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Mercatus scholars apply economic analysis to the issues of the day

Nobelist Douglass North Taught Us Institutions Matter Most

by John Nye on November 25, 2015

Douglass C. North passed away on Nov. 23, 2015, at the age of 95. A recipient of the Nobel Memorial Prize in Economics, he was one of the most cited and influential scholars of his generation—not just in economics, but also in law, political science, history, and development. Though he started as a conscientious objector and even a Marxist before World War 2, North's views constantly evolved and in the end, he did more than anyone to restore to the study of economics the importance of good institutions as the basis for the success of modern market capitalism.

Today, the idea that good formal and informal institutions (laws, norms, and their enforcement characteristics)—the rules of the game as he called them—are a crucial determinant of economic success or failure is almost a trite truism accepted by...

An ACA Provision You've Never Heard of Could End up Being Very Costly

by James C. Capretta, Joseph Antos on November 23, 2015

One of the most consequential provisions of the Affordable Care Act (ACA) is also one of its most obscure.

The “productivity adjustment factor,” inserted by the ACA into the Medicare program, is a massive spending cut, one of the largest in the program’s history. It was included to make room in the federal budget for the ACA’s expensive new health insurance subsidies.  If Congress follows past practice, the ACA’s higher spending will be with us long after savings from the productivity adjustment factor have been reduced or eliminated altogether.

The productivity adjustment factor is one of four ACA “indexing” provisions we examined in a new research paper published by the Mercatus Center at George Mason University. Indexing refers to adjustments that are made to keep tax and program benefit parameters consistent with policy preferences over time....

Don't Blame Food Companies for Your High-Calorie Thanksgiving

by Sherzod Abdukadirov on November 23, 2015

As Thanksgiving draws near, once again everyone's attention turns to festive holiday treats and the explosive number of calories contained therein. The usual incriminations of Big Food and its role in ballooning waistlines typically follow. Health advocates blame food companies for putting profits above consumers' well-being and for selling consumers cheap junk food loaded with fat and sugar but containing few nutrients. Consequently, they call for food regulations and taxes on junk food to counter the food industry's harmful effects. Yet health advocates are unlikely to achieve the outcomes they seek because they mistake the nature of the problem.

To understand just how unusual the criticism of food...

A Downgraded ACA Baseline

by Brian Blase on November 19, 2015

In a new study published today by the Mercatus Center at George Mason University, I assess key predictions made by both government and nonprofit research organizations about the Affordable Care Act’s (ACA) impact. The misestimates include: overestimating total exchange enrollment, overestimating enrollment of higher income people who do not qualify for subsidies to reduce premiums, projecting too many healthy enrollees relative to less healthy enrollees, and underestimating premium increases. This post focuses on the Congressional Budget Office’s (CBO) estimates. As CBO accounts for the first two years of the ACA’s implementation, its 2016 revised baseline will almost certainly show a lower overall budgetary cost for the law’s subsidies even as the average subsidy amount increases to account for a more adverse risk pool than expected...

New Research: Affordable Care Act Not Working as Intended

by Brian Blase on November 19, 2015

When the Affordable Care Act or “Obamacare” passed five years ago, government prognosticators and private research organizations projected between 21 and 27 million exchange enrollees in 2016. But last month, the Obama administration announced that it reduced that target to just 10 million enrollees.

In 2010, the Urban Institute, a left-of-center think tank, projected that almost as many people with income above four times the poverty level ($47,080 for a single person and $97,000 for a family-of-four in 2015) would enroll in exchange plans as people with income less than half these amounts. Urban’s projections, which were fairly representative of other groups, are in hindsight wildly optimistic. It turns out that more than 25 times as many people with income below...

A Common-Sense Solution to the Uber vs. Taxi Wars

by Matthew Mitchell, Michael Farren on November 19, 2015

Since Uber's launch in San Francisco five years ago, government officials have wrestled with how to address this new type of transportation service. Meanwhile, taxi drivers have cried foul over the unequal regulatory environment. They face a mountain of rules, ranging from sensible to comical and even bizarre, while ride-share upstarts Uber and Lyft operate outside most taxi laws. Policymakers across the nation could learn from their peers in Florida, who may have found a way to level the playing field and still make way for innovation.

Last month, Broward County commissioners voted to reduce excessive taxi and ride-sharing regulations, creating a single set of simple rules that apply equally to all transportation services. Days later, Collier County joined the cities of Sarasota and Gainesville in completely deregulating vehicle-for-hire services,...

The Unintended Consequences of CFPB Debt Reform

by Todd Zywicki, Chad Reese on November 18, 2015

While we can be confident that new regulations for the debt collection industry are on the way, it's not yet clear whether those regulations will help or harm consumers. The result is largely dependent upon the Consumer Financial Protection Bureau (CFPB), which has the opportunity to either help facilitate open, constructive communication between consumers and debt collection firms, or to saddle the industry and consumers with hasty regulations that result in unintended consequences.

The CFPB so far appears to be pursuing debt collection regulatory reform through the normal regulatory process, receiving more than 20,000 public comments in the wake of their proposal last year, and is surveying consumers about their experiences with debt collection. In addition to those laudable efforts, policymakers would do well to consider the lessons that can be learned from...

The Injustice of Eminent Domain

by Adam Millsap on November 17, 2015

The District of Columbia recently filed suit in D.C. Superior Court to use eminent domain to take control of a piece of land the city needs to placate D.C. United, the District's major league soccer team. Without the land, D.C. United may leave for Virginia. This is just another in a growing list of local governments using the policy of eminent domain to enrich other private citizens, rather than for essential public uses. It's a policy only big business or a government bureaucrat could love.

Eminent domain allows governments to acquire private property from unwilling sellers for public use. In many cases, however, "public use" has been ignored or twisted beyond recognition, as local governments...

The Doomed Crusade Against Daily Fantasy Sports

by Christopher Koopman, Jim Pagels on November 16, 2015

Last week, New York State attorney general Eric Schneiderman issued cease-and-desist letters to DraftKings and FanDuel, the two largest daily-fantasy-sports (DFS) companies, claiming that the games they offer constitute illegal gambling under New York law. The companies have responded with legal action of their own, putting the decision in the hands of the New York court system. 

While this is just the latest in a series of confrontations playing out across the country over the status of daily fantasy sports, it is perhaps the highest-profile one. It also raises important questions about how the law is applied to innovative products and firms, such as DraftKings and FanDuel, as well as who is in the best position to protect consumers. 

In fantasy sports, participants choose their own “teams” composed of real-life athletes in a particular sport, then get points for the statistical accomplishments (yardage gained,...

Rent Control Policies Are Ineffective, Unjust

by Adam Millsap on November 16, 2015

Officials and activists in cities around the United States are lamenting the lack of affordable housing in their communities. Even the federal government is getting involved, as the Secretary of Housing and Urban Development Julian Castro was recently in Minneapolis to discuss the issue.

Most Americans know about the sky-high housing prices in places like San Francisco and New York. But fewer are aware that a similar outcry over housing prices exists in places such as Houston, Denver, ...

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