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Mercatus scholars apply economic analysis to the issues of the day

The Top 3 Things I Learned at the Bitcoin Conference

by Jerry Brito on May 22, 2013

This past weekend I attended the Bitcoin 2013 conference in San Jose, where over one thousand enthusiasts, developers, entrepreneurs, venture capitalists, and, yes, lawyers gathered to chart the future of the virtual currency. Here are the top three things I learned at the conference.

Bitcoin is about more than payments

Bitcoin is an even bigger deal than I thought. While the currency is best known as a censorship-resistant and somewhat-anonymous payments system, it has the potential to be so much more.

“Ultimately bitcoins are data, and you can use a data transit protocol to transit information other than just ‘I’m sending you bitcoins.’ It could be ‘I’m sending you a stock,’ or it could be ‘I’m sending you a bet,’” says Jeff Garzik, one of the six Bitcoin core developers.

Thought of this way, the Bitcoin network is a platform on top of which other...

The Film Tax Credit Farse

by Antony Davies on May 22, 2013

Everyone loves a good movie, but with an average cost of more than $8, most Pennsylvanians have to choose carefully what they will spend their money on. Too bad we don't have that same luxury with our tax dollars, which subsidize the film industry to the tune of $60 million a year. If lobbyists for the “film tax credit” have their way, this will increase to $100 million in short order.

The debate over whether to increase the credit clouds the real issue: The debate should be whether the credit should exist at all. Simply put, it should not.

The credit, we are told, is an “investment” in Pennsylvania. By offering this credit we entice out-of-state productions to the state, which creates jobs and increases the tax base. Everybody wins! But if you really want to see who wins, look at who is pushing for the benefit. Filmmakers win. Taxpayers will be left holding the empty popcorn bag.

The film industry claims that the tax...

If The IRS Bothers You, So Should The FSOC and CFPB

by Hester Peirce on May 22, 2013

The recent revelations about the goings-on at the Internal Revenue Service have gotten a lot of attention. When the patina of government impartiality shows itself so disturbingly thin, people of all political stripes sit up and take notice. The hard lessons drawn from the IRS experience should inform the broader policy debates about regulatory structure and oversight.

When the IRS activities came to light, the president expressed his disapproval and cited the agency's independence. As others have pointed out, the IRS is actually not-as agencies go-particularly independent. It is part of the Treasury Department, an executive agency that answers directly to the president, and the head of the IRS serves at the pleasure of the president. Nevertheless, the president's mention of independence reminds us of the importance of accountability in government-a government official who does not answer to anybody else can do quite a bit of damage without anyone...

Why Government Aid Programs Aren’t the Best Way to End Poverty

by Christopher Coyne on May 21, 2013

Based on the high standards of living enjoyed by their citizens, you might think that the governments of First World countries know how to create development. They don’t. Development isn’t created by anyone, not least well-intentioned politicians or development “experts”. The process of improving well-being only takes place in an environment that encourages constant innovation and experimentation.

Unfortunately, the state-led aid industry not only neglects the realities of development, but often takes actions that actively undermine it. For First World countries, development does not mean allowing other societies to go through the same messy process they did themselves. It entails top-down planning and grandiose promises that – this time – their plans will end poverty and suffering for good. Just consider the $9bn (£5.9bn) pledged to Haiti following its 2010 earthquake. Only a small portion was delivered, and even that has proven ineffective. Haiti’s...

Why Is There No Milton Friedman Today?

by Daniel Klein, Tyler Cowen, John Blundell, David R. Henderson on May 21, 2013

Imagine that someone with all the endowments of a Milton Friedman were born in the 1960s or 1970s. Is it conceivable that such a person would develop into a ‘Milton Friedman’ like we know the actual Friedman to have been, including his academic eminence and his eloquent and influential advocacy of classical liberalism? Here leading economists address the question: Why is there no Milton Friedman today?

Click to see essays by authors below:

Hard To Find the Return on Green Energy Investments

by Veronique de Rugy on May 20, 2013

Wind energy is the darling of the green energy sector. Over the past 35 years, the industry has received nearly $30 billion in federal subsidies and cash grants, and Washington has promised another $12 billion in subsidies over the next decade.

Thus, the argument goes, subsidizing wind energy will not only help boost economic growth and create jobs, it will also promote a cleaner environment. However, evidence shows these arguments to be at best a stretch, and at worst outright false. Let's review.

The wind industry's main subsidy, the Renewable Energy Production Tax Credit, was created in 1992 to provide temporary assistance for promoting investments in energy technology. But 21 years later, the subsidy is still in effect.

Department of Energy data show that as of March 1, 2010, 86 percent of all renewable-energy grants went to wind projects. From 2000 to 2010, federal wind subsidies grew by an average of 32 percent...

The Federal Reserve Ignores Its Own Role in the Financial Crisis

by Steven Horwitz on May 20, 2013

Since the financial meltdown in 2008, the Federal Reserve's range of powers have expanded, as have the kinds of financial institutions it monitors and regulates. Fed Chairman Ben Bernanke is now saying that the Fed's oversight has expanded beyond strictly financial institutions to wide swaths of the economy that might, in his words, provide evidence of "emerging vulnerabilities."

The justification for all of these new powers is that the Fed is best able to prevent a repeat of the 2008 meltdown by keeping in check the potential systemic problems revealed in that crisis. But the notion that the Fed is the firefighter standing by with the hose to douse any reignited embers of 2008 ignores its own role in creating those problems in the first place.

The Fed's own policy choices were central to the housing boom and bust and the associated financial crisis. In trying to soften the possibility of a post-9/11 recession, and then wrongly...

Five Reasons to Keep Government Out of Internet Governance

by Eli Dourado on May 13, 2013

Starting on May 14, the International Telecommunication Union – an agency of the United Nations – is kicking off a meeting for governments and telecom companies to discuss "international Internet-related public policy matters." Up for debate are six draft opinions on various aspects of Internet policy, but the unifying question is: how much should governments (and intergovernmental organizations) involve themselves in the building and running of the Internet? Under the current system, governments do very little – and the Internet has flourished because of it.

Here are five reasons we should resist giving governments a bigger role in Internet governance:

1. Censorship: Some governments want to be more involved in managing the Internet so that they can better monitor who is saying what online. Reporters Without Borders...

Interstate Protectionism and the Dormant Commerce Clause

by Jason Sorens on May 10, 2013

All 50 states ban the direct sales of motor vehicles from manufacturers to consumers. The politics of this regrettable policy are clear: auto dealers are powerful political players in every state, while only a few states actually have manufacturing facilities. Banning direct manufacturer sales benefits dealers while hurting manufacturers and consumers.

State governments continue to insert themselves into the contractual relationships between car manufacturers and dealers, typically to the ostensible benefit of the latter. The New Hampshire Senate...

The SEC's Cross Border Regulatory Creep

by Hester Peirce on May 08, 2013

Last week, the Securities and Exchange Commission proposed its cross-border security-based swaps rule under Dodd-Frank with great fanfare and a unanimous commission vote. Many outside the SEC have deemed the proposal a success, presumably because it is not as bad as the approach taken by the Commodity Futures Trading Commission that has angered regulators the world over. Exceeding the CFTC's low bar is a pretty poor metric for assessing regulatory success.

Dodd-Frank prohibits the SEC from applying its rules to security-based swaps businesses conducted "without the jurisdiction of the United States," except to the extent the firm violates SEC rules designed to prevent evasion of Dodd-Frank provisions. The SEC's proposed approach strays from the statute's territorial limitations and instead employs a nebulous approach based on conjecture about whether particular activities will be "conduits of risk into the U.S. financial system." As a consequence, the...

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