The Problem of Cash

One area of my research involves payment systems and the role of financial intermediaries in fulfilling various government functions, including tax and criminal enforcement. When we use banks or credit card networks to pay others, we create electronic records that can be accessed by the government for various purposes. (The same is true when we use our cell phones, but encryption may make it difficult to access such information – a problem unfolding in the current controversy with Apple.)

Anti-money laundering (AML) rules impose some obligations on financial intermediaries to identify their customers, know something of their business, and report suspicious transactions. Tax reporting rules also require tracking and reporting of certain kinds of payments – including interest, dividends, and other revenue sources. This allows the government to “trust, but verify” positions taken by its citizens, ensuring that our voluntary tax reporting system remains functional. Continue reading The Problem of Cash

Primordial Brain Modules?

Dr. Michael Munger of Duke University delivered a very interesting lecture at the Heider College of Business on Friday, February 5. He explored problems associated with price gouging laws, which proscribe the practice of raising prices during a state of emergency. Those trained in economics are likely to understand that such laws are likely to harm those affected by emergency conditions. Prices provide important signals to the marketplace, allowing consumers to allocate scarce resources based on where they are valued most. Moreover, those higher prices are likely to trigger increased supplies, thereby providing the impetus for consumer demands to be met and lower prices in the near future. Obfuscating the price signal through legal constraints does not change Continue reading Primordial Brain Modules?

Temperate Climates and Human Capital Development

Today in Nebraska we are enduring a winter storm, with near blizzard conditions in many areas. This kind of weather tests our coping abilities. Visit a grocery store and you will find depleted inventory, as people stock up for what is likely to be a day or two of isolation. This kind of weather reveals the malleability of human preferences in the face of potential scarcity. What a great country where we ordinarily get so many choices!

These formidable challenges of living in a temperate climate may also produce higher economic output and development as compared with easier climates – at least in the case of our ancestors. Thomas Sowell outlines some of these advantages in his latest book, Wealth, Poverty, and Politics (Basic Books 2015).

Dr. Sowell explains how geography affects Continue reading Temperate Climates and Human Capital Development