Subject: Chinese investment surge, regulating e-cigarettes, and Toledo price gouging (AEI Economics

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What to watch for this fall

A surge of Chinese investment in the US. Derek Scissors: The remainder of 2014 and 2015 could see
over $20 billion in fresh Chinese spending. About half of U.S. states, including Florida, Washington, and
Indiana, have seen no large Chinese transactions. That's the equivalent of a large country which remains
untapped and it's a situation that seems unlikely to last.

The costs of overregulation

FDA, please dont regulate away e-cigarettes. Sally Satel and Alan Viard: E-cigarettes are much safer
than cigarettes because they do not have the carcinogenic tars and harmful gases produced by
cigarettes. . . . The FDA's own analysis indicates that the administrative burdens of the review process
would drive the overwhelming majority of e-cigarette products out of the market.

The living-will process sets banks up for failure. Abby McCloskey and Paul Kupiec: This type of
regulatory discretion is not uncommon in the world, but it is usually found in banana republics and
countries where the government runs the banking system. Such unconstrained authority opens up all
sorts of avenues for partiality and government intrusion into a financial institution's operations.

Regulating the Internet. Jeffrey Eisenach: The success of the Internets voluntary interconnection
regime stands in stark contrast to the distortionary, inflexible regulatory regimes that have governed
interconnection in the POTS world. Simply put, regulators lack the information necessary to set efficient
interconnection prices and the flexibility to adjust them in the face of changing market conditions, leading
to inefficient market structures, misallocated investment, arbitrage schemes, and regulatory
gamesmanship.

Failed stimulus

A clunker of a program. Stan Veuger: The least one can expect from a bailout program is that it helps
the firms it is supposed to bail out. Cash for Clunkers was so clumsily designed that it did not even
accomplish that. Instead, it harmed the industry that it was meant help.

Government spending doesnt make poor countries rich. James Pethokoukis: New research from
the International Monetary Fund undercuts the idea that big push infrastructure and other public
investment projects can create accelerating economic growth and higher productivity in low-income
countries.

In other news

In defense of price gouging in Toledo. Benjamin Zycher: Residents of Toledo, Ohio were warned not
to use city water supplies due to algae growth in Lake Erie. (After a few days, the water was declared
safe to drink.) For those few days, unsurprisingly, the demand and market prices for bottled water
increased sharply, and few politicians can resist such opportunities for demagoguery.

A Kansas City enthusiast. Michael Strain: I astonish my Acela corridor friends with facts: In Kansas
City, you can buy a 5,000 square foot mansion for seventeen dollars; you cant find a thirty minute drive if
you try, even in rush hour; the (non-barbeque) restaurants are actually getting better, to the point that
sometimes you feel like you could be eating in New York.

About the failure and bailout of Banco Espirito. Alex Pollock: Anyone who has seen a few financial
crises knows that one of their typical occurrences is for central banks and governments to offer
assurances that things are all right, when in fact a disaster is approaching.


Mark your calendar

8.20 FOMC minutes released
8.21 Jobless claims released

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