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Mercatus scholars apply economic analysis to the issues of the day

Distinguishing Policy from Politics in the Cadillac Plan Tax

by Charles Blahous on October 05, 2015

The Affordable Care Act’s “Cadillac plan tax” has been much in the news of late.  A motley collection of health sector companies, conservative ACA opponents, labor unions and presidential candidates is working for repeal.  On the other side 101 health policy experts recently wrote to urge Congress to retain the tax “unless it enacts an alternative tax change...

Sarasota's Anti-Regulation Vote Settles the Uber-Taxi Feud

by Michael Farren on October 05, 2015

Last month in Florida, the Sarasota City Commission did the unthinkable. It unanimously voted to end unnecessary regulation of taxis in its city. In an era where the political feud between taxis and ridesharing companies seems to reach new heights every day – and has already boiled over into violent protests in France, Mexico and India – the city of Sarasota provided an admirable example of how to release the tension surrounding a contentious issue.

The city commission recognized that...

How the Unseen Effect of Regulation Harms Economic Growth

by Adam Millsap on October 01, 2015

The 2015 Economic Freedom of the World report was recently released and out of the 157 countries ranked the United States fell from the 12th slot in 2014 to 16th. This includes an especially low rank of 49th in the category “Business regulations,” which is probably not surprising to any U.S. business owner.

According to the Mercatus Center’s RegData database, federal restrictions on business activities increased 28 percent from 1997 to 2012. While these regulations may be well intentioned, excessive rules and restrictions can have pernicious effects on the economy.

A new study that uses RegData shows that...

How to Fix the Social Security Disability Insurance Program

by Jason J. Fichtner on September 30, 2015

As I noted in my previous MarketWatch column, the Social Security Disability Insurance (SSDI) program faces real and increasingly urgent financial challenges. Absent legislative action to shore up the program's finances, benefits will automatically be cut by almost 20% upon the trust fund's depletion sometime near the end of 2016 — roughly one year from now. Such an outcome would be unconscionable for individuals with disabilities who rely upon this program, and bipartisan action must be taken to avoid it. Unfortunately, differences among policymakers over how best to address this issue have stymied action thus far.

For this reason, the Bipartisan Policy Center (BPC) convened a working group, of which I am a member, to find areas of common ground for improving the SSDI program...

Cheating Gets the Most Attention, but Doesn't Do the Most Damage

by Tyler Cowen on September 29, 2015

The New York Times Room for Debate posted this question:

Has the pervasiveness of cheating made moral behavior passé?

Tyler Cowen provided the following response:

The behavior of Volkswagen has been heinous and the company and probably some of its executives deserve some serious punishments. Yet our reaction to the scandal is as illuminating as the misbehavior itself. We get much more upset when people do wrong out of deliberate fraudulent intent rather than through accidental negligence, or sheer inability to solve problems, even if the latter phenomena are often the greater risks.

The falsification of Volkswagen emissions software has meant more nitrogen oxide in the air, but how costly is this extra pollution in economic terms? One plausible estimate suggests this additional pollution has been...

Rotten Eggs and Spoiled Regulations

by Christopher Koopman on September 28, 2015

Many regulations have a natural shelf life, and when left out past their expiration dates, they tend to spoil. It simply becomes a matter of cleaning out the proverbial fridge. Identifying what is ready for the trash, however, can be tricky. Sometimes it isn't the law itself that went sour, but its effects. Laws that look harmless on their face sometimes aren't, and this can be a recipe for rather nefarious outcomes. Hampton Creek, manufacturer of the popular condiment "Just Mayo," is the latest to encounter this sometimes hard-to-swallow truth.

At issue is what can and cannot be called "mayo." Currently, federal law defines mayonnaise, and the code of federal regulations mandates a single recipe: It must include vegetable oil, an acidifying ingredient (either vinegar, lemon juice or lime juice), and egg. In its...

Pope Francis' Condemnation of Capitalism Undercuts His Call to End Poverty

by Liya Palagashvili, Donald J. Boudreaux on September 28, 2015

With Pope Francis' first visit to the United States just wrapping up, he leaves behind two contradictory positions. He touched on these contradictions in a speech to Congress last Thursday.

Francis criticizes the evils of capitalism and its spirit of profit. Yet at the same time, he pushes for an end to poverty. Here's the conflict:

Capitalism is fueled by voluntary exchange; under it, individuals prosper only by serving their fellow men and women. It is in capitalist societies where doctors are sometimes motivated by higher earnings to save the lives of individuals. It is in capitalist societies where scientists often work tirelessly to create medicine that will cure diseases. It is typically profit that motivates your local grocer to deliver the food you need to survive.


The Measured Working Man

by Tyler Cowen on September 28, 2015

Discussions of income inequality typically focus on how information technology raises the return to skilled labor, or on the rise of global trade, or perhaps on the way that politics skews power toward the rich and well-connected. But there’s another fundamental driver of income inequality: the improved measurement of worker performance. As we get better at measuring who produces what, the pay gap between those who make more and those who make less grows.

Consider journalism. In the “good old days,” no one knew how many people were reading an article like this one, or an individual columnist. Today a digital media company knows exactly how many people are reading which articles for how long, and also whether they click through to other links. The exactness and the transparency offered by information technology allow us to measure value fairly precisely.

The result is that many journalists turn out to be not so valuable at all. Their...

Guilty Verdict Puts Food Safety Responsibility Where It Belongs

by Richard Williams on September 24, 2015

Guilty! The perpetrator of the 2008-09 Salmonella outbreak, Stewart Parnell of the Peanut Corporation of America, just received a 28-year sentence for knowingly distributing Salmonella-containing peanuts. The familiar refrain will be that this is evidence that our food safety system is broken. But those who believe that the response in 2010, the Food Safety Modernization Act (FSMA), is the answer have it completely wrong. In fact, the results of this court case provide a strong incentive for everyone involved in food safety, from farms to restaurants, to exercise due diligence.

This case proves that innovation like traceback technology (being able to...

How Uncle Sam Uses Behavioral Science

by Sherzod Abdukadirov on September 24, 2015

President Obama has issued an executive order urging federal agencies to use behavioral-science insights in designing government policies and regulations. The order argues that such insights have the potential to improve consumer welfare through better policy design.

When most people think of behaviorally informed policymaking, they think of the "nudge" — in which the government doesn't mandate a desired behavior, but instead gently encourages it, for example by making it the default. For example, some have suggested making retirement savings and organ donation opt-out rather than opt-in.

This may sound innocuous, but there are two major concerns. First, even with a nudge, regulators must assume the role of arbiters in deciding what constitutes consumers’ best interests. And second, the...

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