Archive for the ‘Mercatus Center (George Mason University)’ Category

Auto Franchise Laws Restrict Consumer Choice and Increase Prices

July 14, 2015 Comments off

Auto Franchise Laws Restrict Consumer Choice and Increase Prices
Source: Mercatus Center

Arizona, Michigan, New Jersey, and Texas recently received the 2014 Luddite Award from the Information Technology and Innovation Foundation for preventing automaker Tesla from selling cars directly to consumers. These states’ efforts to ban direct sales are reminiscent of the Luddites, nineteenth-century English workers employed in the textile industry who both rejected technological development and actively worked to prevent its use through its destruction. State legislatures, rather than destroying physical plant and equipment like the Luddites, actively impede alternative distribution models, reducing consumer choice.

Auto franchise laws often include three major restrictions: mandatory dealership licensing requirements, onerous terms for terminating dealerships, and the creation of exclusive territories for incumbent dealers. Each rule carries a potential cost for consumers.

The coverage of these laws has expanded significantly during the past 30 years.

Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom

April 1, 2015 Comments off

Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom
Source: Mercatus Center (George Mason University)

What policy vision will govern the future of technological innovation? Will innovators be forced to constantly seek the blessing of public officials before they develop and deploy new devices and services, or will they be generally left free to experiment with new technologies and business models?

In Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom, Adam Thierer argues that if the former disposition (“the precautionary principle”) trumps the latter (“permissionless innovation”), the result will be fewer services, lower quality goods, higher prices, diminished economic growth, and a decline in the overall standard of living.

When public policy is shaped by “precautionary principle” reasoning, it poses a serious threat to technological progress, economic entrepreneurialism, and long-run prosperity. By contrast, “permissionless innovation” has been the secret sauce that fueled the success of the Internet and much of the modern tech economy in recent years, and it is set to power the next great industrial revolution—if we let it.

The Questionable History of Regulatory Reform Since the Administrative Procedure Act

March 18, 2015 Comments off

The Questionable History of Regulatory Reform Since the APA
Source: Mercatus Center (George Mason University)

The 114th Congress will likely consider many regulatory reform bills. Understanding how such bills pass is important for effective policymaking. While compromise is often key to legislative success, some kinds of compromise may undermine the future success of the intended regulatory reform. If the history of regulatory reform is any indication, the success of future reform will hinge on whether reform bills maintain the substantive intent of their sponsors or are watered down until they fulfill a merely symbolic purpose.

A new study for the Mercatus Center at George Mason University examines the legislative histories and implementation of key regulatory reform statutes and finds that these bills passed after crucial but controversial provisions were weakened. Compromises included in the legislation to secure its passage have consistently undermined substantive reform objectives by maintaining broad agency discretion to interpret the law and by minimizing judicial review. To achieve regulatory reform objectives, legislators must be careful not to abandon core reform elements or history will continue to repeat itself.

Taxicab Cartels Restrict Entry into Market at the Expense of Consumers

March 8, 2015 Comments off

Taxicab Cartels Restrict Entry into Market at the Expense of Consumers
Source: Mercatus Center (George Mason University)

As the debate continues about how sharing economy service providers such as Uber, Lyft, and Sidecar should be regulated, this week’s chart shows why this is such a hotly contested issue. In New York City, taxi cabs can legally operate only if they have a taxicab medallion. The inflation-adjusted prices for NYC taxicab medallions rose 133 percent, on average, from 2007 to 2013, with prices for both corporate medallions and individual medallions increasing.

Despite the fact that the population of New York City grew roughly 12 percent over the last 70 years, the number of taxicab licenses has actually decreased since 1937, when the Haas Act, which regulated taxis, limited the number of cab licenses in New York City to 16,900. In 2004 only 12,187 medallion cabs operated in the city. Unsurprisingly, the price of medallions has increased dramatically since then. Indeed, over the last 80 years, taxi medallions have generated an annualized 15.5 percent rate of return. Put another way, the value of a medallion doubled, on average, every four and a half years.

These are staggering returns for this particular type of rent-seeking.

The bulk of this windfall goes to the medallion owners and is used to pay the up-front costs of procuring new licenses. Under such a system, current operators gain little from increasing total production; in fact, they gain by lowering it. Limiting the supply of medallions allows the taxi cartel to maintain high fares by preventing entrepreneurs from entering the market.

Nondiscrimination on the Basis of Disability by Public Accommodations-Movie Theaters; Movie Captioning and Audio Description

March 3, 2015 Comments off

Nondiscrimination on the Basis of Disability by Public Accommodations-Movie Theaters; Movie Captioning and Audio Description
Source: Mercatus Center (George Mason University)

With this Notice of Proposed Rule Making (NPRM) the DOJ proposes amendments to Title III of the ADA concerning captioning and audio description services at movie theaters.1 Title III of the ADA applies to places of “public accommodation,” such as movie theaters, restaurants, schools, and doctors’ offices.2 These covered entities are prohibited from discriminating against any individual “on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation.”3

In particular, Title III of the ADA prohibits public accommodations, such as movie theaters, from affording unequal or lesser service to individuals with disabilities.4 As a result, these entities must “ensure that no individual with a disability is excluded, denied services, segregated or otherwise treated differently . . . because of the absence of auxiliary aids and services.”5

The Problems with Measuring and Using Happiness for Policy Purposes

January 20, 2015 Comments off

The Problems with Measuring and Using Happiness for Policy Purposes
Source: Mercatus Center (George Mason University)

The use of happiness as a measurement tool is a new interest among some policymakers. Many governments around the world are considering measures of happiness (sometimes called “subjective well-being”) as alternatives to gross domestic product (GDP) for the purpose of guiding economic policymaking. Proponents of happiness measures correctly point out that GDP does not capture many aspects of economic growth, such as nonmarket activity and certain dimensions of citizens’ and residents’ quality of life. Thus, proponents claim happiness measures may better capture the quality of life of a nation’s citizens and lead to policies that are more effective and equitable.

There are important reasons why using happiness to guide policymaking cannot work as promised. The term happiness covers many different concepts and means something different to different people. Indeed, what constitutes happiness is difficult for most people to put into words. It is even more difficult for researchers and policymakers to define and measure happiness in a way that generates meaningful data that can be used to guide policy. Moreover, implementing policy choices based on happiness data would lead to undesirable or contradictory outcomes that would exacerbate existing societal problems.

An Introduction to Monetary Policy Rules

January 19, 2015 Comments off

An Introduction to Monetary Policy Rules
Source: Mercatus Center (George Mason University)

As policymakers seek to prevent another financial crisis, they are scrutinizing the role the Federal Reserve (Fed) played before and during the 2008 crisis. The Fed currently exercises a great deal of discretion in monetary policy. A key point of debate is whether requiring the Fed to follow a specific rule would be preferable to the Fed’s current broad discretion.

In a new study for the Mercatus Center at George Mason University, scholar Alexander William Salter examines several different proposed rules that the Fed could follow. Salter provides a framework to help policymakers better understand how incentives and information can affect monetary policy and discusses discretion-based and rule-based approaches to monetary policy. He concludes that a rule-based approach is superior and may have been able to prevent the 2008–2009 financial crisis. While Salter does not advocate a particular rule in his study, he presents a framework for policymakers to use as they strive to choose the best monetary policy rule.


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