Does Competition Reduce Discimination?

Evidence from College Football

By Jeffrey Miron. 

"A standard economic view holds that markets will moderate some kinds of discrimination because “profit” maximizing organizations will recognize that discrimination is costly to their bottom line or other goals.

A recent study looked to the integration of college football in the 1970s for supporting evidence. By comparing conference-wide rankings and team win percentages before and after a team integrated, the study found that

poorly performing teams, potentially seeking to improve their win rate, choose to integrate.

Also,

worse teams were more likely to integrate than better teams… A likely explanation … is that poorly performing teams integrated to attract talented players.

These results indicate that

firms with low profits stop discriminating, or discriminate less, in a bid to increase profitability.

Somewhere, Gary Becker is smiling."

Entrepreneurs Take on the Funeral Monopoly: When Selling a Box Becomes a Crime

Oklahoma’s protectionist casket laws block competition and inflate costs. But some entrepreneurs are fighting back, taking their case to court to defend economic freedom

By Patrick Carroll of AEIR. 

"In 2017, Candi Mentink and her husband, Todd Collard, of Calvin, Oklahoma, launched Caskets of Honor, an innovative business selling caskets wrapped in vinyl graphics to honor the deceased. Todd, a graphic designer, created designs ranging from religious and patriotic themes to sports and hobbies.

The business grew quickly, but after four years, they discovered something surprising: in Oklahoma — one of only three states alongside Virginia and South Carolina — it is illegal to sell caskets without a funeral director’s license.

Candi and Todd learned this lesson the hard way. When they advertised their caskets at the Tulsa State Fair in October 2021, an Oklahoma Funeral Board investigator posed as an interested customer. After Todd told him he would be happy to sell him a casket, the investigator informed them that they were breaking the law. The investigator proceeded to file a complaint with the Board, which pursued an administrative action against the couple, resulting in a $4,000 fine, among other requirements.

To continue operating their business, Candi and Todd had to do some creative maneuvering. Obtaining a funeral director license was out of the question. That would require two years in a mortuary science program, a one-year apprenticeship, and thousands of dollars in fees. On top of that, to fully comply with the law, they would also have to transform their workshop into an official funeral home, which would be prohibitively expensive — not to mention wasteful, since they don’t plan on becoming funeral directors or running a funeral home.

Their workaround was moving the company’s legal home to Texas and requiring online orders. This allowed them to operate under interstate commerce rules, though Oklahoma law still bars them from selling or advertising to Oklahomans from their shop, cutting into sales.

Lawmakers have repeatedly tried to repeal the restriction, but pushback from the Funeral Board and a private trade association has stalled reform.

As a result, Candi and Todd have decided to sue. Working with the Institute for Justice (IJ), they filed a lawsuit on February 4 challenging the law as unconstitutional under Oklahoma’s protections of economic freedom.

Commenting on the lawsuit, IJ Attorney Matt Liles highlighted the absurdity of the current law. “At the end of the day, a casket is just a box. It serves no health or safety purpose,” he said. “You shouldn’t need to spend years studying unrelated topics just to sell a box.” 

The lawsuit drew particular attention to the protectionist nature of the current legal regime. “Oklahoma’s licensure requirements for casket sales have the intent and effect of establishing and maintaining a cartel for the sale of caskets within Oklahoma,” IJ writes. “…This anti-competitive cartel limits the lawful sale of caskets in Oklahoma to those who provide all other funeral services, while preventing individuals who do not wish to provide funeral services from offering caskets directly to the public. This scheme creates arbitrary and unreasonable barriers to conducting a lawful business and serves no legitimate interest related to public health, safety, or welfare.”

Vested Interests and the Power of Public Opinion 

In his 1949 treatise Human Action, the Austrian economist Ludwig von Mises warned about the ever-present threat of special interest groups that wish to stifle competition through legislation. 

“There were and there will always be people whose selfish ambitions demand protection for vested interests and who hope to derive advantage from measures restricting competition,” he wrote. “Entrepreneurs grown old and tired and the decadent heirs of people who succeeded in the past dislike the agile parvenus who challenge their wealth and their eminent social position.”

It’s easy to see why Oklahoma’s funeral industry wants to block up-and-coming competitors like Caskets of Honor. Less competition allows them to charge higher prices and ignore evolving consumer preferences — such as customized casket designs. The Institute for Justice notes that “the average funeral in Oklahoma costs $5,671 — 18 percent higher than the cost in neighboring states.”

How do vested interests get away with policies so clearly harmful to competitors and consumers? Mises explains: “Whether or not their desire to make economic conditions rigid and to hinder improvements can be realized, depends on the climate of public opinion.” In other words, they succeed because public opinion is on their side — a fact reflected in the repeated failure of three bills to end Oklahoma’s protectionist law.

Such protectionism, Mises observed, would have been largely futile in the nineteenth century, when classical liberalism prevailed. “But today,” he wrote, “it is deemed a legitimate task of government to prevent an efficient man from competing with the less efficient. Public opinion sympathizes with the demands of powerful pressure groups to stop progress.”

Changing that public opinion is challenging, but one promising approach is to tell the stories of entrepreneurs like Candi and Todd. When people see the real-world impact of protectionist policies, the injustice becomes impossible to ignore."

The Reagan White House Rejected Trump’s Tariff Power Claims

Section 122 was never meant to justify tariffs over ordinary trade deficits.

By Phillip W. Magness. Excerpt:

"Since 1976, the United States has had a near-continuous annual trade deficit. In 1984, this pattern prompted Congress to ask President Ronald Reagan to investigate its causes. The Senate Finance Committee submitted a list of questions to the White House about possible policy responses, including the following: “We would also like your analysis of the applicability of section 122 of the Trade Act of 1974 to the current [trade] imbalance, and the utility of surcharges or quotas to deal with this imbalance.”

The task of answering this question fell to Martin Feldstein, a longtime Harvard economist and a leading expert in macroeconomics, international economics, and public finance. At the time, Feldstein was serving as the chair of Reagan’s Council of Economic Advisers. He delivered the administration’s answer on Section 122 in a committee hearing on March 23, 1984:

On a more technical level, section 122 appears not even to apply to the current situation. The specific language of that section provides for the imposition of a tariff surcharge under two conditions: To deal with large and serious balance-of-payments deficits, and second, to prevent an immediate and significant depreciation of the dollar in foreign exchange markets.

Feldstein then carefully explained the conceptual difference between the “trade deficit” and a “balance-of-payments deficit” as contemplated by the statute:

Now, although we have a trade deficit and a current account deficit, we do not have a balance-of-payments deficit, in the strict sense envisioned in section 122. The technical definition for the balance-of-payments is the rate of accumulation of official reserve assets, including gold. Since net U.S. sales of other assets to foreigners, in other words net private investment in the United States, last year was more than enough to offset our current account deficit, the official U.S. reserves didn’t have to be drawn upon.

At the time of these remarks, official reserve drawdowns had become a thing of the past. Under the old Bretton Woods system, other countries maintained an official currency peg to the U.S. dollar. The dollar was, in turn, pegged to gold. Participants in this arrangement followed a complex set of rules administered by the International Monetary Fund to keep their currencies valued within the target ranges of the peg. As part of the deal, other governments could redeem their U.S. dollar holdings for gold at $35 an ounce. When a foreign government exercised this clause and exchanged dollars, it drew down on official U.S. reserves in gold and led to a “balance-of-payments deficit.”

In August 1971, President Nixon closed the gold exchange window and terminated this policy in a bid to stave off the depletion of U.S. gold reserves. The “Nixon Shock” threw the international exchange system into chaos, although for a while the United States attempted to reinstate a number of fixed exchange rate regimes. Congress passed the Trade Act of 1974, including the Section 122 tariff provision, amid this chaos in an attempt to provide negotiating leverage for a successor to the Bretton Woods system. That successor never emerged and in 1976 the International Monetary Fund formally amended its articles to terminate the fixed exchange rate system. The United States formally gave its assent to this change in October 1976, and exchange rates have floated on an open currency market ever since.

As a result of these changes to the international exchange system, the “balance-of-payments deficit” contemplated under Section 122 is now a relic of the past. Official U.S. reserves are no longer tied up in maintaining a fixed exchange system and are therefore not typically drawn down into deficit. Feldstein explained as much in his 1984 testimony:

Thus, although the current account deficit will be larger in 1984 than it was last year, there is no reason at this time to expect that there will be a balance-of-payments deficit in 1984. We will have a trade deficit, we will have a current account deficit; but there is no reason to think that we will be drawing down U.S. reserves or selling off our gold stock, and therefore we don’t have the balance-of-payments deficit that is required as a condition for triggering section 122.

Trump’s interpretation of Section 122 is not only a misreading of its terminology—it’s a misreading that past administrations investigated in response to similar trade deficit conditions. As Feldstein’s testimony shows, the Reagan Administration explicitly rejected Trump’s current argument and found that a “balance-of-payments deficit” did not exist under the current floating exchange rate system."

Jones Act Waiver Talk Highlights the Law’s Costs

By Colin Grabow of Cato. Excerpts:

"Although routinely defended as essential to national security, Jones Act waivers are often floated precisely when a genuine national security crisis or economic emergency arises. It’s an implicit acknowledgment by policymakers of what the law’s defenders rarely admit: It constrains transportation options and raises costs. A law portrayed as indispensable to national security suddenly becomes optional when pressures mount."

"Of the world’s nearly 7,500 tankers for moving crude oil and refined products, just 54 comply with the law. And those that do are dramatically more expensive than their international counterparts. Constructing a medium-range tanker suitable for carrying gasoline or jet fuel in a US shipyard costs roughly $190 million more than building one abroad. Building a crude oil tanker is said to cost over $400 million more. Annual operating costs run $8 million–10 million higher per vessel.

Combine those cost premiums with a minuscule fleet size and the result is predictable: Coastal tanker shipping in the United States is structurally expensive."

"By opening domestic routes to internationally flagged shipping, relief from the Jones Act would vastly increase the supply of vessels available to move American crude oil and refined products to US ports. That, in turn, would unlock new and more efficient supply chains."

"only a single Jones Act–compliant crude oil tanker currently serves the East Coast. With additional ships, US refineries could more easily source oil from Texas rather than import it from Libya or Nigeria. California, which currently imports fuel from the Bahamas as a costly Jones Act workaround, could obtain it more directly from the Gulf Coast."

"“if there was not a Jones Act, then there probably would be more movements of crude oil from Texas to Philadelphia.” The source of that quote? The same Jones Act tanker firm CEO who recently downplayed the benefits of waiving the 1920 law."

"Among liquefied natural gas tankers, only a single compliant vessel exists, and it is restricted to serving Puerto Rico. Among oceangoing dry bulk carriers, the workhorses of fertilizer transport, precisely zero exist in the Jones Act fleet."

"By the industry’s own admission, eliminating the Jones Act would increase domestic energy movements. That means fewer market distortions and more competitive pricing at the margin." 

Why is the USDA Involved in Housing?!

By Alex Tabarrok.

"In yesterday’s post, The 21st Century ROAD to Housing Act, I wrote that Trump’s Executive Order “cuts off institutional home investors from FHA insurance, VA guarantees and USDA backing…”. The USDA is of course the United States Department of Agriculture. In the comments, Hazel Meade writes:

USDA? Wait, what????
Why is the USDA in any way involved in housing financing?
Are we humanly capable of organizing anything in a rational way?

It’s a good question. The answer is a great illustration of the March of Dimes syndrome. The USDA got involved with housing in the late 1940s with the Farmers Home Administration. The original rationale was to support farmers, farm workers and agricultural communities with housing assistance on the theory that housing was needed for farming and the purpose of the USDA was to improve farming. Not great economic reasoning but I’ll let it pass.

Well U.S. farm productivity roughly tripled between 1948 and the 1990s as family farms became technologically sophisticated big businesses. So was the program ended? Of course not. Over time the program subtly shifted from farmers to “rural communities”–the shift happened over decades although it was officially recognized in 1994 when the Farmers Home Administration was renamed the Rural Housing Service. Today rural essentially means low population density which no longer has any strong connection to agriculture.

So that’s the story of how the US Department of Agriculture came to run a roughly $10 billion annual housing program for non-farmers in non-agricultural communities. And how does it do this? By supporting no-money-down direct lending and a 90 percent guarantee to approved private lenders. Lovely.

It’s a small program in the national totals, but an amusing example of the US government robbing Peter to pay Paul and then forgetting why Paul needed the money in the first place."

Ellen Wald's Misunderstandings about Gasoline Shortages and Oil Markets

It takes price controls to cause a shortage

By David R Henderson. 

"That leaves us at the precipice of the worst-case global energy scenario. The United States, by virtue of its robust domestic oil and gas industry and its synergy with Canada’s oil industry, is in the best possible place to weather a global energy crisis. If this war had happened in 2012, we might soon have been reliving 1973, complete with gasoline lines and rationing. But it is 2026, and domestic oil production is the highest ever. Our imports from Persian Gulf countries are the lowest since 1985 and account for a small percentage of the oil we import and consume.

So writes Ellen R. Wald, “This is How an Energy Crisis Starts,” The Free Press, March 8, 2026.

This paragraph leaves out a crucial factor and also shows Wald’s misunderstanding of the world oil market.

The crucial missing factor: whether or not we have price controls on oil and gasoline. The reason for the gasoline lines and rationing in 1973, as almost all informed economists know, is the presence of Nixon’s price controls. These controls prevented the domestic price of oil from rising to $11 per barrel, which became the world price in late 1973 after OPEC cut output. That caused a shortage at both the crude level and the retail gasoline level. Countries, like Switzerland, that avoided price controls also avoided gasoline lines. Contrary to Wald, if this war had happened in 2012, we would have avoided shortages and gasoline lines if our governments had avoided price controls.

Wald also shows a misunderstanding in the quoted paragraph about how world oil markets work. Whether or not we produce much or little of the oil we consume, we will be subject to the world oil price. Price is determined in a world market. I’m guessing you noticed that fact if you drove by a gasoline pump today.

To be fair, it is true that the increase in the price of oil hurts us less when we import little than when we import a lot. The reason is that “us” includes oil producers. So most of the loss to U.S. consumers goes to U.S. producers."

White House wrong to push Railway Safety Act

By Sean Higgins & Steve Swedberg of CEI.

"The White House is reportedly urging lawmakers to include new restrictions on freight rail operations in upcoming infrastructure or transportation legislation. CEI policy experts Sean Higgins and Steve Swedberg explain how this plan would do more to impose red tape than improve safety.

CEI Research Fellow Sean Higgins:

“The legislation would mandate minimum two-member crews (one conductor, one engineer) on freight trains. There is no evidence that such a mandate would make trains any safer, but it would prohibit attempts to further automate them. Railroad companies have reduced crew sizes for decades while also reducing accident rates. The two-crew rule exists solely for the benefit of unions that represent railroad workers. If there is any form of transportation that should be on the leading edge of automation, it is trains, which have a natural safety edge because they don’t use public roads or the skies.”

CEI Finance and Monetary Policy Analyst Steve Swedberg:

“The White House’s push to include the Railway Safety Act in a broader infrastructure or transportation bill risks enshrining policies that do little-to-nothing to improve rail safety or address root causes of rail accidents.

Instead, the legislation includes prescriptive government mandates that needlessly increase costs, diminish innovation, and slow rail operations. Locking technologies and procedures into federal law would impede the rail industry from adopting new technologies that achieve safety gains. Congress should be wary of any plan that imposes rigid rules instead of actual safety standards.”

Related analysis: The Railway Safety Act would derail progress one provision at a time"