law and economics – Page 4

Incentives Matter: ObamaCare Edition

Merrill Matthews has a great post on Forbes.com today about some “surprising” developments in response to the ObamaCare health insurance debacle. In short:

(Not really news) The cost of most health insurance programs for young and/or healthy individuals is predicted to increase dramatically to cover the costs of coverage imposed by the law…to the point that many will have no incentive to purchase the coverage until they actually need its benefits (i.e., a perverse incentive created by prohibiting exemptions on pre-existing conditions which, ironically, also drives up the cost of the insurance to begin with).
(Somewhat news) Since the IRS has no authority to proactively collect the fine/tax/penalty from people who refuse to buy insurance and can only withhold tax refund payments, smart taxpayers who opt out of health insurance will simply make sure they have no tax refunds coming by adjusting their withholdings accordingly–and pay little or no fine. If taxpayers start using this loophole in earnest, expect Democrats to attempt to pass legislation allowing the IRS to start beaming money directly out of your checkbook or seizing assets to pay for the non-tax-fine-“no, it’s a tax” penalty.
(A truly entrepreneurial twist!) Some life insurance companies, which are not affected by ObamaCare, have begun offering policies that allow policyholders to receive pre-demise benefits from their life insurance for “critical illness” expenses. Kind of a “getting-close-to-possibly-dying” rider to the traditional life insurance policy. Beneficiaries can use the advanced payments to cover the medical bills (if they want) and the death benefit is reduced by the amount of the payment. Truly ingenious…exactly the kind of creative, market-driven genius that has fueled the American economy since before there was an American economy.

Matthews summarizes it quite well in a way that captures what this blog is all about:

See, that’s the amazing thing about markets. They try to meet the needs of consumers rather than the wants and political aspirations of politicians. And sometimes they can even undermine those political aspirations.

So Much News, So Little Time

The past couple weeks I’ve either been traveling, camping, or preparing for trips. Leave the keyboard for a couple weeks and all kinds of interesting things happen.

It’s SCOTUS season, with the Supreme Court handing down some long-awaited (and some less-awaited) decisions to close out the 2012-13 term. In one of them, Horne v. Department of Agriculture, the Court unanimously ruled that agricultural producers had the right to contest the marketing order set-asides as “takings” and sent the case back to the Ninth Circuit for further consideration. The SCOTUS ruling itself opens a potential host of legal challenges not just from agricultural producers, but any businesses that seek to challenge regulatory fines (see here). Now the Ninth Circuit will have to deal with the takings issue itself, which I discussed previously (here).

The SCOTUS also ruled on a land use property rights case that has potential implications for a wide range of businesses, including agricultural producers and agribusinesses. Koontz v. St. Johns River Water Management District expanded the scope of the Court’s rulings in Nollan v. California Coastal Commission and Dolan v. City of Tigard, which set limitations on the government’s ability to impair property interests with land use regulations. This case deserves a little more digging for those interested in land use restrictions and required environmental concessions.

And finally, the US House of Representatives showed that no political backscratching is exempt from ideological divides as it failed to pass its own version of the Farm Bill. Republicans who felt the programs contained in the bill needed to be cut further teamed with Democrats who believed the cuts were already too large to kill the bill. Most of the disagreement had less to do with farming, per se, than with food stamps and other nutritional subsidy programs. “Oh SNAP!” indeed!

Perhaps I’ll get some time to go back and look at each of these in a little more detail and write more on each–or at some of the other issues that have come up over the past couple week.

The "Laws" of Economics

Economics has few “laws”. The most notable is the Law of Demand, which simply states that there is an inverse relationship between the price of a thing and how many units people are willing to buy (i.e., when the price goes down (up), people buy more (less)). The Law of Demand is basically just the culmination of the most basic observations of human behavior; specifically, The Basics with which I started this blog.

There are a few other things that sometimes get labelled as “laws” in economics textbooks. The “law of supply” only applies to things still actively produced, for which the necessary inputs are available; but in general, the more people are willing to pay for something, the more of it producers will try to produce. The “law of diminishing returns”–typically applied in the context of production–assumes there is at least one fixed input that constrains the marginal productivity of the rest. It’s more a rule of thumb than a “law.” But it is also analogous to Rule #3 in The Basics: More more is less better.

Whether we consider them “laws” or not, one thing is for certain: when we ignore these basic principles, we do so at our own peril. And that brings me to the motivation for this post; namely a recent blog post by “The Edgy Optimist” (aka Zachary Karabell) at Reuters.com titled “The ‘laws of economics’ don’t exist.” Continue reading “The "Laws" of Economics”

Conducting Empirical Legal Scholarship

The 12th Annual Conducting Empirical Legal Scholarship Workshop will take place at the USC Gould School of Law May 22-24, 2013. The workshop is for law school faculty, political science faculty, and graduate students interested in learning about empirical research and how to evaluate empirical work. Leading empirical scholars Lee Epstein and Andrew Martin will teach the workshop, which provides the formal training necessary to design, conduct, and assess empirical studies, and to use statistical software (Stata) to analyze and manage data. Participants need no background or knowledge of statistics to enroll in the workshop. For more information, see the conference website.

Most economics grad students get a lot of exposure to econometric and statistical concepts, but not necessarily to an understanding of how to actually apply that knowledge to conduct empirical research. I suspect the organizers may be willing to let even economics grad students participate.

Wrinkles In The US Raisin Cartel

Cartel sounds much sexier than “marketing order”, doesn’t it? But that’s basically what it is…and some of the cartel members are not happy.

It didn’t receive the attention some other recent US Supreme Court cases did, but a couple weeks ago in Horne v. Department of Agriculture the SCOTUS heard arguments about whether mandatory marketing order set-asides amount to federal takings and should be compensated. This case has tremendous potential impact for upward of 30 agricultural products governed by marketing orders run under the auspices of the USDA. These marketing orders date back to the 1930s and were an attempt by agricultural producers to increase the prices they received for the products by disposing of “excess production”. In other words, farmers of the 1930s got the federal government to institute a national cartel for the purposes of raising the price of food…and those cartels continue to operate today.

So how does that work?

Continue reading “Wrinkles In The US Raisin Cartel”