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Though privileged firms may not focus on it when they obtain their favors, privilege almost always come with strings attached. And these strings can sometimes be quite debilitating. Call it one of the pathologies of government-granted privilege. Perhaps the best statement of this comes from the man whose job it was to pull the strings […]

Whenever someone suggested a new innovation or an improvement, Empress Maria Theresa had a favorite response: “Leave everything as it is.” As the sovereign of most of central Europe during the 18th Century, the Habsburg Empress epitomized absolutist rule, claiming that her powers had no limit. But as her statement demonstrates, she clearly understood that […]

What lead the city of Hercules, California to default on its debts? Guest poster Marc Joffe, Principal Consultant at Public Sector Credit, finds a case of mission-creep in the “dynamic city on the Bay’s”  decision to issue debt to finance power plants and affordable housing. (For more of Marc Joffe’s research on modeling credit risk, read […]

Behind every privilege to a particular firm, there is a taxpayer, a customer, or a competitor who ends up paying for it. And those who are privileged today can easily find themselves on the other side of the equation tomorrow. Tesla Motor Company is coming to learn this lesson the hard way. This past week New Jersey […]

The “pension tapeworm” and Fiscal Federalism

March 5, 2014

In his annual report to shareholders, Warren Buffett cites the role that pension underfunding is playing in governments and markets: “Citizens and public officials typically under-appreciated the gigantic financial tapeworm that was born when promises were made. During the next decade, you will read a lot of news –- bad news -– about public pension plans.” […]

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Profiles in Privilege

February 21, 2014

When powerful politicians give no-bid construction contracts to their friends, you get Olympic bathrooms with two toilets to a stall. Thank god we don’t have those sorts of problems here in the West, right? Sheldon Adelson, owner of one of the largest (off-line) gambling ventures in the world, is really worried about on-line gambling. And, […]

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Does statehood trigger Leviathan? A case study of New Mexico and Arizona

February 19, 2014

I was recently asked to review, “The Fiscal Case Against Statehood: Accounting for Statehood in New Mexico and Arizona, by Dr. Stephanie Moussalli for EH.net (the Economic History Association). I highly recommend the book for scholars of public choice, economic history and accounting/public finance. As one who spends lots of time reading  state and local […]

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What are the best arguments against film subsidies?

February 19, 2014

The Academy Awards are nearly upon us, and that means long-winded acceptance speeches from actors and directors, filled with thanks for all the people who have helped them along the way. Listen closely to those speeches. Because they should really be thanking you. That’s because each of the nine films up for Best Picture this year received […]

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When Regulatory Agencies Ignore Comments from the Public

February 19, 2014

A few days ago, the Department of Energy (DOE) finalized a rule setting energy efficiency standards for metal halide lamp fixtures. Last October I wrote a public interest comment to the DOE to point out several problems with the agency’s preliminary economic analysis for the rule. As part of the Administrative Procedure Act, agencies are […]

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Does an income tax make people work less?

February 13, 2014

Harry Truman famously asked for a one-handed economist since all of his seemed reluctant to decisively answer anything: “on the one hand,” they’d tell him, but “on the other…” When asked whether an income tax makes people work more or less, the typical economist gives the sort of answer that would have grated on Truman like […]

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