Is America’s housing finance crisis finally behind us? According to Charles W. Calomiris, professor of financial institutions at Columbia Business School, and Stephen H. Haber, professor of political science at Stanford University, the main source of potential trouble — risky investments in residential mortgages, undertaken by overleveraged government‐sponsored enterprises and banks — has not been addressed. The authors review the latest round of policies, from the implementation of the Volcker Rule to the creation of the Financial Stability Oversight Council. “The sad truth is that reforms that have been implemented are either irrelevant or have been lobbied to the point that they have been made irrelevant,” they write. In short, there is little indication that the Obama administration is serious about rolling back mortgage‐risk subsidies. “Until average Americans decide to punish political leaders for acquiescing to the subsidization of mortgage risk, effective reform will remain elusive, although reform likely will be promised again — right after the next banking crisis,” Calomiris and Haber conclude.
Next, Ike Brannon, a senior fellow at the George W. Bush Institute, examines the forces that have increased income inequality in the United States by considering how they affected one particular market: professional basketball. The National Basketball Association’s (NBA) explosion in popularity has created a few spectacularly rich people, but most of the wealth created has gone to people who hold solidly middle‐class jobs. This has not only produced entertainment value for hundreds of millions of fans, but has created tens of thousands of well‐paying jobs that don’t involve shooting a jump shot. “That the result of this has also been the creation of a few dozen millionaires each year is a good problem to have,” Brannon writes. Taxing a majority of their wealth away, he argues, would accomplish little in terms of our long‐term budget situation and, if done poorly, could easily punish the nonrich, as well as threaten the league’s future success. “That’s a lesson that holds for the rest of the economy as well.”
Since most economic controls over domestic commercial aviation ended in the late 1970s, the airline industry has changed dramatically. The underlying philosophy has been that competition, while not perfect, was generally preferable to government dictates. Kenneth Button, a professor of public policy at George Mason University, explores whether competition can be taken further, and in particular whether market entry can be widened. “While the 1978 Airline Deregulation Act removed many of the legal barriers that limited the routes that individual carriers could serve and the fares they could set, it did nothing to open up the domestic market to international carriers,” he writes.
Other contributors include Michael L. Wachter on “The Striking Success of the NLRA,” Dwight R. Lee on “The Two Moralities of Outlawing Price Gouging,” and Robert H. Nelson on “Bringing Religion into Economic Policy Analysis.”
The Spring 2014 issue concludes with reviews of books on the powerful case for immigration, the history of public compensation, and the atrophied state of law in the United States. It wraps up with editor Peter Van Doren’s survey of recent academic papers, as well as a final word from columnist Tim Rowland on the tension between freedom and environmental accountability.