The recent rise of “FinTech”—the use of technology to provide financial services in innovative ways—has the potential to significantly change how consumers access financial services. These changes are pressuring existing regulatory structures and norms, and they are creating concern that regulators will hamper needed modernization or fail to prevent a harmful destabilization of the financial system. I commend the OCC for acknowledging that its existing model for regulation could be improved to better match the needs of the current market and for providing an initial framework for how it plans to address innovation within its jurisdiction.
The case examined here is the package of regulations that met the initial legal requirements provided by the Nutrition Labeling and Education Act of 1990 (NLEA, Public Law 101-535). This act gave the FDA the authority to require nutrition labeling of most foods regulated by the Agency and to require that all nutrient content claims (e.g., “high fiber” or “low fat”) and health claims be consistent with agency regulations.
The OECD hopes that the new reporting standards will provide tax administrators with useful information to more effectively direct auditors while making it easier to identify artificial profit shifting to tax-advantaged environments. This public comment will argue that the accounting costs of country-by-country reporting will be larger than the Department of the Treasury’s revenue gains and that there will be even higher unanticipated costs from inadvertent disclosures of sensitive information. Because the costs of information centralization will be greater than the benefits, we recommend that the IRS should not implement the proposed regulation on country-by-country reporting. This recommendation is informed by a recent paper from the Mercatus Center at George Mason University that explains key features of the international corporate tax system, the changes the OECD wants to make, and the potentially far-reaching consequences of those changes. The study also provides recommendations to improve corporate taxation without compromising state sovereignty or taxpayer rights.
Whatever the justification behind licensing in the past, its rationale is disappearing as technology provides new solutions to old problems. This meeting is an opportunity for policymakers to reevaluate traditional regulations aimed at addressing information deficiencies and allow technological innovation to do what regulation could not: improve consumer welfare while encouraging innovation and economic growth.
Ill-considered regulation regarding algorithmic trading will adversely affect the ability of legitimate market participants to contribute to liquidity, price discovery, narrow spreads, and low trading costs. The CFTC shares with market participants a growing interest in algorithmic trading and its potential effects on the markets. Rather than working with market participants cooperatively, the Commission proposes a prescriptive regime applicable to virtually any firm that trades in the futures (and swaps) markets. If finalized, this proposal will establish an approach dominated by enforcement that will chill firms’ willingness to work with the Commission to address emerging problems in the area. In addition, by opening firms’ source code to unlimited inspection by the Commission and others, the proposal creates dangerous vulnerabilities for an asset of utmost importance to trading firms.
While higher capital requirements can reduce the likelihood of banking crises, I would like to raise two key issues concerning the proposed policy statement: 1) bank subsidiary capital requirements may be more effective than holding company capital requirements, and 2) the benefit-cost analysis used to analyze the rule could be improved by adding other dimensions to the analysis.
The Federal Aviation Administration (FAA) has issued an interim final rule creating a new electronic registration system for unmanned aircraft systems (UAS) and requiring, for the first time, the registration of model aircraft operators. This comment highlights an omission in the agency’s alternative scenario analysis, questions some of the purported benefits of the rule, and points out some of the continuing legal shortcomings associated with the FAA’s approach. While we support the advent of a simple and streamlined registration system, we object to the extension of the registration requirement to model aircraft operators.
Virtually all states require auto manufacturers to sell new vehicles through local franchised dealers, protect dealers from competition in Relevant Market Areas, and terminate franchises with existing dealers only after proving they have a “good cause” to do so. In 1979, fewer than half of all states regulated all three of these aspects of the manufacturer-dealer relationship. By 2014, all but one state regulated every single one of these aspects. These state laws harm consumers by insulating dealers from competition and forestalling experimentation with new business models for auto retailing in the twenty-first century.
Contrary to Title II proponents’ claims, wireless carriers do not infringe free speech rights when they filter text messaging content they believe their customers do not wish to receive. Title II regulation of text messaging and short code service would not protect free speech. In fact, because mobile carriers exercise editorial discretion over mass messages they transmit, regulation would impermissibly chill wireless carriers’ exercise of speech. Further, since wireless carriers transmit short codes and other messaging based on individual arrangements and exercise control over the content of certain messages, messaging does not resemble telecommunications. For these reasons, regulating short code and similar messaging services under Title II of the Communications Act would likely be unconstitutional and contrary to law.
The first fundamental question for policymakers in this area is defining the policy goal. I believe the appropriate goal of competition policy related to online platforms should be the promotion of consumer welfare—a concept rigorously defined in the economics literature. Consumer welfare is maximized when every unit of every resource is employed in the use that consumers value most highly. Competition policy agencies in the United States typically regard consumer welfare as the sole goal of competition policy. Even if policymakers choose to pursue goals other than consumer welfare, they need to understand the impact of policies on consumer welfare so they can act with full information of the relevant tradeoffs.
In the first half of 2016, the US economy skirted close to recession territory but so far has registered positive growth. What are the major forces that seem to be driving the slow-growth economy? Is the economy getting stronger? Or, will we hit recession territory before the end of the year?
Join us for a discussion with Mercatus Research Fellow Christopher Koopman, who will explain the greatest threats to capitalism today and what reforms could put us on the path to the next Industrial Revolution.
In this book, Adam Thierer argues that if the former disposition, “the precautionary principle,” trumps the latter, “permissionless innovation,” the result will be fewer services, lower-quality goods, higher prices, diminished economic growth, and a decline in the overall standard of living.