Category Archives: Public Choice

Costco CEO Favors Minimum Wage Hike

Posted on March 6, 2013 | Comments Off on Costco CEO Favors Minimum Wage Hike

An overlooked argument in the minimum wage debate is that a high minimum wage gives big businesses an artificial competitive advantage over their smaller competitors. As I noted recently:

When states are considering hiking their minimum wages, big companies like Walmart routinely lobby in favor of the increases. They know that while they can afford the extra payroll, the mom-and-pop store down the road might not be able to. Advantage: Walmart.

As if on cue, the Huffington Post reports today that Costco CEO Craig Jelinek came out in favor of increasing the minimum wage to $10 per hour, even higher than President Obama’s proposed $9 per hour. The article notes that Costco has a reputation for paying its employees very well, and would be mostly unaffected by such an increase.

Who would be affected? Costco’s smaller competitors, who would have to raise prices and/or trim their workforces to make payroll. Advantage: Costco.

Given how popular minimum wage increases are with non-economists, Jelinek stands to reap some good PR for Costco from his announcement. And maybe he really believes that a minimum wage hike would be a net good for the working poor. But another plausible explanation is rent-seeking — using government regulations to gain artificial competitive advantages (and profits). And that’s something a struggling economy could do without.

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Posted in Economics, Price and Wage Controls, Public Choice

Why James Buchanan Deserved His Nobel

Posted on March 1, 2013 | Comments Off on Why James Buchanan Deserved His Nobel

Better-Than-Plowing-and-Other-Personal-Essays-Buchanan-James-M-9780226078168
Sometimes offhand comments are the most revealing of all about someone’s character. Many Nobel laureates are defined by their vanity at least as much as their accomplishments. Not Buchanan. In an aside near the end of an autobiographical essay — written, at least in part, so he could shoo away pesky journalists asking about his life story, telling them to read this instead — he remarks that he doesn’t even feel like a part of the discipline whose highest honor he had recently won:

I am not, and never have been, an economist in an narrowly defined meaning. My interests in understanding how the economic interaction process works have always been instrumental to the more inclusive purpose of understanding how we can learn to live one with another without engaging in Hobbesian war and without subjecting ourselves to the dictates of the state. The “wealth of nations,” as such, has never commanded my attention save as a valued by-product of an effectively free society.

-James Buchanan, Better than Plowing and Other Personal Essays, p. 17

Right in line with the subtitle of Buchanan’s favorite book of his, The Limits of Liberty: Between Anarchy and Leviathan. The Buchananite approach is so much more relevant to the real world than the discipline’s conventional approach of inapplicable, if pretty, mathematical gymnastics.

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Posted in Books, Economics, Great Thinkers, Public Choice

The First Law of Congressional Behavior

Posted on January 29, 2013 | Comments Off on The First Law of Congressional Behavior

On page 140 of Douglas Arnold’s book The Logic of Congressional Action, while discussing why Congressmen are so reluctant to close unneeded military bases in their home districts, he states the first law of congressional behavior:

[N]ever impose costs on one’s constituents that might be directly traced to one’s own individual actions.

This is both true and important. Reforms that ignore this law are doomed to failure.

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Posted in Books, Political Animals, Public Choice

John Locke Anticipates Public Choice

Posted on January 20, 2013 | Comments Off on John Locke Anticipates Public Choice

While James Buchanan’s simple insight that politicians are just as self-interested as the rest of us may have shocked the economic discipline, it strikes the rest of humanity as simple common sense. John Locke, writing well before the rise of Samuelson and Nordhaus, shows such common sense towards the beginning of chapter 12 of his Second Treatise:

And because it may be too great a temptation to human frailty, apt to rasp at power, for the same persons, who have the power of making laws, to have also in their hands the power to execute them, whereby they may exempt themselves from obedience to the laws they make, and suit the law, both in its making, and execution, to their own private advantage, and thereby come to have a distinct interest from the rest of community, contrary to the end of society and government: therefore in well-ordered commonwealths, where the good of the whole is so considered, as it ought, the legislative power is put into the hands of divers persons, who duly assembled, have by themselves, or jointly with others, a power to make laws, which when they have done, being separated again, they are themselves sunject to the laws they have made; which is a new and near tie upon them, to take care, that they make them for the public good.

That incredibly long sentence says two things, and both of them are true: legislators act in their own interest, and we should design our political institutions with that in mind to minimize the harm they can do. Buchanan would agree on both fronts.

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Posted in Books, Economics, Philosophy, Public Choice

In Related News, Water Is Wet

Posted on October 10, 2012 | Comments Off on In Related News, Water Is Wet

Politico: Pentagon contractors defend their own interests

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Posted in Political Animals, Public Choice

Beware of Unaudited Benefit Analyses

Posted on September 20, 2012 | Comments Off on Beware of Unaudited Benefit Analyses

One of the first things people learn when they move to Washington is that government agencies are just as self-interested as the rest of us. They have an eternal incentive to expand their missions and grow their budgets, and they behave accordingly. One consequence of this is that their cost-benefit analyses cannot be trusted. Because the analyses are done in-house instead of by an independent third party, you can bet that cost estimates will be understated, and benefit estimates will be overstated. Over at Investor’s Business Daily, Wayne Crews and I expand on that theme:

The biggest problem lies in the simple question: Benefits compared with what? Government is hardly the only regulator; governance doesn’t always require government. Competitive markets have disciplinary mechanisms — including reputation, loss, insurance, and liability — to punish bad actors. Consumers are harsh sovereigns. Private organizations like Underwriters Laboratory set high standards for its sought-after product certifications.

If a new government regulation codifies best practices for an industry, a common result is stasis. Technology and on-the-ground best practices evolve much more quickly than the Code of Federal Regulations does. When regulations hold back advances, they wipe out many potential benefits to consumers and producers alike.

Read the whole thing here. Also see Wayne’s new working paper, “Tip of the Costberg.”

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Posted in Economics, Public Choice, regulation

Congress Should Create a Repeal Committee

Posted on August 29, 2012 | Comments Off on Congress Should Create a Repeal Committee

There are a lot of old, musty, unused, and obsolete laws on the books. Congress should repeal them as part of its basic hygiene, but members have little incentive to do so. A standing repeal committee could help. David Deerson and I look at how such a committee might work in a piece over at RealClearPolicy:

The job would be a big one. All in all, the Code of Federal Regulations (CFR) rambles on for 169,000 pages, many of which could be dispensed with and replaced with nothing. For example, one of the 50 titles in the CFR is dedicated entirely to the Panama Canal, which hasn’t been under United States jurisdiction since 1999. Elsewhere, an entire chapter consists of guidelines for dealing with the Y2K computer crisis that didn’t happen 12 years ago…

As old Washington hand Joseph Gibson points out in his book, A Better Congress, a repeal committee would almost certainly face strong opposition from members of other committees, who would see it as a threat to their own prerogatives. To soften this opposition, he suggests involving the committee with jurisdiction over the statute to be repealed through a secondary referral—subject to time limit to ensure that the committee cannot sit on a proposed repeal indefinitely.

Read the whole thing here.

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Posted in Public Choice, Publications, regulation

In Praise of Judicial Activism

Posted on August 14, 2012 | Comments Off on In Praise of Judicial Activism

Judicial activism is a dirty word in politics. It shouldn’t be. Over at The American Spectator, David Deerson and I try to rehabilitate a term that has been sorely missing from a passive judiciary. Judges shouldn’t legislate from the bench, of course. But nor should they let the other branches’ excesses stand:

No matter which party is in power, Congress and the White House often overstep their constitutional authority. From the political speech restrictions in McCain-Feingold to the Washington, D.C., handgun ban, examples of the Supreme Court striking down unconstitutional legislation are not hard to find. That is the kind of judicial activism we need more of.

Of course, we’re not that optimistic about this changing anytime soon:

No president would nominate a judge who might nullify his administration’s signature achievements. No senator would vote to confirm a judge who might strike down an important bill that she wrote. There is a selection bias favoring judges who will defer to the political branches of government. As Georgetown University law professor Randy Barnett told The Wall Street Journal, “If I want to bet actual money, I’ll always bet the court upholds anything Congress does.”

Read the whole thing here.

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Posted in Law, Public Choice

Regulation of the Day 226: Hot Dog Carts

Posted on August 10, 2012 | Comments Off on Regulation of the Day 226: Hot Dog Carts


Nathan Duszynski is 13 years old and lives in Holland, Michigan. His stepfather has multiple sclerosis. His mother has epilepsy. Neither is able to work.

To help out with his family’s expenses, Nathan started mowing lawns and soon saved up the $1,200 or so that he needed to buy a hot dog cart. That way he could make even more money.

The owner of a local sporting goods store was even kind enough to allow Nathan to set up shop in his store’s parking lot. But regulators shut Nathan down ten minutes after opening up shop for the first time. He had yet to sell his first hot dog. Turns out that food carts are illegal in Holland unless they’re connected to a brick-and-mortar restaurant.

Seeing as many cities across the country have unaffiliated food carts and no evidence of consumer harm, there can only be one explanation for Holland’s hot dog cart ban: rent-seeking. Restaurants don’t want to deal with the competition, so they convinced the government to do their dirty work for them.

Because of this rent-seeking, Nathan and his family are now homeless.

Our friends at the Mackinac Center have spoken with the family:

“Nate and I are now in a shelter,” Lynette Johnson said. “Doug can’t stay with us because he takes prescription narcotics to deal with his pain and the shelter does not allow him with those kinds of drugs.”

She said the situation has been stressful on the family. Lynette is afraid to be away from her husband in case she has a seizure.

Nathan has still been working hard. He’s selling hot dogs at private events, which is legal. But according to a local paper, it’s still difficult:

The cart is the only solid income the family can rely on, said Lynette. But the business is in jeopardy due to the family’s financial situation…

The reason, she said, is that each event requires a new health department permit, and the cost varies between West Michigan municipalities. The last event, a private wedding reception on Friday, cost about $200 for the permit.

Coupled with food and supply cost, they barely broke even, she said.

Nathan now has a web site for Nathan’s Hot Dog Hut, where you can make a donation via PayPal. Nathan writes, “If you believe in free enterprise and can help with the costs of my fight with City Hall and the losses we have sustained so far please donate what you can to help us and those others in similar situations by clicking the button below.”

Here’s hoping Nathan wins his fight. Everyone has the right to make an honest living — even if their competitors would rather they didn’t.

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Posted in Public Choice, regulation, Regulation of the Day

The Case for a Repeal Amendment

Posted on August 10, 2012 | Comments Off on The Case for a Repeal Amendment

Nobel-winning economist James Buchanan distinguishes between two kinds of analysis: pre-constitutional and post-constitutional. Pre-constitutional analysis focuses on the rules of the game; post-constitutional analysis focuses on how people behave under those rules once they’re in place. The current rules of America’s political game result in 3,500-plus new regulations every year, trillion-dollar deficits, and other major problems.

The solution isn’t to put different people in charge. The status quo’s incentive structures guarantee that the results will stay about the same, no matter who is in power. Instead, real reform can only happen at the institutional level. Change the rules of the political game in a way that gives politicians an incentive to keep their worst impulses in check. If you want different results, you need different rules.

Over at Real Clear Policy, my colleague David Deerson and do a bit of pre-constitutional analysis on one rule change that could do a lot of good:

[A]dd a repeal amendment to the U.S. Constitution, one that would allow two-thirds of state legislatures to repeal any federal law or regulation they see fit. A repeal amendment would enhance federalism and make democracy more meaningful to citizens by bringing it closer to them.

When most people think of the government’s separation of powers, they think of the three branches of the federal government—executive, judiciary, and legislative. In a federalist system such as ours, the separation of powers between the federal government itself and the states is just as important.

Read the whole thing here.

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Posted in Economics, Public Choice, Publications