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Mercatus scholars apply economic analysis to the issues of the day

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

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...

The Debt Deniers Who Threaten America’s Future

by Richard Williams on September 12, 2014

There is no shortage of both real and imagined crises vying for the headlines these days. Left relatively unchallenged, largely ignored, or often denied by Washington and the media, however, is one of the gravest internal, self-made threats to our economy: the crisis of government debt. Most economists agree that the United States federal debt poses a real and serious problem for our future, but for the debt deniers, such warnings fall on deaf ears.

As the latest Congressional Budget Office (CBO) report notes, even with the recent—and temporary—decline in budget deficits, government debt continues surging to historic levels. In 2007, for example, debt owed to outside investors (called “debt held by the public”) equaled about 35 percent of the nation’s gross domestic product (GDP). Today this debt level is 74 percent—or nearly three-quarters the size of our entire economy—and is projected to grow larger from there.

Yet even this is...

Let the Markets Fix the Ratings Agencies

by Hester Peirce on September 10, 2014

Two weeks ago, the Securities and Exchange Commission adopted a new set of credit rating agency regulations. Credit rating agencies are at the top of many financial crisis blame lists because they seemed to blithely give high ratings to all manner of mortgage-backed securities and related products. As is often the case with purported market failures, the government set the stage for failure. Government regulations shaped and molded the credit rating industry, and the SEC's latest set of regulations does more shaping and molding.

For years, regulators forced banks, money-market mutual funds, and others to rely on ratings issued by the few credit rating agencies that enjoyed the SEC's blessing. For example, asset-backed securities were not securities eligible for inclusion in money-market mutual fund portfolios unless they were rated by a government-blessed credit rating agency. Not...

Still Free to Choose in Hong Kong

by Donald J. Boudreaux on September 09, 2014

Thirty-five years ago, Rose and Milton Friedman traveled to Hong Kong to film some segments of their 10-part PBS series “Free To Choose.” The reason is that Hong Kong had then what it still has today: the world's freest economy. It's an economy based on secure private property rights, low taxes, an independent and honest judiciary, free trade and few government regulations.

The Friedmans correctly used Hong Kong as an example of the beneficial power of individual freedom. Hong Kong has no natural resources to speak of except its large harbor. And that harbor, combined with freedom and a robust bourgeois culture, has made Hong Kong one of the wealthiest places on the planet. It's a place where free trade and voluntary market exchanges reign.

This economic freedom has raised Hong Kong's annual per capita income today to equality with that of the United States. At about $53,000 (U.S.), that income per person is nearly 50 percent higher...

The Right Level of Regulatory Rigor

by Jerry Ellig, James Broughel on September 08, 2014

A proposal by Rep. Paul Ryan, R-Wis., to require federal agencies to assess the effects of regulations on the poor continues to generate considerable debate — a debate, which is long overdue.

Benefit-cost analysis of regulations, as currently practiced by federal agencies, usually just compares total benefits with total costs. But those costs and benefits tend to fall on different people. In order to judge whether or not a regulation is regressive, the analysis must look at both the benefits and costs for each group affected by a regulation. Regulations whose costs to the poor outweigh the benefits to the poor are regressive. And if lifting the poor out of poverty is a priority, regulations with regressive effects ought to face higher hurdles.

Regulations tend to increase prices of goods and services. In this way, regulations act like a regressive...

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