Deregulate the Remittance Industry

By Jeffrey Miron of Cato.

"Exchanging money with friends or family should be simple and costless. While this currently occurs for many domestic transfers (think Venmo or Zelle), international remittances from hundreds of millions of migrants, totaling $905 billion in 2024, tell a different story. As of Q1 2025, the global average cost of remittances sits at 6.49 percent. And these costs are so high in some areas that senders use stablecoins instead. Although advancements in banking technology and infrastructure have lowered costs, several factors continue to make remittances expensive and slow. The most notable is the regulatory requirement for remittance transactions.

In the US, money service businesses are subject to the 1970 Bank Secrecy Act (BSA) and its numerous subsequent modifications, especially the post‑9/​11 Patriot Act and the 2020 Anti-Money Laundering (AML) Act. Although international money transfer regulations vary across countries, all such policies are extensive, expensive, and complicated.

Remittance regulations force money service providers to act as law enforcement, collecting detailed personal data, performing extensive customer screenings to bar sanctioned individuals, obtaining licenses in both sending and receiving countries, and hiring additional compliance personnel. US financial institutions spent $46 billion in 2022 on compliance. Unfortunately, a 2022 IMF working paper finds that

the price of sending remittances [tends] to be higher in countries that impose controls on remittance transactions, since these operate like a tax that is likely to be passed onto recipients.

Not only does this regulatory regime impose costs on consumers, but it also decreases competition. Due to regulatory requirements, entry into the remittance market is difficult, so the number of operators is small. This often results in a nearly oligopolistic market, including major banks with pricing and markup power.

The authors of the IMF working paper concluded that

the market structure is important: banks charge higher fees than money transfer operators (MTOs), [and] a larger share of banks among remittance service providers is also associated with higher fees charged by MTO[s].

To put these costs into perspective, MTOs consistently charge a significantly lower fee (5.04% as of Q1 2025), when compared to banks (14.55% as of Q1 2025).

Indeed, competition in the remittance market directly contributes to price reductions, according to this IMF article:

[a]n example where competition has spurred reductions in fees is in the U.S.–Mexico corridor, where remittance fees have fallen by more than 50 percent from over $26 (to send $300) in 1999 to about $12 in 2005.

Finally, after 44 years of the BSA,

[a]s late as 2014, academic research affirmed that possible benefits from the existing AML framework (internationally) had not yet been demonstrated.

Indeed, the BSA/AML regime seems to result in excessive overreporting: only 4 percent of suspicious Activity Reports (SARs, which are the mandatory reports financial institutions submit to the US Financial Crimes Enforcement Network) received any type of feedback from law enforcement. Finally, alternative money transfer channels such as crypto, where transactions are anonymous, practically untraceable, and most importantly, cheap, are increasingly available, allowing illicit transactions to bypass remittance regulatory frameworks.

In summary, regulatory overhead on international money transfer provides little to no security benefits while imposing significant costs for both money service providers and remitters. The right response is deregulation of the remittance industry to allow decreased operational costs and increased competition.

This article appeared on Substack on August 20, 2025. Eric Jin, a student at Southridge School, co-wrote this post."

 

*Capitalism: A Global History*, by Sven Beckert

By Tyler Cowen.

"This 1103 pp. book reflects a great deal of learning, and it is often interesting to read.  It is well-written.  So virtually everyone can absorb interesting things from it.  In that sense I am happy to recommend it.

The book has two major problems however.

First, is “capitalism” the right way of centering a book topic across centuries and 1103 pages?  What exactly ties all the different discussions together?  And how many of them succeed in making original contributions to the areas they cover?  There is a kind of “replacement level” left-wing series of cliches running throughout the narrative, but what else is unifying this story?  I would rather read a book on any single one of the covered topics.  And in too many cases the coverage seems only OK.  For instance, the discussions of Pinochet’s Chile, and neoliberalism, in the book’s final chapter are not above the quality of basic media coverage, as you might find in the NYT.

Second, the author does not know what “capitalism” is.  I am not going to insist on my pet definition, but consider a simple example.

Birkerts (p.180) is keen to describe mid-17th century Barbados as capitalism, indeed as a kind of extreme or ideal capitalism.  Well, in some regards.  Yes there were markets.  But King Charles I gave all the land to the Earl of Carlisle to distribute, and of course land was a centrally important asset back then.  Might that be called…heaven forbid…statism?  There was slavery too, at various stages of development, depending which years one is looking at.  Is that really “an almost perfectly Smithian economy”?  Smith hated slavery, and also considered it economically inefficient.  The Navigation Act of 1651 limited trade with the Dutch, and could be considered a further deviation from Barbadian capitalism.  The whole system was mercantilism built on land theft and slavery, and none of that is synonymous with capitalism.  Nor are these distinctions clearly unpacked in the discussion.

Or look to the book’s epilogue.  Cambodia is held up as the embodiment of current capitalism.  Really?  Not Poland or Ireland or Singapore?  Or even the Dominican Republic?  Better yet, how about multiple contrasting examples to conclude the book?  Cambodia was ruled by vicious communists, suffered under a major murderous holocaust, still has an absolute dictator, ranks 98th in the Heritage index of economic freedom (“mostly unfree“), and lies in the thrall of Chinese domination, economic, political, and otherwise.  I do understand there is now more FDI there, but this is hardly the proper representation of contemporary capitalism or its future, as the title of the final chapter seems to indicate.

The main problem is that the author has very little sense of what he does not understand.  Above all else, it is an example of just how insular our institutions of elite higher education have become."

Make Drug Approval Easier

By David Henderson. 

"A few days ago, I listened to Russ Roberts’s EconTalk interview of cardiologist Eric Topol on the health issues involved with aging. For some reason, I’m getting increasingly interested in that issue.

An interesting issue comes up at about 36:00 point. Topol states:

We should be using better nanoparticles and keeping that mRNA from ever having untoward side effects. But, we haven’t. The companies that make these are stuck in the original version. But, we got about a billion people exposed to them.

Later, Russ follows up with this:

When you say companies are stuck with their original versions, is that because of the intellectual property protection that they’re relying on and that it’s expensive therefore for them to start from scratch, and therefore they just don’t have an incentive to innovate? Or is there something else going on?

Russ is onto something: the expense of starting from scratch.

Topol responds:

No, I think part of it is the intellectual property. Part of it is they have now had mass production of hundreds of millions of vaccines and to go to a new process–the point being, is: we’ve known that the nanoparticles can be optimized so they even have better penetration. We have these things called self-amplified vaccines where you give much tinier amounts of mRNA. And that’s approved in Japan. But there’s not even a bit of effort to get that going in the United States. That would help reduce the mRNA side effects.

So, these companies, they did very well during the pandemic and they got things going quickly. That’s great; but they’re not keeping up with the field. And we’re seeing in other parts of the world the innovations that we need.

What Topol doesn’t get into is why there’s progress in Japan that is not being replicated in the United States.

The answer is the Food and Drug Administration. Ever since the 1962 change in law, drug companies that want to introduce a drug into the lucrative U.S. market must show not only safety but also efficacy. The requirement for showing efficacy has added almost a decade to the drug development process.

So the issue is not intellectual property per se. It’s that the process of getting approval is daunting.

That’s why it makes sense, as Dan Klein has argued, for the FDA to automatically approve drugs that have been approved by the FDA’s counterpart in even one of, say, a list of 15 relatively wealthy countries.

You might argue that that’s too risky. But if you don’t like the risk, wait until the FDA approves it. Other people can take their chances. That’s what’s so great about freedom. We need more of it."

Imported goods cost 5% more than pre-tariff trends predicted

Tweet from Alberto Cavallo of Harvard Business School.

"US tariffs update: Imported goods cost 5% more, domestic goods 3% more than pre-tariff trends predicted. Data now runs through Aug 8 — and we push the history back to Jan 1, 2024 (Appendix), showing a full year of stability before tariffs broke the trend. http://pricinglab.org/tariff-tracker" 

 

How Tariffs Impact the Home Building Industry

By Alex Strong of The National Association of Home Builders. Excerpts:

"Scarcity and an acute, sustained rise in building material costs — from softwood lumber to distribution transformers — are driving up the cost to construct homes and harming housing affordability. There are several factors driving this trend, notably inflationary pressures and global factors, including trade uncertainty.

NAHB estimates that $204 billion worth of goods were used in the construction of both new multifamily and single-family housing in 2024. $14 billion of those goods were imported from outside the U.S., meaning approximately 7% of all goods used in new residential construction originate from a foreign nation."

"Data from the NAHB/Wells Fargo Housing Market Index (HMI) April 2025 survey reveals that builders estimate a typical cost effect from recent tariff actions at $10,900 per home." 

 

Trump Is Right on ‘Debanking’

Regulators have abused their power to cut off political opponents

WSJ editorial. Excerpts:

"bank examiners have pressed banks to cut off certain groups, businesses or individuals.

Starting in the mid-1990s, financial regulators started considering “reputational risk” in grading banks for safety and soundness. If a bank provides services to an unsavory business, examiners could sanction it. During Operation Choke Point, Obama regulators pushed banks to cut off gun retailers and payday lenders by deeming them reputational risks.

Regulators backed off after Republicans in Congress exposed the pressure campaign, but Biden appointees used the same tactic to clamp down on crypto. Banking regulators this year committed not to grade banks based on reputational risk, and Mr. Trump’s order directs them to remove it from guidance documents and examination manuals."

"But the FBI and Treasury abused the system [Bank Secrecy Act] to conduct a dragnet investigation of conservatives. A House Judiciary Committee report last fall detailed how the FBI “suggested” banks file SARs on “suspicious” people tied to the Jan. 6 riot so they could investigate them without a warrant. There’s no such thing as a “suggestion” from government overlords."

"Violations of the Bank Secrecy Act can lead to penalties of hundreds of millions of dollars"  

Make Cars Beautiful Again

Congress quietly axed the fuel-economy standards that help drive the ugliness

By Andy Kessler. Excerpt:

"Fuel-economy standards were enacted in 1975 after the oil embargo. The auto industry immediately complained that future fuel-efficient trucks and buses would be underpowered and never make it up hills. So in June 1976, Congress provided exemptions by defining “a non-passenger automobile” via Title 49 of the Code of Federal Regulations.

What exactly is a “non-passenger automobile”? The first test is if it can “transport more than 10 persons.” Yes, only our government can classify buses and vans as “non-passenger.” In addition to RVs, cargo vans and trucks, an exemption was also provided for vehicles “capable of off-highway operation”—a loophole big enough to drive through.

To be considered “off-highway,” a vehicle must have four-wheel drive or weigh more than 6,000 pounds. Other characteristics include an approach angle of more than 28 degrees. Approach angle? Think of it as the steepest angle you can drive up (there’s a 20% descent angle) without scraping your bumper. It’s measured as the angle from the ground at the bottom of the tire to the lowest part of the bumper. Clearance requirements to avoid scraping were also included.

Check out compact SUVs and crossovers on the streets today. You don’t need a protractor to see these bumper-to-tire angles and clearances—all to avoid fuel economy and safety standards. No wonder every auto company loves to sell suburban assault vehicles (to paraphrase Bill Murray in “Stripes”). But complying with off-road rules to get a CAFE exemption leaves almost no room for design creativity. Hence the sameness. And most of these “off-road” vehicles probably never leave pavement."