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Mercatus scholars apply economic analysis to the issues of the day

Blackout Repeal Heads in the Right Direction

by Brent Skorup on September 30, 2014

Today’s announcement that the Federal Communication Commission is ending its sports blackout rule after nearly 40 years is a step in the right direction, according to Brent Skorup, a research fellow at the Mercatus Center at George Mason University.  Skorup says that overturning these rules will  make media companies freer to respond to consumer demands and changing viewing technologies.

“After today’s rule repeal goes into effect, sports blackouts will occur only when the leagues and networks believe a blackout makes business sense—not because the government says certain games must be withheld from consumers,” said Skorup. 

“Hopefully the FCC won’t stop with the repeal of sports blackout rules. Many more TV regulations are designed for the rabbit-ears antenna era and harm consumers who live in an entertainment world of hundreds of TV channels, online video from...

Banking Regulators Could Use a Lesson in Humility from Hayek

by Hester Peirce on September 30, 2014

Forty years ago, Friedrich August von Hayek received the Nobel Prize in economic sciences for his "pioneering work in the theory of money and economic fluctuations" and for "penetrating analysis of the interdependence of economic, social and institutional phenomena."Officially known as the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, it was first awarded only five years earlier.

In his banquet speech, Hayek mused that perhaps such an award never should have been created, lest its recipients think too much of themselves. He told the Nobel Committee that he was "almost inclined to suggest that you require from your laureates an oath of humility, a sort of...

Judge to CFTC: Heads You Win, Tails You Win Too

by Hester Peirce on September 24, 2014

Last week was a big week for the Commodity Futures Trading Commission. As Commissioner Sharon Bowen pointed out, the CFTC held its first meeting at which "all of the Commissioners have arrived after passage of the Dodd Frank Act." Also this week, a judge largely upheld CFTC guidance regarding the extraterritorial application of CFTC rules governing swaps (a type of derivative). In doing so, the judge gave the freshly minted CFTC commissioners a green light to continue the bad practices of their predecessors.

The lawsuit, which was brought by several industry organizations, came in response to an 80-page, 650-footnote CFTC guidance document that-along with some letters issued by the CFTC staff-defined the scope of the agency's extraterritorial jurisdiction. The industry argued that the CFTC essentially wrote a binding rule without calling it a rule and thus avoided...

Bad Arguments for Good Policy

by Donald J. Boudreaux on September 23, 2014

History and sound analysis supply many reasons for those of us who celebrate mass prosperity to support free markets. Yet champions of free markets sometimes offer bad arguments to support their positions. These bad arguments only damage the case for free markets.

One bad argument is that high tariffs and other forms of protectionism decrease the number of jobs in the home market.

In fact, protectionism does not decrease employment. Nor, however, does protectionism increase employment. What protectionism does is shift workers from jobs that are more productive into jobs that are less productive.

The number of jobs in an economy is determined by the size of that economy's labor force and by conditions in the domestic labor market. For example, government policies, such as ObamaCare, that artificially raise firms' costs of employing workers will result in fewer domestic jobs.

But...

If You Like Your Plan, You Still Can't Keep It

by Robert Graboyes on September 22, 2014

There’s a bizarre reason why millions of Americans saw their health insurance plans cancelled in 2013 – and as explained in a new video put out by the Mercatus Center at George Mason University, millions more will lose their plans in years to come. 

Insurance coverage for Americans will remain in permanent turmoil because the Affordable Care Act requires all plans to fit within four cookie-cutter designs called "metallic tiers." (The tiers – bronze, silver, gold and platinum – refer to the percentage of medical expenses a particular plan pays.) The video also notes that families may have to change plans repeatedly because, as circumstances change, a plan that fits within a tier one year may not fit in any tier a later year.

...

The Medicare Cost Problem Remains Unsolved

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by Charles Blahous on September 17, 2014

On August 28 the New York Times published a provocative article entitled “Medicare: Not Such a Budget Buster Anymore.” Its thesis was that Medicare no longer poses the budgetary threat it was projected to just a few years ago (the New York Times piece contrasts current projections with those made in 2006), thanks in part to the Affordable Care Act and other changes in the healthcare sector. After its publication, other commentators such as Paul Krugman and those at Vox picked up the theme, with Krugman arguing that “our supposed fiscal crisis has been postponed, perhaps indefinitely” by the Medicare cost slowdown...

Regulation, Media Mergers and the Consumers' Interest

by Adam Thierer on September 16, 2014

Leo Hindery Jr. gets it right when noting, "Consumers and viewers won't gain a thing from regulators blocking the media-distribution industry's natural evolution" ("The Absurd Opposition to Media Mergers," op-ed, Sept. 9). But he misses two of the most important reasons why Chicken Little-ism about media mergers is unwarranted.

Even when mergers don't make sense, the market does a better job than regulators of sorting the good from the bad. Remember AOL-Time Warner's 2000 marriage? Their shareholders certainly don't want you to. Regulators worried the sky would fall if they wed, but they divorced just a few years later after losing over $100 billion on the mega-flop. Likewise, News Corp 2003 deal for DirecTV was a disaster, and DirecTV was spun off after three years.

There is plenty of churn in the media world with old giants...

Forfeiture and Criminal Proceedings

by Donald J. Boudreaux on September 16, 2014

You properly denounce Philadelphia's abominable practice of civil forfeiture to boost its revenues ("What's Yours Is Theirs," Sept. 3). Much blame for this frightening state of legal affairs belongs to the late Chief Justice William Rehnquist.

The 1996 case Bennis v. Michigan upheld, by a 5-4 vote, the civil seizure of John and Tina Bennis's car after John pleaded guilty to—and paid a fine for—having sex with a prostitute in the car. The Supreme Court ruled that, according to the tradition of civil forfeiture, Tina Bennis's innocence of her husband's criminal actions didn't protect her from being stripped of her ownership share in the car. Writing for the majority, Mr. Rehnquist further argued that because civil forfeiture was part of Anglo-American common law when the Bill of Rights was ratified, the Constitution allows such civil seizures.

But the...

More Capital, Safer Banks

by Stephen Matteo Miller on September 15, 2014

Unless you’re on the receiving end, it’s hard to approve of corporate welfare like government decreed loan guarantees. That principle underlies recent debates my colleague, Veronique de Rugy, has taken part in over the Export-Import Bank’s future. Similarly, unless you think your deposits lie in a troubled bank, it’s hard to approve of bank bailouts, such as those we saw after the 1982 Latin American debt crisis, the savings and loans crisis and now the most recent crisis. That principle underlies the “Wall Street vs. Main Street” debate.

My colleague Matt Mitchell points out there are many forms of corporate welfare, including direct cash...

Why the Economic Gender Gap Will Eventually Close

by Tyler Cowen on September 13, 2014

Debates over the supposed differences between men and women are a staple of pop culture. But two new books offer an economic look at the evidence, giving support to both pessimistic and optimistic perspectives on the direction of gender relations and the prospects for more fairness and equality.

The first book, “Why Gender Matters in Economics” (Princeton University Press, 2014) by Mukesh Eswaran, an economics professor at the University of British Columbia, draws on data from past economic studies conducted under laboratory conditions to show how gender influences financial actions and relationships.

In one set of these experiments, called the dictator game, women were found to be more generous than men. Players were given $10 and allowed but not required to hand out some of it to a hidden and anonymous partner. Women, on...

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