Week in Review

IN THE NEWS 

• The U.S. Supreme Court limited the U.S. Environmental Protection Agency’s (EPA) authority to control wetland pollution—the second decision in a year restricting the ability of EPA to combat climate change. Specifically, the Court held that the Clean Water Act does not allow EPA to regulate wetlands near bodies of water unless the wetlands have a “continuous surface connection” to those waters. Although the actual decision was unanimous, four justices argued that the majority’s new test is too narrow and will negatively affect water quality and flood control in the United States. President Joe Biden stated that the decision “upends the legal framework that has protected America’s waters for decades.”
• Nebraska Governor Jim Pillen signed a bill into law that will ban transgender surgeries for minors as well as makes illegal most abortions after 12 weeks. The new law, which will be enforced starting October 1, also calls on the state’s Chief Medical Officer, Timothy Tesmer, to establish criteria under which puberty blockers and hormone therapy may be administered to people younger than 19. Democrats have expressed concerns, however, that Tesmer will establish onerous requirements to access puberty blockers and hormones, effectively resulting in a full ban on these therapies. Nebraska State Senator Machaela Cavanaugh stated that “the only victory in this is that trans people, especially trans youth, are no longer invisible.”
• The Texas House passed a bill aimed at banning diversity, equity and inclusion (DEI) offices in public colleges and universities. If signed into law, the legislation will ban public colleges and universities in Texas from establishing DEI offices, issuing DEI statements, and implementing mandatory DEI training. Black legislators warned that this bill will take resources away from students, halt progress, and jeopardize billions of dollars of research funding. This bill comes as other states, such as Florida, have adopted legislation targeting DEI programs.
• The U.S. Department of Education announced a proposed rule that would deny federal funding to for-profit institutions and certificate programs that leave graduates with unaffordable debt or unimproved earnings. Under the proposed rule, federal funding for these educational programs would depend on whether the programs can demonstrate that their graduates can afford debt payments and that at least half of the graduates have higher earnings than the average high school graduate in the state where the program is located. The proposed rule, which is aimed at creating greater accountability and financial transparency in higher education, is now open for public comment.
• The U.S. Department of Commerce amended export administration regulations by adding 71 entities to the Department’s entity list due to their suspected involvement in activities contrary to U.S. national security interests. When an entity is listed on the Department’s entity list, it is subject to additional license requirements on exports, re-exports, and transfers. The Department added 69 new entities to the list due to business conducted with Russia’s military and defense sector. The additional two entities were added because of conduct that prevented the successful physical verification of their use of goods imported.
• The U.S. Department of Energy proposed new energy conservation standards for dishwashers under the Energy Policy and Conservation Act. The standards, if adopted, would significantly decrease the maximum permissible estimated annual energy use and maximum per-cycle water consumption for dishwashers. The Department estimated that the energy savings associated with these new standards would lead to consumer and social net benefits of between $2 billion and $4 billion, but would likely also increase manufacturers’ costs by between $90 million and $135 million.
• The Massachusetts Cannabis Control Commission (CCC) voted to cancel a pilot program that would have initially limited social consumption establishments—locations where patrons can purchase and use marijuana products—to 12 communities. The CCC instead approved a proposal to craft a regulatory framework awarding licenses for all social consumption sites. CCC Commissioner Nurys Camargo, a member of a working group that recommended the change in approach, said the decision will permit the state to authorize increased access to social consumption of marijuana in Massachusetts “a little quicker.” Nearly seven years ago, Massachusetts citizens voted to legalize recreational marijuana in the state and approve the creation of social consumption establishments.
• Colorado Governor Jared Polis signed a bill to lay the groundwork for a regulatory framework for natural medicine, or psychedelics. Among its provisions, the bill established a natural medicine advisory board and a division of natural medicine within the state’s Department of Revenue. The bill also defined the penalties for infractions, including fines for underage consumption. Supporters of the legislation stated that it will increase access to methods of healing, although some commentators have expressed concern over the new law’s potential exploitative effect on Indigenous culture.
• The U.S. Senate heard calls for AI regulation from tech industry experts and executives, including OpenAI CEO Sam Altman. Altman suggested solutions such as an AI-specific agency to license and audit AI companies. Some experts, including Meredith Broussard, an associate professor at New York University, expressed concern that AI tech executives’ openness to regulation is intended to mislead lawmakers as similar industry positions apparently has with respect to social media regulation. Broussard and other experts emphasized the importance of incorporating non-commercial voices in the ongoing discussions of AI regulation.

WHAT WE’RE READING THIS WEEK

• In a working paper, John A. List, a professor at the University of Chicago, Matthias Rodemeier, a professor at Bocconi University, Sutanuka Roy, a professor at The Australian National University, and Gregory K. Sun, a graduate student at Washington University in St. Louis, compared the effects of “nudges”—policy designs that push individuals to make certain choices—with those of taxes on smoking cessation, flu vaccination, and household energy consumption. List, Rodemeier, Roy, and Sun found that nudges changed behavior in all three settings, but were the most efficient option only with smoking cessation. They suggested that these insights can guide policymakers in choosing the most efficient policy instrument available.
• In a Brookings Institution report, Robert Seamans, a nonresident senior fellow at Brookings, and Sukhi Gulati-Gilbert, a graduate research assistant at the Massachusetts Institute of Technology, argued that policymakers should consider using data portability and interoperability as regulatory tools, especially in technology sectors. Seamans and Gulati-Gilbert defined “data portability” as the ability of customers to maintain possession of some core data about themselves, and they defined “interoperability” as the capacity of systems to exchange data seamlessly. Seamans and Gulati-Gilbert explained that these tools would help reduce the cost customers incur when switching brands or products, encourage new market entrants, and promote competition and innovation.
• In an article in the Columbia Business Law Review, Merritt B. Fox, a professor at Columbia Law School, Lawrence R. Glosten, a professor at Columbia Business School, and Sue S. Guan, an assistant professor at Santa Clara University School of Law, examined the impact of quote-drive manipulation, or spoofing, on securities markets and social welfare. Fox, Glosten, and Guan noted that spoofing, or intentionally placing fake market orders, undesirably affects economic efficiency and causes social harm. Fox, Glosten, and Guan suggested that regulators can target spoofing by treating it as misstatement manipulation.

EDITOR’S CHOICE

• In an essay in The Regulatory Review, Keith Belton, the Senior Director of Policy Analysis and Statistics at the American Chemistry Council, commented on draft artificial intelligence regulation guidance issued by the U.S. Office of Management and Budget (OMB) in 2019. Citing the risk of uncertain or overly stringent regulations impeding innovation, Belton suggested several additions to OMB guidance, such as developing the capacity to investigate instances where AI applications have gone awry. Belton also proposed that OMB report annually to Congress on the regulatory oversight of AI. Belton concluded that these changes could position the United States as a leader in international discussions on regulation of AI.