Pathology privilege
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Transcript of Pathology privilege
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Matthew Mitchell
Senior Research Fellow
THE PATHOLOGY OF PRIVILEGETHE CONSEQUENCES OF GOVERNMENT FAVORITISM
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“Government must rein in business”
“Government is crushing business”
LEFT RIGHT
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RAISE TAXES? CUT
TAXES?
What did the Tea Act actually do?
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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
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Image by AgnosticPreachersKid
Implicit
federal backingExplicit
$224,000,000,000
$336,000,000,000
to
in Federal Bailout
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Types of Privilege
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Types of Privilege
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Subsidies
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36 States Require “Certificates of Need”
to Open a Health Facility
Regulations
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10 States Require Hair Braiding Licenses
Regulations
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Regulations
10 States Require Hair Braiding Licenses
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Expected Bailouts
Loans at 0.5% Lower Interest than Competitors
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Tax Credits
Sales, Use, Hotel exemptions; Refundable tax credits
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Monopolies
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Loan Guarantees
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Protectionism
2003: Tariffs 8 to 30%
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Non-Competitive Bidding
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THECONSEQUENCES
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Anti-Competitive
Lower QualityHigher
Prices
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Privilege-Seeking Costs
$1 - $3.5 Trillion Annually
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Misallocation of TalentBaumol (1990)
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Images by scottchan and Michael Marcol
Murphy, Shleifer and Vishney (1991)
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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
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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
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What Happens when the political process fails to
predict customer desires?
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Undermined Legitimacy of Government and Business
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0
75
150
225
$220 in Tax Savings$1 in
lobbying
Alexander, Mazza and Scholz (2009)
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Most Important Determinant of Italian Success?
“Knowledge of Influential People”
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WHAT TO DO?
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[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
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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
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www.NeighborhoodEffects.com
@MattMitchell80
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THE PATHOLOGY OF PRIVILEGETHE CONSEQUENCES OF GOVERNMENT FAVORITISM