Rent-Seeking and Economic Regulation Hurts Those in Mourning in Maryland

This 2006 article from the Baltimore Sun discusses how expensive funeral services are in Maryland (not to mention everywhere else in America) due to an early 20^th century state law that was passed in order to protect consumers from unreliable morticians; the article goes on to reveal that this law is actually popular amongst funeral business owners today in Maryland because they can use it to prevent legitimate funeral service businesses from opening up around them. The author of this article states that “funeral directors couldn't engineer this protection by themselves; they've had help from state lawmakers who have prevented attempts to reform the funeral laws. Few Marylanders are aware that one of Annapolis's more generous political benefactors is the Maryland State Funeral Directors Association.”

With this quote, the problem of rent-seeking within the funeral service business in Annapolis, Maryland becomes obvious. In terms we have discussed in class via Tullock’s chapter on the topic, because of the monetary gains that can be obtained from keeping regulatory state laws in place, there is an incentive for funeral business owners today to give money to the Maryland state government (aka spend resources on rent-seeking expenditures), and thus money is spent away from the natural direction of the market. Funeral home owners have fought innovations in the funeral service business that would lower funeral costs by “working with their politician friends…they have defended and strengthened anti-competitive funeral regulations aimed at stemming the tide of Internet casket sales, the expansion of funeral home chains and the popularity of cremations.”

In this rent-seeking case in Maryland, resources were wasted trying to obtain the “rent” of regulation to entry in the funeral service business. Therefore, I also felt as though this article was interesting because it provided a real life example that tied Tullock’s article on rent-seeking to Stigler’s article on economic regulation. The author of this article states that “people usually think that businesses dislike regulation. But businesses often find it profitable to have regulations crafted to impede would-be competitors. This allows politically well-connected businesses to charge higher prices and manipulate consumers' choices.” With this quote, Stigler’s argument of how businesses like government regulation because it gives them market power and control is proven. The funeral business owners give money to the government (rent-seeking) in order to make sure that it is hard for new funeral service businesses to open up and therefore their prices can stay high (theory of economic regulation).

My question after reading this article is, how will this cycle of rent-seeking and unnecessary regulation over entry into a market be fixed? Or will people in Maryland just always have to pay more for their funeral services?

How Tiebout is true in NYC

This article was published in the spring of 2009, and it focuses on various New Yorkers’ approach to their children’s education in the wake of the Great Recession that started in the fall of 2008. The article discusses how there has been an increase in interest and in applications for public schools in certain New York City areas because some families can no longer afford to pay private school tuition for their children. The areas mentioned in the article are ones that are typically thought of to be inhabited by wealthier families (like the Upper East Side and Upper West Side of Manhattan). The article also shows how some couples without children (but who plan on having them in the future) are now looking to buy/rent apartments in areas with established public school systems because the education of their future children is very important to them, and they do not know if the economy will have turned around by the time their future children reach school-age.

I felt as though this article tied in well with our discussion of Charles Tiebout’s “A Pure Theory of Local Expenditures” and the concept of “voting with one’s feet.” The article provides several examples of people who had purchased apartments in an area of New York before the recession hit, and their education preferences were not factored in to their apartment location because they assumed that they would send their children to private school. However, the recession is causing these families to alter their preferences to include their children’s public school education, as private school is no longer economically feasible. Many of the families mentioned in the article are either trying to sell/sublet their current apartment and move in/rent a new apartment located in a better public school zone. Although not all of the assumptions of Tiebout’s model hold in this article (some of the people interviewed mention the high costs associated with moving), Tiebout’s overall conclusion that people reveal their true preferences by their location is realized.

After reading this article, I was curious to see if the local government of New York responded to the changing preferences of these New York families. Not surprisingly, I found another article (which was published after the first one) about the opening of a new public middle school (the first new public school building built on the Upper East Side in almost 50 years!) in one of the areas mentioned in the first article that had seen an increase in public school applications. As Tiebout suggested, local provision and adjusting was done within the public school district by the voter based on where they live; the government saw both the movement of families to a certain area and the increase in public school applications in that area and responded by allowing a new public school to be built in said area. A pretty good real-life example of Tiebout’s argument in my opinion!

Are Long Weekends always a good thing?

Friday's Cavalier Daily held a column reporting on a proposition for Virginia state employees - obviously of concern for the University. Associate Editor Rebecca Rubin tells us that the Virginia state government is reviewing a proposal to place many government workers under a four-day work week of 10-hour days, maintaining forty hours per week. The idea, according to Isaac Wood of the Centre for Politics, is to save possibly more than $3 million in energy costs.

Wood apparently ignores the social costs or externalities of the proposal, calling the cuts "really painless" before he asks "do the benefits to the state outweigh the costs?" Rubin is more economically astute and (though without calling them such) assesses some negative externalities that the proposal could inflict. She highlights the inability of the public to work with the affected agencies for the additional day each week. Are there more externalities hidden here, positive or negative?