Why the U.S. Should Adopt the Nordic Approach to Private Roads

By Giovanna da Silva

Many view the United States as a free market capitalist state and Nordic countries such as Sweden and Finland as socialist due to their extensive welfare system. Yet, in the United States, most roads, highways, and other transportation infrastructure are publicly owned and operated. Meanwhile, the vast majority of roads in Sweden and Finland are operated by the private sector and maintained by local communities. Examining Sweden and Finland’s public-private road model may give us insight into how private roads can operate in the United States.

Two-thirds of roads in Sweden are privately operated and managed by local Private Road Associations (PRAs). These road associations are composed of homeowners who live along private roads. An estimated 140,000 kilometers (about 87,000 miles) of roads are the responsibility of 60,000 PRAs. While most Swedish private roads do not experience a high level of traffic, the delegation of roads to the private sector helps the government offset costs. Government works in conjunction with road owners and associations to subsidize the costs of repair and maintenance. Around 24,000 PRAs receive government subsidies.

The costs of upkeep are divided among members of the association. PRAs that do not accept government subsidies can prohibit traffic at their discretion. Those that receive subsidies must allow all vehicles to travel on their roads. Regardless of whether they receive funding, however, the associations may not ban horses, bicycles, and pedestrians from using the roads.

Private ownership by PRAs has proven to be a cost-effective measure for operating roads according to the the Swedish government. In 2001, a government-commissioned evaluation found PRAs could run their roads at about half the cost as for the national.

Finland employs a similar system. Many private roads are managed by local cooperatives. Finland has 78,000 kilometers (about 48,500 miles) of public roads and 280,000 kilometers (about 174,000 miles) of private roads. Of the 5 million people who live in Finland, around 700,000 of them reside near a private road. Like Swedish PRAs, Finnish cooperatives are made up of homeowners who live proximate to private roads. These homeowners collectively maintain their local roads and are eligible to receive subsidies from the federal government to cover a portion of their expenses.

The Finnish government determines the subsidy amount based on the amount of traffic that a road bears and the number of houses it serves. The geographic location and average income of the area also figure into its consideration. The shift in road management to the community ensures that roads are taken care of on a regular basis. This makes for a more efficient and democratic system of road maintenance because community members, unlike government officials from far away, are distinctly aware of the needs of their roads.

The private sector can be engaged to provide transportation services through several different approaches. Depending on population size, certain frameworks may produce more favorable outcomes than others. For instance, toll roads operated by private companies, as is the case with the Dulles Greenway in Northern Virginia, are preferable to local associations composed of community residents due to high volume of vehicular traffic.

On the other hand, sparsely populated regions of the United States may benefit greatly from implementing the Swedish model of privatization and establishing local private road associations. The government could help subsidize the operation costs to avoid imposing toll fees on outsiders who use the roads. This may also decrease operation costs and improve the quality of rural roads that are often neglected due to lack of state and federal funding.

Different models of public-private partnerships ought to be experimented upon in order to determine what works best for different cities and localities.

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Private Toll Roads: A Case Study of Tallahassee’s Orchard Pond Parkway

By Giovanna da Silva

Florida boasts the highest number of toll roads in the country. Until last April, state and local governments owned and operated all of Florida toll roads. Tallahassee’s Orchard Pond Parkway challenged this precedent, however, opening to the general public in 2017 and becoming the first privately constructed and operated toll road in Florida.

Financing new road projects can be difficult for state and local governments, as the federal Highway Trust Fund often experiences budget shortages. According to the Heritage Foundation, the Highway Trust Fund pays for one-fourth of public highway spending. In testimony before the Senate Finance Committee, Cato Institute’s director of tax policy studies Chris Edwards advocated for private-public partnerships, the repeal of regulations that prohibit tolls on interstate highways, and the privatization of state transportation to reform highway funding and offset budget gaps. Many cities in Florida resort to building toll roads to fund road maintenance. With the help of the private sector, toll roads can mitigate gaps in road funding on the federal and state levels. The success of Orchard Pond Parkway can serve as a model for increased public-private partnerships within Florida and the rest of the nation.

The Orchard Pond Parkway is a 5.2 mile two-lane toll road that spans North Meridian and Old Bainbridge roads and runs parallel to the existing Orchard Pond dirt road. The parkway helps alleviate traffic in the Northeast area of the city and reduces travel time to the Tallahassee International Airport.

Road construction began January of 2015. Jeff Phipps, Tallahassee resident and owner of the land, opened the road to the public on April 18, 2016. Phipps contracted M of Tallahassee Inc., to build the road and construction costs totaled around $17 million. He took out a 30-year loan from the Florida Department of Transportation of $13.5 million and invested $3 million of his own money to finance construction. Phipps is leasing the road from Leon County to operate and maintain for 99 years. After this period, Leon County will assume sole ownership of the road. Toll revenues go towards upkeep and paying off the loan.

Phipps designed the road to minimize its environmental impact. He used 45,000 pounds of recycled concrete to build the road and incorporated wildlife crossings such as ecopassages, culverts, and other passageways to allow animals of different sizes to safely travel under or alongside the road. To reduce traffic noise, he leveled the road and constructed a 20-foot berm. He also built an accompanying  pedestrian-friendly bike trail on the old Orchard Pond dirt road. Additionally, Phipps plans to sell a large part of his land to the state for conservation.

“By building it [the parkway] myself,” he said in an interview with the Tallahassee Democrat, “I hope I can do a better job than if it had been done (by a government agency) on a tight budget. We’ll be able to save more trees and do more for wildlife.”

Use of the road has steadily increased since its opening. Phipps initially estimated traffic to be between 500 and 1,000 cars per day. It now averages 1,5000 to 1,650 cars on weekdays and 1,050 and 1,250 on weekends. The toll is $1.69, reduced to $1.19 for drivers with SunPass cards.

Based on current projections, Florida’s population is expected to grow from the current 20 million to roughly  23 to 27 million  by 2035. This increase will likely place pressure on roads and public transportation infrastructure. Public-private partnerships such as the successful Orchard Pond Parkway project may be the solution to road construction and maintenance amidst budget shortages and population growth.

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Middle Eastern Entrepreneurs Face Regulatory Hurdles

By Kristen Carpenter and Giovanna da Silva

Entrepreneurship often serves as a means to achieve social change. In the Middle East, social enterprises such as Glowork foster advancement by providing the disenfranchised with empowerment and professional development opportunities.

Many entrepreneurs and employment seekers in the area, however, face regulatory hurdles to starting their own business. Excessive regulations stifle job growth and increase unemployment rates. Reducing the amount of bureaucracy in the employment sector is crucial to promoting a healthy environment of entrepreneurship and increased rates of employment, thus facilitating increased economic growth.

Prospective entrepreneurs can face arduous regulations before they receive approval to create an enterprise. In Saudi Arabia and the United Arab Emirates, registering a business with their respective national governments can cost around $15,000. The cost of starting a business is highest in Yemen, however, where expenses amount to 73.5 percent of income per capita. In the West Bank and Gaza strip, registration expenses can reach 45 percent of income. In contrast, startup costs in Europe and Central Asia are just above four percent of income per capita. These exorbitant fees restrict those with entrepreneurial aspirations but little financial capital from starting their own businesses.

The World Bank’s “Doing Business” project collects data from local businesses in 190 countries and analyzes the regulations they face overtime. The project uses this information to compare regulatory environments of nations and regions worldwide. According to the report, Middle Eastern and North African (MENA) nations ranked in 115th place on average for “ease of doing business.” In the same category, Latin American and Caribbean states averaged in 110th place while the European Union ranked in 34th place. In Lebanon, securing a license to construct a warehouse averages 249 days, with the MENA regional average at 132 days. A business will need  90 days to receive electricity in Qatar and 68 days in Saudi Arabia.

Businesses in the Middle East are also constrained by stringent labor restrictions which contribute to a high unemployment rate in the region. Middle Eastern youth aged 15 to 24 experience a rate of unemployment at 21 percent. This contrasts with the global average rate of youth unemployment of 13 percent. While certain regulations are justified in order to protect the rights and safety of workers, an excessive amount of government involvement in the labor market decreases the rate at which companies employ workers. This especially hinders vulnerable groups such as women and young, inexperienced people from acquiring employment.

Several Middle Eastern countries require businesses to pay fines for each person they fire regardless of the cause. In some cases, the business owner must re-train employees instead of firing them. This policy decreases the quality of customer service and disincentivizes workers’ productivity. It may also encourage employees to see their employment as a fixed source of income, unrelated to their job performance. Under this labor regulation, businesses are discouraged from hiring new workers. Additionally, this regulation encourages corruption and rule-breaking. Employment laws are often evaded in both the public and private sector.  

Companies avoid firing fees by signing a fixed-term contract with employment. Those working on fixed-term contracts, however, earn lower wages, experience higher turnover rates, and are trained less on average. Fixed term contracts also provide little opportunity to move up in the company.

Not surprisingly, 38 percent of firms in Lebanon report that labor regulations are a “major constraint to doing business,” followed by Oman at 35 percent, Syria at 34 percent, and Jordan at 14 percent.

The public sector is responsible for a large portion of employment in the Middle East due to government intervention in the economy and the nationalization of industries such as oil production notes the Brookings Institution in Washington, D.C. Incentivizing the growth of entrepreneurship in the private sector is integral to combating high unemployment rates. Lifting employment restrictions, streamlining the licensing and permitting processes, and decreasing the cost to register a business with the government are all important measures that must take place in order to advance the growth of entrepreneurship in the private sector and improve the standard of living of those who are unemployed.


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Bethel Church Vital to Frenchtown Community Redevelopment

By N’namdi Green

Today, faith-based organizations continue to influence communities beyond the religious realm. Bethel Missionary Baptist Church of Tallahassee is a prime example of a faith-based organization inserting itself into non-conventional fields.

Bethel has been at the forefront of economic development within the Frenchtown community in Tallahassee for almost 30 years. This includes past projects such as Bethel Towers, a 60-unit affordable housing apartment complex for the elderly, and the affordable housing neighborhood of Carolina Oaks. Leaders from the church see economic development as a platform to give back to the community. Bethel’s redevelopment projects seek to re-establish the once vibrant identity of Frenchtown.

An upcoming project on West Tennessee Street, proposed in conjunction with the Frenchtown Redevelopment Partners LLC, is one way the church hopes to bring economic prosperity and identity back to the Frenchtown community. This initiative is a mixed-use housing complex with a grocery store, retail space, economy drug store, a financial institution, and office incubators.

The reasoning for fusing these various entities together is rooted in the expressed needs of the community and the vision the church has for the area according to those directly involved in the project and interviewed for this article. In an interview for this article with one of Bethel’s economic empowerment leaders, members of the community approached Bethel with their ideas about what should be included in the project. The church took these suggestions under consideration. By working with community members, they believe, Bethel provides the foundation for restoring Frenchtown without sacrificing its identity.

Bethel’s leadership felt the community lagged economically compared to other parts of Tallahassee such as Midtown, a neighborhood that encourages development with a sense of culture. Bethel intends for the project to remedy some of the neighborhood’s economic shortcomings by developing businesses and educating members of Frenchtown through community empowerment programs. The proposed financial institution would counsel individuals on topics such as personal budgeting, money management, and debt prevention. If members of the community are economically empowered, Bethel believes the neighborhood will begin to thrive again.

A 2015 report by Governing Magazine states that programs funded by Cities for Financial Empowerment Fund (CFE Fund), a non-profit organization, saved clients an average of  $3,000. They did so by providing one on one financial guidance for individuals in poor neighborhoods in five major cities across the United States. Financial education initiatives and economic redevelopment are pertinent to Bethel’s focus of regaining Frenchtown’s unique economic identity.

As the project continues, Bethel may be laying important groundwork for a new path toward private-sector led urban revitalization. Whether these efforts create sustainable roots in the community has yet to be seen, but ongoing research and monitoring of these projects should provide important clues to how cities can reset the course of economic development in marginalized communities.

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Regulations Hinder Growth of Florida’s Solar Energy Sector

By Sam Stadtlander and Giovanna da Silva

In 1883, Charles Fritts created the first solar cell and established the path towards developing renewable solar energy.  Since then, the 20th and 21st centuries have seen increased demand for technological innovation in the solar sector as an alternative to natural gas and other conventional energy sources. Due to the state’s geographic location and warm climate, Florida is in a position to potentially benefit economically from producing solar energy. While current statutes incentivize solar production, permitting third-party financing for solar would allow individual consumers and small businesses to finance solar energy at an affordable rate. This would increase accessibility of solar production outside of the commercial sector.

Florida provides tax credits, financing opportunities, and rebates to those seeking to invest in clean-energy equipment. The 2006 Florida Energy Act resulted in the formation of the Solar Energy Systems Incentives Program, which provides rebates to those who purchase solar generation equipment. Section 212.08 of the Florida Statutes allows a sales tax break to anyone who purchases solar generation machinery certified by the Florida Solar Energy Center.

Some local governments in Florida offer residents loans to purchase eco-friendly appliances. The city of Tallahassee, for example, provides Energy-Efficiency Loans at 5 percent interest in exchange for purchasing energy efficient generators, refrigerators, water heaters, air conditioners, lighting, solar systems, and other appliances. Additionally, the city offers rebates and grants for investing in eco-friendly products such as replacing conventional electric water heaters with natural gas water heaters. Similarly, the Orlando Utility Commission provides solar energy rebates to commercial businesses at $0.03 per kilowatt hour of energy produced and homeowners with a $1,000 rebate to purchase solar equipment. Loans are also available to Orlando residents.

While these incentives help increase solar production, the major obstacle solar energy producers face is that Florida prohibits customers from directly purchasing power from solar energy developers. In other words, few generators of solar power–with the exception of a handful of utility companies such as Florida Power and Light–are allowed to sell the energy they generate directly to consumers.This consequently prohibits third-party financing.

Third-party financing takes two forms: the purchase power agreement (PPA) model and the leasing model. Under the PPA model, a private solar energy developer builds and maintains a solar energy system for free on the customer’s property. The consumer signs a contract to buy solar power from the developer, often paying lower rates for electricity. With the leasing model, the customer pays the developer over the course of several years for installing solar equipment on the person’s property. Both options are beneficial to consumers seeking low-cost and environmentally friendly energy alternatives to conventional energy sources.

Section 366.91 of the Florida Statutes provides financial incentives to those that use solar panels. Through net metering, Florida Power and Light offers discounted energy rates to those who generate excess energy via solar panels. Florida further incentivizes solar energy production by providing tax exemptions to solar energy producers. Without third-party financing, however, these incentives are limited to a select group of people who can afford to pay the costs of solar equipment upfront.

Florida’s solar industry has been steadily increasing in large part due to the sales tax exemption program, rebates, and other incentives offered on a local level. While progress has been made, the legalization of third party ownership will encourage the growth of the solar sector.

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Entrepreneur Develops Technology to Monitor Police Interactions

By Leesa Newbon and Giovanna da Silva

Transparency and government accountability are considered essential components to  maintaining a healthy democracy and reducing corruption. With the rise of  technological advancements in the digital media era, entrepreneurs can facilitate demands for transparency by developing online programs and apps that allow citizens to monitor government institutions and agencies. For example, Raheem AI, a chatbot powered by Facebook Messenger, enables citizens to anonymously report and rate their encounters with police officers, increasing transparency in law enforcement.

Brandon Anderson created Raheem AI in response to the fatal shooting of his romantic partner by police. Wanting to prevent this experience from happening to others, Anderson created the app in order to reduce and hold police accountable for misconduct.   

Anderson’s concerns mirror general attitudes toward law enforcement. According to a Gallup poll conducted in July 2017, 57 percent of Americans said that they had a “great deal” or “quite a lot” of confidence in the police. While approval ratings overall have risen compared to 52 percent in 2015, survey responses from minorities, Democrats, and adults aged 18-34 indicate a significant decline in confidence compared to previous years. For instance, Hispanic approval dropped from 59 percent in 2012-2014 to 45 percent in 2015-2017, and black approval ratings decreased from 35 percent to 30 percent over the same period.

Raheem AI is designed to monitor civilians’ interactions with law enforcement officers. Through the Facebook Messenger chatbot, people can rate and provide anonymous feedback of their encounters with police. This encourages more people to report not only due to the convenience of the online app interface, but also the confidentiality it provides.

A driving force behind the creation of the app, Anderson says, was the idea that police officers could improve their approach to policing as  citizens played a more active role in policing law enforcement and holding poorly rated officers accountable for their actions.Currently Raheem AI is in the beta testing phase in a few small police departments near Berkeley, California.

The Georgetown University Social Innovation and Public Service Fund (SIPS) provided grant money for Raheem AI. SIPS is a student driven program that supports Georgetown students and alumni striving to improve the world through social entrepreneurship. As Raheem AI began to gain notice, the White House also offered financial support to the project through My Brother’s Keeper, a program created by President Barack Obama to address the opportunity gaps faced by boys and men of color.

Social entrepreneurs such as Brandon Anderson are fundamentally altering the manner in which citizens interact with government institutions. User friendly programs focused on increasing transparency such as Raheem AI is just one example of how they are accomplishing this goal. In this way, they are well-suited towards bringing about meaningful social and political change.


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Jones Act Protectionism Hinders Puerto Rican Recovery Efforts

By Giovanna da Silva

On September 16, Category 5 Hurricane Maria made landfall on Puerto Rico with sustained winds of 155 miles per hour. Maria set the record as the strongest hurricane to hit the island in 89 years. With millions of displaced Puerto Ricans desperately in need of basic essentials, such as oil, food, and medicine, a little known law regulating maritime commerce–the Jones Act– hindered short-term emergency response efforts causing needless suffering. Further, the act is likely to impede long-term recovery of the island’s economy.

The Jones Act, formally known as the Merchant Marine Act of 1920, is a policy implemented to strengthen national security and protect the American shipbuilding industry from foreign competition. The act restricts the transport of goods in US ports to vessels that are built, owned, and operated by Americans.

Many economists agree that the Jones Act negatively impacts economic growth. Puerto Rico in particular suffers from the impact of Jones Act protectionism. Puerto Rican citizens pay more than necessary for consumer goods and other materials due to increased shipping costs, contributing to a higher cost of living. Given Puerto Rico’s geographic location, the island solely relies on shipping as a way to receive goods. Supermarket goods, for example, are priced 21 percent more than the US average. A study conducted by the New York Federal Reserve found while the price to ship a 20 foot container of goods from the US to Puerto Rico totals around $3,063, it only costs $1,504 to ship the same container to neighboring Santo Domingo, Dominican Republic, and $1,687 to Kingston, Jamaica.

Twelve days after Hurricane Maria hit Puerto Rico, President Donald Trump waived the Jones Act, issuing a 10-day suspension. This decision has come under fire from supporters of the act.

The first argument asserts that lags in initial relief efforts were due to poorly executed federal response efforts, not cargo coming into the island. In addition, relief and supplies already in ports faced delays due to the damage in infrastructure and lack of available truckers and gas to carry the cargo into the towns and countryside. This resulted in shortages in food, water, and other necessities

The second criticism argues that a 10-day waiver wasn’t enough time for Puerto Rico to recover from the storm’s destruction. Puerto Rico will have to build new infrastructure in the wake of the hurricane’s destruction. Some are still without cell phone service or electricity on the island. There are around 1,000 people in Puerto Rican shelters and thousands who relocated to Florida to escape harsh conditions on the island.  

Senators John McCain (R-Arizona) and Mike Lee (R-UT) have proposed legislation to permanently exclude Puerto Rico from Jones Act restrictions. While controversial, this may be an important step toward helping Puerto Rico rebuild its infrastructure and economy in the long run.  


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Saudi Arabian Entrepreneur Advances Women’s Rights in the Middle East

By Kristen Carpenter and Giovanna DaSilva

Earlier this year, Saudi Arabia became the first country to grant a robot by the name of Sophia full-fledged citizenship. Critics noted that while Sophia can roam the streets of the country unaccompanied, Saudi Arabia’s female citizens are not afforded this right. After all, women are still prohibited from working or travelling without permission from a male guardian. But these attitudes may be changing because of the efforts of Saudi entrepreneurs.

The Saudi Arabian government has implemented legislative reforms to allow women certain freedoms. Saudi Arabia, for example, recently legalized driving by women, an important milestone in advancing their rights in the kingdom.

Legislation alone, however, fails to fully address the oppressive culture women face in the country. Social entrepreneurship can play an important role in facilitating this change. Glowork, the first Saudi female job-matching service, aims to help women achieve economic independence through employment.

Khalid Alkhudair founded Glowork in 2011, after he witnessed the difficulties women face in obtaining employment. “We entered into companies that didn’t have women and convinced them to employ females,” Alkhudair remarks in an interview.

By partnering with the Saudi Ministry of Labor, Glowork has access to the Ministry’s employment database, which provides information on the 1.6 million jobless women in the country. Glowork receives a commission from the government for each job match. Additionally, the company acts as an advisor to the government in drafting legislation that supports increased presence of women entering the workforce. The company has successfully matched over 27,000 women with employment, facilitating economic growth and opportunities for female advancement. Glowork also mentors women through the hiring process at its career center. Its program, “A Step Ahead,” provides job training workshops and hosts job fairs. Outside of Saudi Arabia, Glowork currently has an office in Jordan with plans to increase its presence in Oman.  

Recently, Alkhudair designed a glowork smartphone app.  With this app, women are able to meet and connect with future employers, create digital resumes, and use geolocation to access an online map of businesses looking to hire nearby. Additionally, women use the app to communicate with one another, fostering a network of support and camaraderie.

The company’s success has spurred controversy among some citizens. In one instance, a grocery chain that employed 11 women through Glowork faced an organized boycott, leaving the owner no choice but to fire the women. Most efforts at integration, however, have been successful. As female presence in the public sphere increases, cultural attitudes will likely shift accordingly.

Currently, Saudi Arabia ranks 141 out of 144 countries in the World Economic Forum’s global gender gap index. While there is a long way to go in terms of equality, progress will continue to be made through social enterprises such as Glowork. Thanks to Khalid Alkhudair, Saudi women now have greater access to employment. Cultural shifts result from decentralized efforts as well as government mandates. For this reason, entrepreneurs wield significant power in driving social change.


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Hurricane Response Efforts are Most Effective When Decentralized

By Chad Thomas

According to the Federal Emergency Management Agency (FEMA), emergency responses to hurricanes aim to prevent further loss of life and  property damage. Effective emergency responses utilize local information and enable decentralized responses from within the disaster zone. Local information about necessary relief in affected areas aids response efforts. A decentralized response enables responders in the affected area to act as the disaster situation unfolds.

Residents, organizations, and governments have different responsibilities throughout emergency management phases. Before landfall, local officials near a hurricane’s projected path prepare supplies, initiate evacuations, and broadcast warnings and residents prepare for the hurricane. After disaster strikes, responders conduct rescue missions and provide relief, such as food, water, healthcare, and shelter.

In Florida, city and county emergency management directors and the governor can assume emergency management powers to direct resources within their jurisdictions after officials declare a state of emergency. The president can approve federal aid at the request of the governor. FEMA provides financial support and additional supplies to overwhelmed communities during the recovery phase.

Sparse information regarding the locations and needs of victims hinders disaster response efforts. Economists have studied how to overcome the problems of coordinating dispersed bits of localized knowledge such as those faced by responders to natural disasters—the so-called “knowledge problem—extensively.  Russell Sobel and Peter Leeson, for example, discuss Hayek’s information problem and state that an effective disaster response identifies the existence of a disaster, type of disaster, and proper allocation of resources in an attempt at addressing the knowledge problem. Economist Friedrich A. Hayek popularized the concept of the  information problem  in his essay, The Use of Knowledge in Society. Hayek wrote that a major economic challenge “is a problem of the utilization of knowledge which is not given to anyone in its totality.” Utilizing local information helps communities prepare for and manage the emergency on an as-needed basis within affected communities.

Ball State University economist Steven Horwitz credits decentralization  with enabling responders to make decisions about how best to manage supplies and overcome obstacles with local information. For example, decentralization in the Coast Guard and private organizations assisted effective responses following Hurricane Katrina. Responders from the Coast Guard did not have to constantly receive commands from higher officials to act in changing situations.  Before the storm hit New Orleans, Walmart and Home Depot stationed trucks filled with supplies in surrounding areas to quickly provide for those in need. The Coast Guard deployed rescuers around the Gulf of Mexico and rescued over 33,500 people from danger. When FEMA arrived in New Orleans, the agency prevented early responders, such as Walmart and the Red Cross, from bringing in some supplies. The Department of Homeland Security’s inspector general criticized FEMA for poor supply management and uncoordinated rescue missions.  

Disaster responses that utilize local information can  provide relief to victims, limit property damage, manage supplies, and rescue people.  Decentralization and coordination between private and public disaster relief efforts can further maximize the aforementioned benefits from local information.

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The Jones Act is Sinking the Growth of American Industries

By Giovanna DaSilva

The Merchant Marine Act of 1920, commonly referred to as the Jones Act, is a law enacted to protect the United States’ maritime industry, regulate commerce, and bolster national defense. While well-intentioned, the act fails to reflect the current needs of the United States. Repealing the Jones Act would prove beneficial to economic growth.

The Jones Act is a modern iteration of regulations imposed on maritime trade, going as far back as 1790. The act’s sponsor, Wesley Jones, wrote of the importance of facilitating the growth and development of a merchant marine in order to strengthen national defense and the shipping industry.

Today, proponents still argue the Jones Act is essential for maintaining jobs, fostering economic growth, and preserving the United States’ maritime industry. They posit that the act allows the American maritime industry to remain competitive in an era of globalization.

One of the main provisions of the act requires vessels that carry goods between American ports are: “owned by U.S. companies that are controlled by U.S. citizens with at least 75 percent U.S. percent ownership; at least 75 percent crewed by U.S. citizens; built (or rebuilt) in the United States; and registered in the United States.”

This requirement restricts market competition within the shipping industry, thus increasing the cost of shipping. The act negatively impacts Puerto Rico in particular. Instead of receiving shipments from neighboring islands at a substantially cheaper price, the island must pay for overpriced US shipments.

Increased domestic shipping costs incentivize states to import commercial goods from abroad instead of shipping goods from other states, to the detriment of domestic industries. Shipping Texas oil to Boston, Massachusetts costs three times more than importing similar oil from Europe.

Researchers Russ Kashian, Ike Brannon, and Jeff Pagel argue the Jones Act impedes the growth of several American industries. They cite estimates from transportation economists Joseph Francois and his colleagues, in the article, “Commercial Policy and the Domestic Carrying Trade,” who found that repealing the act would increase revenues in the water transportation sector  by $1.5 billion.The chemical, plastics and lumber sectors would also prosper. Alaska, Hawaii and Puerto Rico would realize around $5-15 billion more in annual revenue.

Florida, on the other hand, ranks second among the states in maritime jobs, and might see a decline in related employment and revenue. However, repeal of the Jones Act could increase economic growth by bolstering other sectors of the economy responsible for a large portion of the state’s GDP. Francois and his coauthors speculate that any jobs lost in the maritime industry could be replaced by growth in industries such as the  domestic water sector, agriculture, trade, and manufacturing.

Jones Act protectionism shields the shipping industry from market competition at the expense of increased costs to the American consumer and US industries. While politicians and interest groups champion the act as an “America first” policy, it is ultimately in America’s economic best interest to repeal the act entirely even if states such as Florida find themselves at a temporary disadvantage until they adjust to a more competitive global economy.


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