Date post: | 09-May-2015 |
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Health & Medicine |
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Matthew Mitchell
Senior Research Fellow
THE PATHOLOGY OF PRIVILEGETHE CONSEQUENCES OF GOVERNMENT FAVORITISM
“Government must rein in business”
“Government is crushing business”
LEFT RIGHT
RAISE TAXES? CUT
TAXES?
What did the Tea Act actually do?
Image by AgnosticPreachersKid
Implicit
$2.25 billion line of credit at the Treasury
Exemption from state and local taxation
Exemption from SEC filing requirements
Lower capital requirements (1/4th)
federal backing
Image by AgnosticPreachersKid
Implicit
federal backingExplicit
$224,000,000,000
$336,000,000,000
to
in Federal Bailout
Types of Privilege
Types of Privilege
Subsidies
36 States Require “Certificates of Need”
to Open a Health Facility
Regulations
10 States Require Hair Braiding Licenses
Regulations
Regulations
10 States Require Hair Braiding Licenses
Expected Bailouts
Loans at 0.5% Lower Interest than Competitors
Tax Credits
Sales, Use, Hotel exemptions; Refundable tax credits
Monopolies
Loan Guarantees
Protectionism
2003: Tariffs 8 to 30%
Non-Competitive Bidding
THECONSEQUENCES
Anti-Competitive
Lower QualityHigher
Prices
Privilege-Seeking Costs
$1 - $3.5 Trillion Annually
Misallocation of TalentBaumol (1990)
Images by scottchan and Michael Marcol
Murphy, Shleifer and Vishney (1991)
Infla
tio
n-A
dju
ste
d D
olla
rs
$0
$6,111
$12,222
$18,333
$24,444
$30,556
$36,667
$42,778
$48,889
$55,000
1975 1980 1985 1990 1995 2000 2005 2010
$42,662
Actual Per Capita Production
Infla
tio
n-A
dju
ste
d D
olla
rs
$0
$6,111
$12,222
$18,333
$24,444
$30,556
$36,667
$42,778
$48,889
$55,000
1975 1980 1985 1990 1995 2000 2005 2010
$42,662
$54,071
Actual Per Capita Production
Per Capita Production with
Less Rent Seeking
What Happens when the political process fails to
predict customer desires?
Undermined Legitimacy of Government and Business
0
75
150
225
$220 in Tax Savings$1 in
lobbying
Alexander, Mazza and Scholz (2009)
Most Important Determinant of Italian Success?
“Knowledge of Influential People”
WHAT TO DO?
[The First Amendment] ought to read, ‘Congress shall make no law authorizing government to take any discriminatory measures of coercion.’ I think that would make all the other rights unnecessary.
“
”-FA Hayek in interview with James Buchanan, 1978
Generality
We’ve soc ia l ized losses and privatized gains - that’s not capitalism.
“
”-Joseph Stiglitz, at Occupy Wall Street rally, 2011
An End to Privilege
[email protected] www.Mercatus.org
www.NeighborhoodEffects.com
@MattMitchell80
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THE PATHOLOGY OF PRIVILEGETHE CONSEQUENCES OF GOVERNMENT FAVORITISM