Nicholas A. Snow

Banks, Insurance Companies, and Discrimination

This article examines some of the reasons why banks and insurance companies have been accused of discrimination, and shows that this is by and large a false accusation. Economic analysis demonstrates that racial discrimination is not a profit-maximizing strategy. Actually, unwise public policies are actually precluding many consumers from the market.

The Broken Trailer Fallacy: Seeing the Unseen Effects of Government Policies in Post-Katrina New Orleans

Purpose – The purpose of this paper is to analyze some of the unseen negative effects of the post-Katrina government policies dealing with housing in New Orleans. Design/methodology/approach – Since Hurricane Katrina, the government, along with private for profit and not-for-profit organizations, has worked to rebuild the city of New Orleans. This effort is most evident in the response to the housing crisis that followed the storm. The government has spent billions of dollars and brought thousands of people in to rebuild homes and other infrastructure in the long run and to provide stopgap measures in the short run. The approximately 120,000 Federal Emergency Management Agency (FEMA) trailers in the region are one of the most visible examples of government efforts. Findings – The paper finds that while the trailers did provide benefits to those who received them, it could be argued that the government’s policies aimed toward solving the housing crisis suffer from Fre´de´ric Bastiat’s broken window fallacy. FEMA trailers and the multitude of workers brought in are examples of what is seen, and, as Bastiat showed, we must also look at what is unseen.

Rational Irrationality and the Micro Foundations of Reform

Bryan Caplan’s book The Myth of the Rational Voter (2007) supports the idea that voters indulge in holding irrational beliefs about economic policy because the cost of doing so to the individual is negligible. As a consequences, socially and economically destructive policies receive widespread public support. Furthermore, because there is no private benefit of learning from experience, such policies can persist over time. Voters are biased and do not face sufficient incentives to choose rationally, instead they vote for various private reasons, which Caplan labels biases. We argue here that despite this otherwise dismal outlook on public policy, Caplans theory leaves two avenues for economically sensible reform: First, when the ex post costs of irrationality are higher than expected, rationally irrational voters will reduce their consumption of irrationality and demand more rational policies. Second, rationally irrational voters can be convinced to rationally update their policy preferences through the use of appealing rhetoric and persuasion by experts (Caplan 2010). We discuss these two avenues for reform using the example of the repeal of the 18th amendment, which as we will show relied on both updating as well as persuasive campaigning.

Advances in Austrian economics

F. A. Hayeks contribution to economic science is broadly remembered as relating to the “use of knowledge in society�? but his contribution to economics of knowledge are often summarized differently. We emphasize the contextual nature of the knowledge. Hayek says the market economy is capable of eliciting and utilizing in the process of coordinating economic activities. There is, however, a double meaning of context that we explore. Hayek developed his argument about the use of knowledge in the context of the socialist calculation debate, and the aspect of knowledge he came to focus on was the contextual nature of knowledge in human action in markets, politics, law, and society. This paper traces out the development of Hayeks focus on the epistemic foundations of the complex coordination in an advanced market economy and shows that his critique of classical and market socialism led to a refined, subtle approach to understanding spontaneous order. Furthermore, it is precisely Hayeks focus on the role of institutions in creating the conditions for the utilization and transference of knowledge through the price system that continues to shape the progressive research programs in economic science and public policy analysis that is his legacy