New Research: MMT, Housing Affordability, and Benefit-Cost Analysis

Research Round-Up: March 18, 2019

How Reliable Is Modern Monetary Theory as a Guide to Policy?

Scott Sumner and Patrick Horan | Policy Brief

From the brief: "MMT relies on dubious assertions about the causes of inflation and the respective roles of monetary and fiscal policy. It also rests on the unrealistic view that fiscal authorities would do an adequate job in managing inflation. An MMT agenda of having fiscal authorities manage monetary policy runs the risk of very high debts, inflation, or both—and both can be very harmful to the broader economy. Rather than rely on MMT, it would better for the Fed to ensure a stable, rules-based monetary policy, and for policymakers in Congress to exercise prudence in setting fiscal policy.”

An Analysis of Recent Federal Data Privacy Legislation Proposals

Jennifer Huddleston | Policy Brief

From the brief: "The presumption that data privacy is broken based on individual incidents such as breaches rather than real harm to consumers or competition could lead to tradeoffs that impact innovation and remove choices that consumers actually enjoy. Many of the proposed solutions could result in valuing privacy over innovation and choice. As a result, such changes could unintentionally lock in the current options and prevent new players from arising and providing better products. Ideally, policy proposals should focus on remedying actual harms while allowing as much freedom to innovate as possible, lest America surrender its technological leadership.”

The Link Between Local Zoning Policy and Housing Affordability in America’s Cities

Kevin Erdmann, Salim Furth, and Emily Hamilton | Policy Brief

From the brief: "Throughout American history, cities have experienced rapid population growth during periods when they offered exceptionally well-paying jobs. But population growth in high-wage cities is only possible when people can find housing within a reasonable commuting distance. Unlike in the past, policymakers in some regions have implemented land use regulations that block new housing development, creating “Closed Access” cities. These are highly regulated cities that are not experiencing rapid population growth despite offering some of the highest wages and best career opportunities in the country.”

RegData Canada: An Overview

Patrick McLaughlin, Scott Atherley, and Stephen Strosko | Policy Brief

From the brief: "The RegData Canada project from the Mercatus Center at George Mason University was launched in summer of 2018. The methodology for RegData Canada was initially established in a paper by Omar Al-Ubaydli and Patrick McLaughlin in 2015 and extended in papers by McLaughlin and coauthors in 2017 and McLaughlin and Oliver Sherouse in 2018. To date, the RegData Canada project has released 14 unique datasets: a Canadian federal dataset and 13 provincial datasets. Following the methodology established in the original, US-focused RegData project (hereafter, RegData US), the datasets for the RegData Canada project (hereafter, RegData Canada) were created by applying text analysis and machine-learning algorithms to regulatory text issued by federal and provincial regulators. The datasets provide a variety of quantitative data and indicators, including regulatory restriction counts (by ministry or department), relevance of regulations to economic sectors and industries, the prevalence of incorporation by reference, linguistic complexity, the location of outdated language, and the likelihood that a regulation includes design standards.”

Equity or Efficiency? The Battle for the Soul of Benefit-Cost Analysis

James Broughel | Policy Brief

From the brief: "There is a need to revisit the foundations of BCA, starting with first principles. What measure of welfare is to be evaluated? Should analysts discount? How can analysts ensure that the unseen consequences of policy are accounted for? Taking a closer look at the foundations of BCA reveals a complex machinery that advances certain values, by accident or by design. This machinery and the equations that define its operation conceal value judgements. In the future, perhaps experts and nonexperts alike can have a fruitful discussion about what policy should aim to achieve and why. For now, analysts can start by being more forthcoming about the values built into their standard tools of policy analysis.”