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Mercatus scholars apply economic analysis to the issues of the day

How to Restart Health Care Reform

by Robert Graboyes on October 20, 2014

Midterm elections are coming, and both parties are lobbing grenades over health care. Despite the furious rhetoric, the two sides are more alike than they realize. Both spent decades pursuing policies that obstruct health care's capacity to save lives, ease suffering and cut costs. The endless vitriol resembles World War I-style trench warfare. The Affordable Care Act moved the battle lines a little in one direction; the midterms that year moved them a little in the opposite direction. With divided government, the 2014 elections will move the lines even less.

But those weary of the trenches can begin improving health care in January 2015 by shifting to a different theater of a different war in a different era. Think Pacific Islands, World War II. Think innovation.

For 70 years, one side asked one question only: "How many Americans have insurance cards?" The other side pushed back feebly, claiming a superior ability to distribute cards...

Does Eminent Domain Even Raise Revenue?

by Dean Stansel, Carrie Kerekes on October 17, 2014

Proponents of eminent domain for private development -- i.e., of forcibly taking private property and giving it to another private party -- claim it will generate more revenue for state and local governments. The Supreme Court even based its landmark 2005 case Kelo v. City of New London on this assertion, holding that the alleged economic benefits for communities legally justify these takings as "public use."

The claim that eminent domain leads to higher revenues has largely gone unchallenged. We recently examined the available data, and our study finds virtually no evidence that eminent-domain activity for private development is associated with higher government revenue. To the contrary, we find some evidence that eminent domain is associated with lower growth of government revenue in the future.

In other words,...

Who’s Regulating the Regulators?

by Veronique de Rugy on October 16, 2014

As the Goldman Sachs tapes show, regulators almost always fail. In other cases, they cheat consumers out of choices. Leave it to the market.

Many people simply take it for granted that government regulation achieves its intended ends. National political debates often reflect this: Doe-eyed Democrats position themselves as the forthright champions of the little guy, selflessly tying unscrupulous businessmen to the mighty yoke of the regulatory state. On the other side, smooth, corporate Republicans appeal to our inner entrepreneurs, decrying the lost productivity and forgone trickled-down growth that would torture our nation’s shackled conglomerates under the proposed new round of regulations.

Whether you’re pro-regulation or anti-regulation in America depends more on affiliation than reality. For better or worse, the truth is more insidious; regulators are often captured by the industry they regulate at the expense of everyone else....

License to Invest

by Hester Peirce on October 15, 2014

Last week, the Securities and Exchange Commission's (SEC) Investor Advisory Committee — on which I currently serve — recommended, over my objection, that the SEC change the way it assesses who qualifies as an "accredited investor." Although sensibly challenging the existing approach to accreditation, the committee's approach was too conservative. Instead, the committee should have called for a more fundamental reconsideration of whether existing investment restrictions are consistent with investor protection.

Under existing law, companies can raise funds through public and private offerings. A public offering involves registration of the offering with the SEC and compliance with an ever-expanding list of regulatory requirements. Anyone can buy shares in a public offering. A private offering, by contrast, is subject to a much shorter regulatory checklist, but — with limited exceptions — only accredited investors are able to buy shares.


Losing Employer-Provided Coverage: Another ACA Prediction Comes True

by Charles Blahous on October 14, 2014

This past week provided an important example of the anticipated effects of the Affordable Care Act coming to pass. Walmart has announced that it will no longer offer health insurance for 26,000 part-time workers, prompting a piece at Vox recognizing that this termination of coverage occurred because “Obamacare changes the calculus on getting coverage at work” and noting that “the loser in the Walmart decision is the federal budget.”

Sarah Kliff, author of the Vox piece, explains as follows:

For low-wage workers, Obamacare has introduced a new and big drawback to the employer insurance. Namely, anybody who gets access to affordable coverage at work is barred from getting subsidies through the new exchanges. This is even true for people who don't buy insurance at work; just the...

Put the Market Back in Real Estate

by Dino Falaschetti on October 14, 2014

We’re six years out from the financial panic of 2008. But the U.S. economy continues to stop almost $1 trillion short of its potential. And while unemployment rates have decreased, a remarkable number of Americans have left the labor force.

The facts are discouraging, but public policy can do better. For example, allowing markets to discipline how we finance housing – not doubling down on the unsustainable political favors that got us here – can go far in turning our economy in a better direction.

How, you might ask, could improving financial policy for a single sector like housing do so much good? Because poor policy has done so much bad.

Consider this: News about rising prices for energy, food and transportation is regularly characterized as bad for the...

Health Care Cartels Limit Americans' Options

by Thomas Stratmann on October 14, 2014

Every year, 50,000 Americans die from preventable colon cancer. Because of the invasive and uncomfortable nature of the dreaded colonoscopy, it's no surprise only 50% of at-risk individuals actually get screened. Fortunately, advances in medical imaging technology now make screening more comfortable and less expensive.

President Obama himself chose a "virtual colonoscopy" during his first comprehensive exam as commander in chief, but it isn't as widely available as it should be. Misguided certificate-of-need (CON) laws in 36 states restrict access to the procedure recommended by the American College of Radiology.


A Nobel Economist’s Caution About Government

by Donald J. Boudreaux, Todd Zywicki on October 13, 2014

Forty years ago the Nobel Prize in Economic Science was awarded to a scholar who believed the prize perhaps should not exist. As he graciously accepted the distinction in 1974, Austrian-British economist Friedrich A. Hayek worried aloud that thinking of economics as a science might fuel what he called “the pretense of knowledge”—the idea that anyone could know enough to engineer society successfully. He was right to fret.

Hayek’s greatest contribution to economics was to show that society is far more complex than we realize, with little pieces of knowledge dispersed among millions of individuals. “The curious task of economics,” he famously wrote in “The Fatal Conceit,” which he published in 1988, “is to demonstrate to men how little they really know about what they imagine they can design.”

Recent government interventions suggest that politicians and bureaucrats today think they can design just about anything. This ignorance has backfired, as it always does, bringing...

Lame Duck Sessions Reveal What Members of Congress Really Want

by Matthew Mitchell, Emily Washington on October 12, 2014

What does your member of Congress really want? It can be hard to know because typical legislators are under extraordinary pressure to do what other people want. For one, she must cater to home-district special interests because the ability to organize can make or break a political career. She must also accommodate the wishes of donors, for it’s nearly impossible to win reelection without a sizeable war chest. Then there are congressional colleagues. Your member must indulge their often-parochial interests because she needs their support for her own priorities. And, finally, there are party leaders. Because they control the agenda, a sizeable portion of campaign funds, and all-important committee assignments, leadership’s interests must also be indulged.

Wouldn’t it be nice to know how your member of Congress really feels about the important issues, to have a political science version of the movie What Women Want? It turns out something like this exists...

Why Everything Elizabeth Warren Told You About Consumer Credit Is Wrong

by Todd Zywicki on October 10, 2014

Why do people borrow? To hear law professor turned Senator Elizabeth Warren, it is because they are seduced by rapacious lenders and a consumerist culture into living beyond their means, buying big-screen televisions, new cars, and expensive vacations. And before you know it, you are under the thumb of the big banks—or, even worse, of the street corner payday lender.

But as we show in our new book, Consumer Credit and the American Economy, economists have long understood why consumers borrow. Although there are exceptions to any rule, for most it bears little resemblance to Senator Warren’s picture of hapless victims goaded into debt by rapacious credit card issuers. Instead, consumers borrow for essentially the same reasons that businesses borrow: for capital...

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