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Expert Commentary

Mercatus scholars apply economic analysis to the issues of the day

Why the Berkeley Soda Tax Has Got No Fizz

by Sherzod Abdukadirov on November 25, 2014

Just in time for Thanksgiving – the holiday season when most American put on a few pounds – citizens of Berkeley, California approved a ballot measure that would impose a one-cent tax on each ounce of soda. Their goal is to counter the trend of increasing obesity, which advocates of the tax blame largely on soda and other sugar-sweetened drinks. But while the city’s goal to improve the health of its citizens is laudable, its policy is misguided and may in fact cause more damage than good.

The biggest problem is that advocates treat the tax as a twofer. They argue that the tax would both decrease soda consumption and raise revenue, which could then be used for health programs. However, if the tax raises substantial revenues, it would in fact be a failure. The measure’s ultimate goal should be to...

What Do We Mean by Online Safety?

by Adam Thierer on November 24, 2014

It was my great pleasure to participate in last week’s 8th annual Family Online Safety Institute conference. As a veteran of all eight annual conferences as well as a frequent participant in many other FOSI events through the years, I can say with great certainty that this year’s event was one of the very best.  This organization and the diverse community of individuals and institutions it has brought together have accomplished a remarkable amount of good in a very short period of time.

But formidable challenges remain. In fact, the theme of this year’s annual event, “Redefining Online Safety,” made it clear that, in many ways, our community is still struggling to figure out exactly what it is we are all trying to accomplish.

Toward that end, FOSI asked me to join forces with Kim Sanchez, one of the sharpest experts in this field, to moderate a breakout session to consider different conceptions of “online safety” and how we might...

Overdraft Protection Rules Could Hurt Consumers More Than They Help

by G. Michael Flores, Todd Zywicki on November 24, 2014

Bank overdraft protection has come under close scrutiny from the Consumer Financial Protection Bureau. This summer, several researchers at the CFPB released a study that provides information about the patterns of overdraft protection use by consumers at several large banks, focusing particularly on use by the small category of consumers who use overdraft protection regularly.

While the new data and analysis provided by the CFPB advances our understanding of the use of overdraft protection, it does not address several key questions that must be answered before the CFPB imposes new regulations.

First, while the focus of the report is on the large banks over which the CFPB exercises supervisory...

Ex-Im Helps Hillary's Friends at Boeing, Not Women-Owned Firms

by Veronique de Rugy, Andrea Castillo on November 24, 2014

Here’s some news that is sure to shock no one: Hillary Clinton is a big fan of the Export-Import Bank. During a recent address at a Little Rock event hosted by the No Ceilings Project, Clinton made a point to support the federal subsidizer of exporting multinational corporations. 

The perpetual presidential hopeful told the crowd that the Ex-Im Bank is “a tool for us to be competitive in order to support our businesses exporting.” She claimed that those who oppose Ex-Im’s questionable lending practices to large, politically connected corporations are driven by ideology, not by evidence. Setting aside the fact that economists of all ideological backgrounds have amassed...

How a GOP Senate Can Help the Poor

by Veronique de Rugy on November 23, 2014

Right now, the Republicans are riding high due. But if they want to stay in power and help Americans in the process, they need to change their priorities.

Emboldened and energized by their triumphant midterm victories, Republicans are eager to repeat their winning formula in the next presidential election. They have one big problem: Republican midterm gains had more to do with a sagging Democrat brand than an attractive GOP platform. Voters are simply tired of the left’s divisive political tactics, like the mythical “War on women,” cynical race-baiting, and indecent partisanship. Exit polls suggest that Republicans made surprising inroads with rural, young, and Hispanic voters who were hurt or disappointed by the president.


A New Congress Must Perform Major Surgery On Dodd-Frank

by Hester Peirce on November 19, 2014

In the four years since the passage of Dodd-Frank, the financial regulators have written a lot of new rules. Throughout the implementation period, at least one of the chambers of Congress has been under the control of the party that passed Dodd-Frank. Agencies therefore have been spared some painful scrutiny of their Dodd-Frank implementation programs. This month's election changed that, and agencies are likely to face a lot more uncomfortable oversight in the upcoming Congress. But the new Congress, not as wedded to Dodd-Frank as its predecessors, could also make life more bearable for regulators by eliminating some of Dodd-Frank's extraneous statutory mandates.

The Securities and Exchange Commission is a prime candidate for mandate trimming. Dodd-Frank assigned the SEC responsibilities that are far from its core mission. For example, Dodd-Frank directed the SEC to require companies to assess and report their use of minerals tied to the violence in and...

Incentive Pay for Congress

by Eli Dourado on November 19, 2014

Most large enterprises use incentive pay like performance bonuses and stock options to better align the interests of employees, especially top managers, with those of the shareholders. To be sure, these compensation systems are often gamed, and CEOs sometimes receive a large payout even if their performance disappoints. Yet despite these imperfections, incentive pay is an indispensable tool — even startups and privately held companies, which have the strongest reasons to organize efficiently, use it extensively.

We don’t offer incentive pay to members of Congress, but perhaps we should. Like shareholder capitalism, representative government creates a principal-agent problem: no matter how much politicians wrap themselves in the rhetoric of public service, their interests are never quite our own. Voter irrationality compounds the problem — members of Congress usually do not literally enrich themselves at the expense of voters; rather, they play to voters...

Embracing a Culture of Permissionless Innovation

by Adam Thierer on November 19, 2014

“Why does economic growth… occur in some societies and not in others?” asked Joel Mokyr in his 1990 book, Lever of Riches: Technological Creativity and Economic Progress.1 Debate has raged among generations of economists, historians, and business theorists about that question and the specific forces and policies that prompt long-term growth.

As varied as their answers have been, there was at least general agreement that institutional factors mattered most—it was really just a question of what mix of them would fuel the most growth. Those institutional factors include: government stability, the enforceability of contracts and property rights, tax and fiscal policies, trade policies, regulatory policies, labor costs, educational policies, research and development expenditures, infrastructure, demographics, and environmental factors.2


Sidestep the FCC and the FDA

by Arnold Kling on November 19, 2014

It is difficult to imagine rapid economic growth taking place in the United States without technological innovation. Other countries can grow by catching up to existing technology, but for us it is necessary to push the frontier.

Two potential areas for rapid innovation are telecommunication and medicine. I am very concerned that these areas are regulated by the FCC and the FDA, respectively, two agencies that were established in different eras. My fear is that these agencies are culturally incapable of adapting to the environment that scientific advances have created. I have proposals for sidestepping each agency.

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Why Treasury Debt Matters More Than the End of QE

by Stephen Matteo Miller on November 17, 2014

Large markets for standardized goods tend to be impersonal. The market's ability to function depends more on the quantity and quality of goods for sale than on who buys the goods. This applies to markets for financial assets too — and it's important to keep in mind when weighing the potential effects of the current volume of U.S. Treasury debt against the impact of the Federal Reserve's decision to end quantitative easing.

Under the Fed's historic bond-buying program, the central bank purchased longer-term Treasury debt and Fannie Mae and Freddie Mac mortgage-backed securities from primary dealer banks like JPMorgan Chase and Citigroup. The Fed then paid the banks by putting credits into their accounts with the Fed, known as reserves. Increasing banks' reserves was supposed to stimulate the economy by...

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