Behavioral economics (BE) examines the implications for decision-making when actors suffer from cognitive flaws documented in the psychological literature. Broadly, BE replaces the assumption of rationality—that errors tend to cancel out over time and across populations, so on average firms and consumers act as if they were rational—with one of “bounded rationality.” When actors are boundedly rational, their cognitive flaws lead to systematic errors and self-control problems. It should come as no surprise that BE has become an increasingly common justification for regulatory intervention.
Historically, the FCC’s Universal Service Fund has paid for two programs that subsidize telephone service for low-income households. Lifeline, the larger program, pays phone companies to reduce monthly subscription fees for low-income households by an average of $9.25 per month, with some states providing additional funding. Link Up subsidizes one-time connection charges by up to $30.2 In 2012, the FCC voted to phase out Link Up.
Virginia’s labor market is more troubled than its unemployment rate suggests. If labor force participation were at its 2007 level, the state’s unemployment rate would be as high as 8.6 percent. We estimate that 10 percent of Virginia’s workforce is indirectly employed by the federal government via federal contract expenditures. Excluding these jobs, private job loss in Virginia since 2007 is on par with the national average.
The US federal tax code contains a number
of provisions designed to encourage
individuals to save for retirement. These
provisions allow individuals to avoid or
defer taxes if they choose to set aside a
portion of their income for future consumption.
When all of these provisions are combined, they
are the second largest “tax expenditure” category
as defined by the Joint Committee on Taxation.
The exclusion of retirement savings from taxation
causes some economic distortions, which we will
discuss in this paper. However, unlike some other
tax expenditures, there is a strong economic rationale
for not taxing savings. Higher rates of investment
lead to higher rates of economic growth, and
it may be sound policy for the tax code to encourage
this behavior, even after considering the economic
costs. Excluding retirement income from
taxation may also make the tax system more efficient,
even though most other tax expenditures
Many observers have been perplexed
by the slow recovery from
the 2008 recession. In the United
States, Congress passed a nearly
$800 billion stimulus in early 2009,
yet growth remained sluggish. More recently, a shift
toward fiscal austerity does not seem to have noticeably
slowed the rate of economic growth.1 This seems
to go against the textbook Keynesian model, which
says fiscal stimulus has a multiplier effect on GDP;
however, we shouldn’t be surprised that fiscal policy
seems less effective than anticipated. As we’ll see, fiscal
policy ineffectiveness is one byproduct of modern
central banking, with its focus on inflation targeting.
The exclusion of employer-provided health insurance from taxation lowers federal tax revenue significantly. According to the Office of Management and Budget, the federal government missed out on over $170 billion in income tax revenue and another $108 billion in payroll tax revenue in fiscal year 2012 due to the exclusion.1 Over the next five fiscal years, the federal government would collect around $1 trillion in income tax revenue if employer-provided health benefits were taxed, plus another $600 billion payroll tax revenue. Given the large deficits that the federal government continues to accumulate, this exclusion is a tempting source of new revenue. But closing this loophole would also mean a significant tax increase on all working Americans that currently receive health insurance from their employer.
For more than three decades, presidents have instructed executive branch agencies to use the results of Regulatory Impact Analysis (RIAs) when deciding whether and how to regulate. Scores from the Mercatus Center’s Regulatory Report Card—an in-depth evaluation of the quality and use of regulatory analysis conducted by executive branch agencies— show that agencies often fail to explain how RIAs affected their decisions. For this reason, regulatory reform should require agencies to conduct analysis before making decisions and explain how the analysis affected the decisions.
While the Great Recession had a moderately less severe impact on Pennsylvania than on the nation as a whole, the state’s recovery since the height of the recession has been slower than the national average. Sluggish economic growth is slowing the pace of the state’s labor market recovery.
Congress passed the Occupational Safety and Health Act of 1970 (OSH Act) to create a safer working environment. The Act created two federal agencies: the Occupational Safety and Health Administration (OSHA), which establishes and enforces workplace safety and health standards, and the National Institute for Occupational Safety and Health (NIOSH), which researches the causes and remedies of occupational injuries and illnesses. OSHA is the fourth pillar of the US safety policy system, the others being the legal system, state workers’ compensation insurance programs, and the labor market.
For an exploration of the economic situation and more, the Mercatus Center at George Mason University invites you to join Dr. Bruce Yandle as he presents a year end, quarterly economic commentary and discusses the outlook for the year ahead.
Mercatus Senior Research Fellow Keith Hall explains the economics behind the jobs numbers and how to read between the lines to get a better understanding of what they mean for our economy and different groups of Americans.
In this book, Paul Dragos Aligica discusses some of the most challenging ideas emerging out of the research program on institutional diversity associated with Elinor Ostrom and her associates, while outlining a set of new research directions and an original interpretation of the significance and future of this program.