Todd Zywicki, a colleague over in GMU’s Scalia Law School, writes with co-author Julian Morris (and with help from Geoff Manne) that the Durbin Amendment should be repealed, not least because this instance of price control does what all price controls do: inflicts disproportionate harm on the very groups that it is ostensibly meant to help. A slice:
Second, Mr. Durbin’s theory ignored that banks would have to recoup their lost revenue in other places. Since the amendment’s enactment, banks have slashed access to free checking (which has fallen from 76% to 38% of accounts since 2008), doubled monthly maintenance fees on other accounts, raised other monthly fees, and increased the mandatory minimum balance to qualify for free checking from $109 in 2008 to $670 last year. In addition, affected banks have almost completely eliminated rewards on debit cards, amounting to an effective 1% price increase on all goods and services for consumers who previously used these “cash back” rewards cards. All told, according to a study by the Boston Fed, banks have recouped roughly 30% of their lost interchange revenue by charging customers higher fees.
Wealthy households have largely avoided the Durbin Amendment’s sting by shifting purchases to rewards-rich credit cards and raising their monthly balances to hang on to free checking. Lower-income families, by contrast, are either paying hundreds of dollars in new bank fees or have been driven out of bank accounts entirely, turning instead to check cashers, pawnbrokers and other financial providers that cater—at higher cost—to unbanked consumers. All told, we estimate that the Durbin Amendment has saddled lower-income consumers with $1 billion to $3 billion per year in higher out-of-pocket costs—with little or no relief in the form of lower retail prices.
Speaking of negative effects of price controls, Brady Horn, Johanna Catherine Maclean, and Michael Strain – in a new paper published in Economic Inquiry – find that minimum wages are bad for workers’ health. Here’s the abstract of their paper:
This study investigates whether minimum wage increases impact worker health in the United States. We consider self-reported measures of general, mental, and physical health. We use data on lesser-skilled workers from the 1993 to 2014 Behavioral Risk Factor Surveillance Survey. Among men, we find no evidence that minimum wage increases improve health; instead, we find that such increases lead to worse health outcomes, particularly among unemployed men. We find both worsening general health and improved mental health following minimum wage increases among women. These findings broaden our understanding of the full impacts of minimum wage increases on lesser-skill workers.
David Henderson reveals some of the many reasons why predatory pricing is vastly overrated (among those who haven’t thought deeply about the matter) as a means of attempting to acquire monopoly power.