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642. Freddie Mac and Fannie Mae: An Exit Strategy for the Taxpayer
- Author:
- Arnold Kling
- Publication Date:
- 09-2008
- Content Type:
- Policy Brief
- Institution:
- The Cato Institute
- Abstract:
- The Fannie Mae-Freddie Mac crisis may have been the most avoidable financial crisis in history. Economists have long complained that the risks posed by the government-sponsored enterprises were large relative to any social benefits.
- Topic:
- Economics, Government, and Financial Crisis
- Political Geography:
- United States
643. Rails Won't Save America
- Author:
- Randal O'Toole
- Publication Date:
- 10-2008
- Content Type:
- Policy Brief
- Institution:
- The Cato Institute
- Abstract:
- Rising gas prices and concerns about greenhouse gases have stimulated calls to build more rail transit lines in urban areas, increase subsidies to Amtrak, and construct a large-scale intercity high-speed rail system. These megaprojects will cost hundreds of billions of dollars, but they won't save energy or significantly reduce greenhouse gas emissions.
- Topic:
- Development, Economics, and Government
- Political Geography:
- United States
644. Does Barack Obama Support Socialized Medicine?
- Author:
- Michael F. Cannon
- Publication Date:
- 10-2008
- Content Type:
- Policy Brief
- Institution:
- The Cato Institute
- Abstract:
- Democratic presidential nominee Sen. Barack Obama (IL) has proposed an ambitious plan to restructure America's health care sector. Rather than engage in a detailed critique of Obama's health care plan, many critics prefer to label it "socialized medicine." Is that a fair description of the Obama plan and similar plans? Over the past year, prominent media outlets and respectable think tanks have investigated that question and come to a unanimous answer: no.
- Topic:
- Economics, Government, Health, and Markets
- Political Geography:
- United States
645. Global Imbalances, Tanking Dollar, and the IMF's Surveillance over Exchange Rate Policies
- Author:
- Sitikantha Pattanaik
- Publication Date:
- 09-2007
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The exchange rate policies of the member countries of the International Monetary Fund could come under more intrusive scrutiny because of the June 15, 2007, decision of the IMF Executive Board on bilateral surveillance. This article highlights why the IMF decision cannot help in addressing the problem of global imbalances, even if it succeeds in delivering further appreciation of the exchange rates of surplus countries against the U.S. dollar. Moreover, there could be enormous challenges for effective implementation of the decision, which may further erode the credibility of the IMF. Even though disorderly correction of global imbalances remains a concern for every country, shifting the burden of adjustment entirely to surplus countries could have potentially damaging implications for international cooperation on global economic challenges. Past experiences of international cooperation to deal with global imbalances and currency misalignments suggest that countries rarely sacrifice their domestic economic priorities. Without appropriate macroeconomic adjustment measures, neither the high and growing U.S. current account deficit nor the savings glut of several surplus countries can be corrected solely by removing exchange rate misalignments.
- Political Geography:
- United States
646. Can Corruption Ever Improve an Economy?
- Author:
- Douglas A. Houston
- Publication Date:
- 09-2007
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Many in the world of developmental economics believe that corruption, the circumvention of the rule of law for private gain, leads to nothing but woe for any nation's economy, under any circumstances. Transparency International makes the elimination of corruption their mission, and many large multinational firms today echo that goal by building ethical codes that prohibit employees from engaging in practices deemed corrupt, regardless of local attitudes and customs toward the practices. The World Bank makes curbing corruption a linchpin in their campaign to improve governance. Reasons given for blanket condemnation of corrupt behavior are often utilitarian: Corruption is expected to increase the economic costs of doing business by undermining the laws of the land; this, in turn, reduces productive activities and investments, with negative consequences unfolding for human development and economic growth.
- Topic:
- Corruption, Economics, and Government
647. Economic Freedom, Corruption, and Growth
- Author:
- Mushfiq us Swaleheen and Dean Stansel
- Publication Date:
- 09-2007
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- This article adds to the empirical literature on the relationship between corruption and economic growth by incorporating the impact of economic freedom. We utilize an econometric model with two improvements on the previous literature: (1) our model accounts for the fact that economic growth, corruption, and investment are jointly determined, and (2) we include economic freedom explicitly as an explanatory variable. Using a panel of 60 countries, we find that for countries with low economic freedom (where individuals have limited economic choices), corruption reduces economic growth. However, in countries with high economic freedom, corruption is found to increase economic growth. Our results contradict the generally accepted view that corruption lowers the rate of growth. We use Osterfeld's (1992) distinction between expansive and restrictive corruption to explain our results. According to Osterfeld, corruption expands output if more bribes help the economy move toward greater free exchange. Thus, in economies where economic freedom is high, if bribing makes public officials less diligent in enforcing restrictions on firms' activities, output will increase. However, corruption will restrict output when bribes reduce competition and increase market rigidities. This outcome is more likely in countries where economic freedom is low due to widespread state ownership of assets (e.g., in China), monopolies and high tariff barriers granted to businesses owned by ruling elites and their cronies (e.g., the Philippines under Marcos and Indonesia under Suharto), and state-run marketing boards that are often the sole purchasers of agricultural products (e.g., in several African countries). An increase in corruption in these low economic freedom countries means even less competition and free exchange and leads to a fall in output. The policy implication of our finding is straightforward: The surest way to mitigate corruption and its adverse effects is to increase economic freedom.
- Political Geography:
- Africa
648. Government Behavior and Trust: The Case of China
- Author:
- Peihong Yang
- Publication Date:
- 09-2007
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Social capital has become a critical term in the social sciences since Loury (1977) and Coleman's (1988) seminal studies. Coleman (1990) and Putnan, Leonardi, and Nanetti (1993) focus on the positive spillover effect of social capital. Fukuyama (1997) argues that only certain shared norms and values can be regarded as social capital. Putnan (2000), Ostrom (2000), and Bowles and Gintis (2002) highlight the network effect of social capital. All these studies demonstrate that trust is central to social capital.
- Political Geography:
- China
649. The Real Coase Theorems
- Author:
- Glenn Fox
- Publication Date:
- 09-2007
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The “Coase theorem,” in one respect, is a triumph of social science scholarship. Web searches using “Coase theorem” as key words typically yield over 100,000 hits. Economists, legal scholars, environmentalists, and political scientists have written volumes on the theorem. Few ideas written by economists in the 20th century have been as widely debated. And the debating continues, 47 years after the publication of “The Problem of Social Cost” (Coase 1960), the essay recognized as the source of the ideas in question. There is only one problem: Ronald Coase maintains that the theorem that bears his name conveys an idea that is antithetical to the message that he intended.
650. Potential Gains from Trade in Dirty Industries: Revisiting Lawrence Summers' Memo
- Author:
- Jay Johnson, Gary Pecquet, and Leon Taylor
- Publication Date:
- 09-2007
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Lawrence Summers has a long history of controversial statements. Well before his comments in 2005 as then-president of Harvard University about the underrepresentation of women on faculties for mathematics and science, Summers was the chief economist at the World Bank. In that position, he penned a memo to his colleagues in 1991 that was leaked to the public, drawing heated criticism. In 1999, when President Bill Clinton nominated Summers as Secretary of the Treasury, the controversy over Summers' memo was revived during his Senate confirmation hearings. Hundreds of articles were posted on the Internet at that time attempting to sway public opinion against Summers.