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661. The Myth of the Rational Voter: Why Democracies Choose Bad Policies

Author:
Bryan Caplan
Publication Date:
05-2007
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
In theory, democracy is a bulwark against socially harmful policies. In practice, however, democracies frequently adopt and maintain policies that are damaging. How can this paradox be explained? The influence of special interests and voter ignorance are two leading explanations. I offer an alternative story of how and why democracy fails. The central idea is that voters are worse than ignorant; they are, in a word, irrational—and they vote accordingly. Despite their lack of knowledge, voters are not humble agnostics; instead, they confidently embrace a long list of misconceptions.
Topic:
Civil Society, Democratization, and Political Economy
Political Geography:
United States

662. In Pursuit of Happiness Research: Is It Reliable? What Does It Imply for Policy?

Author:
Will Wilkinson
Publication Date:
04-2007
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
“Happiness research” studies the correlates of subjective well-being, generally through survey methods. A number of psychologists and social scientists have drawn upon this work recently to argue that the American model of relatively limited government and a dynamic market economy corrodes happiness, whereas Western European and Scandinavian-style social democracies pro- mote it. This paper argues that happiness research in fact poses no threat to the relatively libertarian ideals embodied in the U.S. socioeconomic system. Happiness research is seriously hampered by confusion and disagreement about the definition of its subject as well as the limitations inherent in current measurement techniques. In its present state happiness research cannot be relied on as an authoritative source for empirical information about happiness, which, in any case, is not a simple empirical phenomenon but a cultural and historical moving target. Yet, even if we accept the data of happiness research at face value, few of the alleged redistributive policy implications actually follow from the evidence. The data show that neither higher rates of government redistribution nor lower levels of income inequality make us happier, whereas high levels of economic freedom and high average incomes are among the strongest correlates of subjective well- being. Even if we table the damning charges of questionable science and bad moral philosophy, the American model still comes off a glowing success in terms of happiness.
Topic:
Economics, Markets, and Political Economy
Political Geography:
United States, America, and Europe

663. Energy Alarmism: The Myths That Make Americans Worry about Oil

Author:
Daryl Press
Publication Date:
04-2007
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Many Americans have lost confidence in their country's “energy security” over the past several years. Because the United States is a net oil importer, and a substantial one at that, concerns about energy security naturally raise foreign policy questions. Some foreign policy analysts fear that dwindling global oil reserves are increasingly concentrated in politically unstable regions, and they call for increased U.S. efforts to stabilize—or, alter-natively, democratize—the politically tumultuous oil-producing regions. Others allege that China is pursuing a strategy to “lock up” the world's remaining oil supplies through long-term purchase agreements and aggressive diplomacy, so they counsel that the United States outmaneuver Beijing in the “geopolitics of oil.” Finally, many analysts suggest that even the “normal” political disruptions that occasionally occur in oil-producing regions (e.g., occasional wars and revolutions) hurt Americans by disrupting supply and creating price spikes. U.S. military forces, those analysts claim, are needed to enhance peace and stability in crucial oil-producing regions, particularly the Persian Gulf.
Topic:
Security, Oil, and Political Economy
Political Geography:
United States and America

664. Escaping the Trap: Why the United States Must Leave Iraq

Author:
Ted Galen Carpenter
Publication Date:
02-2007
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
The U.S. military occupation of Iraq has now lasted longer than U.S. involvement in World War II. Yet there is no end in sight to the mission. Staying in Iraq is a fatally flawed policy that has already cost more than 3,000 American lives and consumed more than $350 billion. The security situation in that country grows increasingly chaotic and bloody as evidence mounts that Iraq has descended into a sectarian civil war between Sunnis and Shiites. Approximately 120 Iraqis per day are perishing in political violence. That bloodshed is occurring in a country of barely 26 million people. A comparable rate of carnage in the United States would produce more than 1,400 fatalities per day.
Topic:
Security and War
Political Geography:
United States, Iraq, America, and Middle East

665. Why We Fight: How Public Schools Cause Social Conflict

Author:
Neal McCluskey
Publication Date:
01-2007
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
It is all too often assumed that public education as we typically think of it today—schooling provided and controlled by government—constitutes the “foundation of American democracy.” Such schooling, it is argued, has taken people of immensely varied ethnic, religious, and racial backgrounds and molded them into Americans who are both unified and free. Public schooling, it is assumed, has been the gentle flame beneath the great American melting pot.
Topic:
Conflict Resolution, Civil Society, Demographics, and Education
Political Geography:
America

666. Has U.S. Income Inequality Really Increased?

Author:
Alan Reynolds
Publication Date:
01-2007
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
There are frequent complaints that U.S. income inequality has increased in recent decades. Estimates of rising inequality that are widely cited in the media are often based on federal income tax return data. Those data appear to show that the share of U.S. income going to the top 1 percent (those people with the highest incomes) has increased substantially since the 1970s.
Topic:
Demographics, Development, and Economics
Political Geography:
United States

667. Global Imbalances: A Source of Strength or Weakness?

Author:
Kristin J. Forbes
Publication Date:
07-2007
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Gross capital flows into the United States totaled $1.8 trillion in 2006. When combined with the $1.0 trillion the United States sent abroad, these net capital inflows funded the U.S. current account deficit of about $800 billion.1 The source of a large proportion of these capital inflows was developing economies—especially China and major oil exporters. Why are foreigners willing to invest such massive amounts of money in the U.S. economy? And perhaps even more surprising—why are countries with low levels of investment willing to send this relatively scarce resource to a capital-abundant economy instead of investing in their own countries? Understanding the motivation behind the millions of individual decisions that drive these capital inflows is critically important to understanding if this massive net transfer of capital into the United States reflects a strength or weakness of the global economy.
Topic:
Economy, Investment, and Capital
Political Geography:
Global Focus and United States of America

668. The Welfare Implications of Global Financial Flows

Author:
Eswar Prasad
Publication Date:
07-2007
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Any discussion of whether the global financial system has served the world well requires us to think about what it is that capital flows could achieve in the best of circumstances. The basic neoclassical model suggests that, with rising financial globalization, capital should flow from rich to poor countries, making people in both sets of countries better off by enabling a more efficient international allocation of capital from countries where capital is less productive to those where it ought to be more productive. In addition, financial flows should allow for more efficient sharing of risk across countries, thereby facilitating the smoothing of national consumption against countryspecific shocks to national output. These benefits are likely to be greater for developing countries as they have less capital and more volatile growth, implying that both the growth and risk sharing benefits would be larger for them.
Topic:
Economy, Welfare, Capital, and Financial Systems
Political Geography:
Global Focus

669. The Benefits and Risks of Financial Globalization

Author:
Peter B. Kenen
Publication Date:
07-2007
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
It is by now almost impossible to conceive of a world without a global financial system. To be sure, large numbers of low-income developing countries have little access to that system. But most middle-income developing countries, even some that still have capital controls of one sort or another, are increasingly integrated into that system, and all of the major developed countries are fully integrated.
Topic:
Development, Economy, Integration, and Financial Globalization
Political Geography:
Global Focus

670. The Role of Monetary Policy in the Face of Crises

Author:
Anna J. Schwartz
Publication Date:
07-2007
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
In this article I first review the Greenspan Fed’s record of providing liquidity in response to its perception of shocks the economy is facing. It assumed that the shocks were likely to generate financial crises. No financial crises, however, have occurred. Yet the Fed was dilatory in draining the market of unneeded liquidity. Failure to do so meant that monetary policy remained accommodative. I next discuss whether there is a connection between the Fed’s accommodative policy and the depreciation since 2002 of the exchange value of the dollar as well as the twin deficits and growing global imbalances. In that discussion I refer to the need to raise the national saving rate, in part by eliminating the budget deficit as well as projected deficits from the unfunded liabilities of Social Security and Medicare. Monetary policy, however, must be independent of fiscal policy. I conclude with some observations on the advisability of adoption by the Fed of inflation targeting.
Topic:
Monetary Policy, Federal Reserve, and Economy
Political Geography:
North America and United States of America