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102. Discrimination, Managers, and Firm Performance: Evidence from “Aryanizations” in Nazi Germany
- Author:
- Killian Huber, Volker Lindenthal, and Fabian Waldinger
- Publication Date:
- 10-2021
- Content Type:
- Policy Brief
- Institution:
- The Cato Institute
- Abstract:
- Large‐scale increases in discrimination can lead to dismissals of highly qualified business leaders and managers. Discriminatory expulsions of individuals holding important positions in the economy have occurred repeatedly, both historically and in modern times. Recent political developments have renewed interest in the economic effects of this type of discrimination. For instance, the U.S. travel ban on citizens of seven Muslim‐majority countries has raised fears among large corporations that increasing discrimination will leave them unable to retain talent.
- Topic:
- History, Economy, Business, Discrimination, and Nazi Germany
- Political Geography:
- Germany and United States of America
103. Why U.S. Immigration Barriers Matter for the Global Advancement of Science
- Author:
- Ruchi Agarwal and Patrick Gaule
- Publication Date:
- 10-2021
- Content Type:
- Policy Brief
- Institution:
- The Cato Institute
- Abstract:
- While talent can be born anywhere, few places specialize in nurturing it. Accordingly, talented individuals have pursued opportunities abroad for centuries. For instance, Aristotle moved from Northern Greece to Athens to attend Plato’s Academy and then to Macedonia to tutor a young Alexander the Great. More recently, the United States has emerged as a hub for foreign talent, playing an outsized role in the global knowledge network of scientific activity in recent decades. However, the recent introduction of restrictive immigration policies in the United States may adversely impact scientific activity. While studies have examined the potential negative impact of restrictive U.S. immigration policies on U.S. competitiveness in science and innovation, there has been less focus on understanding how U.S. immigration barriers may in turn impact scientific activity globally. In this context, our work studies the impact of U.S. immigration barriers on global knowledge production and examines which policy actions are more likely to help advance the global knowledge frontier.
- Topic:
- Science and Technology, Immigration, Border Control, and Research and Development
- Political Geography:
- Global Focus and United States of America
104. The Smoot‐Hawley Trade War
- Author:
- Kris James Mitchener, Kirsten Wandschneider, and Kevin H. O'Rourke
- Publication Date:
- 11-2021
- Content Type:
- Policy Brief
- Institution:
- The Cato Institute
- Abstract:
- In the words of Robert J. Samuelson, “The ghost of Smoot‐Hawley seems to haunt President Trump.” As fears of a trade war between the United States and China grew after the U.S. presidential election of 2016, many commentators drew this link between the signing of the Smoot‐Hawley Tariff Act of 1930 and recent trade disputes. And the consensus was that the trade wars of the 1930s were an ominous portent of what might await the world if Donald Trump’s protectionist impulses were not checked.
- Topic:
- Tariffs, Trade Wars, Economic Policy, and Imports
- Political Geography:
- China and United States of America
105. In Vaccines We Trust? The Effects of the CIA’s Vaccine Ruse on Immunization in Pakistan
- Author:
- Monica Martinez-Bravo and Andreas Stegmann
- Publication Date:
- 11-2021
- Content Type:
- Policy Brief
- Institution:
- The Cato Institute
- Abstract:
- Trust in the medical sector and in medical products is a key determinant of the demand for health care. This is especially relevant for the use of vaccines. Because of herd immunity, it is difficult—if not impossible—to learn about the effectiveness of vaccines through one’s own experience. Hence, events that discredit the effectiveness of vaccines or the reputation of the medical sector can have dramatic consequences on immunization rates. A commonly discussed example of such dynamics was the publication of an article in the medical journal The Lancet in 1998 that linked autism to the measles, mumps, and rubella vaccine. Media reports have associated this publication with the emergence of the anti‐vaccine movement and with the recent rise in the number of unvaccinated children in several countries. The declines in vaccination rates have contributed to the reemergence of previously eradicated diseases in several countries.
- Topic:
- Public Health, Vaccine, and Central Intelligence Agency (CIA)
- Political Geography:
- Pakistan and South Asia
106. The Intended and Unintended Consequences of Disposable Bag Regulation
- Author:
- Tatiana Homonoff, Lee-Sien Kao, Javiera Selman, and Christina Seybolt
- Publication Date:
- 11-2021
- Content Type:
- Policy Brief
- Institution:
- The Cato Institute
- Abstract:
- Many recent government and corporate policies aimed at reducing a variety of negative externalities include regulations that ban the provision of externality‐generating products. However, these policies often ban only a narrow subset of products associated with the underlying externality. For example, the U.S. Department of Justice banned bump stocks, which assist in rapid‐fire shooting, after a Las Vegas mass shooting rather than placing stricter regulations on all assault weapons. Similarly, Starbucks recently banned the distribution of plastic straws at its stores to reduce environmental waste, and New York City attempted to pass a restaurant ban on sugar‐sweetened beverages over 16 ounces to curb obesity.
- Topic:
- Environment, Government, Regulation, and Corporations
- Political Geography:
- Global Focus
107. The Economic Geography of Global Warming
- Author:
- José‐Luis Cruz
- Publication Date:
- 12-2021
- Content Type:
- Policy Brief
- Institution:
- The Cato Institute
- Abstract:
- The world is getting warmer due to carbon emissions generated by the economic activity of humans. Global carbon emissions will affect temperatures everywhere over long periods of time and in geographically different ways. What will be the impact of carbon emissions, and the implied changes in temperatures, on the world economy and on the economies of particular regions? How will individuals react to these changes, and how are these reactions impacted by their ability to migrate, trade, or invest and develop alternative centers of economic activity? What are the best policies to combat global warming, and what are the implications of these policies for different regions across the world? We propose and quantify a novel model to address these questions.
- Topic:
- Climate Change, Migration, Economic Policy, Innovation, Trade, and Carbon Emissions
- Political Geography:
- Global Focus
108. Getting Schooled: The Role of Universities in Attracting Immigrant Entrepreneurs
- Author:
- Natee Amornsiripanitch, Paul A. Gompers, George Hu, and Kaushik Vasudevan
- Publication Date:
- 12-2021
- Content Type:
- Policy Brief
- Institution:
- The Cato Institute
- Abstract:
- Immigrants play a vital role in innovation activities and entrepreneurship. Given the substantial contribution of immigrants in these areas, a set of natural questions arise: What are the pathways that high‐skilled immigrants take to arrive in the United States, and how has the importance of these pathways changed over time? What are important institutions that serve as gatekeepers for high‐skilled immigrants, and do they affect the types of immigrant founders that come to the United States? Do certain parts of the United States benefit disproportionately from high‐skilled immigration, and if so, what are some factors that contribute to these benefits? The answers to these questions have important implications for designing immigration policy and regulation, which have become increasingly acrimonious topics in public discourse. They also have important implications for firms and universities that recruit talent from abroad and for the communities that hope to promote vibrant entrepreneurial ecosystems.
- Topic:
- Entrepreneurship, Immigrants, Innovation, Higher Education, and Startup
- Political Geography:
- North America and United States of America
109. Money, Stability, and Free Societies
- Author:
- Steve H. Hanke
- Publication Date:
- 06-2020
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Monetary instability poses a threat to free societies. Indeed, currency instability, banking crises, soaring inflation, sovereign debt defaults, and economic booms and busts all have a common source: monetary instability. Furthermore, all these ills induced by monetary instability bring with them calls for policy changes, many of which threaten free societies. One who understood this simple fact was Karl Schiller, who was the German Finance Minister from 1966 until 1972. Schiller’s mantra was clear and uncompromising: “Stability is not everything, but without stability, everything is nothing” (Marsh 1992: 30). Well, Schiller’s mantra is my mantra. I offer three regime changes that would enhance the stability in what Jacques de Larosière (2014) has asserted is an international monetary “anti-system.” First, the U.S. dollar and the euro should be formally, loosely linked together. Second, most central banks in developing countries should be mothballed and replaced by currency boards. Third, private currency boards should be permitted to enter the international monetary sphere.
- Topic:
- Debt, Foreign Exchange, Monetary Policy, Developing World, Inflation, and Currency
- Political Geography:
- Europe, United States of America, and European Union
110. The Effect of War on Economic Growth
- Author:
- Clifford F. Thies and Christopher F. Baum
- Publication Date:
- 01-2020
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- With the collapse of the Soviet Union, it was thought that major wars had become obsolete (Mueller 1989) and perhaps regional conflicts might be brought under control (Cederman, Gleditsch, and Wucherpfennig 2017). But, while the level of violence declined, the number of wars in the world appears to have reached a new steady state. A world that was once organized by East-West rivalry is now characterized by ethno-religious conflicts, as well as by spontaneously arising transnational terrorist organizations and criminal gangs. For various reasons, economists have become interested in investigating the causes and effects of war and other armed conflict (e.g., Coyne and Mathers 2011). This article uses a consistent measurement of these forms of violence across space and time to conduct a rigorous quantitative analysis of the effect of war on economic growth.
- Topic:
- Cold War, War, History, Economic Growth, and Conflict
- Political Geography:
- Global Focus
111. Tariffs and Monetary Policy: A Toxic Mix
- Author:
- Michael D Bordo and Mickey D. Levy
- Publication Date:
- 01-2020
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The ratcheting up of tariffs and the Fed’s discretionary conduct of monetary policy are a toxic mix for economic performance. Escalating tariffs and President Trump’s erratic and unpredictable trade policy and threats are harming global economic performance, distorting monetary policy, and undermining the Fed’s credibility and independence. President Trump’s objectives to force China to open access to its markets for international trade, reduce capital controls, modify unfair treatment of intellectual property, and address cybersecurity issues and other U.S. national security issues are laudable goals with sizable benefits. However, the costs of escalating tariffs are mounting, and the tactic of relying exclusively on barriers to trade and protectionism is misguided and potentially dangerous. The economic costs to the United States so far have been relatively modest, dampening exports, industrial production, and business investment. However, the tariffs and policy uncertainties have had a significantly larger impact on China, accentuating its structural economic slowdown, and are disrupting and distorting global supply chains. This is harming other nations that have significant exposure to international trade and investment overseas, particularly Japan, South Korea, and Germany. As a result, global trade volumes and industrial production are falling. Weaker global growth is reflected in a combination of a reduction in aggregate demand and constraints on aggregate supply.
- Topic:
- International Trade and Finance, Monetary Policy, Economic Growth, Tariffs, and Industry
- Political Geography:
- Japan, China, Europe, Asia, South Korea, Germany, North America, and United States of America
112. The U.S.-China Trade War: Is There an End in Sight?
- Author:
- Simon Lester and Huan Zhu
- Publication Date:
- 01-2020
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Donald Trump was a trade “hawk” long before he became president. In the late 1980s, he went on the Oprah Winfrey show and complained about Japan “beating the hell out of this country” on trade (Real Clear Politics 2019). As president, he has continued with the same rhetoric, using it against a wide range of U.S. trading partners, and he has followed it up with action (often in the form of tariffs). While many countries have found themselves threatened by Trump’s aggressive trade policy, his main focus has been China. As a result, the United States and China have been engaged in an escalating tariff, trade, and national security conflict since July 2018, when the first set of U.S. tariffs on China went into effect and China retaliated with tariffs of its own. In this article, we explore the U.S.-China economic conflict, from its origins to the trade war as it stands today. We then offer our thoughts on where this conflict is heading and when it might end.
- Topic:
- Economics, International Trade and Finance, Tariffs, Trade Wars, and Donald Trump
- Political Geography:
- China, Asia, North America, and United States of America
113. How the Classical Gold Standard Can Inform Monetary Policy
- Author:
- James A. Dorn
- Publication Date:
- 10-2020
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- atching the frenzy surrounding Judy Shelton’s confirmation hearing before the Senate Banking Committee on February 13, one is led to believe that the gold standard is a “nutty” idea, for which no serious economist or monetary policymaker could possibly have a kind word (see U.S. Senate 2020). This article critiques that wholesale refutation of the gold standard. In recent years (as well as in the past), both serious economists and reputable monetary policymakers have recognized the benefits of a gold standard in reducing regime uncertainty and promoting monetary and social order. Whatever one may think of President Trump’s recent Fed picks, the gold standard itself deserves more respect than it’s been getting.
- Topic:
- Monetary Policy, Federal Reserve, Finance, and Gold Standard
- Political Geography:
- Global Focus and United States of America
114. On the Origins of Entrepreneurial Alertness: Did Bauer and Yamey Precede Kirzner?
- Author:
- J. Robert Subrick
- Publication Date:
- 10-2020
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- After the Second World War, the entrepreneur virtually disappeared from economic analysis (Baumol 1968). This neglect followed from the emerging models of general equilibrium that formed one aspect of the core of economic theory. By assumption, the Walrasian auctioneer knew the appropriate prices necessary to equate quantity supplied with quantity demanded in each market. In addition, the auctioneer knew when and by how much to adjust prices when an exogenous factor changed such as income or production technology. Trade only occurred at equilibrium prices so that markets cleared. No market participant chose or changed prices; it occurred exogenously. Kenneth Arrow recognized the lack of real world mechanisms to determine and adjust prices in competitive markets. He identified a logical gap in the perfectly competitive model. He wrote that “there is no place for a rational decision with respect to prices as there is with respect to quantities” (Arrow 1959: 42). Prices exist independent of consumer and firm behavior. A complete model would have to provide a solution to the conundrum.
- Topic:
- Markets, History, Entrepreneurship, and Economy
- Political Geography:
- North America and United States of America
115. Assessing State Capacity Libertarianism
- Author:
- Ryan H. Murphy and Colin O'Reilly
- Publication Date:
- 10-2020
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Tyler Cowen (2020), in a controversial and widely discussed blog post, has argued that free economic institutions must be accompanied by state capacity to achieve maximal growth rates. He calls this “State Capacity Libertarianism,” which echoes positions he has posed previously (Cowen 2007, 2018). Besley and Persson (2011) can be perhaps seen as a direct predecessor. Criticisms immediately emerged, with Henderson (2020) arguing that Cowen’s specific proposals are in direct conflict with libertarianism, and with minor caveats, free economic institutions are already able to achieve the goals Cowen hopes to achieve with state capacity. Geloso and Salter (forthcoming) argue that the lack of examples of wealthy countries with weak states is due to survivorship bias, and they apply their argument to criticize Cowen (Geloso and Salter 2020). Caplan (2018), while not directly addressing State Capacity Libertarianism, argues that there is little reason to believe that the effects of state capacity are the result of strong states themselves, rather than the social and cultural factors that allowed a strong state to emerge in the first place. The purpose of this article is to put data to the question of the individual effects of state capacity and free economic institutions on economic performance, and the potential interaction between the two.
- Topic:
- Economics, Markets, State, and Libertarianism
- Political Geography:
- Global Focus
116. The American News Media’s Volatile Perspectives on China
- Author:
- Ted Galen Carpenter
- Publication Date:
- 10-2020
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- In the decades since the founding of the People’s Republic of China (PRC) in 1949, wild swings have occurred in the way that American media outlets view that country. At most times, a herd mentality is evident, as a large percentage of news stories portray China in one particular fashion, although there always are some dissenters from the dominant narrative. The nature of that narrative sometimes shifts rapidly and dramatically, however. During some periods, the prevailing perspective has been extremely hostile, with nearly all accounts seeing the PRC as a monstrous oppressor domestically and an existential security threat to the United States. That was the case for more than two decades following the communist revolution, until Richard Nixon’s administration suddenly altered U.S. policy in 1971–1972, and Washington no longer treated the PRC as a rogue state.
- Topic:
- Security, Foreign Policy, Public Opinion, Media, and Economy
- Political Geography:
- China, Asia, North America, and United States of America
117. U.S. Policy Options Toward China: An Appraisal
- Author:
- Simon Lester
- Publication Date:
- 10-2020
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Most Americans will agree that the Chinese government has behaved badly in a number of ways, although they may not agree on exactly which Chinese government behavior is a problem. Perhaps it’s the treatment of ethnic or religious minorities, such as the Uighurs or Tibetans or Christians; maybe it’s the crackdown on protests in Hong Kong and failure to uphold the “one country, two systems” principle; or assertiveness in territorial disputes; or censorship; or protectionist trade practices; or intellectual property theft; or cyber‐hacking; or spying; or most recently, being slow to disclose the emergence of the coronavirus and engaging in a propaganda war regarding who is at fault. It’s a long list, and everyone has their own priorities. But while there is loose agreement on the existence of a problem, there is great difficulty in coming up with an appropriate response. What can or should the United States government do about any of this? Is it possible to change the behavior of other governments? Is the U.S. government in a position to do it? Is it appropriate to do so?
- Topic:
- Foreign Policy, Human Rights, Bilateral Relations, and Trade
- Political Geography:
- China, Asia, North America, and United States of America
118. The Fall of Chile
- Author:
- Axel Kaiser
- Publication Date:
- 10-2020
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Following the failed Marxist experiment of Chilean President Salvador Allende, a free‐market revolution led by the so‐called Chicago Boys in the 1970s and 1980s created the conditions necessary for the country to experience an “economic miracle” that captured worldwide attention.1 As Nobel laureate economist Gary Becker (1997) put it, Chile became “an economic role model for the whole underdeveloped world.” This performance, said Becker, “became still more impressive when the government was transformed into a democracy.” Along the same lines, Nobel laureate economist Paul Krugman argued that the reforms introduced by the Chicago Boys “proved highly successful and were preserved intact when Chile finally returned to democracy in 1989” (Krugman 2008: 31). Indeed, from 1990 to 2010 a left‐wing coalition called “Concertación” came to power. Despite having been comprised of opponents to the military dictatorship and by many former members of Salvador Allende’s government, Concertación kept in place the foundations of the free‐market system. A pragmatic view prevailed, leading to the recognition and adoption of the economic legacy of the Pinochet years.
- Topic:
- Economics, Reform, Neoliberalism, Ideology, Crisis Management, Transparency, and Free Market
- Political Geography:
- South America, Chile, and United States of America
119. Economic Liberalizations Around the World Since 1970: Shock Therapy Versus Gradualism
- Author:
- Kerianne N. Lawson and Robert A. Lawson
- Publication Date:
- 10-2020
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- This article examines 77 countries with the most significant economic liberalizations since 1970, as measured by changes in the Economic Freedom of the World (EFW) index. Measures of both the speed and comprehensiveness of the reforms are presented. Our empirical evidence suggests that faster reforming nations economically outperformed slower reformers. We do not find evidence that more comprehensive reforms, as opposed to more narrowly targeted reforms, had much of an impact on ensuing economic growth.
- Topic:
- Economics, Reform, Economic Growth, and Liberalization
- Political Geography:
- Global Focus
120. Immigration and State Institutions: Does Region of Origin Matter?
- Author:
- Meg Tuszynski and Dean Stansel
- Publication Date:
- 10-2020
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Some immigration opponents claim that immigrants import bad institutions and policies from their country of origin into their new home country. We argue just the opposite—namely, that immigrants are more likely to self‐select into countries with better institutions than those in their home countries. Researchers have examined this issue in both a cross‐country and within‐country context. Their findings have been mixed. Although others have found small or nonexistent impacts of immigrants on state institutions, those papers assume that all immigrants are the same. Our approach is unique in that it divides immigrant populations in a variety of ways. We build on the previous literature that examines the relationship between immigration and institutions at the state level, where there are smaller inherent differences in economic institutions (compared to differences across countries). We do so by incorporating the regional diversity of immigrant populations, examining whether immigrants’ countries of origin matter for economic outcomes in their new home country. Controlling for the diversity of immigrant populations in a way that previous researchers have not done improves our ability to assess immigration opponents’ claims that immigrants from economically worse‐off countries hurt U.S. economic institutions. We find virtually no evidence of an economically and statistically significant relationship between the levels of immigration we have experienced in recent decades and a decline in economic institutions in the United States, regardless of the region or economic conditions of recent immigrants’ home countries. The limited statistically significant evidence we do find is mixed and small in magnitude. Thus, one of the key rationales used to call for immigration restrictions is not supported by our findings.
- Topic:
- Immigration, Institutions, and Macroeconomics
- Political Geography:
- North America, Global Focus, and United States of America
121. Financial Transactions Taxes: Inaccessible and Expensive
- Author:
- Diego Zuluaga
- Publication Date:
- 10-2020
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Financial transactions taxes (FTTs) have become increasingly popular since the 2008 financial crisis. During the 2020 Democratic presidential primary race, FTTs featured prominently on the platforms of both moderate Michael Bloomberg and socialist Bernie Sanders. The likely nominee, Joe Biden, has also expressed support for an FTT, albeit without offering any details in his election platform.
- Topic:
- Financial Crisis, Finance, Domestic Politics, Tax Systems, and Transactions
- Political Geography:
- North America and United States of America
122. Lessons from the Swedish Experience with Negative Central Bank Rates
- Author:
- Fredrik N. G. Anderson and Lars Jonung
- Publication Date:
- 10-2020
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Interest rates declined in the wake of the 2007–2009 global financial crisis. They remained low for most of the 2010s, only rising modestly toward the end of the decade. In some European countries, interest rates even became negative. While limited to a few countries initially, the likelihood of more central banks following suit is growing in the wake of the COVID-19 pandemic. Not least, the Federal Reserve System is under pressure to adopt a negative federal funds rate (Bernanke 2020; Lilley and Rogoff 2020).
- Topic:
- Monetary Policy, Interest Rates, and Central Bank
- Political Geography:
- Europe and Sweden
123. Perspectives on Balance Sheet and Credit Policies: A Tribute to Marvin Goodfriend
- Author:
- Esther L. George
- Publication Date:
- 10-2020
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Iappreciate this opportunity to pay tribute to Marvin Goodfriend and his many contributions to the theory and practice of monetary policy. At the Kansas City Fed, we knew Marvin as a scholar and a good Federal Reserve colleague. Marvin also was a participant in a number of our Jackson Hole Economic Symposiums. As a Research Officer at the Richmond Fed, he attended the first symposium that we held in Jackson Hole, Wyoming, in 1982, where his work on “Discount Window Borrowing, Monetary Control, and the Post‐October 6, 1979 Federal Reserve Operating Procedure” was widely cited.1 Thirty‐four years later in 2016, as a professor at Carnegie Mellon, he presented a paper making the case for deeply negative interest rates as a policy tool that could breach the zero lower bound on nominal rates. He argued that “the zero interest bound encumbrance on monetary policy should be removed so that movements in the intertemporal terms of trade can be reflected fully in interest rate policy to sustain price stability and full employment with a minimum of inefficient and costly alternative policies” (Goodfriend 2016; 128; emphasis added).
- Topic:
- Monetary Policy, Finance, Interest Rates, and Credit
- Political Geography:
- Global Focus and United States of America
124. Illegal Immigration and Crime in Texas
- Author:
- Alex Nowrasteh, Andrew C. Forrester, and Michelangelo Landgrave
- Publication Date:
- 10-2020
- Content Type:
- Working Paper
- Institution:
- The Cato Institute
- Abstract:
- Donald J. Trump launched his candidacy for the Republican presidential nomination in June 2015 by comments on illegal immigrants and the crime they commit in the United States. “When Mexico sends its people, they’re not sending their best. They’re not sending you. They’re not sending you,” he said. “They’re sending people that have lots of problems and they’re bringing those problems with us. They’re bringing drugs, they’re bringing crime, they’re rapists, and some, I assume, are good people.” A few weeks after Trump’s announcement, 32‐year‐old Kate Steinle was shot and killed by an illegal immigrant Jose Inez Garcıa Zarate in San Francisco, California. Although Zarate was later acquitted of all murder and manslaughter charges due to mistakes made by the prosecutor, his shooting of Steinle seemed to support Trump’s worry about illegal immigrants causing a crime spree and helped win him the election in 2016.
- Topic:
- Crime, Immigration, and Border Control
- Political Geography:
- North America, Texas, and United States of America
125. Immigrants Do Not Negatively Affect the Economic Institutions of American States
- Author:
- Alex Nowrasteh and Andrew C. Forrester
- Publication Date:
- 11-2020
- Content Type:
- Working Paper
- Institution:
- The Cato Institute
- Abstract:
- Freer immigration could potentially lead to trillions of dollars in additional annual global output. However, the movement of many more immigrants could produce negative externalities that swamp the benefits, particularly if immigrants undermine productivity in their new countries by bringing with them the institutions or cultures that are responsible for low productivity in their home countries. We examine this by seeing how immigrants affect state budgets — a proxy for the quality of economic institutions — between 1970 and 2010 in the United States. We find that larger immigrant shares of the population produce large reductions in the growth of real per capita tax revenue and outlays in the short run that moderate to smaller longer‐term growth declines in both.
- Topic:
- Immigration, Economy, Immigrants, Tax Systems, Institutions, and Revenue Management
- Political Geography:
- North America and United States of America
126. How Property and Civil Rights Help Forest Tribes Modernize and Prosper: Lessons from India
- Author:
- Swaminathan S. Anklesaria Aiyar and Neeraj Kaushal
- Publication Date:
- 07-2020
- Content Type:
- Commentary and Analysis
- Institution:
- The Cato Institute
- Abstract:
- Do historically isolated forest tribes need protection from modernization? Critics claim that modernization, especially through dams and mining, is disastrous for tribes and that tribespeople cannot handle commercial life, are easily duped, and end up destitute. Some modernization projects have fueled Maoist insurrections. However, other examples show that tribes can join mainstream society and prosper if empowered with property rights and civil rights.
- Topic:
- Civil Rights, Modernization, Property, Tribes, and Forest
- Political Geography:
- South Asia and India
127. Qualified Immunity: A Legal, Practical, and Moral Failure
- Author:
- Jay Schweikert
- Publication Date:
- 09-2020
- Content Type:
- Commentary and Analysis
- Institution:
- The Cato Institute
- Abstract:
- Qualified immunity is a judicial doctrine that protects public officials from liability, even when they break the law. The doctrine has no valid legal basis, it regularly denies justice to victims whose rights have been violated, and it severely undermines official accountability, especially for members of law enforcement. Accountability is an absolute necessity for meaningful criminal justice reform, and any attempt to provide greater accountability must confront the doctrine of qualified immunity. This judicial doctrine, invented by the Supreme Court in the 1960s, protects state and local officials from liability, even when they act unlawfully, so long as their actions do not violate “clearly established law.” In practice, this legal standard is a huge hurdle for civil rights plaintiffs because it generally requires them to identify not just a clear legal rule but a prior case with functionally identical facts.
- Topic:
- Law, Reform, Criminal Justice, Accountability, Police, and Qualified Immunity
- Political Geography:
- North America and United States of America
128. Despite Modi, India Has Not Yet Become a Hindu Authoritarian State
- Author:
- Swaminathan S. Anklesaria Aiyar
- Publication Date:
- 11-2020
- Content Type:
- Commentary and Analysis
- Institution:
- The Cato Institute
- Abstract:
- Indian democracy is flawed, but pessimists claiming that Modi will crush all dissent, abandon secularism, and make India a Hindu state have been proved wrong. India’s constitution guarantees democracy, civil liberties, and secularism. But fears of India becoming a Hindu authoritarian state have been voiced after Narendra Modi of the Bharatiya Janata Party (BJP) came to power in New Delhi in 2014. The party’s Hindutva philosophy—the creation of a great Hindu state—envisages a Hindu state where citizens with other religious beliefs are tolerated but have second‐class status. It lauds military toughness. Earlier governments were reluctant to retaliate militarily against Pakistan for fomenting terrorism in Kashmir, but Modi has responded twice with military strikes, gaining popularity as a strongman. In Muslim‐majority Kashmir, which is claimed by Pakistan, Modi has abolished the state’s constitutionally guaranteed autonomy, arrested top local politicians and activists, and locked down the state. Meanwhile, a Pew Research Poll in 2017 suggested that most Indians would support military or authoritarian rule.
- Topic:
- Nationalism, Authoritarianism, Hinduism, and Narendra Modi
- Political Geography:
- Pakistan, South Asia, and India
129. Space Force: Ahead of Its Time, or Dreadfully Premature?
- Author:
- Claire Farley
- Publication Date:
- 12-2020
- Content Type:
- Commentary and Analysis
- Institution:
- The Cato Institute
- Abstract:
- In December 2019, Congress established the U.S. Space Force as an independent uniformed military service within the Department of the Air Force. Although many defense analysts had long argued for a reorganization of the Department of Defense’s space capabilities, few had settled on this particular solution. This policy analysis evaluates the reasoning behind the Space Force’s establishment, concluding that the service’s creation is premature. The Space Force is the first new independent U.S. service since the creation of the Air Force in 1947. At its inception, the Air Force had hundreds of thousands of personnel, several years of battle experience, a coherent body of doctrine, and a robust organizational culture. Even so, the creation of the Air Force sparked bitter interservice conflict for the first decade of its existence. However, the Space Force lacks a strong institutional basis, an identifiable organizational culture, and an established foundation of strategic theory. In the short term, it runs the risk of disrupting existing procedures and relationships that enable the U.S. military to function. In the long term, it runs the risk of distorting the procurement and force structure of U.S. space capabilities.
- Topic:
- Science and Technology, Armed Forces, Military Affairs, and Space Force
- Political Geography:
- North America and United States of America
130. COVID-19 and the U.S. Fiscal Imbalance
- Author:
- Jeffrey Miron
- Publication Date:
- 12-2020
- Content Type:
- Commentary and Analysis
- Institution:
- The Cato Institute
- Abstract:
- Policymakers must do something to slow the growing debt burden or else face a major fiscal meltdown. Proposals such as Medicare for All and the Green New Deal would only make the looming fiscal crisis worse. Before COVID-19, the U.S. debt burden was large and on an unsustainable path under reasonable assumptions about economic fundamentals. Standard policy responses, such as higher taxes or lower discretionary spending, could not substantially slow the growth of the U.S. debt burden; only reduced growth in entitlement spending, especially on Medicare, had the potential to avoid eventual fiscal default. COVID-19, the ensuing recession, and the subsequent policy responses have all increased U.S. deficits substantially, potentially altering these conclusions. But these events are likely to be temporary and may be partially offset by other demographic and economic changes related to COVID-19. As a result, the pandemic did not substantially alter the projected path of the U.S. fiscal imbalance. That bit of good news does not alter the grim long‐term U.S. fiscal outlook. The most effective way to slow the growth of the debt burden is to cut entitlement spending substantially.
- Topic:
- Debt, Tax Systems, Fiscal Policy, COVID-19, and Fiscal Deficit
- Political Geography:
- North America and United States of America
131. The 1948 German Currency and Economic Reform: Lessons for European Monetary Policy
- Author:
- Gunther Schnabl
- Publication Date:
- 10-2019
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Twenty years after the introduction of the euro, the European Monetary Union (EMU) is at its crossroads. Following the outbreak of the European financial and debt crisis in 2008, the European Central Bank (ECB) took comprehensive measures to stabilize the common currency. Interest rates were cut to and below zero and several asset purchase programs have inflated the ECB balance sheet (Riet 2018). Within the European System of Central Banks, large imbalances have emerged via the TARGET2 payments system, which can be seen as quasi-unconditional credit in favor of the southern euro area countries (Sinn 2018). While the ECB terminated its asset purchase program at the end of 2018 and is expected to increase interest rates in late 2019, financial instability is reemerging. Growing uncertainty about the fiscal discipline of the Italian government has triggered a significant increase in risk premiums on Italian government bonds. In particular, in Italy and Greece, but also in Germany, bad loans and assets remain stuck in the banking systems. In the face of the upcoming downswing, European banks do not seem ready for new financial turmoil. In this fragile environment, the future path of the EMU is uncertain. To enhance the stability of the EMU, a group of German and French economists has called for a common euro area budget, for a strengthening of the European Stability Mechanism as lender of last resort for euro area countries and banks, as well as for a common European deposit insurance scheme (Bénassy-Quéré et al. 2018). In response, 154 German economists have warned against transforming the EMU into what they call a “liablity union,” which systematically undermines market principles and wealth (Mayer et al. 2018). In 2018, a French-German initative to introduce a common euro area budget faced strong opposition from a group of northern European countries as well as from Italy, symbolizing the political deadlock concerning reforms of the EMU. This article explains the different views on the institutional setting of monetary policymaking in Europe from a historical perspective. It begins with a description of the economic and monetary order in postwar Germany. It then discusses the positive implications for the European integration process and the economic consequences of the transformation of postwar German monetary order. The final section offers some economic policy recommendations.
- Topic:
- Economics, History, Monetary Policy, Reform, European Union, Banks, and Currency
- Political Geography:
- Europe and Germany
132. Modern Monetary Theory: Cautionary Tales from Latin America
- Author:
- Sebastian Edwards
- Publication Date:
- 10-2019
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- dea has emerged in economic policy circles in the United States: “Modern Monetary Theory” (MMT). The central tenet of this view is that it is possible to use expansive monetary policy—money creation by the central bank (i.e., the Federal Reserve)—to finance large fiscal deficits, and create a “jobs guarantee” program that will ensure full employment and good jobs for everyone. This view is related to Abba Lerner’s (1943) “functional finance” idea, and has become very popular in progressive spheres. According to MMT supporters, this policy would not result in crowding out of private investment, nor would it generate a public debt crisis or inflation outbursts.
- Topic:
- Debt, Monetary Policy, Populism, Banks, Economic Policy, and Inflation
- Political Geography:
- Latin America
133. Assessing Global Financial Stability
- Author:
- Tobias Adrian
- Publication Date:
- 06-2019
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- In the decade since the global financial crisis, there has understandably been great concern about potential threats to global financial stability, and policymakers have wisely remained vigilant in watching for warning signs of possible economic risk. At the International Monetary Fund (IMF), we remain committed to providing our 189 member countries with farsighted analyses of trends in the financial markets, thus guiding them toward sound policy choices that help maintain economic stability.
- Topic:
- International Trade and Finance, Global Recession, Financial Crisis, Economy, Economic Growth, Risk, IMF, and Financial Stability
- Political Geography:
- Global Focus
134. Assessing President Trump’s Trade Priorities
- Author:
- Daniel Griswold
- Publication Date:
- 01-2019
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- President Trump has delivered on his promise to shake up Washington, arguably nowhere more so than in the policy space of international trade. President Trump’s trade agenda has challenged more than seven decades of bipartisan policy commitment to seeking lower trade barriers at home and abroad through negotiated agreements. While President Trump pays lip service to pursuing free trade and eliminating tariffs, his trade policies so far have been marked by higher U.S. duties on a range of products, from washing machines to steel. Under Section 301 of the Trade Act of 1974, the administration has imposed duties on $250 billion of imports from China, with those duties set to escalate in 2019 absent an agreement with China. And under Section 232 of the Trade Expansion Act of 1962, the president is threatening to impose a 25 percent duty on imported automobiles in the name of national security. The Trump administration has renegotiated existing trade agreements with Canada, Mexico, and South Korea, but its modifications are as likely to restrict trade as expand it. One of the president’s first actions after assuming office was to withdraw the United States from the pending Trans-Pacific Partnership, which would have eliminated almost all duties with 11 trading partners around the Pacific Rim, including Japan.
- Topic:
- Economy, Tariffs, Trade, and Donald Trump
- Political Geography:
- North America and United States of America
135. U.S.-China Relations: The Way Forward
- Author:
- P. H. Yu
- Publication Date:
- 01-2019
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- As confrontation looms over Washington and Beijing, it is critical to identify the true nature of this challenge from an international relations perspective before any attempt to devise a counter measure. Wrong presumptions or prejudicial interpretations may lead to dire consequences of unforeseeable magnitude. One past example would be the U.S. government’s belief that Iraq was developing weapons of mass destruction (WMDs) before the American invasion in 2003. A more current example would be the American nuclear anxiety on North Korea and how President Trump bypassed conventional American strategic thinking and circumvented hawkish threats of preemptive nuclear annihilation to resolve a “draconian crisis” via “smart diplomacy.” These examples may shed light on a pathway to resolution for the current U.S.-China trade conflict. The United States and China have ample experience of weathering a crisis on the brink of war, whether it was on the Korean Peninsula or in Indochina. China today remains on the U.S. sanctions list for certain high-tech products and military equipment. Both the Trump administration and Congress continue to criticize China regularly, ranging from human rights to religious rights, from the rule of law to the autocratic political system, from the state-owned banks to restrictive market access to foreign corporations, and from currency manipulation to unfair trade practices.
- Topic:
- International Relations, Bilateral Relations, Trade Wars, and Trade
- Political Geography:
- China, Asia, North America, and United States of America
136. China’s Future Development: Challenges and Opportunities
- Author:
- James A. Dorn
- Publication Date:
- 01-2019
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- 1978 has been erratic, with many interruptions along the way. The end result, however, has been eye opening: the Middle Kingdom has become the world’s largest trading nation, the second largest economy, and more than 500 million people have lifted themselves out of poverty as economic liberalization removed barriers to trade. One of the enduring lessons from China’s rise as an economic giant is that once people are given greater economic freedom, more autonomy, and stronger property rights, they will have a better chance of creating a harmonious and prosperous society (see Dorn 2019). Nevertheless, China faces major challenges to its future development. There is still no genuine rule of law that effectively limits the power of government, no independent judiciary to enforce the rights promised in the nation’s constitution, no free market for ideas that is essential for innovation and for avoiding major policy errors, no competitive political system that fosters a diversity of views, and a large state sector that stifles private initiative and breeds corruption. China’s slowing growth rate, its increasing debt burden, environmental problems, and the increasing tension in U.S.-China relations compound the challenges facing Beijing.
- Topic:
- Development, Economics, History, and Trade Liberalization
- Political Geography:
- China and Asia
137. Flawed Plan to Keep Out Welfare‐Using Immigrants
- Author:
- David Bier
- Publication Date:
- 01-2019
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The Trump administration has proposed a new regulation that would greatly expand an old rule banning legal residence to immigrants deemed “likely to become a public charge”—that is, someone who the government has the responsibility to care for (USCIS 2018). The rule does not, nor could it, change eligibility for welfare programs for noncitizens in the United States. Instead, it requires applicants to prove that they are not likely, in the future, to become so dependent on welfare that they become a “public charge.” Therefore, the question regarding this regulation is not whether it is appropriate for noncitizens to become dependent on welfare, but whether the government will accurately predict their likelihood of doing so.
- Topic:
- Immigration, Welfare, and Donald Trump
- Political Geography:
- North America and United States of America
138. An Analysis of the PBOC’s New Mobile Payment Regulation
- Author:
- Andrew Liu
- Publication Date:
- 01-2019
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- In 2016 alone, China saw $9 trillion in mobile payments—in contrast to a comparably small $112 billion of mobile payments in the United States (Abkowitz 2018). The use of mobile payment systems such as Alipay and WeChat Pay are widespread in China, with users ranging from beggars to lenders to criminals. Previously, the mobile payments landscape was largely untouched and unregulated by the Chinese government because of its relative insignificance in the Chinese economy. However, with the explosive growth in mobile payment transactions, the People’s Bank of China (PBOC) implemented a new mobile payment regulation on June 30, 2018. Most notably, the government will require all mobile payments to be cleared through the PBOC, and hence, all mobile payment transactions will begin to touch the hands of the Chinese Communist Party (CCP) (Hersey 2017). The PBOC’s stated reasoning for implementing this regulation is to curb money laundering and fraud. While those are valid concerns, it is unlikely that there are not additional motivations for the new regulation. In this article, I analyze the effects this new regulation has had and will likely have on the various mobile payment system stakeholders, competitors, and users, and also uncover what underlying motives the PBOC has in implementing the regulation.
- Topic:
- Government, Regulation, Economy, Banks, and Chinese Communist Party (CCP)
- Political Geography:
- China and Asia
139. Assessing China’s Financial Reform: Changing Roles of the Repressive Financial Policies
- Author:
- Yiping Huang and Tingting Ge
- Publication Date:
- 01-2019
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- When China began economic reform in 1978, it had only one financial institution, the People’s Bank of China (PBOC), which, at that time, served as both the central bank and a commercial bank and accounted for 93 percent of the country’s total financial assets. This was primarily because, in a centrally planned economy, transfer of funds was arranged by the state and there was little demand for financial intermediation. Once economic reform started, the authorities moved very quickly to establish a very large number of financial institutions and to create various financial markets. Forty years later, China is already an important player in the global financial system, including in the banking sector, direct investment, and bond and equity markets. However, government intervention in the financial system remains widespread and serious. The PBOC still guides commercial banks’ setting of deposit and lending rates through “window guidance,” although the final restriction on deposit rates was removed in 2015. Industry and other policies still play important roles influencing allocation of financial resources by banks and capital markets. The PBOC intervenes in the foreign exchange markets from time to time, through directly buying or selling foreign exchanges, setting the central parity, and determining the daily trading band. The regulators tightly manage cross-border capital flows, and the state still controls majority shares of most large financial institutions.
- Topic:
- Economics, Foreign Exchange, Reform, Financial Markets, and Banks
- Political Geography:
- China and Asia
140. American Constitutional Theory and History: Implications for European Constitutionalism
- Author:
- Roger Pilon
- Publication Date:
- 10-2018
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- It is perhaps not impertinent to suggest that American constitutional theory and history, owing to the longevity of the document that is their subject, hold lessons for constitutionalism everywhere, but especially for European constitutionalism—the more recent and ever evolving treaties that serve as a “Constitutional Charter” for the European Union. An American constitutionalist looking east today, seeing everything from Brexit to Grexit plus the reactions in European capitals, must be struck by the tension in the EU between exclusion and inclusion in its many forms, including individualism and collectivism. Those themes underpin my discussion here. The issues surrounding them are universal. They are at the heart of the human condition.
- Topic:
- Markets, History, European Union, and Constitution
- Political Geography:
- Europe, North America, and United States of America
141. Some Thoughts on International Monetary Policy Coordination
- Author:
- Charles I. Plosser
- Publication Date:
- 06-2018
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- It is a pleasure to be back here at Cato and to be invited to speak once again at this annual conference. This is one of the premier ongoing monetary policy conferences, and the participants, both at the podium and in the audience, attest to its prominence. This is a session on international monetary arrangements, and there has already been an interesting discussion. I find myself in substantial agreement with the comments of John Taylor, so I do not wish to repeat his points. What I will try to do is put the rules-based approach to international monetary policy coordination in a context that I hope will help us understand some of the past failures so we might avoid them in the future. In many ways, I will simply be reminding us of some principles we all have known for some time, yet which we seem to forget all too frequently.
- Topic:
- International Cooperation, Monetary Policy, and Banks
- Political Geography:
- Global Focus
142. The Case for a New International Monetary System
- Author:
- Judy Shelton
- Publication Date:
- 06-2018
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- How often do we hear references to the notion that we live in a rules-based global trading system? Addressing the World Economic Forum at Davos in January 2017, British Prime Minister Theresa May praised liberalism, free trade, and globalization as “the forces that underpin the rules-based international system that is key to our global prosperity and security” (Martin 2017). Chinese President Xi Jinping likewise extolled the virtues of a rules-based economic order at Davos, winning widespread praise for defending free trade and globalization (Fidler, Chen, and Wei 2017). But could someone please explain: What exactly are those rules? Because if we are going to invoke the sentimentality of Bretton Woods by suggesting that the world has remained true to its precepts, we are ignoring geopolitical reality. Moreover, we are denying the warped economic consequences of global trade conducted in the absence of orderly currency arrangements. We have not had a rules-based international monetary system since President Nixon ended the Bretton Woods agreement in August 1971. Today there are compelling reasons—political, economic, and strategic—for President Trump to initiate the establishment of a new international monetary system.
- Topic:
- Economics, International Cooperation, and Monetary Policy
- Political Geography:
- Global Focus
143. Toward a Rules‐Based International Monetary System
- Author:
- John B. Taylor
- Publication Date:
- 06-2018
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Over the past few years I have been making the case for moving toward a more rules-based international monetary system (e.g., Taylor 2013, 2014, 2015, 2016a, 2016b, 2017). In fact, I made the case over 30 years ago in Taylor (1985), and the ideas go back over 30 years before that to Milton Friedman (1953). However, the case for such a system is now much stronger because the monetary system drifted away from a rules-based approach in the past dozen years and, as Paul Volcker (2014) reminds us, the absence of a rulesbased monetary system “has not been a great success.” To bring recent experience to bear on the case, we must recognize that central banks have been using two separate monetary policy instruments in recent years: the policy interest rate and the size of the balance sheet, in which reserve balances play a key role. Any international monetary modeling framework used to assess or to make recommendations about international monetary policy must include both instruments in each country, the policy for changing the instruments, and the effect of these changes on exchange rates. Using such a framework, I show that both policy instruments have deviated from rules-based policy in recent years. I then draw the policy implications for the international monetary system and suggest a way forward to implement the policy.
- Topic:
- International Cooperation, International Trade and Finance, Monetary Policy, and Central Bank
- Political Geography:
- Global Focus
144. Extending the Economic Freedom of the World Index to the Cold War Era
- Author:
- Ryan Murphy and Robert A. Lawson
- Publication Date:
- 01-2018
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- This article uses newly gathered and available data and autoregressive methods to create an economic freedom index for the 1950s and 1960s for up to 95 countries. The resulting index allows not only for a longer time series but also for a larger sample of countries than has been previously available.
- Topic:
- Economics, History, and Economic Growth
- Political Geography:
- Global Focus
145. Monetary Policy in an Uncertain World: The Case for Rules
- Author:
- James A. Dorn
- Publication Date:
- 01-2018
- Content Type:
- Working Paper
- Institution:
- The Cato Institute
- Abstract:
- Since monetary policy operates in an uncertain world, discretionary policymaking relying on macroeconomic models of the economy is a weak reed upon which to base policy. The complexity of economic systems and constant changes in the underlying data mean errors may occur in a discretionary regime that can lead to monetary and financial instability.1 The 2008 financial crisis is a case in point: central bankers and their expert staffs failed to anticipate the crisis, and may have worsened it by keeping policy rates too low for too long (Taylor 2012). Moving to a rules‐based regime would not eliminate radical uncertainty, but it could decrease institutional uncertainty—or what Robert Higgs (1997) has called “regime uncertainty”—and thus reduce the frequency of policy errors. Higgs focused on the uncertainty caused by fiscal and regulatory policies that attenuated private property rights by decreasing expected returns on capital. A discretionary monetary regime increases uncertainty about the future purchasing power of money and thereby undermines an important property right.
- Topic:
- Economics, Monetary Policy, Economic structure, and Macroeconomics
- Political Geography:
- Global Focus
146. A Tale of Three Headlines
- Author:
- David Boaz
- Publication Date:
- 08-2018
- Content Type:
- Policy Brief
- Institution:
- The Cato Institute
- Abstract:
- Democrats accuse President Trump of abuse of executive power and “thinking he is a dictator.” But then, Republicans made similar charges about President Obama. They all have a point. At least since the administration of Franklin D. Roosevelt, there has been a flow of power from civil society to government, from the states to the federal government, and from Congress to the executive branch. But a recent newspaper headline reminded me of some other headlines that tell a story.
- Topic:
- International Affairs
- Political Geography:
- America
147. Repeal, Don’t Replace, the AUMF
- Author:
- Gene Healy
- Publication Date:
- 08-2018
- Content Type:
- Policy Brief
- Institution:
- The Cato Institute
- Abstract:
- For the past 17 years, presidents have used the 2001 Authorization for the Use of Military Force (AUMF) as a blank check to wage war whenever and wherever they please. Congress is now debating several replacement AUMFs—but these, too, pose the danger of granting the president far broader war powers than the Constitution envisioned. At a Capitol Hill Briefing, Cato’s GENE HEALY and JOHNGLASER made the case for repealing, rather than replacing, the AUMF.
- Topic:
- International Affairs
- Political Geography:
- America
148. Why Americans pay too much for health care
- Author:
- Institute CATO
- Publication Date:
- 08-2018
- Content Type:
- Commentary and Analysis
- Institution:
- The Cato Institute
- Abstract:
- Why do we pay $600 for EpiPens, a long-existing piece of technology that contains just a dollar’s worth of medicine? Why do hospitalized patients so frequently receive bills laden with inflated charges that come out of the blue from out-ofnetwork providers or that demand payment for services that weren’t delivered?
- Topic:
- International Affairs
- Political Geography:
- America
149. Checkpoint America
- Author:
- Institute Cato
- Publication Date:
- 08-2018
- Content Type:
- Special Report
- Institution:
- The Cato Institute
- Abstract:
- In April, Cato’s Patrick Eddington introduced his new online initiative Checkpoint America: Monitoring the Constitution-Free Zone.
- Topic:
- International Affairs
- Political Geography:
- America
150. Cato Educates Capitol Hill
- Author:
- Cato Institute
- Publication Date:
- 08-2018
- Content Type:
- Commentary and Analysis
- Institution:
- The Cato Institute
- Abstract:
- Congressional staff members play a vital role in shaping policy—they make decisions on which issues their bosses prioritize, which arguments the representatives and senators hear, and what language makes it into legislation. Cato’s popular Capitol Hill Briefings offer these staff members timely briefings on the most pressing issues facing their offices. At these events, Cato scholars and other experts update the staff on their latest scholarship and policy recommendations, critique current or upcoming legislation, and answer staffers’ questions.
- Topic:
- International Affairs
- Political Geography:
- America
151. Your Uber Ambulance Has Arrived
- Author:
- Institute Cato
- Publication Date:
- 08-2018
- Content Type:
- Commentary and Analysis
- Institution:
- The Cato Institute
- Abstract:
- Ambulances are notoriously expensive—one ride may cost more than $1,000, and insurance companies frequently refuse to cover them. In the past, patients had few alternatives to get themselves to the hospital—but in “Does Ride-Sharing Substitute for Ambulances?” (Research Briefs in Economic Policy no. 114), Leon S. Moskatel of Scripps Mercy Hospital and David J. G. Slusky of the University of Kansas demonstrate how the age of Uber and Lyft is changing that and is reducing expensive and unnecessary ambulance trips.
- Topic:
- International Affairs
- Political Geography:
- America
152. Indispensable Remedy: The Broad Scope of the Constitution’s Impeachment Power
- Author:
- Gene Healy
- Publication Date:
- 09-2018
- Content Type:
- Special Report
- Institution:
- The Cato Institute
- Abstract:
- Presidential impeachments are vanishingly rare in American constitutional history: in the 230 years since ratification, only three presidents have faced serious attempts to remove them from office. And yet, as President Donald J. Trump’s tumultuous tenure continues, it seems increasingly plausible that we’ll see a fourth.
- Topic:
- International Affairs, Democracy, and Constitution
- Political Geography:
- America
153. The Political Impact of Immigration
- Author:
- Anna Maria Mayda
- Publication Date:
- 09-2018
- Content Type:
- Research Paper
- Institution:
- The Cato Institute
- Abstract:
- Political leaders’ positions on the issue of immigration can be an important determinant of their electoral success or failure. Immigration took center stage in the 2016 U.S. presidential election and its aftermath, as now-president Donald Trump took strong stands on illegal immigration, the construction of a border wall, refugees from Syria, and “sanctuary cities.”
- Topic:
- International Relations and Immigration
- Political Geography:
- Global Focus
154. Tax Reform and Interstate Migration
- Author:
- Chris Edwards
- Publication Date:
- 09-2018
- Content Type:
- Special Report
- Institution:
- The Cato Institute
- Abstract:
- The Tax Cuts and Jobs Act of 2017 was the largest overhaul of the federal income tax in decades. The law changed deductions, exemptions, and tax rates for individuals, while reducing taxes on businesses.
- Topic:
- International Political Economy and Immigration
- Political Geography:
- America
155. The Impact of the Dodd-Frank Act on Small Business
- Author:
- Michael D Bordo
- Publication Date:
- 09-2018
- Content Type:
- Research Paper
- Institution:
- The Cato Institute
- Abstract:
- The Dodd Frank Act of 2010 (DFA) was designed to overcome the sources of excessive leverage and systemic risk in the U.S. financial sector perceived to have created the Great Financial Crisis of 2007–2008. Since then, considerable controversy has swirled around the efficacy of various components of the multifaceted act. Many have been critical of the Volcker Rule, while others have praised the elevation of capital ratios and the requirements for banks to undergo periodic stress tests. However, there has been mounting concern in the financial community, Congress, and the press over the negative impact of the DFA regulations on small banks and businesses.
- Topic:
- International Political Economy
- Political Geography:
- America
156. Government and the Cost of Living Income-Based vs. Cost-Based Approaches to Alleviating Poverty
- Author:
- Ryan Bourne
- Publication Date:
- 09-2018
- Content Type:
- Special Report
- Institution:
- The Cato Institute
- Abstract:
- Federal, state, and local governments seek to assist poor households financially using transfers, minimum wage laws, and subsidies for important goods and services. This “income-based” approach to alleviating poverty aims both to raise household incomes directly and to shift the cost of items, such as food, housing, or health care, to taxpayers. Most contemporary ideas to help the poor sit firmly within this paradigm
- Topic:
- International Political Economy
- Political Geography:
- America
157. U.S. Citizens Targeted by ICE: U.S. Citizens Targeted by Immigration and Customs Enforcement in Texas
- Author:
- David Bier
- Publication Date:
- 08-2018
- Content Type:
- Research Paper
- Institution:
- The Cato Institute
- Abstract:
- Texas law SB 4 imposes jail time on local police who fail to detain anyone whom federal Immigration and Customs Enforcement (ICE) requests. Data from Travis County, Texas, show that ICE targets large numbers of U.S. citizens. From October 2005 to August 2017, 814 targets of ICE detainers in Travis County-3.3 percent of all requests-claimed U.S. citizenship and presented officers with a Social Security number (SSN). ICE subsequently canceled or declined to execute about a quarter of those detainer requests. Based on statements from ICE officials, the best explanation for not executing these detainers is that ICE targeted at least 228 U.S. citizens in the county before canceling or declining to execute those detainers. SB 4 will likely increase the detention of U.S. citizens for supposed violations of immigration law by preventing local police from releasing them.
- Topic:
- International Affairs and Immigration
- Political Geography:
- America
158. Economic Freedom and Mass Migration: Evidence from Israel
- Author:
- Benjamen Powell
- Publication Date:
- 10-2017
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The economic case for free immigration is nearly identical to the case for free trade. They both rely on a greater division of labor based on comparative advantage to ensure that allowing the free movement of goods and services or the free movement of people results in greater global wealth. Estimates of the global gains that could be achieved by the global adoption of an open immigration policy are massive, ranging from 50 to 150 percent of world GDP (Clemens 2011). Even a migration of just 5 percent of the world’s poor to wealthier countries would boost world GDP by more than could be gained by completely eliminating all remaining trade barriers to goods, services, and capital flows (Clemens 2011).
- Topic:
- Economics and Immigration
- Political Geography:
- Middle East, Israel, and Palestine
159. China's Future and the Determining Role of the Market for Ideas
- Author:
- Ning Wang
- Publication Date:
- 01-2017
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The ultimate success of China’s search for economic prosperity, cultural renaissance, and a “peaceful rise” depends, in large part, on whether a free market for ideas can reemerge and flourish in China. The concept of the “market for ideas” (sixian shichang) was first introduced to a Chinese audience by Ronald Coase and myself in How China Became Capitalist (Coase and Wang 2012, see also Coase 1974). It quickly won acceptance among academics and the media. China is the only leading economy where the production and communication of ideas remains under strict state control. Universities, the primary venue where new ideas are produced, are run by the state. Newspapers, radio and TV stations, and publishers are all controlled by the state; ideas unwelcome by the state have a hard time to see the light of day. Because the freedom to supply ideas, choose ideas, and criticize ideas is severely limited, the creativity of the Chinese people is underutilized and their innovative potential undertapped.
- Topic:
- Economics, History, and Freedom of Press
- Political Geography:
- China and Asia
160. Making Inroads: China's New Silk Road Initiative
- Author:
- Christine R. Guluzian
- Publication Date:
- 01-2017
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- China’s New Silk Road initiative is a multistate commercial project as grandiose as it is ambitious. Comprised of an overland economic “belt” and a maritime transit component, it envisages the development of a trade network traversing numerous countries and continents. Major investments in infrastructure are to establish new commercial hubs along the route, linking regions together via railroads, ports, energy transit systems, and technology. A relatively novel concept introduced by China’s President Xi Jinping in 2013, several projects related to the New Silk Road initiative—also called “One Belt, One Road” (OBOR, or B&R)—are being planned, are under construction, or have been recently completed. The New Silk Road is a fluid concept in its formative stages: it encompasses a variety of projects and is all-inclusive in terms of countries welcomed to participate. For these reasons, it has been labeled an abstract or visionary project. However, those in the region can attest that the New Silk Road is a reality, backed by Chinese hard currency. Thus, while Washington continues to deliberate on an overarching policy toward Asia, Beijing is making inroads—literally and figuratively— across the region and beyond.
- Topic:
- Infrastructure, Soft Power, Belt and Road Initiative (BRI), and Trade
- Political Geography:
- China and Asia
161. The Japanese Experience with QE and QQE
- Author:
- John Greenwood
- Publication Date:
- 01-2017
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- This article provides an overview of the three episodes of quantitative easing (QE) pursued by the Bank of Japan (BOJ) since 2001. It begins with a brief account of the initial reluctant shift to unorthodox policies under BOJ Governors Hayami and Fukui in 2001–06 (here designated QE1) and then covers the equally reluctant adoption of QE by Governor Shirakawa in 2010–13 (QE2). The article then turns to an account of the attempt since April 2013 by the BOJ under Governor Kuroda, designated “quantitative and qualitative easing” (QQE), to revive the economy and achieve a 2 percent inflation target. None of these attempts at QE has been successful in raising the broad money growth rate for M2 sustainably above the 2–3 percent per annum range where it has languished for the past 25 years. Consequently, Japan’s attempts at QE have all failed to raise the equilibrium level of Japanese nominal GDP by any material magnitude, and so far, attainment of the 2 percent inflation target under QQE has remained elusive. At the time of writing (October 2016), the Japanese economy therefore continues to grow at a low rate with periodic lapses into deflation. After discussing the case of Japan, the article compares the experience of the United States in 1929–33, when there was no QE, and the experience of 2008–14, when the Fed conducted QE over three periods. The comparison is deliberately focused on the quantitative aspects of the policy, not its interest rate effects. Finally, the article explains that there are two brands of QE, and that the failure of QE in Japan is fundamentally due to the choice of the wrong brand of QE. Given the type of QE that the Japanese authorities have chosen, the policy cannot be expected to succeed, except under limited conditions.1 If QE were to be implemented according to a different design, the prospects of success would be much greater. In brief, the primary reason for the failure of BOJ-style QE or QQE derives from the habitual tendency to buy securities from banks instead of from nonbank private-sector entities (such as nonbank financial firms, nonfinancial firms, households, or foreigners). While QE policy in Japan boosts the monetary base, it does not increase broad money. But it is broad money that drives nominal GDP, not the monetary base.
- Topic:
- History, Economy, Banks, and Central Bank
- Political Geography:
- Japan and Asia
162. Risk, Regulation, and the Innovation Slowdown
- Author:
- Fredrik Erixon and Bjorn Weigel
- Publication Date:
- 10-2016
- Content Type:
- Special Report
- Institution:
- The Cato Institute
- Abstract:
- The great value of innovation is not merely in invention but rather diffusion and adaptation. And real innovation requires an economy that runs on the culture of experimentation and is open to innovators and entrepreneurs contesting markets—challenging incumbents to such a degree that it redefines the market (like Apple’s iPhone did with the handset market in 2007). In the past decades, however, these forces of diffusion and adaptation simply have not been powerful enough; in fact, legislators have acted to shield incumbent businesses from them. Now the existential challenge that capitalism faces is the growing resistance to innovation.
- Topic:
- Economics, Political Economy, and Digital Economy
- Political Geography:
- America and Global Markets
163. Gun Control: Grounds for Compromise?
- Author:
- Robert Levy
- Publication Date:
- 10-2016
- Content Type:
- Commentary and Analysis
- Institution:
- The Cato Institute
- Abstract:
- It’s doubtful that new gun controls—imposed mostly on persons who are not part of the problem—will be ef- fective. Accordingly, they should expire automatically after a reasonable test period. If they work, they can be reenacted. The Second Amendment doesn’t bar sensi- bleregulations,butitdemandsrigorfromourlawmak- ers and the courts in legislating and reviewing gun control measures.
- Topic:
- Arms Control and Proliferation
- Political Geography:
- America
164. The Making of a State: Transition in Montenegro
- Author:
- Igor Lukšic and Milorad Katnic
- Publication Date:
- 10-2016
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The first Montenegrin state started to take shape in the 8th century with the arrival of the Slavs and their mingling with the local population. Originally it was called Doclea, whose ruler received a royal insignia by the Pope Gregory VII in 1078 (Andrijaševi ´c and Rastoder 2006). Montenegro fell under the Ottomans in the late 15th century, but acted as a de facto independent state until formal recognition came at the Berlin Congress in 1878. Despite being on the victors’ side in the Balkan Wars and in World War I, it was annexed by Serbia and lost its sovereignty in 1918. After the Second World War it became a part of socialist Yugoslavia, where it remained until 1992. Montenegro’s political transition started in earnest after the Belgrade Agreement signed in March 2002. Montenegro held an independence referendum in 2006 and was subsequently admitted to the United Nations and other international organizations. Today Montenegro is engaged in accession talks with the European Union (EU).
- Topic:
- History, Elections, State, and Transition
- Political Geography:
- Europe and Montenegro
165. Rent Seeking and Entrepreneurship: Internet Startups in China
- Author:
- Tain-Jy Chen and Ying-Hua Ku
- Publication Date:
- 10-2016
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Against all odds, China has developed one of the most vibrant Internet industries in the world. According to Atomico (2015), which tracked venture capital (VC)-funded startups in the world, there were 156 Internet startups that had been founded in 2003–14 and that had become billion-dollar companies (based on market capitalization) by the end of 2014 after initial public offerings (IPOs). The United States leads the list with 86 companies, followed by China’s 30, and Sweden’s 5. All Chinese billion-dollar startups are consumer-related, while billion-dollar startups in other countries include business applications, games, and others. Similarly, the Wall Street Journal tracked unlisted VC-funded startups and identified 78 of them whose market valuation (measured by financing terms in the most recent round of funding) had exceeded one billion dollars in March 2015 (Table 1). The list includes startups in the Internet as well as other sectors. Again, the United States leads the list with 50 ventures, followed by China’s 8. All Chinese ventures are Internet-related, if Xiaomi, which tops the list of all startups and sells smartphones on the Internet, is also counted as an Internet company (Dow Jones Venture Source 2015). In short, Chinese startups are numerous, vigorous, and most successful in Internet-based consumer business.
- Topic:
- Science and Technology, Internet, Entrepreneurship, and Business
- Political Geography:
- China and Asia
166. The G20 and Global Governance
- Author:
- Stephen Kirchner
- Publication Date:
- 10-2016
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The Group of 20 sees itself as “the premier forum for international economic cooperation” (G20 2009b). This article examines its evolution and performance, and member countries’ compliance with G20 summit commitments. The G20 evolved as a response to the shortcomings of its predecessor, the G7/8. Yet its creation allowed member countries to avoid confronting many of the problems that arose out of the earlier forum. The best defense of the G20 is that it is the only institution of its type, but it still consumes scarce political and diplomatic capital, sometimes to the detriment of the policy objectives to which it is notionally committed. In this article, I compare data on members’ compliance with G20 summit commitments to proxy measures of the quality of domestic policies and institutions. While the proxies predict G20 compliance, it turns out that G20 compliance has no power to predict subsequent changes in domestic policies and institutions. The main implication of this data is that international economic and political cooperation is a symptom, not a cause, of domestic policies and institutions. Improvement in domestic policies makes the best contribution to advancing the G20 agenda, but such improvements do not appear to depend on the G20 process.
- Topic:
- Economics, International Cooperation, Governance, and G20
- Political Geography:
- Global Focus
167. Rethinking the International Monetary System
- Author:
- John B. Taylor
- Publication Date:
- 06-2016
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- In previous articles in the annual monetary issue of the Cato Journal, I drew on historical facts and economic theory to explain the benefits of rules-based monetary policy and why legislation could help the United States reap those benefits (Taylor 2011, 2013a). In this article, I discuss the international aspects of monetary policy, a subject often glossed over in modern debates about rules-based policy, at least compared with discussions about the classic rulesbased gold standard.
- Topic:
- Economics, International Cooperation, and Monetary Policy
- Political Geography:
- North America, Global Focus, and United States of America
168. Subnational Economic Freedom and Performance in the United States and Canada
- Author:
- Daniel L. Bennett
- Publication Date:
- 01-2016
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- During his illustrious career spanning more than half a century, Richard Vedder has tirelessly advocated for limited government and free enterprise. Much of his scholarship has focused on examining how fiscal and labor market policies consistent with the principles of economic freedom are associated with economic and social benefits such as stronger economic performance (Vedder 1981, 1990), lower unemployment (Vedder and Gallaway 1996, 1997), and poverty alleviation (Vedder and Gallaway 2002). Vedder has also examined the impact of government policy on income inequality (Vedder 2006; Vedder and Gallaway 1986, 1999; Vedder, Gallaway, and Sollars 1988), an area that he and I have collaborated to study (Bennett and Vedder 2013, 2015). Thus, Vedder’s scholarship has contributed to our understanding of the impact that economic freedom exerts on economic outcomes.
- Topic:
- Government, Income Inequality, Economy, and Free Trade
- Political Geography:
- Canada, North America, and United States of America
169. The Resolution of Systematically Important Financial Institutions: Lessons from Fannie and Freddie
- Author:
- Mark A. Calabria
- Publication Date:
- 01-2015
- Content Type:
- Working Paper
- Institution:
- The Cato Institute
- Abstract:
- There was perhaps no issue of greater importance to the financial regulatory reforms of 2010 than the resolution, without taxpayer assistance, of large financial institutions. The rescue of firms such as AIG shocked the public conscience and provided the political force behind the passage of the Dodd-Frank Act. Such is reflected in the fact that Titles I and II of Dodd-Frank relate to the identification and resolution of large financial entities. How the tools established in Titles I and II are implemented are paramount to the success of Dodd-Frank. This paper attempts to gauge the likely success of these tools via the lens of similar tools created for the resolution of the housing government sponsored enterprises (GSEs), Fannie Mae and Freddie Mac.
- Topic:
- Economics, International Trade and Finance, Financial Crisis, and Reform
170. China's Political-Economic Institutions and Development
- Author:
- Chenggang Xu
- Publication Date:
- 10-2015
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- After more than three decades of economic reform, China has transformed from being one of the poorest economies in the world to being the second-largest economy measured by nominal exchange rates, or the largest economy measured by purchasing power. As such, it is important to elucidate the determinants of China’s future development. This article will focus on China’s institutions. I argue that although the size of China’s economy is extremely important in terms of its impact on the global economy, it is misleading to ignore political and economic institutions. Indeed, forecasts based on extrapolating past trends could be erroneous (see Pritchett and Summers 2014). China was the largest economy in the world before the end of the 19th century but then lost ground to Western nations that established the rule of law and free trade. To understand China’s past and future development, one has to examine its institutions.
- Topic:
- Economics, Reform, and Global Political Economy
- Political Geography:
- China and Asia
171. The Power of Ideas and Leadership in China's Transition to a Liberal Society
- Author:
- Weiying Zhang
- Publication Date:
- 02-2015
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- History and casual observations suggest that ideas and leadership are the two most important forces in all institutional changes. However, they have been absent or downplayed in conventional economic analysis of institutional changes. Conventional economics has exclusively focused on the notion of “interest” in explaining almost everything, from consumers' choices to public choices to institutional changes. IN particular, institutional changes have been modeled as a game of interests between different groups (such as the ruling and the ruled), with the assumption that there is a well-defined mapping from interests into outcomes.
- Topic:
- Economics
- Political Geography:
- China
172. Political Capitalism
- Author:
- Randall G. Holcombe
- Publication Date:
- 02-2015
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Political capitalism is an economic and political system in which the economic and political elite cooperate for their mutual benefit. The economic elite influence the government's economic policies to use regulation, government spending, and the design of the tax system to maintain their elite status in the economy. The political elite are then supported by the economic elite which helps the political elite maintain their status; an exchange relationship that benefits both the political and economic elite.
- Topic:
- Economics and War
- Political Geography:
- America
173. Thinking Ahead of the Next Big Crash
- Author:
- George C. Bitros
- Publication Date:
- 02-2015
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- In the aftermath of the unprecedented 2008 financial crisis, researchers of macroeconomics, finance, and political economy are showing renewed interest in the old but very significant question: Are central banks in large reserve currency democracies—in particular, the U.S. Federal Reserve—prone to creating asset bubbles, and if so, how is it possible to prevent the misuse of the banks' discretionary powers?
- Topic:
- Political Economy
- Political Geography:
- United States and England
174. Income Inequality: Piketty and the Neo-Marxist Revival
- Author:
- Thomas H. Mayor
- Publication Date:
- 02-2015
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Karl Marx formulated his ideas in the middle of the 19th century when much of Europe, particularly England, was well along in what is often referred to as the Industrial Revolution. The central Marxist idea was that those who had wealth would reap the benefit of this revolution and become ever more wealthy while those who lived from their labor alone would be relegated to a bare subsistence. In his view, capital accumulation and increases in productivity do not benefit those who work for a living. Allegedly, those who own the means of production (wealth) and supposedly perform no work, receive all the benefits.
- Topic:
- Government
- Political Geography:
- Europe and England
175. The Impact of Economic Inequality on Economic Freedom
- Author:
- Ryan H. Murphy
- Publication Date:
- 02-2015
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Contemporary economic policy debates are dominated by concerns regarding the rise in inequality (Stiglitz 2012, Piketty 2014). Primarily, this has led to a focus in re-invigorating redistribution. For instance, Robert Shiller (2014) has recently argued for indexing top marginal tax rates to inequality and using the revenues to fund transfer payments. Secondarily, there are the longstanding objections to “neoliberalism” in general, which has encouraged globalization and the liberalization of markets. To the extent that liberal reforms have improved economic institutions, might today's inequality subsequently derail them?
- Topic:
- Economics and Markets
176. Welfare Economics and Second-Best Theory: Filling Imaginary Economic Boxes
- Author:
- Richard E. Wagner
- Publication Date:
- 02-2015
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Since the beginnings of the efforts of economist to give their discipline scientific grounding, economists have thought their theoretical efforts had relevance for addressing significant public issues. While the classical economists generally supported what Adam Smith described as the “system of natural liberty,” those economists also weighed in on numerous issues of public discussion. The tenor and substance of those efforts is set forth wonderfully by Lion Robbins (1952) and Warren Samuels (1966). While the analytical default setting of those economists was to support the system of natural liberty, they also recognized the value of sound public policy in supporting that stem. The classical economists thought that there could be publicly beneficial activities that the system. The classical economists thought that there could be publicly beneficial activities that the system of natural liberty would be unlikely to do well in providing. They also thought that there were activities provided through commercial transactions that could wreak significant effects on bystanders to those transactions. The amount of education acquired within a society was one such candidate (West 1965), with the care of the poor being another (Himmelfarb 1983). IN such matters as these, the classical economists engaged in strenuous debate and discussion that served as a forerunner to the development of welfare economics during the 20th century.
- Topic:
- Government
177. The Rule of Nobody: Saving America from Dead Laws and Broken Government
- Author:
- Philip K. Howard
- Publication Date:
- 02-2015
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Phillip Howard is a lawyer nationally known for his best-selling books and extensive commentary on the dysfunctions of the American legal and political systems and the adverse effects those dysfunctions have on individual behavior and the overall workings of society.
- Topic:
- Government
- Political Geography:
- America
178. Mass Flourishing: How Grassroots Innovation Created Jobs, Challenge, and Change
- Author:
- Edmund S. Phelps
- Publication Date:
- 02-2015
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- In his most recent tome, Edmund Phelps, the 2006 Nobel Laureate in Economic Science, addresses a topic crucial to successful national capitalist systems: the dynamics of the innovation process. Phelps develops his thesis around three main themes: In part one, he explains the development of the modern economies as they form the core of early—19th century societies in the West; in part two, he explores the lure of socialism and corporatism as competing systems to modern capitalism; and, in part three, he reviews post-1960s evidence of decline in dynamism in Western capitalist countries.
- Topic:
- Economics
- Political Geography:
- United States and Europe
179. Falling Behind? Boom, Bust, and the Global Race for Scientific Talent
- Author:
- Michael Teitelbaum
- Publication Date:
- 02-2015
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- In Washington, doomsday prophets tend to be effective motivational speakers. They successfully persuade the electorate that their cause is worthy and prompt Congress to take action. In his book Falling Behind? Boom, Bust, and the Global Race for Scientific Talent, Michael Teitelbaum takes on a particular brand of doomsday prophet: those who see impending shortages in the science and engineering workforce. Teitelbaum walks his readers through five postwar cycles of boom and bust in the science and engineering workforce, which eh argues have been driven to a large extend by political machinations set in motion by labor shortage claims (claims that have been almost universally rejected by economists studying the issue). The institutions that currently shape the science and engineering workforce are largely the product of policy responses to these booms and busts. As a result, Falling Behind? Is more than just a work of policy history. It is also a cogent analysis of contemporary R funding mechanisms, high-skill immigration policies, and PhD program structures.
- Topic:
- Government
- Political Geography:
- Washington and Soviet Union
180. Saving Congress from Itself: Emancipating the States Empowering Their People
- Author:
- James L. Buckley
- Publication Date:
- 02-2015
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- “The United States faces two major problems today,” writes James L. Buckley: “runaway spending that threatens to bankrupt us and a Congress that appears unable to deal with long-term problems of any consequence.” Contributing significantly to both, he argues, are the more than 1,100 federal grants-in-aid programs Congress has enacted—federal grants to state and local governments, constituting 17 percent of the federal budget, the third-largest spending category after entitlements and defense, with costs that have risen from $24.1 billion in 1970 to $640.8 billion in fiscal 2015. His “modest proposal”? Do away with them entirely, thereby saving Congress from itself while emancipating the states and empowering their people. If that sounds like a program for revising constitutional federalism, it is.
- Topic:
- Government
- Political Geography:
- United States
181. The American Warfare State: The Domestic Politics of Military Spending
- Author:
- Rebecca U. Thorpe
- Publication Date:
- 02-2015
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- In The American Warfare State, Reecca Thrope attempts to answer what she calls “the fundamental puzzle” of American politics: “Why a nation founded on a severe distrust of standing armies and centralized power developed and maintained the most powerful military in history.”
- Topic:
- Economics
- Political Geography:
- America
182. Boom Towns: Restoring the Urban American Dream
- Author:
- Stephen J. K. Walters
- Publication Date:
- 02-2015
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The image of a boom town is commonly used to describe exceptional conditions through which a village suddenly becomes a city. Often such conditions are the discovery of mineral deposits that attracts industry and commerce. While in their booming condition, such towns are oases of societal flourishing relative to their preceding state. In Boom Towns, Stephen J.K. Walters, a professor of economics at Loyola University in Baltimore, explains that cities in general have the capacity perpetually to b forms of boom towns. Cities can serve as magnets to attract people and capital, thus promoting the human flourishing that has always been associated with cities at their best. It is different if cities are at their worst, as Walters explains in brining Jane Jacobs's Death and Life of Great American Cities into explanatory ambit. There are no natural obstacles to cities occupying the foreground of societal flourishing. There are obstacles to be sure, but these are man-made. Being man-made, they can also be overcome through human action, at least in principle even if doing so in practice might be difficult.
- Topic:
- Government
- Political Geography:
- America
183. Is the Government Buying Science or Support? A Framework Analysis of Federal Funding-induced Biases
- Author:
- Patrick J. Michaels and David E. Wojick
- Publication Date:
- 04-2015
- Content Type:
- Working Paper
- Institution:
- The Cato Institute
- Abstract:
- The purpose of this report is to provide a framework for doing research on the problem of bias in science, especially bias induced by Federal funding of research. In recent years the issue of bias in science has come under increasing scrutiny, including within the scientific community. Much of this scrutiny is focused on the potential for bias induced by the commercial funding of research. However, relatively little attention has been given to the potential role of Federal funding in fostering bias. The research question is clear: does biased funding skew research in a preferred direction, one that supports an agency mission, policy or paradigm? Federal agencies spend many billion dollars a year on scientific research. Most of this is directly tied to the funding agency mission and existing policies. The issue is whether these financial ties lead to bias in favor of the existing policies, as well as to promoting new policies. Is the government buying science or support?
- Topic:
- Government
184. Fatalistically Flawed: A Review Essay on Fragile
- Author:
- George Selgin
- Publication Date:
- 03-2015
- Content Type:
- Working Paper
- Institution:
- The Cato Institute
- Abstract:
- Not long ago a colleague of mine, who works regularly with legislators, attended a conference at which the lunch speaker, a famous economist, began by telling everyone why governments regulate financial institutions. The reasons the economist gave consisted of various (supposed) financial-market failures. Said the colleague to me later: “I just wanted to stand up and shout, 'That's got nothing to do with it!'” I relate this because some readers may otherwise fail to appreciate the importance of a work whose chief revelation is that financial legislation — and consequently the general structure of financial systems — are shaped by politics. My colleague didn't need to be told, but others, including many economists, evidently do. In Fragile by Design: The Political Origins of Banking Crises Scarce Credit, Charles Calomiris and Stephen Haber tell them. Banking arrangements, they argue, are “not a passive response to some efficiency criterion but rather the product of political deals that determine which laws are passed” (pp. 13 and 38). What's more, the laws such deals give rise to are, more often than not, detrimental to bank safety and soundness. In few words, banking instability has its roots, not in any fragility inherent to commercial banking, but in deals struck between governments and various interest groups. Fragile by Design is at once an alternative interpretation of the history of banking and a contribution to the debate on the causes of the recent crisis. Though other reviewers have tended to focus their attention on the latter contribution, many of Fragile by Design's most important insights, as well as many of its more serious flaws, are independent of its take on the subprime crisis. It is to those insights and flaws that I wish to draw attention
- Topic:
- Government
185. A Roadmap to Monetary Policy Reforms
- Author:
- Norbert J. Michel
- Publication Date:
- 03-2015
- Content Type:
- Working Paper
- Institution:
- The Cato Institute
- Abstract:
- We now have a 100-year history by which to judge the Federal Reserve's performance. On balance, the Fed has not increased economic stability relative to the pre-Fed era. The Great Depression, the great stagflation, and the 2008 financial crisis have all occurred on the Fed's watch. Even excluding the Great Depression, business cycles have not become appreciably milder, nor have recessions become less frequent or measurably shorter. The Fed has strayed so far from the classic prescription for a lender of last resort—to provide short-term funds to solvent institutions at penalty rates—it strains all reason to suggest that it has successfully fulfilled that function. Its regulatory failures are numerous. It failed even to see the 2008 financial crisis coming. Perhaps the best that can be said about the Fed is that the variability in inflation has declined since 1984.
186. The Conservatorships of Fannie Mae and Freddie Mac: Actions Violate HERA and Established Insolvency Principles
- Author:
- Mark A. Calabria and Michael Krimminger
- Publication Date:
- 02-2015
- Content Type:
- Working Paper
- Institution:
- The Cato Institute
- Abstract:
- Not long ago a colleague of mine, who works regularly with legislators, attended a conference at which the lunch speaker, a famous economist, began by telling everyone why governments regulate financial institutions. The reasons the economist gave consisted of various (supposed) financial - market failures. Said the colleague to me later: “I just wanted to stand up and shout, 'That's got nothing to do with it!'”
- Topic:
- Economics
187. The Case against a Carbon Tax
- Author:
- Robert P. Murphy, Patrick J. Michaels, and Paul "Chip" Knappenberger
- Publication Date:
- 10-2015
- Content Type:
- Working Paper
- Institution:
- The Cato Institute
- Abstract:
- A vigorous campaign aimed at American policymakers and the general public has tried to create the perception that a federal carbon tax (or similar type of “carbon price”) is a crucial element in the urgently needed response to climate change. Within conservative and libertarian circles, a small but vocal group of academics, analysts, and political officials are claiming that a revenue-neutral carbon tax swap could even deliver a “double dividend” — meaning that the conventional economy would be spurred in addition to any climate benefits. The present study details several serious problems with these claims. The actual economics of climate change — as summarized in the peer-reviewed literature as well as the U.N. and Obama Administration reports — reveal that the case for a U.S. carbon tax is weaker than the public has been told.
- Topic:
- Climate Change, Economics, Energy Policy, and Politics
- Political Geography:
- Global Focus
188. On the Desirability of Nominal GDP Targeting
- Author:
- Julio Garin, Robert Lester, and Eric Sims
- Publication Date:
- 08-2015
- Content Type:
- Working Paper
- Institution:
- The Cato Institute
- Abstract:
- This paper evaluates the welfare properties of nominal GDP targeting in the context of a New Keynesian model with both price and wage rigidity. In particular, we compare nominal GDP targeting to inflation and output gap targeting as well as to a conventional Taylor rule. These comparisons are made on the basis of welfare losses relative to a hypothetical equilibrium with flexible prices and wages. Output gap targeting is the most desirable of the rules under consideration, but nominal GDP targeting performs almost as well. Nominal GDP targeting is associated with smaller welfare losses than a Taylor rule and significantly outperforms inflation targeting. Relative to inflation targeting and a Taylor rule, nominal GDP targeting performs best conditional on supply shocks and when wages are sticky relative to prices. Nominal GDP targeting may outperform output gap targeting if the gap is observed with noise, and has more desirable properties related to equilibrium determinacy than does gap targeting.
- Topic:
- Economics, Human Welfare, Markets, and GDP
- Political Geography:
- Global Focus
189. The Supply of Transaction Assets, Nominal Income, and Monetary Policy Transmission
- Author:
- Joshua R. Hendrickson and David Beckworth
- Publication Date:
- 06-2015
- Content Type:
- Working Paper
- Institution:
- The Cato Institute
- Abstract:
- Over the last few years, the Federal Reserve has conducted a series of large scale asset purchases. Given the Federal Reserve’s dual mandate, the objective of this policy has been to generate an increase in real economic activity while maintaining a low, stable rate of inflation. The effectiveness of large scale asset purchases and the ability of the central bank to achieve a particular target has been subject to debate. The monetary transmission mechanism is of primary importance for understanding the effects of both the recent large scale asset purchases and of monetary policy more generally. The purpose of this paper is to propose a monetary transmission mechanism and to present empirical support for this mechanism. In particular, this paper suggests that monetary policy is transmitted through changes in the growth rate of transaction assets through both a direct and indirect effect. First, an increase in the growth rate of the monetary base, whether through lump sum transfers or open market operations, generates a real balance effect that increases real economic activity. Second, the indirect effect is through bank lending. Since bank loans are often a function of nominal income, expansionary monetary policy increases bank lending. Since economics agents are forward-looking and the the effects of monetary policy are persistent, monetary policy is transmitted through the expected future time path of the growth of transaction assets and nominal income. This characteristic is especially important in light of the policy recommendations of Sumner (2011, 2012) and Woodford (2012), in which the central bank attaches an explicit target for the level of nominal income to large-scale asset purchases.1
- Topic:
- Economics, Markets, Monetary Policy, and Federal Reserve
- Political Geography:
- Global Focus
190. International Developments in the Insurance Sector: The Road to Financial Instability?
- Author:
- Therese M. Vaughan and Mark A. Calabria
- Publication Date:
- 05-2015
- Content Type:
- Working Paper
- Institution:
- The Cato Institute
- Abstract:
- International activity related to the regulation and supervision of financial services has exploded since the global financial crisis. The crisis exposed weaknesses in the structure for regulating internationally active banks, and motivated a number of work streams aimed at strengthening standards (most notably, significant revisions to the Basel capital standard for internationally active banks, now known as Basel III). The insurance sector was also stressed by the meltdown in financial markets that occurred in 2007-2008, albeit far less than the banking sector, and, with the exception of AIG, it is generally recognized that insurers played little role in the financial crisis, and that traditional insurance activities do not pose a systemic risk to the financial system.1,2 Nonetheless, the insurance sector has also been targeted for a new stream of regulatory initiatives at the international level. The most important organizations with respect to these activities are the International Association of Insurance Supervisors (IAIS) and the Financial Stability Board (FSB), both based in Basel, Switzerland. The purpose of this paper is to review these developments and to highlight potential concerns for U.S. insurance markets.
- Topic:
- Economics, International Trade and Finance, Markets, and Financial Crisis
- Political Geography:
- Global Focus
191. A Tale of Two Villages: Kinship Networks and Political Preference Change in Rural India
- Author:
- Neelanjan Sircar
- Publication Date:
- 09-2015
- Content Type:
- Working Paper
- Institution:
- The Cato Institute
- Abstract:
- This paper develops a theory on how voters form and change political preferences in democratic developing world contexts. In the developing world, where state institutions are often weak, voters tend to be more focused on the competence and capacity of parties and candidates to deliver benefits. Such information may be difficult to ascertain, so voters must glean information from how candidates conduct themselves during the electoral campaign. Voters use kinship networks to develop more accurate preferences by collectively reasoning through newly available information on candidates. In order to demonstrate these claims, this study analyzes data collected on political preferences and kinship networks in two villages just before and after the campaign period during the 2011 Assembly election in the Indian state of West Bengal. The paper finds very strong kinship network effects on changes in issue preferences and vote choice over the course of the campaign and explains the results through qualitative work and a series of network autoregressive statistical models. In sum, this paper demonstrates how voters develop independent preferences and implement political change, even in low information contexts with weak human capital.
- Topic:
- Democratization, Politics, Self Determination, and Elections
- Political Geography:
- India
192. Whose Side Are You On? Identifying the Distributive Preferences of Local Politicians in India
- Author:
- Mark Schneider and Neelanjan Sircar
- Publication Date:
- 08-2015
- Content Type:
- Working Paper
- Institution:
- The Cato Institute
- Abstract:
- The literature on decentralized public programs suggests that errors in the targeting of anti-poverty programs are rooted in the capture of these programs by local elites or local politicians. Consistent with the literature on moral economy in political science and experimental economics, we argue that voters in contexts of rural poverty prefer local leaders who target subsistence benefits to the poor. In a high information village context, where voters and leaders know each other, we argue that local elections lead to the selection of local leaders with pro-poor preferences over the distribution of these benefits. We show this with a novel theory of local politicians’ social preferences. We test our theory with unique data from a behavioral measure, conducted in the context of a lottery with a modest cash prize in rural India, that captures a scenario in which local leaders have full discretion and anonymity over allocation among members of their rural communities. We analyze our data using a novel estimation strategy that takes the characteristics of the pool of potential beneficiaries into account in decisions over allocation under a budget constraint. We find that local leaders have strong preferences for targeting the poor, and particularly those they believe supported them politically in the past. This article suggests that free and fair elections at the local level can powerfully encourage pro-poor targeting even in contexts of weak institutions and pervasive poverty. It also makes a fundamental contribution to research on distributive politics by challenging research in this area to demonstrate the effect of electoral strategies and other distortions on allocation relative to local leaders’ baseline distributive preferences.
- Topic:
- Democratization, Economics, Politics, Political Theory, and Elections
- Political Geography:
- India
193. Editor's Note
- Author:
- James A. Dorn
- Publication Date:
- 07-2015
- Content Type:
- Working Paper
- Institution:
- The Cato Institute
- Abstract:
- When the Federal Reserve was created in 1913, its powers were strictly limited and the United States was still on the gold standard. Today the Fed has virtually unlimited power and the dollar is a pure fiat money. A limited constitutional government calls for a rules-based, freemarket monetary system, not the topsy-turvy fiat dollar that now exists under central banking. This issue of the Cato Journal will examine the case for alternatives to central banking and the reforms needed to move toward free-market money
194. Monetary Muddles
- Author:
- James A. Dorn
- Publication Date:
- 07-2015
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The stability or instability of the market economy is an issue that has been all but ignored in macroeconomics for several decades. Within monetary economics, the distribution of income has been similarly ignored. The crisis of recent years tells us in no uncertain terms that we have to pay more attention to these two topics. Changes in financial regulation and in the conduct of monetary policy have not only played a very significant role in generating the financial crisis but have also been important in bringing about a large shift in the distribution of income over the last two or three decades
195. Money and Banking: A Constitutional Perspective
- Author:
- Walker F. Todd
- Publication Date:
- 07-2015
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Banks either are or should be fiduciaries holding the public’s funds as a public trust. Those who want to participate in the risktaking aspects of banking are shareholders (or should be shareholders). If the government is called upon to share the risks of banking, especially the risks of investment banking, then it should be a shareholder. As Edward J. Kane puts it, “For investment banker’s risk, there should be investment banker’s reward for the taxpayers.” And once the government is a shareholder, it owes a public duty to restrain the egregious risk taking and excess executive compensation in which banks seem to have wanted to engage for the last 30 years or so.
196. Gold and Silver as Constitutional Alternative Currencies
- Author:
- Edwin Vieri Jr.
- Publication Date:
- 07-2015
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- In his Inaugural Address of 1933, Franklin D. Roosevelt warned his fellow Americans that “in our progress towards a resumption of work we require two safeguards against a return of the evils of the old order: there must be a strict supervision of all banking and credits and investments, so that there will be an end to speculation with other people’s money; and there must be provision for an adequate but sound currency.” Nonetheless, Roosevelt proceeded to promote an exceedingly unsound currency—with the seizure of most Americans’ gold, devaluation of gold coinage, removal of domestic redemption of Federal Reserve Notes in gold, and the nullification of gold clauses in both public and private contracts (Vieira 2002:867–1235).
197. The Role of Gold in a Market-Based Monetary System
- Author:
- Jerry L. Jordan
- Publication Date:
- 07-2015
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Fruitful consideration of the role of gold in a market-based monetary system must be preceded by an understanding of why gold is not part of our government-based monetary system. I have set out my view on that issue elsewhere (Jordan 2011) and will not repeat it here. People whose views on money I greatly respect still advocate restoring gold backing to the Federal Reserve-issued U.S. dollar. During the Hearings of the U.S. Gold Commission in 1981–82, several witnesses advocated restoration of some linkage between Federal Reserve-issued dollar notes and gold.
198. Law, Legislation, and the Gold Standard
- Author:
- George Selgin
- Publication Date:
- 07-2015
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- More than a half century ago, in October 1961, Milton Friedman’s “Real and Pseudo Gold Standards” appeared in the Journal of Law and Economics. In that article, Friedman argued that versions of the gold standard erected after 1914, if not some earlier ones, were “pseudo” gold standards, differing from “real” ones in dispensing with actual gold coins and allowing monetary authorities to sterilize international gold movements, instead of letting those movements automatically regulate national money stocks. Such pseudo gold standards, Friedman argued, amounted to particularly dangerous instances of government price-fixing, and as such ought to be anathema to believers in free markets.
199. Fix What Broke: Building an Orderly and Ethical International Monetary System
- Author:
- Judy Shelton
- Publication Date:
- 07-2015
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- It has been more than six years since the global economy was put through the financial wringer and left hung out to dry. According to former Federal Reserve chairman Ben Bernanke, who presided over the debacle: “September and October of 2008 was the worst financial crisis in global history, including the Great Depression” (da Costa 2014). Given that Bernanke is a scholar on the global economic collapse of the 1930s, his assessment is particularly sobering. After all, a horrifying world war followed in its aftermath.
200. Transitioning Standards of Value in Fixed-Value Monetary Systems
- Author:
- Nathan Lewis
- Publication Date:
- 07-2015
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Historically, there have been two basic frameworks by which a government organizes its monetary affairs. One of these—the Soft Money approach—we are quite familiar with today: a process by which a committee of government bureaucrats manages a floating fiat currency of some sort, on a day-to-day and ad hoc basis. The other format—the Hard Money approach—is typified by the Rule of Law, which is some definite and unchanging framework by which the currency is managed. Consequently, there is no need or role for a day-to-day human discretionary element, except perhaps in some of the particulars of the system’s execution.