyed by society’s growing nannyism that you take up smoking just out of spite. My first cigarette (of very few) was lit in protest of DC’s smoking ban several years ago. I’m sure there are others whose rebellion has drawn them to their very first taste of tobacco. Maybe I’ll call up some random people and see if they feel the same way. New York Times coverage will be right around the corner.

[Big thanks to Rumors Daily for the link. See also the take at TennesseeFree, thanks to Chad.]


NYT exceptionalism

The first item on David Pogue’s list of tech tips every computer user should know on his New York Times weblog:

You can double-click a word to highlight it in any document, e-mail or Web page.

Er, except for on The New York Times website, which still offers the incredibly annoying “feature” of opening a new window with the definition of any double-clicked word. (Not on the blog pages, thankfully.)

I did learn a couple of things though. Somehow I never knew that the space bar scrolls a screen downward or that a double space bar hit punctuates a sentence on the iPhone.

[Via Virginia Postrel.]


A cause for delegation

The editors at The New York Times are amused by the irony of seeing congressional Republicans suddenly calling for oversight of the executive branch now that the Treasury is asking for $700 billion to play with:

As delighted as we were to hear Republicans talk about oversight and accountablity, we couldn’t help but wonder where they were for the last seven years as the Bush administration essentially operated without Congressional oversight…

We can’t help but wonder how much the Republicans’ newfound zeal for regulating the executive branch and the equally out-of-control financial sector will last.

Probably until the elections are over.

All valid points. Congressional deference to the Bush Administration on matters of security has been shameful. But before calling out Republicans for their hypocrisy, the board ought to consider a little history. Congress has a long tradition of passing vague delegations of power and letting administrative agencies sort out the details. It’s a neat trick that lets them appear to address problems while washing their hands of responsibility when the execution goes awry. The practice goes back at least to the Great Depression with attempts to grant Roosevelt unprecedented power to regulate economic activity.

As Robert Levy and William Mellor document in their new book The Dirty Dozen: How Twelve Supreme Court Cases Radically Expanded Government and Eroded Freedom, the Court initially ruled against these delegations as violations of the Article 1 requirement that “All legislative Powers herein granted shall be vested in a Congress of the United States.” In Schechter, for example, the Court struck down a portion of the National Industrial Recovery Act because it under it “The discretion of the President in approving or prescribing codes, and thus enacting laws for the government of trade and industry throughout the country, is virtually unfettered.”

There, unfortunately, the Court stopped. Not a single statutory program since then has been struck down as an impermissible delegation of congressional authority. As long as there is an “intelligible principle” to guide agencies’ discretion, they’re allowed to make and enforce new law — and these “intelligible principles” can be remarkably vague. The laws created by unelected administrative agencies now dwarf those passed by Congress. The Federal Register runs more than 77,000 pages long, listing rules from more than 300 agencies. The FCC, FDA, EPA, SEC, and countless other agencies derive their sweeping authority from the Court’s long history of letting Congress foist responsibility for costly regulations onto unaccountable bureaucracies. Levy and Mellor conclude that:

…delegation buttresses the power and influence of special interests. Ordinary citizens are even less well equipped to press their case before administrative agencies than before Congress. National legislators– but not agency heads — are responsive to the needs and desires of voters, who can exact retribution at the polls. By contrast, individual voters have no direct representation in the administrative process, nor do they typically have access to trained legal counsel, expert witnesses, and consultants…

Delegation has become a political narcotic — hooking Congress on more and bigger regulatory schemes with scant regard for their costs, little concern over the political repercussions, and most of all, disrespect for a Constitution expressly designed to prohibit what Congress has eagerly promoted.

Over at Volokh, David Bernstein speculates that approving a blank check for Paulson could provide the Court a fresh opportunity to revisit the non-delegation doctrine and the limits of what counts as an intelligible principle. If it does so, I expect the NYT editorial board will be among the loudest defenders of broad regulatory power.


Back in The Jungle?

Paul Krugman makes another foray into the food safety issue today. His logic of blaming free market advocates for the failures of a regulatory agency is completely absurd — especially since the regulatory captures he notes in the article are exactly the kinds of things that make libertarians skeptical of government regulation in the first place.

Moreover, it’s not clear that the food safety crisis Krugman writes about has even occurred. News reports about food safety issues are certainly prominent, but according to Alex Tabarrok, the numbers tell a different story. The CDC’s data on foodborne disease outbreaks show a decline from 1998-2006.

Krugman’s previous column on food safety was covered here. Sadly, the intervening year hasn’t made him a better writer.


Is the tobacco bill racist?

That’s the question Jacob Sullum asks in his new article at Reason. Read it here.

Last week I sent the following letter to The New York Times:

Thursday’s article about legislation to ban all cigarette flavorings except menthol quotes former federal health secretaries arguing that the bill “discriminates against African-Americans.” If any proposal could be said to discriminate against African-Americans, it is perhaps the idea that we should prohibit the menthol cigarettes that three-quarters of black smokers prefer. To deny them their choice is to imply that they cannot be trusted to make their own decisions and that they are helpless victims of marketing; in short, to treat them like the children the bill is intended to protect.

There are many reasons to oppose the Philip Morris-backed legislation to give the FDA regulatory authority over tobacco, including manipulation by the industry, loss of variety, and potential bans on safer alternatives to existing cigarettes. Introducing race into the debate is a distraction from these important considerations.

They printed this one from the president of Lorillard Tobacco instead.

Freshly minted bias
Cigars for me, but not for thee


Freshly minted bias

The New York Times ran another article by Stephanie Saul today about the menthol exemption to the proposed ban on flavored cigarettes. Since black smokers are the largest buyers of menthol cigarettes, the issue is becoming entangled in racial politics. For example:

The bill’s treatment of menthol “caves to the financial interests of tobacco companies and discriminates against African-Americans — the segment of our population at greatest risk for the killing and crippling smoking-related diseases,” the letter from the former [federal health] secretaries said. “It sends a message that African American youngsters are valued less than white youngsters.”

Or this, from Saul’s previous article:

Menthol is particularly controversial because public health authorities have worried about its health effects on African-Americans. Nearly 75 percent of black smokers use menthol brands, compared with only about one in four white smokers.

That is why one former public health official says the legislation’s menthol exemption is a “cave-in to the industry,” an opinion shared by some other public health advocates.

“I think we can say definitively that menthol induces smoking in the African-American community and subsequently serves as a direct link to African-American death and disease,” said the former official, Robert G. Robinson, who retired two years ago as an associate director in the office of smoking and health at the Centers for Disease Control and Prevention.

She’s right about the financial interest: the menthol exemption is clearly a sop to Phillip Morris, the only tobacco company backing the bill. And she’s right that there’s no logical reason for allowing only menthol as a flavoring, except for the fact that it’s the flavor most consumers of flavored tobacco actually want. It’s dubious, however, to say that this discriminates against blacks. Whatever the current market shares may be, there’s no reason to think that if other flavorings are banned consumers of all races won’t switch to menthol.

In fact, it’s perverse to say that not banning a product that’s enjoyed by many African-American adults is a form of racial discrimination. To do so implies that blacks are victims of marketing, cannot responsibly make their own decisions, and need to be coercively protected from flavored tobacco products; basically, that they should be treated like children. The alternative view — that however regrettable heavy menthol cigarette use among African-Americans may be, the choice should be theirs to make — doesn’t even merit a mention within the The Times‘ reporting pages.

I don’t believe that either side in this debate is truly motivated by racism. However, if reporters are going to print allegations of discrimination in their coverage of it, they should consider that public health activists are no more immune to racial bias than anyone else.

See also Jacob’s Sullum’s coverage of the issue for Reason:
The Times Discovers the Tobacco Bill’s Flavoritism
FDA-Approved Cancer Sticks