The Consumer Financial Protection Bureau (CFPB) is one of the most powerful and least accountable regulatory agencies in American history. Immune from budgetary oversight by Congress and headed by a single director whom the president cannot remove except under special circumstances, the agency wields unconstrained, vaguely defined powers to regulate virtually every consumer and small business credit product in America (Zywicki 2013a). In part, the CFPB has justified its ongoing intervention into financial credit markets based on a prior belief in the inability of consumers to competently weigh their decisions. This belief is founded on research conducted in the area of behavioral economics, which shows that people are prone to a variety of errors in their decision-making.
This paper presents the results of the Mercatus Center’s Small Bank Survey, which include responses from approximately 200 banks across 41 states with less than $10 billion in assets each, serving mostly rural and small metropolitan markets.
The American regulatory system has no working, systematic process for reviewing regulations for obsolescence or poor performance. Over time, this has facilitated the accumulation a vast stock of regulations. Regulatory accumulation can negatively affect GDP growth, labor productivity, innovation, and safety—perhaps explaining why every president since Jimmy Carter has recognized it as a problem.
New research from Sarah Arnett examines states’ abilities to meet their financial obligations in the face of state budget challenges that have far outlasted the Great Recession. Fiscal simulations by the Government Accountability Office suggest that despite recent gains in tax revenues and pension assets, the long-term outlook for states’ fiscal condition is negative (GAO 2013). These simulations predict that states will have yearly difficulties balancing revenues and expenditures due, in part, to rising health care costs and the cost of funding state and local pensions.
We analyze the choice politicians face when seeking votes from groups that lobby for sales tax rate decreases or from groups that lobby for certain tax exemptions, given the constraint that each politician wants to raise a certain amount of revenue. Using the application of sales taxes and sales tax exemptions we develop a model predicting a positive relationship between the number of sales tax exemptions and the sales tax rate. We find support for this hypothesis. A one-unit increase in the number of exemptions is associated with an increase between 0.10 and 0.25 percent in the sales tax rate. Our results provide one explanation of why estimates of revenue increases generated by a sales tax increase are often too optimistic.
In 2004 Logan, Utah, saw the opportunity to place a turbine within the city’s culinary water system. The turbine would reduce excess water pressure and would generate clean, low-cost electricity for the city’s residents. Federal funding was available, and the city qualified for a grant under the American Recovery and Reinvestment Act. Unfortunately, Logan City found that a complex and costly federal nexus of regulatory requirements must be met before any hydropower project can be licensed with the Federal Energy Regulatory Commission. This regulation drove up costs in terms of time and money and, as a result, Logan City is not planning to undertake any similar projects in the future. Other cities have had similar experiences to Logan’s, and we briefly explore these as well. We find that regulation is likely deterring the development of small hydropower potential across the United States, and that reform is warranted.
We mine two underexplored traditions for insights into intellectual property: the public choice or Virginia school, centered on James Buchanan and Gordon Tullock, and the Bloomington or Institutional Analysis and Development school, centered on Elinor Ostrom and Vincent Ostrom. We apply the perspectives of each school to issues of intellectual property and develop new insights, questions, and focuses of attention. We also explore tensions and synergies between the two schools on issues of intellectual property.
The Consumer Financial Protection Bureau (CFPB) is considering new regulation of payday lending and bank overdraft protection. The Dodd-Frank Act, which established the CFPB, recognizes that consumers benefit from competition among providers of consumer credit products. That law requires the CFPB to preserve fair competition by providing consistent regulatory treatment of similar products offered by both bank and nonbank lenders. We illustrate how this mandate for fair competition applies to the regulation of payday lending and bank overdraft protection, products that are offered by different entities but attract an overlapping customer base, compete with each other directly, and raise similar consumer protection concerns. Unequal regulation would provide a competitive advantage for one product over another, resulting in reduced choice and higher prices for consumers, without a corresponding increase in consumer protection. Therefore, as the CFPB considers new regulation of these products, it should be careful to regulate them similarly to preserve fair competition.
Automobiles are ubiquitous. Most Americans take at least one car trip every day to get to work or school or to run household errands. The automobile has also never been safer. New technology has brought car frames that crumple to reduce the impact of a crash, airbags that cushion the blow of an accident, and cameras that show drivers what is behind the vehicle. In addition, rising standards of living have allowed consumers to purchase more safety equipment and to question the environmental impact of cars. While cleaner, safer automobiles certainly have benefits, as economists, we must ask, what do all these regulations cost the consumer? Costs arise from three sources: workplace safety regulation, environmental regulation, and consumer safety regulation. In this paper, we examine each area in turn, focusing on how the cost of regulations impacts the average automobile consumer.
The Mercatus Center at George Mason University invites you to join Todd Zywicki, Senior Scholar and Senior Fellow with the F.A. Hayek Program at the Mercatus Center and Ted Gayer, Vice President and Director of the Economic Studies program at the Brookings Institution for a Regulation University program that examines the mistakes agencies make in developing “nudge” regulations and the unintended, but foreseeable, consequences of those mistakes.
Please join us for a casual reception where you can take a break from March Madness and meet some of our scholars who can provide the kind of practical information you need to be most effective in your work.
This book provides a comprehensive defense of third-world sweatshops. It explains how these sweatshops provide the best available opportunity to workers and how they play an important role in the process of development that eventually leads to better wages and working conditions.