Cato Studies

September/​October 2018 • Policy Report


Since 1920, the Jones Act has restricted shipping between U.S. ports to ships that are U.S. owned, U.S. crewed, U.S. registered, and U.S. built. Originally passed to limit U.S. reliance on foreign shipping during World War I, the Jones Act has hung on for nearly 100 years, imposing massive costs on U.S. industry. In “The Jones Act: A Burden America Can No Longer Bear” (Policy Analysis no. 845), Cato’s Colin Grabow, Inu Manak, and Daniel J. Ikenson explain the history of the law and the many ways in which it harms the American economy and suggest options for reform.

For decades, the federal government has dispensed dubious dietary advice — like its 1970s warnings to avoid saturated fats and eat more carbohydrates, a recommendation that may have led to subsequent obesity and Type 2 diabetes epidemics. In “Why Does the Federal Government Issue Damaging Dietary Guidelines? Lessons from Thomas Jefferson to Today” (Policy Analysis no. 846), Cato’s Terence Kealey makes the case that Thomas Jefferson had it right in 1787 when he declared, “Was the government to prescribe to us our medicine and diet, our bodies would be in such keeping as our souls are now.”

Research demonstrates that post‐​traumatic stress disorder and other aftereffects of trauma tend to make people more violent. Could widespread trauma be affecting military outcomes in places like Afghanistan, which has now experienced 40 years of uninterrupted war? In “War State, Trauma State: Why Afghanistan Remains Stuck in Conflict” (Policy Analysis no. 844), Cato’s Erik Goepner cites his own experience as a unit commander in Afghanistan, as well as scholarly research, to examine Afghanistan as a “trauma state, stuck in a vicious cycle: war causes trauma, which drives more war, which in turn causes more trauma.” Consequently, Goepner makes the case that the United States should decrease its military presence in the country and instead focus on incentivizing a less‐​corrupt Afghan government.

In “Incarcerated Immigrants in 2016: Their Numbers, Demographics, and Countries of Origin” (Immigration Research and Policy Brief no. 7), Michelangelo Landgrave of the University of California, Riverside, and Cato’s Alex Nowrasteh provide an update to their 2017 brief, which was the first nationwide estimate of the incarcerated illegal immigrant population. Once again, they find that all immigrants — legal and illegal — are less likely to be incarcerated than native‐​born Americans relative to their share of the population.

In “The Gender Earnings Gap in the Gig Economy: Evidence from More Than 1 Million Rideshare Drivers” (Research Briefs in Economic Policy no. 118), Cody Cook and Jonathan Hall of Uber Technologies, Inc.; Rebecca Diamond and Paul Oyer of Stanford University; and John A. List of the University of Chicago examine why male Uber drivers earn about 7 percent more per hour than women. Uber provides an ideal case study for the gender wage gap, since it sets driver fares through a simple formula, there is no negotiation of earnings, and the authors are able to demonstrate that customer‐​side discrimination is not materially important. They find that the earnings difference derives primarily from several factors, including that men are more likely to drive in lucrative locations, are willing to drive in areas with higher crime rates and more drinking establishments, and drive more per week and are thus rewarded by Uber’s pay structure in which a driver with more lifetime trips earns a greater percent per hour.

Donald Trump’s presidency has prompted many in Washington to pine for the supposedly lost post‐​1945 “liberal world order.” But in “A World Imagined: Nostalgia and Liberal Order” (Policy Analysis no. 843), Patrick Porter of the University of Birmingham argues that this is a harmful ahistorical myth that “erases the memory of violence, coercion, and compromise that also marked postwar diplomatic history.” He urges against allowing this false nostalgia to prevent the United States from adopting a more restrained posture abroad.

There are very few empirical studies of how copyrights affect creativity and innovation. In “Effects of Copyrights on Science: Evidence from the U.S. Book Republication Program” (Research Briefs in Economic Policy no. 116), Barbara Biasi of Princeton University and Petra Moser of New York University exploit the effects of a World War II program in which the government appropriated all enemy‐​owned property in the country and granted U.S. publishers six‐​month licenses to republish the content of German‐​owned science books. They find that the program resulted in a large increase in citations of the German science books and patents that used information in them.

How do lobbying efforts and regulatory capture affect the banking industry? In “Lobbying on Regulatory Enforcement Actions: Evidence from U.S. Commercial and Savings Banks” (Research Briefs in Economic Policy no. 117), Thomas Lambert of Erasmus University Rotterdam finds that banks engaged in lobbying activities are significantly less likely to receive severe enforcement action relative to their non‐​lobbying peers, that they increase their risk‐​taking, and that they routinely underperform compared with their nonlobbying peers.

As cryptocurrencies increase in popularity, regulators have begun claiming that they are, in fact, disguised securities offerings operating outside of the law. Since the determination of whether cryptocurrencies are securities affects who can buy, hold, and keep custody of them (among other critical questions), this regulatory uncertainty is having a chilling effect on cryptocurrency markets. In “Should Cryptocurrencies Be Regulated like Securities?” (CMFA Briefing Paper no. 1), Cato’s Diego Zuluaga argues that regulators should clarify the law by adopting a framework that distinguishes between functional cryptocurrencies, such as bitcoin — which are not securities — and promises of cryptocurrencies, which may in some cases be securities.

Direct‐​to‐​consumer advertising of prescription drugs is highly controversial. Some argue that ads touting the benefits of namebrand medications drive consumers to request unnecessary and expensive drugs, and others contend that they provide patients with valuable information about their treatment options. In “Promoting Wellness or Waste? Evidence from Antidepressant Advertising” (Research Briefs in Economic Policy no. 119), Bradley Shapiro of the University of Chicago finds that direct‐​to‐​consumer advertising does cause more patients to be prescribed antidepressants, which leads to a direct cost for consumers and insurers. However, he also finds that it causes an increased labor supply, as fewer people miss work, and that these benefits outweigh prescription costs.

Opponents of ride‐​sharing services like Uber and Lyft often agitate over their lack of safety regulations. But in “Ride‐​Sharing, Fatal Crashes, and Crime” (Research Briefs in Economic Policy no. 120), Angela K. Dills and Sean E. Mulholland of Western Carolina University find that after Uber enters a market, fatal accident rates generally decline and arrest rates for certain types of crime — including driving under the influence, drunkenness, and aggravated assaults — also decline. They conclude that the services’ “ease of use, quick response time, and point‐​to‐​point transportation convenience promote safety.”

There are an estimated 11 million unauthorized immigrants in the United States. But despite heated debates over their legalization, few studies have been done on the effects of legalizing them. In “Understanding the Effects of Legalizing Undocumented Immigrants” (Research Briefs in Economic Policy no. 121), Joan Monras of Spain’s Centro de Estudios Monetarios y Financieros, Javier Vázquez‐​Grenno of the Universitat de Barcelona, and Ferran Elias of the University of Copenhagen study Spain’s legalization of 600,000 undocumented immigrants in 2004 and find, among other things, that legalization significantly increased public revenues because these workers are now paying into the social security system.

Although 20 states have now legalized medical marijuana, many voters are still wary of legalizing recreational marijuana. In “Contact High: The External Effects of Retail Marijuana Establishments on House Prices” (Research Briefs in Economic Policy no. 122), James Conklin of the University of Georgia, Moussa Diop of the University of Wisconsin–Madison, and Herman Li of California State University, Sacramento, find that when Denver medical marijuana stores converted to retail marijuana stores, single‐​family residences close to a converted store increased in property value by more than 8 percent, compared with houses farther away.

How do teacher strikes affect student outcomes? In “The Long‐​Run Effects of Teacher Strikes: Evidence from Argentina” (Research Briefs in Economic Policy no. 123), David Jaume and Alexander Willén of Cornell University find that past teacher strikes in Argentina reduced future earnings for students. “The prevalence of teacher strikes in Argentina means that the effect on the economy is substantial: a back‐​of‐​the‐​envelope calculation suggests an aggregate annual earnings loss of $2.34 billion,” they write.

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