Mercatus Site Feed en Regulatory Accumulation Hinders Productivity Growth <h5> Expert Commentary </h5> <p class="p1">Governments worldwide have long recognized that new regulations can create benefits, but always at a cost. <a href=""><b>More than 30 countries</b></a> in the Organization for Economic Co-operation and Development (OECD) have institutionalized the process of evaluating this tradeoff by assessing new rules' prospective impact — that is, its anticipated costs and benefits — prior to their promulgation. Formal processes for retrospective analysis of specific rules — where a rule's costs and benefits are assessed in hindsight — are much rarer. A third aspect of the regulatory process deserves attention: cumulative impact of regulation.</p> <p class="p1">Over time, as regulations <a href=""><b>accumulate</b></a>, an increasing proportion of companies' resources are devoted to compliance. This necessarily diverts resources away from things like the development of new technology or better training for workers. This diversion of resources may be further affected by the interaction of rules. The overlap of rules could potentially increase or decrease the regulatory burden faced by businesses. We currently know little about either the cumulative impact of regulation or about interaction effects inherent in regulatory accumulation. Data and methodological limitations have so far prevented much serious progress on those fronts, which a draft report from the Administrative Conference of the United States <a href=""><b>recently recognized</b></a>.</p> <p class="p1">Fortunately, we are beginning to surmount those limitations. A <a href=""><b>recent study</b></a> evaluated whether the levels of regulation faced by different industries was related to different rates of growth in labor productivity, finding that, from 1997 to 2010, labor productivity for the least-regulated industries grew about twice as quickly as the labor productivity of the most-regulated industries.</p> <p class="p1">One important distinction makes this study particularly relevant to assessing the cumulative impact of regulation: This study was not assessing how an individual rule or even a set of rules contained in a regulatory program affected labor productivity; instead, it was assessing how the cumulated stock of all rules affected labor productivity. This was possible because of the development of a database, <a href=""><b>RegData</b></a>, which comprehensively quantifies federal regulation over time.</p> <p class="p1">Old rules can continue carrying a cost even long after they've stopped yielding benefits — as long as they're on the books, firms may still have to train employees on them and comply with them. Indeed, the endurance of obsolete or useless rules is a problem recognized by every presidential administration since Jimmy Carter's. This study takes a step toward estimating that cost. While it's perhaps intuitively easy to recognize that regulatory accumulation could cause decreased productivity, we can now empirically assess that effect.</p> <p class="p1">Of course, the private sector isn't the only group harmed by regulatory accumulation. Regulatory agencies also have to deal with them. When training inspectors, for example, does an agency choose to ignore obsolete rules? If it doesn't ignore them, then it will necessarily waste resources by training on obsolete rules. Even the alternative — choosing to ignore obsolete rules when allocating training resources — requires the attention and active intervention of the person creating the training program.</p> <p class="p1">Perhaps another question should be added to the research agenda regarding cumulative effects of regulation: Does regulatory accumulation not only lead to lower labor productivity for regulated entities, but also for the regulators themselves?</p> Wed, 29 Oct 2014 11:08:30 -0400 Frightening Federal Budget Trends <h5> Publication </h5> <p class="p1">The ghosts of federal spending past are here to haunt our nation’s fiscal future. This Halloween, the most terrifying frights won’t be found in the creepy mansion on the edge of your town; they’ll be found in the Congressional Budget Office’s (CBO) <a href="">Update to the Budget and Economic Outlook</a>. Ten-year federal outlays exceed projected revenues by $9 billion and growing mandatory entitlement obligations squeeze out discretionary spending for budget items such as veterans’ services, transportation, and national defense. The charts show that without fundamental entitlement reform, the future of federal budgeting will be spooky, indeed.&nbsp;</p><p class="p1"><a href=" "><img src="" width="585" height="425" /></a></p> <p class="p1">This week’s charts use data from CBO and the Office of Management and Budget’s (OMB) <a href="">historical tables</a> to display cumulative federal spending and revenues projected over the next decade along with a time series plotting of the <a href="">Steuerle-Roeper Index of Fiscal Democracy</a>, developed by <a href="">Eugene Steuerle and Tim Roeper</a>, which measures the percentage of federal revenues remaining for discretionary spending after mandatory outlays and interest payments have been covered.</p> <p class="p1">The first chart displays CBO’s cumulative baseline projections for federal outlays and revenues over the next ten years in billions of real 2013 dollars. While CBO anticipates the federal government will rake in $40.8 billion in revenues from 2014 to 2024, projected spending of $48.9 billion over that same time will result in a gap of $9 billion. The spending column on the chart breaks down the composition of federal outlays. Expenditures on major health care programs—such as Medicare, Medicaid, the Children’s Health Insurance Program (CHIP), and new health care subsidies enacted under the Affordable Care Act—are projected to amount to $15.7 billion. Social Security comprises another $11.8 billion. Remaining mandatory spending—on programs such as the Supplemental Nutrition Assistance Program (SNAP, commonly referred to as “food stamps”), unemployment compensation, and veterans’ benefits—is projected at $4.2 billion. Interest payments on the debt are expected to cost roughly $5.1 billion. These items alone tally to an astounding $36.8 billion of the $49.8 billion in total ten-year federal outlays, or 74 percent of the total. This leaves roughly $13.1 trillion remaining for all discretionary spending, $6.7 trillion of which is dedicated to defense spending and $6.3 trillion of which remains for spending on items like transportation and scientific research.&nbsp;</p><p class="p1"><a href=""><img height="425" width="585" src="" /></a></p><p class="p1"><span style="font-size: 12.222222328186px;">The second chart displays this budgetary trade-off between mandatory spending along with interest payments on the debt and discretionary spending from 1962 through 2024 projections. The Steuerle-Roeper Index is calculated by subtracting mandatory and interest spending from total federal revenues and dividing the difference by total revenues. In other words, the index measures how much revenue is left to cover all other budget items once mandatory spending and interest payments have been made. A high percentage means that there are ample funds remaining for other budget items. A low percentage suggests that few federal funds remain for discretionary spending.&nbsp;</span></p> <p class="p1">As the chart shows, the Steuerle-Roeper index declines over the next decade, indicating dwindling federal funds for discretionary spending. The average measure for 2003 through 2024 is about 14 percent—about one third the average value of the index for the years 1962 through 2002 of 41.5 percent. The average measure for the next decade drops to just over ten percent. By 2024, the Steuerle-Roeper measure of 0.5 percenta level below the 2.4 percent and 2 percent the index reached in the aftermath of the Great Recession.</p> <p class="p1">If left untouched, the federal budget could one day become merely a transfer mechanism for entitlement programs and a debt machine that incurs higher and higher interest payments, so discretionary programs of the sort Americans are accustomed to will be harder to continue. While this year’s Halloween frights will soon fade, this budget problem will continue haunting our future unless we start fixing it now.</p> Wed, 29 Oct 2014 16:06:09 -0400 No, Uber and Lyft Won't Hurt Consumers <h5> Expert Commentary </h5> <p class="p1">A group of prominent economists recently and <a href="">universally approved</a> of the new transportation services being provided by Uber and Lyft, noting the benefit to consumers. Though most people are now recognizing the benefits of new, cheap transportation services, some are decrying the <a href="">dangers of an unregulated market</a>. This particular criticism accuses Uber and Lyft of engaging in a turf war that could hypothetically result in one of the firms replacing traditional cab services with a resulting glut of idling cabs, belching exhaust and clogging the streets.</p> <p class="p1">There’s nothing wrong with a healthy skepticism of the benefits of new goods and services, but musing on potential hazards to the environment and misplaced fears of monopoly expose a fundamental misunderstanding of how markets work. While competition is certainly fierce in the current turf war between different transportation services, consumers will almost certainly come out winners – despite fears to the contrary – as people benefit from lower fares, expanded service and greater control of customer feedback.</p><p class="p1"><a href="">Continue reading</a></p> Wed, 29 Oct 2014 05:18:42 -0400 How to Print Yourself a New Hand <h5> Expert Commentary </h5> <p class="p1"><a href="">Smiling children</a> are using prosthetic hands to open windows through which we can glimpse the future of health care -- a future where outsiders and amateurs innovate along with insiders and professionals. The question is, "Will America lead the way, as it has for a century, or will it fall behind, as it has begun to do?"</p> <p class="p1">My forthcoming <a href="">Mercatus Center research </a><a href="">"Fortress and Frontier in American Health Care"</a> argues that leading requires us to abandon the partisan rancor over health insurance ("Obamacare" vs. "repeal and replace") and focus, instead, on innovating our way to better health.</p> <p class="p3">FDA-approved prosthetic hands <a href="">cost around $40,000</a>. <a href="">Several years ago, a South African carpenter lost some fingers in an accident and collaborated</a> with a Washington state puppetmaker to invent a vastly more affordable device.</p> <p class="p1">They adapted a 19th-century metal-and-whalebone design for a 21st-century 3-D printer to produce a hand that allows users to drive, <a href="">ride bikes</a>, play ball, grasp objects and feel normal and complete.</p> <p class="p5">Printed hands require only a few hours of assembly time, and materials (essentially a special glue, string and screws) cost between $10 and $50 -- 1/1000 the cost of professional models.</p> <p class="p1">The proliferation of printed hands began when Jon Schull at the Rochester Institute of Technology formed <a href="">e-NABLE</a>, a global, Web-based social network, to connect people who need hands with people who are interested in building them.</p> <p class="p1">Amateurs quickly began modifying the hands. One <a href="">added an extra thumb</a> so his son could grasp objects more easily. A student designed a hand that rotates at the wrist just as natural hands can but which $40,000 prosthetics can't.</p> <p class="p1">Children <a href="">designed hands that mimic those of comic-book superheroes</a>-- earning the envy of classmates. Professional prosthetics are much more elaborate, but at $40,000 a pop, they aren't practical for growing children. A fashion designer created<a href="">stunningly beautiful hands</a> for a fellow student.</p> <p class="p1">3-D Printed hands are evolving at breathtaking speed because of what my Mercatus colleague <a href="">Adam Thierer</a> calls <a href="">"permissionless innovation."</a> No one has to beg permission from anyone to design, modify or distribute hands. That wouldn't be true if the hands included sensors and/or motors or if they were sold, rather than given away. Regulators would likely swoop in, and innovation would slow.</p> <p class="p1">Permissionless innovation is largely alien to health care.<span style="font-size: 12.222222328186px;">&nbsp;</span></p> <p class="p1">New drugs, devices and procedures typically wait for years as regulators sort through stacks of proposals and tons of data. The film "Dallas Buyers Club" is based on the true story of an AIDS victim, 30 days from death, who was denied lifesaving treatment because the Food and Drug Administration wanted extra years of testing to assure safety and effectiveness.</p> <p class="p1">The greatest example of permissionless innovation is the Internet.</p> <p class="p1">In the early 1990s, the federal government surrendered control over the Internet and enabled commercial developers to make full use of the system. Once that happened, professionals and amateurs produced software, hardware and apps in ways and at speeds no one could have foreseen.</p> <p class="p1">An American of 25 years ago could scarcely believe our world of Google, Siri, GPS, YouTube, Street View, Facebook, Amazon, Bitcoin and Kindle. None of this would have happened had there been a Federal Internet Commission judging each innovation.</p> <p class="p1">If you think, "but health care is different," keep in mind that it would have been equally easy in 1989 to demand heavy regulation of a frightening new communication technology. The Internet raises risks of online fraud, sexual predators, coordinated terrorism, identity theft and privacy violations. If such things as OnStar, GM's safety and connectivity system, or hospital connectivity fails, people can die. Somehow, we decided to accept these risks to enjoy the benefits.</p> <p class="p1">Health care may change as much by 2039 as consumer electronics did since 1989.</p> <p class="p1">We'll likely see 3-D printed transplantable organs, drugs tailor-made to patients' personal DNA, nanobots to repair damaged genes and artificial intelligence to guide people toward wellness. Excessive regulation, however, can bring these processes to a crawl.<span style="font-size: 12.222222328186px;">&nbsp;</span></p> <p class="p1">Adam Thierer says, "Trying to preemptively plan for every hypothetical worst-case scenario means the best-case scenarios will never come about."<span style="font-size: 12.222222328186px;">&nbsp;</span></p> <p class="p1">The innovations will happen in Europe, India, Singapore and elsewhere if not here. And to compete, we have to accept some risks and open the door to some outside innovators. No one suggests completely deregulated health care. The question is one of degree and design. Already, Europe surpasses the United States in drug availability, thanks to its more decentralized approval process.</p> <p class="p1">We can suggest an Iron Law of Innovation: For better products at lower cost, you must allow reasonable risk-taking (by consumers and producers), and you must allow unknown outsiders to introduce unexpected genius into the process. The printed hand shows us how. The task is to apply its lessons across health care.</p> <p class="p1">Talking about innovation will be a lot more fun and incredibly more productive than squabbling over the Affordable Care Act.</p> Mon, 27 Oct 2014 09:36:31 -0400 The Economics of the Ex-Im Bank <h5> Events </h5> <p>The stopgap spending bill included a short-term reauthorization of the Export-Import Bank of the United States through June 2015. Between now and this new expiration date, Congress is faced with a choice of whether to keep the Bank or allow its charter to expire.</p> <p>The Mercatus Center at George Mason University invites you to join us for an exploration of the economics of the Ex-Im Bank with Mercatus Center senior research fellow, Dr. Veronique de Rugy.</p> <p>This program will:</p><ul><li><span style="font-size: 12px;">Provide a brief overview of the history and operations of the Ex-Im Bank;</span></li><li><span style="font-size: 12px;">Examine the key justifications for the Bank’s continued authorization; and</span></li><li><span style="font-size: 12px;">Compare the justifications to the economic realities.</span></li></ul> <p>Space is limited. Please register online for this event.</p> <p>This event is free and open to all congressional and federal agency staff. This event is not open to the general public. Food will be provided. Due to space constraints, please no interns.&nbsp;<i style="font-family: inherit; font-weight: inherit;">Questions? Please contact Caitlyn Van Orden, Event Coordinator, </i><span style="font-size: 12px;">at</span><i style="font-family: inherit; font-weight: inherit;"> </i><a style="font-size: 12px;" href=";" target="_blank"><i></i></a><i style="font-family: inherit; font-weight: inherit;"> </i><span style="font-size: 12px;">or</span><i style="font-family: inherit; font-weight: inherit;"> (703) 993-4925.</i></p> Fri, 24 Oct 2014 14:49:55 -0400 Trick or Treat? Government's Halloween Tax Costume <h5> Expert Commentary </h5> <p class="p1">Autumn is now upon us. The leaves are changing, temperatures are falling, football is in full swing, and one of Americans' favorite holidays is just about to arrive on our doorstep. Kids across the country will don costumes and race from home to home in a festive search for sweet rewards on Halloween.</p> <p class="p1">A kind word about their costumes and some candy or cookies are enough to elicit jubilant smiles and infectious excitement as trick-or-treaters eagerly await the loot dropped into their bags. Benefits abound for both the giver and the receiver in our celebration of All Hallows' Eve. But not so fast. Someone call in the fun police.</p> <p class="p1">Consumers are exercising their choice to purchase and give away "unhealthy" snack foods, so something must be done. Politicians, disguising revenue grabs as incentives for improving Americans' diets, are proposing or passing new or higher selective consumption taxes on a lengthening list of calorie-dense items.</p> <p class="p1">In addition to the traditional sins of smoking cigarettes and drinking alcohol, 17 states tax candy at rates exceeding those on other foods and beverages. The Sugar-Sweetened Beverages Tax (SWEET) Act, proposed to Congress over the summer, would impose an additional tax on sugary soft drinks, including soda pop, pre-sweetened tea and sports drinks. Already, 26 states tax soda pop at higher rates than groceries.</p> <p class="p1">Yet consumption taxes are an ineffective way to change behavior. In a forthcoming study to be published by the Mercatus Center at George Mason University - on the causes and consequences of selective consumption taxation - we explore the regressive effects of these taxes on a wide variety of goods. Our research concludes that the "quantities purchased of all of consumption items considered ... are remarkably unresponsive to changes in their own prices, including price changes caused by imposing new selective sales or excise taxes or raising existing tax rates."</p> <p class="p1">Although the proponents of imposing consumption taxes on "lesser desirable" products hope consumers will switch in droves to healthy alternatives, few people replace potato chips with apple chips. Because consumption declines only modestly, an overwhelming majority of consumers simply fork over the cash needed to pay for the higher-priced (higher-taxed) consumption good or substitute other (untaxed) items containing just as many calories (drinking chocolate milk instead of soft drinks, for instance).</p> <p class="p1">Not only do selective taxes do little to influence behavior, their burden falls disproportionately on low-income households during a time of growing income inequality. One explanation for this finding from our research is that "higher incomes supply wider ranges of choices for maximizing household utility. Combined with the demographic characteristics of low-income neighborhoods, which offer few healthy substitutes for fast foods, the selective consumption-tax burden on poor people is differentially heavy."</p> <p class="p1">A consumption tax is a hasty and superficial attempt to enact behavioral policy. More effective and less harmful policies targeting the consumption choice architecture - or offering rewards for healthy choices, rather than punishments for "unhealthy" choices - are available, but politicians are reluctant to adopt such policies because they do not generate tax revenue.</p> <p class="p1">Obesity is a growing problem for Americans, and its social consequences cannot be ignored. But don't be tricked by the paternalistic costume worn by consumption-tax advocates; they offer no solution. Besides, do you really want to be the house on the block that hands out celery on Halloween?</p> Fri, 24 Oct 2014 09:47:20 -0400 Robert Graboyes Discusses Health Care Reform on CSPAN's Washington Journal <h5> Video </h5> <iframe width="560" height="315" src="//" frameborder="0" allowfullscreen></iframe> <p>Robert Graboyes Discusses Health Care Reform on CSPAN's Washington Journal&nbsp;</p><div class="field field-type-text field-field-embed-code"> <div class="field-label">Embed Code:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> &lt;iframe width=&quot;560&quot; height=&quot;315&quot; src=&quot;//; frameborder=&quot;0&quot; allowfullscreen&gt;&lt;/iframe&gt; </div> </div> </div> Thu, 23 Oct 2014 13:18:33 -0400 Sorry William Dudley, Regulation Itself Is the Culture Killer <h5> Expert Commentary </h5> <p class="p1">The Federal Reserve's talking heads have been hard at work over the last week. They have tackled issues ranging from <a href=""><b>early childhood education</b></a>, to the Fed's "<a href=""><b>duty</b></a> to advance the maximum well-being of all citizens," to regulatory compliance by financial firms. The Fed's musings on topics far outside of its mandate seem odd for an institution that has a lot more thinking to do about-just to throw out a crazy suggestion-monetary policy. But the Fed's regulatory mandate is also large, so its reflections on compliance are worth a closer look.</p> <p class="p1">New York Fed President <a href=""><b>William Dudley</b></a> and Fed Governor <a href=""><b>Daniel Tarullo</b></a> both gave speeches on the subject on Monday. They rejected the idea that "a few bad apples" are to blame for the industry's troubles, and concluded the problem runs much deeper. Mr. Dudley believes that the "pattern of bad behavior" in the financial industry and the industry's resulting poor public image "originate from the culture of the firms [which] is largely shaped by the firms' leadership."</p> <p class="p1">In reality, the problems originate not from inside the firms, but from the regulatory structure within which firms operate. Bank regulators write the intricate rules with which firms must comply. Regulatory agencies engage in hands-on management of banks' compliance through on-site supervision, threats of enforcement action, and granting or withholding privileges (such as approval of dividend payouts or mergers).</p> <p class="p1">Regulators also influence compliance by directing firm decision-making in key areas from capital, to customer relationships, to compensation, to crisis management. As my colleague Stephen Miller <a href=""><b>points out</b></a>, regulations help to dictate the type of assets that banks hold. And, as a supervisory order directing a bank to stop serving payday lenders (published this week in connection with a <a href=""><b>congressional inquiry</b></a>) illustrates, bank regulators also weigh in on whether particular customer relationships are appropriate. In the last crisis, regulators influenced strategic decision-making by large financial institutions, in part through the use of government funds and guarantees.</p> <p class="p1">Even the example of bank malfeasance that Mr. Dudley uses in his speech-the manipulation of the London Interbank Offered Rate (LIBOR)-reminds us of just how central a role regulators play in influencing banks' compliance culture. Mr. Dudley longs for a world in which an employee who suggests manipulating LIBOR is met with a resounding "no way" and a referral to compliance. Yet, when a banker <a href=""><b>told</b></a> one of the New York Fed's employees in late 2007 that "LIBOR's being set too low anyway," her recorded response was not moral outrage, but an unfazed "Yeah."</p> <p class="p1">Mr. Tarullo acknowledges that outside influences, like regulators, can play a role in setting the unwritten rules by which financial firms operate. Lacking criminal prosecutorial power and the power to throw people in prison, Mr. Tarullo recommends that regulators make liberal use of enforcement actions and mandated firings to shape the industry's compliance norms.</p> <p class="p1">Mr. Dudley's speech embodies an even subtler way to influence firms. He signals that the Fed is watching whether the tone that emanates from the top of financial firms is sufficiently compliance-oriented. Would the Fed give a firm that raised questions about the wisdom or quality of Fed regulation a passing grade for compliance culture? Does "respect for law"-something Mr. Dudley calls a "core element of any firm's mission and culture"-mean that firms must pretend that the regulations with which they are dutifully complying are well-intentioned and well-designed? Mr. Dudley also suggests that employees receive an "ethics and compliance score." This score would be available to future employers, perhaps as part of "a central registry" of hired and fired employees. Would questioning the technical workability of regulatory obligations or pointing to potential deleterious consequences of compliance result in a lower score?</p> <p class="p1">Regulators should be wary of firms and employees that intentionally disregard regulatory mandates. We should all be wary of regulatory attempts to grade firms and their employees on their attitudes toward compliance. There is no surer way to keep firms and their employees from challenging their regulators. Regulators are not always right, and regulated entities must be free to point out their errors without fearing retribution. Professor Julie Hill has <a href=""><b>shown</b></a> that the appeals process for challenging bank supervisory determinations is dysfunctional and rarely used. Attitude monitoring by bank regulators will only further dampen regulated entities' appetite for challenging regulators.</p> <p class="p1">Mr. Dudley is correct that "a good culture cannot simply be mandated by regulation or imposed by supervision." A bad culture, however, can be cultivated by regulators that micromanage firms and offer banks cover when they make mistakes. Allowing market pressures to work-even to the point of firm failure-would be a more effective way than giving tough speeches, threatening enforcement action, and monitoring attitudes toward compliance to encourage firms to reassess their own corporate cultures.</p> Wed, 22 Oct 2014 10:51:10 -0400 Regulation of Platform Markets in Transportation <h5> Publication </h5> <p class="p1">The development of communication networks along with the rapidly expanding use of smartphones has resulted in unexpected innovations, revolutionizing taxicab and transportation services. Two new firms, Uber and Lyft, offer a particularly novel&nbsp;transportation service by providing car-share and taxi services via cell phone applications and GPS. Users needing rides simply push buttons on their phones, and within minutes, vehicles arrive at their locations.</p> <p class="p6">This platform market would seem to be a boon to both customers and providers. But, as novel services, Uber and Lyft are competing with established taxicab companies, who resist these newcomers. In cities such as Chicago, Houston, Seattle, and Boston, local taxi companies are suing and submitting regulatory complaints in attempts to shut down these would-be competitors.<sup>1</sup></p> <p class="p7">These threatened taxicab firms are spending scarce resources on contesting wealth instead of creating it, or rent-seeking.<sup>2</sup> The goal of rent-seeking is to create higher profits by lobbying politicians to impose costly regulatory burdens, such as licensure, safety prescriptions, and price controls, on their new competitors. This is how entrenched interest groups, citing something like public safety, use government to protect their privileges and stifle market innovations.</p> <p class="p8">But even without regulation, firms must maintain good reputations to remain competitive. Government regulation at best duplicates and at worst hinders the role of reputation in encouraging firms to maximize the benefi of their services to their customers. As it currently stands, even a company with an excellent reputation is limited in how fast it can expand its services because of preexisting regulation of transportation services.</p><p class="p1">Figure 1. Average price of NYC medallions.<img src="" width="585" height="244" style="font-size: 12.222222328186px;" /><span style="font-size: 12.222222328186px;">&nbsp;</span></p> <p class="p5">Source: NYC Taxi &amp; Limousine Commission, <a href=""></a></p> <p class="p9"><span style="font-size: 12.222222328186px;">Traditional taxi regulations restrict entry by requiring a license to legally operate a taxicab. This effely limits the number of available taxis. The rationale for regulating taxicabs is to protect consumers, yet the regulation’s main result is to keep prices high and actively discourage services to lower-income customers. Platform market transportation services, such as Uber and Lyft, can reverse this trend by maintaining a high quality of service while extending coverage to underserved communities.</span></p> <p class="p17">WHO REALLY PROFITS FROM CAB SERVICES?</p> <p class="p18">Taxicabs are an integral component of any urban transportation network. In 2013 more than 236 million pas- sengers used taxicabs in New York City, and the average taxi traveled 70,000 miles a year.<sup>3</sup> Like many cities, New York heavily regulates taxi companies by restricting the number of potential drivers. The Haas Act of 1937 regulated taxis and limited the number of cab licenses in New York City to 16,900. Despite the population growth of the last 70 years, the number of licenses has actually decreased. In 2004 only 12,187 medallion cabs operated in the city.<sup>4</sup></p> <p class="p19">Limiting the supply of medallions allows the taxi cartel to maintain high fares by preventing entrepreneurs from entering the market.&nbsp;<span style="font-size: 12.222222328186px;">Since then, the price of medallions has increased dramatically, as shown in figure 1, above. Indeed, over the last 80 years, taxi medallions have generated an</span><span style="font-size: 12.222222328186px;">annualized 15.5 percent rate of return.<sup>5</sup> Put another way, the value of a medallion doubled, on average, every four and a half years.</span></p> <p class="p22">The returns for this particular type of rent-seeking are staggering, especially given the fact that these profits come not only from higher fares to consumers, but through worse coverage in poor and minority communities, as we explain below.<sup>6</sup> One would think this windfall for cartel operators would trickle down to cab drivers, but this is not the case. As reported by the <i>Washington</i><i> </i><i>Post</i>, cab drivers make approximately $30K a year.<sup>7</sup> The real winners of licensure are not customers or even cab drivers but the original owners of the medallions,<sup>8</sup> who have seen tremendous growth in this asset’s value.<sup>9</sup> Put another way, the bulk of the revenue produced by the system is used to pay the up-front costs of procuring new licenses. Under such a system, current operators gain little from increasing total production; in fact, they gain by lowering it.</p><p class="p22"><a href="">Continue reading</a></p> Tue, 28 Oct 2014 21:01:07 -0400 A History of Cronyism and Capture in the Information Technology Sector <h5> Publication </h5> <p class="p1">This paper documents the evolution of government-granted privileges, or "cronyism," in the information and communications technology marketplace and in the media-producing sectors.&nbsp;</p> <p class="p1">It also shows that cronyism is slowly creeping into new high-technology sectors. This influence could dull entrepreneurialism and competition in this highly innovative sector since time and resources spent on influencing politicians and capturing regulators cannot be spent competing and innovating in the marketplace.&nbsp;</p> <p class="p1">Cronyism will also negatively impact consumer welfare by denying consumers more and better products and services. Additionally, consumers might end up paying higher prices or higher taxes due to government privileges for industry.&nbsp;</p> <p class="p1">Finally, this paper offers strategies for stalling and diminishing the cronyism already taking root in the high-tech sector.</p><p class="p1"><a href="">Continue reading&nbsp;at SSRN</a></p> Tue, 21 Oct 2014 12:56:41 -0400 Todd Zywicki Book Panel: Consumer Credit and the American Economy ( <h5> Events </h5> <p>The <a href="">F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics</a> at the Mercatus Center invites you to a panel discussion featuring Todd Zywicki and his new co-authored book <i><a href="">Consumer Credit and the American Economy</a></i><i>.</i></p> <p>In this book, authors Thomas A. Durkin, Gregory Elliehausen, and Michael E. Staten, and Todd Zywicki examine the economics, behavioral science, sociology, history, institutions, law and regulation of consumer credit in the United States. It looks at why Americans use credit in their everyday lives and the implications of credit use for the American economy and government regulation. This examination challenges stereotypical views and provides an economically informed way of looking at how and why consumers use credit and how it is regulated.</p> <p>We will be pleased to hear from one of the authors, <b>Todd Zywicki</b>, as well as chair, <b>Peter Boettke</b>, and commenters, <b>Steven Pearlstein</b> and <b>Joshua Wright</b>.</p><p><b>If you have any questions about this event,&nbsp;<b>&nbsp;please contact Jason Wilbanks at <a href=""></a> or (703) 993-8297.</b></b></p> <p><b><a href="">Todd Zywicki</a></b><b> </b>is a senior scholar and senior fellow with the F. A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at the Mercatus Center at George Mason University and Foundation Professor of Law at George Mason University School of Law. He specializes in bankruptcy, contracts, commercial law, business associations, law and economics, and public choice and the law.</p> <p><b><a href="">Peter Boettke</a></b><b> </b>is University Professor of Economics and Philosophy at George Mason University, the BB&amp;T Professor for the Study of Capitalism, and the Director of the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at the Mercatus Center at GMU. He specializes in Austrian economics, economic history, institutional analysis, public choice, and social change.</p> <p><b><a href="">Joshua Wright</a></b> is currently a Commissioner at the Federal Trade Commission. Wright was previously a professor at George Mason University School of Law and held a courtesy appointment in the Department of Economics. Wright is a leading scholar in antitrust law, economics, and consumer protection and has published more than 60 articles and book chapters, co-authored a leading casebook, and edited several book volumes focusing on these issues. Wright also served as Co-Editor of the Supreme Court Economic Review and a Senior Editor of the Antitrust Law Journal.</p> <p><b><a href="">Steven Pearlstein</a></b> is Robinson Professor of Public and International Affairs at George Mason University and a Pulitzer-prize winning business and economics columnist for the <i>Washington Post</i>. Professor Pearlstein was awarded the Pulitzer Prize for commentary in 2008 for columns the previous year anticipating and explaining the recent financial crisis and global economic downturn. In 2011 he won the Gerald R. Loeb Award for lifetime achievement in business and financial journalism. His work has also been cited by the Society of Business Editors and Writers. He has appeared frequently as a commentator on national television and radio programs. He continues to write a regular column for the Post’s Sunday Business section, along with book reviews.</p> Tue, 28 Oct 2014 11:41:24 -0400 Reclaiming Federal Spectrum: Proposals and Recommendations <h5> Publication </h5> <p class="p1">As in many countries,<sup>1</sup> the United States government possesses&nbsp;a majority of the most valuable bandwidth and pays virtually&nbsp;nothing for this natural resource.<sup>2</sup> The Government Accountability&nbsp;Office (GAO) and other independent audits make it clear that&nbsp;federal spectrum is used ineffectively and that reforms are long&nbsp;overdue.<sup>3</sup> With increased consumer demands for new services&nbsp;requiring radio transmissions, it is urgent that some of the fallow&nbsp;federal spectrum be brought “online” and into the mobile&nbsp;broadband marketplace.</p> <p class="p1">The consumer demand in recent years for mobile broadband&nbsp;services—such as streaming Netflix, voice-over Internet Protocol,&nbsp;and Facebook use—is unprecedented and strains the current&nbsp;capacity of wireless carriers. Building out cell towers and networks&nbsp;increases capacity, but increasing the supply of radio spectrum is&nbsp;much more cost-efficient.<sup>4</sup> These realities have caused&nbsp;telecommunications policymakers in the past decade to seriously&nbsp;reexamine spectrum management. A growing consensus among&nbsp;experts is that federally held spectrum is lightly used and would be&nbsp;better redeployed for commercial uses that accommodate&nbsp;consumer demands and expand the United States economy.</p> <p class="p1">President Obama and his Federal Communications Commission&nbsp;(FCC) appointees have prioritized, at some political risk, making&nbsp;substantial amounts of spectrum, including spectrum currently&nbsp;used by federal agencies and the military, available for wireless&nbsp;broadband use. This Article discusses the history of spectrum&nbsp;management and the commercial and federal uses of the radio&nbsp;frequencies. Several policy proposals for reclaiming federal&nbsp;spectrum are presented, along with recommendations for&nbsp;rationalizing spectrum management.</p> <p class="p1">Two major spectrum management problems are addressed in&nbsp;the recommendations section. The first is that federal agencies&nbsp;receive almost no price signals that would encourage efficient use&nbsp;of this valuable input. The FCC and the NTIA gave federal users&nbsp;spectrum for free, often decades ago, and from the agencies’&nbsp;perspective it is a free resource.<sup>5</sup> The second problem is that there&nbsp;exists no reliable process for reclaiming federal spectrum and&nbsp;selling it for more productive commercial uses in the relatively&nbsp;short term (the next five to ten years). These agencies are&nbsp;institutionally reluctant to remit any of their spectrum for&nbsp;commercial use,<sup>6</sup> and billions of dollars of social welfare are&nbsp;squandered annually as a result.<sup>7</sup>&nbsp;</p><p class="p1">This Article recommends, in the&nbsp;short term, the creation of an independent spectrum management&nbsp;commission that has the authority to relocate federal systems and&nbsp;transfer federal spectrum to commercial users through auction. In&nbsp;the long term, Congress should establish an agency that possesses&nbsp;all federal spectrum and leases out spectrum at approximately&nbsp;market rates, in a way that imitates the General Service&nbsp;Administration’s (GSA) practice of leasing out real estate to federal&nbsp;agencies.</p><p class="p1"><a href="">Continue reading</a></p> Tue, 21 Oct 2014 12:47:57 -0400 Getting Away from Gosplan <h5> Publication </h5> <p class="p1">Describing the U.S. system of spectrum&nbsp;allocation, former Federal Communications&nbsp;Commission officials Gerald Faulhaber&nbsp;and David Farber have written,&nbsp;“[the] current system is similar to that&nbsp;of the former Soviet Union’s GOSPLAn&nbsp;agency, which allocated scarce resources&nbsp;by administrative fi at among factories and other producers in&nbsp;the Soviet economy.” the U.S. spectrum regulatory framework,&nbsp;still largely intact since 1927, severely distorts the 21st century&nbsp;technology industry and harms consumers with higher prices&nbsp;and lack of choice. As in many countries, the U.S. government&nbsp;possesses a majority of the most valuable radio spectrum and&nbsp;pays virtually nothing for this natural resource. Audits by the&nbsp;Government Accountability Office and independent groups&nbsp;have made clear that federal spectrum is used ineffectively and&nbsp;that reforms are long overdue. President Obama and his Federal&nbsp;Communications Commission appointees have, at some political&nbsp;risk, prioritized making substantial amounts of spectrum&nbsp;available for wireless broadband use, including spectrum currently&nbsp;used by federal agencies and the military.</p> <p class="p1">The consumer demand in recent years for mobile broadband&nbsp;services—such as streaming netflix, Voice-over-internet Protocol,&nbsp;and Facebook use via smartphones and tablets—is unprecedented&nbsp;and strains the current capacity of wireless carriers. Building&nbsp;more cell towers and laying more cables will increase capacity,&nbsp;but increasing the supply of radio spectrum is also needed. For&nbsp;this reason, Congress and the Obama administration examined&nbsp;spectrum management at the national telecommunications&nbsp;and information Administration (NTIA), which oversees federal&nbsp;agencies’ spectrum, and the FCC, which regulates non-federal&nbsp;spectrum. A growing consensus among experts is that federally&nbsp;held spectrum is lightly used and much of it would be better&nbsp;redeployed for commercial uses that accommodate consumer&nbsp;demands and expand the U.S. economy.</p> <p class="p1">Before repurposing federal spectrum can take place, however,&nbsp;Congress must address two major spectrum management&nbsp;problems. the first is that there exists no reliable process for&nbsp;repurposing federal spectrum and selling it for more productive&nbsp;commercial uses in the relatively short term (that is, the next five&nbsp;to 10 years). the second problem is that federal agencies receive&nbsp;almost no price signals that would encourage efficient use of this&nbsp;valuable input. the FCC and NTIA gave federal users spectrum&nbsp;for free, often decades ago, and from the agencies’ perspective it&nbsp;is a free resource. Predictably, overuse abounds and billions of&nbsp;dollars of social welfare are squandered annually as a result. in&nbsp;the short term, Congress should create a temporary independent&nbsp;spectrum commission that has the authority to relocate federal&nbsp;systems to other spectrum bands and transfer federal spectrum to&nbsp;the FCC for auction. in the long term, Congress should establish&nbsp;a permanent agency that possesses the remaining federal spectrum&nbsp;and leases it out at approximately market rates, imitating&nbsp;the GSA’s practice of leasing out real estate and buildings to&nbsp;federal agencies.</p><p class="p1"><a href="">Continue reading</a></p> Tue, 21 Oct 2014 11:50:32 -0400 Why Nebraska's Tax Reform Plan Failed <h5> Expert Commentary </h5> <p class="p1">What would your family do with an extra $3,000 this year? Use the money for college education? Take more vacation? Pay off debt? Based on my research, if state governments eliminated all special privileges in their tax systems and lowered tax rates an equivalent amount, the average family could save thousands of dollars annually – all without any reduction in government services.</p> <p class="p1">In <a href="">my recent study</a> published through the <a href="">Mercatus Center</a> at George Mason University, I discuss the principles for a privilege-free tax system that can responsibly bring this scenario to fruition. Most state income, sales and property taxes contain a variety of exemptions, credits and deductions – or special privileges – that you may know as loopholes. Not only are many of these loopholes unfair, in that only certain industries and individuals can use them, they mean higher tax rates for the rest of us. This is also inefficient; it leads to less economic growth over time and consequently lower incomes for everyone.</p> <p class="p1">Using the state of Nebraska as a case study, I show how the typical family could save over $3,000 annually. Starting with the state’s biannual “tax expenditure” report, which estimates $5 billion in tax expenditures each year, the study isolates the categories that truly represent economic privilege and calculates the smaller but sizeable estimate of $2 billion. That translates into $1,000 for each Nebraskan – or $3,000 for a family of three.</p><p class="p1"><a href="">Continue reading</a></p> Tue, 21 Oct 2014 09:58:21 -0400 Adam Thierer Discusses Driverless Cars on CSPAN-2 <h5> Video </h5> <iframe width="640" height="360" src="//" frameborder="0" allowfullscreen></iframe> <p>Adam Thierer Discusses Driverless Cars on CSPAN-2&nbsp;</p><div class="field field-type-text field-field-embed-code"> <div class="field-label">Embed Code:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> &lt;iframe width=&quot;640&quot; height=&quot;360&quot; src=&quot;//; frameborder=&quot;0&quot; allowfullscreen&gt;&lt;/iframe&gt; </div> </div> </div> Mon, 20 Oct 2014 16:58:51 -0400 Veronique de Rugy Discusses the Ebola Vaccine on Varney and Company <h5> Video </h5> <iframe width="640" height="360" src="//" frameborder="0" allowfullscreen></iframe> <p>Veronique de Rugy Discusses the Ebola Vaccine on Varney and Company</p><div class="field field-type-text field-field-embed-code"> <div class="field-label">Embed Code:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> &lt;iframe width=&quot;640&quot; height=&quot;360&quot; src=&quot;//; frameborder=&quot;0&quot; allowfullscreen&gt;&lt;/iframe&gt; </div> </div> </div> Mon, 20 Oct 2014 13:27:17 -0400 Fortress and Frontier in American Health Care <h5> Publication </h5> <p class="p1">For decades America’s health care debate has pitted Left against Right, federal against state, public&nbsp;against private. All sides, however, have shared a similar, inhibiting mindset—an excessive aversion&nbsp;to risk and deference to medical insiders—instead of stressing the ideal goal of better health care&nbsp;for more people at lower cost on a continuous basis.</p> <p class="p2">A new study published by the Mercatus Center at George Mason University shows how this&nbsp;“Fortress”-like mentality has limited innovation in health care, constraining medical advances&nbsp;and raising costs. Shifting to a “Frontier” approach—one that tolerates risk and opens the field to&nbsp;other participants and disciplines—would bring to health care the kinds of creativity seen in&nbsp;many other fields, such as information technology.</p> <p class="p2">The study illustrates these ideas in part through a set of unconventional characters, including a&nbsp;Hollywood actress who figured out how to stop Nazis from jamming American torpedo controls,&nbsp;a small-town doctor who pioneered stem-cell therapy, an injured carpenter and a puppet-maker&nbsp;who saw $40,000 prosthetic hands and produced a workable alternative that costs less than $50,&nbsp;a dying rodeo enthusiast who successfully battled the Food and Drug Administration (FDA),&nbsp;and—on the other side of the coin—a well-meaning educator who helped destroy African-American medical education.</p> <p class="p2">Below is a brief summary. Please see “<a href="">Fortress and Frontier in American Health Care</a>” to read&nbsp;the study and learn more about author <a href="">Robert F. Graboyes</a>, a senior research fellow at the&nbsp;Mercatus Center.</p> <p class="p1">______________________________ Key Findings ______________________________</p> <p class="p1">• From Fortress to Frontier. To replicate the kinds of revolutionary innovation seen in&nbsp;other fields, health care policymakers need to discard the constraints of their Fortress&nbsp;mentality and adopt a Frontier attitude, which tolerates calculated risks and welcomes&nbsp;competition from diverse practitioners and disciplines.</p> <p class="p1">• Address supply as well as demand. America’s health care debate has focused almost exclusively&nbsp;on demand: how many people have health coverage, and how providers are paid&nbsp;for which currently offered services. Successful reforms must ease limitations on both&nbsp;demand and supply, promoting innovations that can alter the nature of health care delivery&nbsp;and lower costs.</p> <p class="p1">• Step-by-step reform. This does not require wholesale, politically unrealistic changes in&nbsp;the health care sector. Indeed, reformers should instead advance through many small,&nbsp;incremental, and simultaneous steps, seizing opportunities to break down barriers to&nbsp;reform, possibly achieving quick victories.</p> <p class="p1">• Breaking down barriers. A vast range of such opportunities are at hand. The Fortress mentality&nbsp;has erected numerous obstacles to health care innovation. These obstacles are readily&nbsp;identifiable and can be overcome with targeted reforms that do not require a sweeping overhaul&nbsp;of the health care sector. The idea is to identify every potential limit on the supply of&nbsp;health care services, and then eliminate it. If the United States doesn’t do this, other countries&nbsp;will, and America will lose its leadership position in medical innovation.</p> <p class="p1">_______________________________ Summary _______________________________</p> <p class="p1">TWO WORLDVIEWS: FORTRESS AND FRONTIER</p> <p class="p1">The Fortress is an institutional environment that avoids risk and protects established producers&nbsp;(insiders) against competition from newcomers (outsiders). The Frontier, in contrast, tolerates risk&nbsp;and allows outsiders to compete against established insiders.</p> <p class="p1">• In recent decades, numerous industries have experienced remarkable and unexpected&nbsp;advances through a process of “disruptive innovation”—technological change driven by&nbsp;outsiders that yields previously unthinkable quality gains and massive price reductions.&nbsp;This is the Frontier approach.</p> <p class="p1">• An example is the original Internet, called ARPANET, created by an agency within the&nbsp;Department of Defense and at first tightly constrained. Once opened to outsiders, it&nbsp;spawned millions of websites and applications and profoundly changed human society.</p> <p class="p2">• In contrast, NASA was initially a great innovator. But after its heyday—the moon-landing&nbsp;era—the agency grew more and more risk averse (especially after the Columbia disaster).&nbsp;Now private innovators are competing to develop freight and passenger spacecraft, and&nbsp;markets reach above earth’s atmosphere for the first time.</p> <p class="p1">A BRIEF HISTORY OF THE FORTRESS IN HEALTH CARE</p> <p class="p1">In health care, the foundation of the Fortress was laid in 1910, with a report by an educator commissioned&nbsp;by the American Medical Association to evaluate the nation’s medical schools. The report rapidly led to actions that made medical education more exclusive, standardized, centralized, and&nbsp;expensive.</p> <p class="p1">• Following this report, however, half of the country’s medical schools—and most African-American medical schools—were forced to close, constricting the supply of doctors and&nbsp;boosting their incomes. The report also led to an excessive homogenization of medical&nbsp;practice. Essentially, doctors came to believe that, for any set of symptoms (and certain&nbsp;patient data), there is only one correct, deterministic treatment pathway. This stifled the&nbsp;variation that innovation requires.</p> <p class="p1">• Other structures developed, such as health coverage that was not so much insurance as&nbsp;prepaid medical care. In 1938 and again in 1962, driven by the tragic consequences of&nbsp;thalidomide and tainted sulfanimides, the FDA’s control over pharmaceuticals grew, and&nbsp;state controls expanded.</p> <p class="p1">ISLAND-HOPPING: A STRATEGY FOR REFORM</p> <p class="p1">During World War II, American operations in the Pacific Theater pursued many islands simultaneously&nbsp;and somewhat autonomously. To shift health care from Fortress to Frontier, reformers should pursue a similar island-by-island strategy rather than a wholesale approach. This will avoid the same centralized overreach that characterizes both the Affordable Care Act and “Repeal and Replace” proposals.</p> <p class="p1">• Successful reformers will identify legions of obstructions to supply and innovation and&nbsp;then eliminate them piecemeal, gaining incremental and possibly rapid victories.</p> <p class="p1">• Reformers could move state by state to remove particular barriers (e.g., certificate-of-need&nbsp;laws), or policy by policy within the states or the federal government. Issue-specific coalitions&nbsp;could form around each problem and could simultaneously deal with federal, state,&nbsp;and private limits on the supply of health care. This decentralized approach would eliminate&nbsp;the need for one grand bargain—or for total control of Washington, DC, by one party.</p> <p class="p1">LIMITS ON SUPPLY AND DEMAND</p> <p class="p1">To achieve the kind of advances seen in other fields, health care innovators must be free to supply&nbsp;new goods and services and consumers must be free to purchase them.</p> <p class="p1">• FDA limits and delays. The FDA’s slow and burdensome approval process inhibits the&nbsp;development and dissemination of new products and stifles innovation by exerting authority&nbsp;over too many goods and services. This could be partly overcome by methods such as&nbsp;approving drugs in stages so patients with serious, time-critical illnesses could gain early&nbsp;access, and “right to try” legislation that would grant terminally ill patients early access to&nbsp;drugs still in the approval process.</p> <p class="p1">• Limits on providers. Various restrictions, such as medical licensing and scope-of-practice&nbsp;limitations, constrict the supply of physicians and medical services. Among potential&nbsp;remedies are allowing nurse practitioners and other professionals to practice&nbsp;independently (as they already do in numerous states) and authorizing pharmacists to&nbsp;write certain prescriptions independently of physicians. Reciprocity agreements or&nbsp;interstate licensing compacts could make it easier for doctors to move from state to state.</p> <p class="p1">• Malpractice law. Tort law invites lawsuits and discourages innovation while also raising&nbsp;costs. The vagaries of tort law also discourage the production of vaccines and the development&nbsp;of new drugs and devices. Potential remedies include capping awards for noneconomic&nbsp;damages and shortening the statute of limitations on malpractice suits.</p> <p class="p1">• Taxes. Federal tax law favors employer-based coverage, which artificially lowers the cost of&nbsp;group insurance and raises the cost of individual plans. This may be the single most anticompetitive&nbsp;factor in the health insurance market, limiting the variety of available health&nbsp;plans. Breaking down these barriers could start with establishing tax parity for health&nbsp;insurance premiums and individual contributions to health savings accounts.</p> <p class="p1">• Homogenized medical education. Medical schools remain focused on individual knowledge&nbsp;rather than the interdisciplinary teams and networks that characterize much of modern&nbsp;medicine. This results in an overly specialized field. Potential remedies include interweaving&nbsp;classroom and clinical components of medical education and removing obstacles&nbsp;(e.g., licensing requirements) to alternative approaches, such as osteopathic medicine and&nbsp;for-profit, offshore medical schools.</p> <p class="p1">• Government controls and mandates. Most public and private health plans model their benefit&nbsp;structures on Medicare, which overpays for some services and underpays for others, misallocating&nbsp;the supply of countless health care services. In addition, the Affordable Care Act&nbsp;requires small-group and individual health insurance plans to cover a Washington-defined&nbsp;set of essential health benefits. This will homogenize the design of health coverage and limit&nbsp;innovation in the provision of medical services and health insurance. Reform options include&nbsp;allowing Medicare to reimburse for imported or offshore medical services and for email and&nbsp;telephone consultations, removing the essential health benefits and eliminating state benefit&nbsp;mandates, and allowing health insurers to sell policies across state lines.</p> Thu, 23 Oct 2014 12:43:27 -0400 How to Restart Health Care Reform <h5> Expert Commentary </h5> <p class="p1">Midterm elections are coming, and both parties are lobbing grenades over health care. Despite the furious rhetoric, the two sides are more alike than they realize. Both spent decades pursuing policies that obstruct health care's capacity to save lives, ease suffering and cut costs. The endless vitriol resembles World War I-style trench warfare. The Affordable Care Act moved the battle lines a little in one direction; the midterms that year moved them a little in the opposite direction. With divided government, the 2014 elections will move the lines even less.</p> <p class="p1">But those weary of the trenches can begin improving health care in January 2015 by shifting to a different theater of a different war in a different era. Think Pacific Islands, World War II. Think innovation.</p> <p class="p1">For 70 years, one side asked one question only: "How many Americans have insurance cards?" The other side pushed back feebly, claiming a superior ability to distribute cards. Both sides focused on distributing care and ignored creating care. Both contributed to stagnation by obstructing innovation. To understand how, compare health care with the most innovative industry of the past 25 years - information technology.</p> <p class="p1">Imagine riding a time machine to 1989 to tell your friends how health care has changed. They'll be mildly surprised by some specifics, but they'll believe you. Now tell them about IT in 2014: iPads, smartphones, Siri, Amazon, Kindle, Street View, email, iTunes, Netflix, Facebook, Twitter, GPS, Uber, Skype. Tell them how inexpensive it is. Talk about driverless cars, drones, and Bitcoin. Now they'll think you've lost your mind.</p> <p class="p1">Health care lags behind IT in innovation because we've locked health care in a "Fortress" and let IT roam the "Frontier."</p> <p class="p1">In the health care Fortress, policy has two goals: The first is imagining every terrible thing that could go wrong and striving to prevent any of that from happening. The second is making sure doctors and hospitals and health researchers never worry about outsiders threatening their financial security.</p> <p class="p1">On the IT Frontier, policy recognizes that big improvements in quality and big decreases in cost require people to accept some calculated risks. The Frontier allowed Apple and BlackBerry to challenge IBM and Western Electric. Outsiders in garages upended insiders in corporate towers.</p> <p class="p1">Bipartisan consensus allowed IT to thrive on the Frontier but confined health care to the Fortress (even as they argued ferociously about details).</p> <p class="p1">But, you say, health care and IT aren't comparable. Health care involves life and death, pain and suffering. Computers are harmless.</p> <p class="p1">Think again. Computers and smartphones offer terrifying ways to commit financial fraud, stalk and bully the vulnerable, steal identities, violate privacy, destroy reputations, and coordinate terrorism. Wireless telemetry failures put airline passengers and surgical patients at mortal risk. 1989 policy makers could easily have banned the internet and computers and smartphones. Thank goodness they didn't.</p> <p class="p1">Now, take your time machine 25 years into the future. 2039 medicine will likely be as unfathomable to you as 2014 IT seems to your friends in 1989. The question is whether American health care spends those years on the Frontier and leads this technological revolution or, alternatively, remains in the Fortress, leaving other countries to take the lead.</p> <p class="p1">I've been honored to meet some harbingers of the future. Ivan Owen - a puppet-maker who saw $40,000 prosthetic hands and co-invented one costing $10 to $50. Ian Shakil, who doubles doctors' output by freeing them from oppressive interaction with computer keyboards. Pat Basu, who delivers medical appointments by tablet and smartphone. And Jenna Tregarthen, who uses tablets and smartphones to help hundreds of thousands of people struggling with eating disorders.</p> <p class="p1">Other technologies are coming: printed replacement organs, nanobots traveling deep within you to repair damaged genes, pharmaceuticals custom-designed for your DNA.</p> <p class="p1">So how do we mimic the leaps and bounds of IT within health care? Currently, one side struggles to preserve the sputtering ACA. The other pledges to repeal it with a bill they haven't written, using power they don't possess. Regrettably, neither approach will do much to improve Americans' health or financial security.</p> <p class="p1">There is a better path.</p> <p class="p1">Instead of the futile back-and-forth of World War I, we can enter the Pacific Theater of World War II. Identify 10,000 islands blocking the way to innovation of care. Conquer lots of them simultaneously. Attack small pieces of Medicare and the FDA and the ACA rather than tackling the entire health care system in one piece. At the state level, conquer individual obstructions like certificate-of-need and occupational licensure provisions.</p> <p class="p1">Regardless of this election's outcome, island-hopping can begin in January, with coalitions spanning both sides of the aisle, uniting to clear the way for innovation.</p> Mon, 20 Oct 2014 11:14:45 -0400 Dr. Yandle's Economic Situation Summary: Update on the US Economy and Discussion of Bootleggers and Baptists Theory of Regulation <h5> Video </h5> <iframe width="640" height="360" src="//" frameborder="0" allowfullscreen></iframe> <p class="p1" style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">What do GDP reports really tell us? What does economic freedom have to do with job growth?</p><p class="p1" style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">This presentation:</p><ul class="ul1" style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;"><li class="li1" style="margin-bottom: 10px; font-size: 12px;">Examines GDP data and the implications for the years ahead;</li><li class="li1" style="margin-bottom: 10px; font-size: 12px;">Reviews economic indicators;</li><li class="li1" style="margin-bottom: 10px; font-size: 12px;">Looks at unemployment numbers across the fifty states; and</li><li class="li1" style="margin-bottom: 10px; font-size: 12px;">Discusses US manufacturing performance.</li></ul><div class="field field-type-text field-field-embed-code"> <div class="field-label">Embed Code:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> &lt;iframe width=&quot;640&quot; height=&quot;360&quot; src=&quot;//; frameborder=&quot;0&quot; allowfullscreen&gt;&lt;/iframe&gt; </div> </div> </div> Fri, 17 Oct 2014 11:51:17 -0400 Does Eminent Domain Even Raise Revenue? <h5> Expert Commentary </h5> <p class="p1">Proponents of eminent domain for private development -- i.e., of forcibly taking private property and giving it to another private party -- claim it will generate more revenue for state and local governments. The Supreme Court even based its landmark 2005 case <i>Kelo v. City of New London</i> on this assertion, holding that the alleged economic benefits for communities legally justify these takings as "public use."</p> <p class="p1">The claim that eminent domain leads to higher revenues has largely gone unchallenged. We <a href=""><b>recently examined</b></a> the available data, and our study finds virtually no evidence that eminent-domain activity for private development is associated with higher government revenue. To the contrary, we find some evidence that eminent domain is associated with <i>lower</i> growth of government revenue in the future.</p> <p class="p1">In other words, governments' primary justification for taking property from private owners like Susette Kelo and transferring ownership to big companies like Pfizer is based on faulty assumptions. In fact, the redevelopment plan for which Ms. Kelo's house (and those of her neighbors in New London, Conn.) was taken never happened. The land was actually used as a temporary dump for storm debris in the aftermath of Hurricane Irene in 2011.</p> <p class="p1">Confiscating someone's home or business and using the land as a dump is an egregious property-rights violation. Even if eminent domain for private development did achieve the objective of producing higher revenues for state and local governments, it would be an abhorrent activity. However, it also has serious negative implications for the future economic prosperity of the community.</p> <p class="p1">Private-property rights are the foundation of a successful market economy. Any encroachments on private-property rights -- like eminent domain -- hamper economic growth and result in lower standards of living than we would otherwise enjoy.</p> <p class="p1">For example, in countries like Cuba and North Korea, where private-property rights are very insecure, entrepreneurs are less willing to invest in the new machines and equipment they need to expand their businesses. Individuals in these countries have a reasonable expectation that any machinery or equipment, or overall business or land itself, may at some point be taken from them by government predation or by individual criminals.</p> <p class="p1">Fortunately, property rights in the United States are relatively secure -- but things are heading in the wrong direction. The Fraser Institute publishes an annual index that ranks countries according to their economic freedom using data in five areas: size of government, legal system and property rights, sound money, freedom to trade internationally, and regulation. In the recently released 2014 <a href=""><b><i>Economic Freedom of the World</i> report</b></a>, the United States fell to 12th, down from the second spot in 2000 and the seventh spot in 2008. In the area of "legal system and property rights," the United States fell all the way to 36th.</p> <p class="p1">Our study's findings confirm that policymakers and the public are right to be skeptical of attempts to justify the seizure of private property with the promise of future financial windfalls. In reality, these encroachments may hamper economic growth and lead to lower standards of living for more than just those who have lost their homes or businesses.</p> Fri, 17 Oct 2014 16:41:54 -0400