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Mercatus scholars apply economic analysis to the issues of the day

Regulators Need to Do Risk Assessment Right

by Dima Yazji Shamoun on August 03, 2015

Risk science is the study of the effect of exposure to certain substances and activities on public health and safety. The effects produced may be beneficial or harmful, depending on the substance or activity under study and the dose to which one is exposed. As is commonly known, too little water is as harmful as too much water, while a moderate amount is very beneficial. In addition, a deadly substance that only exists on Saturn is of no concern to humans because our exposure to it is zero.

Risk science is, of course, more complex than these two simple examples imply. It must take into account many factors, consider their interactions, and try to uncover the true effect hidden under many layers of complexity. Just like any science, risk science is a systematized study. Yet as long as the best process is carefully and transparently followed, we can trust that objective knowledge will eventually prevail. The danger, as in any science, is when the study is...

Taking Control of Rent Control

by Adam Millsap on August 02, 2015

Cities across the country occasionally flirt with rent control as a way to combat rising housing prices. Seattle is the latest metropolis to consider capping rents, as its city council recently took up the debate despite the fact that the state of Washington currently doesn’t allow rent control. While nobody likes to have their rent go up, it’s important to understand why rent increases occur before taking action to prevent them.

When the demand for a good like housing increases the price will increase. That higher price serves a purpose: It’s a signal to both producers and consumers that housing has become scarcer. The higher price incentivizes consumers to buy less housing while simultaneously encouraging producers to build more. If a policy like rent control is in place the price will be unable to adjust, which eliminates the...

A Warning from the Medicare Trustees

e21
by Charles Blahous on July 30, 2015

My most recent article for e21 summarized the 2015 Social Security trustees’ report released last week. This companion piece does the same for the Medicare report. These are the last annual reports in which I participated as a public trustee based on my term that ended last autumn. The Medicare report shows that the program is on an unsustainable path. Following is some key information from the report about Medicare finances.

Understanding Medicare finances involves much more than just tracking the solvency status of a trust fund. Medicare has two trust funds, one for Hospital Insurance (HI), the other for Supplementary Medical Insurance (SMI). The HI...

Mercatus Scholars on Barriers to Entry and Occupational Licensing

by Veronique de Rugy, Steven Horwitz, Christopher Koopman, Patrick McLaughlin, Matthew Mitchell, Adam Thierer, Edward J. Timmons on July 29, 2015

Mercatus Center scholars have repeatedly documented the costs of occupational licensing and offered suggestions for how to reform or eliminate unnecessary licensing practices.

Research

Biting the Hand That Houses Them

by Michael Farren on July 29, 2015

Forbes recently found San Francisco to be America’s worst city for renters. On top of this, households earning the median income ($100,400) could only afford 11 percent of the homes for sale — by far the lowest percentage in the entire study. The fact that home prices are more than twice the cost compared to New York City — and rental prices are the highest in the nation — is not a failure of the housing market. It’s a failure of governmental policies restricting the construction of new housing.

Soaring rents in the Bay Area can be partly attributed to economic growth in the tech industry, but the already rising prices are exacerbated by misguided, albeit well-intentioned, housing regulations. The Board of Supervisors decided against expanding short-term rental regulations, but now San Francisco voters will be asked to decide whether even more restrictive regulations — limiting all short-term rentals to 75 days per year — are justifiable.

...

Time is Running Out to Fix Social Security

e21
by Charles Blahous on July 28, 2015

Last week saw the publication of the annual Social Security and Medicare trustees’ reports, along with an accompanying summary. The occasion was bittersweet for me, these being the last such reports in which I participated as a public trustee on the basis of my term ending last autumn.  It has been a high honor to serve, largely because of the privilege of working alongside the other trustees – most especially my remarkable fellow public trustee Robert Reischauer – as well as the many dedicated, knowledgeable staff who strive so hard to put together these vital annual reports. 

This column summarizes key information from this year’s Social Security report. A follow-up...

Blahous, Fichtner on Medicare and Social Security Trustees Report

by Charles Blahous, Jason J. Fichtner on July 27, 2015

The Medicare and Social Security annual report, released yesterday, shows that the insolvency date for the Social Security Disability Insurance (DI) trust fund remains unchanged at 2016. While the fundamental outlook remains materially unchanged for both the Social Security Old Age and Survivors Insurance (OASI) trust fund and the combined (OASDI) trust funds, another year has been lost to inaction. 

Mercatus Center senior research fellow Charles Blahous, along with fellow public trustee for Medicare and Social Security Robert Reischauer, warn not to mistake minor improvements in the projected solvency of either program for "financial viability." They note in the "Message from the Public Trustees":

To ensure that [Medicare and Social Security] function adequately, policy makers will need...

What's the Future of Finance, Innovation and Growth?

by Stephen Matteo Miller on July 27, 2015

Several years ago, Stanford University Prof. Ulrike Malmendier and Stefan Nagel, now at the University of Michigan, shed light on how extreme events, like a stock market crash, can affect the way people invest. Those who experienced low returns on their investments around a crash were less willing to take on risk in their financial decisions. It's no surprise that financial market experiences in turn could influence policy views around the world, too.

After the recent crisis, economists have been debating the appropriate role of finance in an economy. Some think finance overall serves a useful function, while others question whether finance...

'Health-Health' Analysis in Policy Decisions

by Patrick McLaughlin on July 23, 2015

Some recent regulatory milestones have been crossed. First, we've reached the five-year anniversary of Dodd-Frank. I recently published some charts showing that Dodd-Frank may be the biggest law ever, if the size is measured by how much new regulatory text it spawns. No one disputes this fact: Dodd-Frank created a massive surge in regulations, and it did so in a relatively short time span.

Second, less than a month ago, the Supreme Court ruled in Michigan v. EPA that the Environmental Protection Agency (EPA) — and perhaps implicitly, all regulatory agencies — must consider economic costs prior to deciding whether to promulgate a regulation. Some...

Michigan's Fiscal Health Is Not Strong

by Theodore Bolema on July 23, 2015

Michigan has struggled to emerge from the Great Recession, just like so much of the rest of the nation — and it still has a great deal of work to do. The latest evidence is a new report published by the Mercatus Center at George Mason University, which shows the state’s “fiscal health” ranking is slipping.

Until recently, assessing the fiscal health of states was difficult because of the lack of standardized data. Now, however, all states prepare audited Comprehensive Annual Financial Reports, which can be compared across states. Using this data, my Mercatus Center colleague Eileen Norcross calculated the fiscal health rankings for all 50 states. This report, “Ranking the States by Fiscal Condition,” puts Michigan in 34th place, based on its solvency in five categories.

This project takes the extensive data in these reports, as well as...

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