A blog of the NYU Colloquium on Market Institutions and Economic Processes
by Mario Rizzo
The Gross Domestic Product (GDP) is growing again at an annual 3.5% rate for the third quarter of 2009. Some people say this means that the recession is over. Apart from the much-touted stubborn unemployment problem, does this make sense? Read the rest of this entry »
by Mario Rizzo
To much fanfare the House Democrats just revealed their healthcare plan. Three items from the CNN report caught my eye:
“The nearly 2,000 page bill — a combination of three different versions passed by House committees…”
A priori, I say this will be a nightmare to read and a mess to interpret.
“Pelosi’s office said the bill would cut the federal deficit by roughly $30 billion over the next decade. The measure is financed through a combination of a tax surcharge on wealthy Americans and spending constraints in Medicare and Medicaid.”
That is $30 billion over TEN years. When have Congressional estimates of savings not been seriously wrong in the direction of greater spending?
“Medicare expenditures would be cut by 1.3 percent annually.”
Politically impossible under the current mindset.
I am astonished by the patently obvious nonsense that is being peddled by this Congress. Let them admit that what they propose will cost a ton and add to the deficits. Then, at least, we could see if there are any counter-balancing benefits.
UPDATE: A few hours ago the House Democrats said the bill would cost $871 billion over ten years. However they “misspoke.” Oops. It has now been revealed that it will cost $1.05 trillion over ten years. (But now it will save about $100 billion over ten years.) Stay tuned.
by Chidem Kurdas
The Obama administration has perfected the fine art of taking a real issue and using it to justify a policy that will almost certainly make the problem worse. Claim to control medical costs, add another trillion dollar medical entitlement to truly break the bank—that sort of thing. Looks like we have another example coming.
The Treasury and House Financial Services chief Barney Frank are apparently cooking up legislation that will allow the government to wreck havoc with the creditors of large financial companies. This is in the name of imposing “market discipline” on institutions that may have to be rescued because they could endanger the system.
“The measure would make it easier for the government to seize control of troubled financial institutions, throw out management, wipe out the shareholders and change the terms of existing loans held by the institution,” according to the New York Times report.
Scroll back to September 2008. Lehman Brothers files for bankruptcy, the credit market seizes up and stocks tank. What difference would the proposed law make in that situation? Lehman management is out and shareholders are wiped out anyway. Instead of regular bankruptcy, where the creditors exert influence, government directly takes over.
So the difference is that lenders will no longer be able to enforce their contractual claims. Oh yes, that will be just the right remedy for a fragile credit market. You’ll tell lenders they’re toast! That will really get credit flowing. Read the rest of this entry »
by Sandy Ikeda
Congratulations to Don Boudreaux for his article debunking insider-trading regulations, “Learning to love insider trading,” which covers the entire front page of the Weekend Journal section of this morning’s paper.
Prohibitions on insider trading prevent the market from adjusting as quickly as possible to changes in the demand for, and supply of, corporate assets. The result is prices that lie. And when prices lie, market participants are misled into behaving in ways that harm not only themselves but also the economy writ large.
With last week’s arrest of Galleon hedge-fund founder Raj Rajaratnam, insider trading has been very much in the news. And now Don has done an excellent job of using and extending arguments originating with Henry Manne to help us understand just what is and isn’t at stake.
by Mario Rizzo
Glen Whitman and I have published another article about the new paternalism – it appears in the Arizona Law Review, volume 51, no. 3 (2009). You can get it here.
This article applies a slippery-slope or policy-dynamic analysis to the “moderate” policies proposed by some new paternalists. (The general slippery-slope analysis was first laid out in a UCLA Law Review article Glen and I published in 2003.)
The following is a summary of the article:
“The “new paternalism” claims that careful policy interventions can help people make better decisions in terms of their own welfare, with only mild or nonexistent infringement of personal autonomy and choice. This claim to moderation is not sustainable. Applying the insights of the modern literature on slippery slopes to new paternalist policies suggests that such policies are particularly vulnerable to expansion. This is true even if policymakers are fully rational. More importantly, the slippery-slope potential is especially great if policymakers are not fully rational, but instead share the behavioral and cognitive biases attributed to the people their policies are supposed to help. Accepting the new paternalist approach creates a risk of accepting, in the long run, greater restrictions on individual autonomy than have been heretofore acknowledged.” Read the rest of this entry »
by Mario Rizzo
This is more an intellectual experiment than a normal post. What I am asking you to do is to clear your mind of its cobwebs. Just “marvel” at the contrast between the classic statements of the limits of the federal government and the recent report in the Wall Street Journal:
“The U.S. pay czar will cut in half the average compensation for 175 employees at firms receiving large sums of government aid, with the vast majority of salaries coming in under $500,000, according to people familiar with the government’s plans.
As expected, the biggest cut will be to salaries, which will drop by 90% on average. Kenneth Feinberg, the Treasury Department’s special master for compensation, also intends to demand a host of corporate governance changes at those firms.”
I am not here concerned with whether this is a good idea but I am simply in a state of naïve wonderment that we got to the point where this is legally possible. Read the rest of this entry »
by Mario Rizzo
The Senate Finance Committee has filed its current version of healthcare reform. It is here.
(HT: Volokh Conspiracy)
It is 1,502 pages long and it is in legislative language. If passed, it will affect our lives in important ways. Let me suggest that you all read it carefully and then let your senators know what you think.
Of course you won’t do that and neither will I. We are rationally ignorant and we shall remain that way.
Will the senators, not on the committee, read it? I doubt it. They will be too busy giving their opinions on selected portions. However, special interests will know about the particular provisions that affect them. As to the senators on the committee, staffers will give summaries. How much they understand or care about provisions that affect the general interests in contrast to the interests that elect them is unknown.
The welfare state makes a mockery of the rule of law and of representative democracy.
By Mario Rizzo
If anyone doubts that this Administration and the Democrats in Congress live in bizarre fantasy world he should take a look at what is happening with the funding of Medicare. Read the rest of this entry »
by Chidem Kurdas
Goldman Sachs has become exhibit number one in attacks on Wall Street and capitalist greed. Last week’s announcement that the bank had strong third-quarter earnings and is on track to pay big bonuses added to the media feeding frenzy.
Let’s look at the logic – to the extent there is logic – in the mass fury. The assault on Goldman contains at least three, related but distinct, complaints.
by Mario Rizzo
Some very good news. Don Boudreaux, Professor of Economics at George Mason University and former president of the Foundation for Economic Education, has been awarded the Thomas Szasz Award for Contributions to Civil Liberties. Although Don is an economist, his commitment to liberty is broad-based. He understands that freedom is important in all areas of human society and life.
For a more complete announcement of the award see the FEE blog, Anything Peaceful.
Congratulations to Don!
