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101. Reflections on Monetary Policy and Its Future

Author:
Jeb Hensarling, Phil Gramm, and John B. Taylor
Publication Date:
06-2021
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The Fed’s huge balance sheet allows it to engage in credit policy (the composition of the balance sheet is by definition credit policy), which inherently auto‐​resides in fiscal policy — but should auto‐​reside with Congress. This discussion, moderated by John B. Taylor, took place at the Cato Institute’s 38th Annual Monetary Conference on November 19, 2020. The transcript has been edited for publication.
Topic:
Economics, Monetary Policy, Federal Reserve, and Credit
Political Geography:
North America and United States of America

102. The New Faces of Internationalism: How Generational Change Is Reshaping American Foreign Policy Attitudes

Author:
A. Trevor Thrall and Erik Goepner
Publication Date:
03-2021
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
Observers of American foreign policy have been worried for years about eroding public support for international engagement, especially in light of increasing public discontent after nearly two decades of military conflict since 9/11. Low support for international engagement and military intervention among younger Americans, in particular, has led some to worry that the age of American internationalism has passed. There is little agreement, however, about how serious the erosion of public support is and what its causes are. Relying on an analysis of seven decades of polling data, we argue that generational effects have slowly reshaped patterns of American foreign policy preferences. Since World War II, Americans have come of age during periods increasingly less conducive to support of military intervention, leading them to adopt worldviews increasingly at odds with those carried by older Americans. As a result, the United States is undergoing a slow motion changing of the guard, as older and more hawkish Americans die and are replaced by younger, less hawkish ones. These findings have important implications for the debate about the state of public support for American leadership of the liberal international order and the evolution of American foreign policy.
Topic:
Foreign Policy, Engagement, International Order, and Generation
Political Geography:
North America and United States of America

103. Questioning Industrial Policy: Why Government Manufacturing Plans Are Ineffective and Unnecessary

Author:
Scott Lincicome and Huan Zhu
Publication Date:
06-2021
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
In the wake of the COVID-19 pandemic and rising U.S.-China tensions, American policymakers have again embraced “industrial policy.” Both President Biden and his predecessor, as well as legislators from both parties, have advocated a range of federal support for American manufacturers to fix perceived weaknesses in the U.S. economy and to counter China’s growing economic clout. These and other industrial policy advocates, however, routinely leave unanswered important questions about U.S. industrial policy’s efficacy and necessity: What is “Industrial Policy”? Advocates of “industrial policy” often fail to define the term, thus permitting them to ignore past failures and embrace false successes while preventing a legitimate assessment of industrial policies’ costs and benefits. Yet U.S. industrial policy’s history of debate and implementation establishes several requisite elements – elements that reveal most “industrial policy successes” not to be “industrial policy” at all. What are the common obstacles to effective U.S. industrial policy? Several obstacles have prevented U.S. industrial policies from generating better outcomes than the market. This includes legislators’ and bureaucrats’ inability to “pick winners” and efficiently allocate public resources (Hayek’s “Knowledge Problem”); factors inherent in the U.S. political system (Public Choice Theory); lack of discipline regarding scope, duration, and budgetary costs; interaction with other government policies that distort the market at issue; and substantial unseen costs. What “problem” will industrial policy solve? The most common problems purportedly solved by industrial policy proposals are less serious than advocates claim or unfixable via industrial policy. This includes allegations of widespread U.S. “deindustrialization” and a broader decline in American innovation; the disappearance of “good jobs”; the erosion of middle‐​class living standards; and the destruction of American communities. Do other countries’ industrial policies demand U.S. industrial policy? The experiences of other countries generally cannot justify U.S. industrial policy because countries have different economic and political systems. Regardless, industrial policy successes abroad – for example, in Japan, Korea and Taiwan – are exaggerated. Also, China’s economic growth and industrial policies do not justify similar U.S. policies, considering the market‐​based reasons for China’s rise, the Chinese policies’ immense costs, and the systemic challenges that could derail China’s future growth and geopolitical influence. These answers argue strongly against a new U.S. embrace of industrial policy. The United States undoubtedly faces economic and geopolitical challenges, including ones related to China, but the solution lies not in copying China’s top‐​down economic planning. Reality, in fact, argues much the opposite.
Topic:
Government, Industrial Policy, Manufacturing, and COVID-19
Political Geography:
China, Asia, North America, and United States of America

104. Manufactured Crisis: “Deindustrialization,” Free Markets, and National Security

Author:
Scott Lincicome
Publication Date:
01-2021
Content Type:
Commentary and Analysis
Institution:
The Cato Institute
Abstract:
Both the American left and right often use “national security” to justify sweeping proposals for new U.S. protectionism and industrial policy. “Free markets” and a lack of government support for the manufacturing sector are alleged to have crippled the U.S. defense industrial base’s ability to supply “essential” goods during war or other emergencies, thus imperiling national security and demanding a fundamental rethink of U.S. trade and manufacturing policy. The COVID-19 crisis and U.S.-China tensions have amplified these claims. This resurgent “security nationalism,” however, extends far beyond the limited theoretical scenarios in which national security might justify government action, and it suffers from several flaws. First, reports of the demise of the U.S. manufacturing sector are exaggerated. Although U.S. manufacturing sector employment and share of national economic output (gross domestic product) have declined, these data are mostly irrelevant to national security and reflect macroeconomic trends affecting many other countries. By contrast, the most relevant data—on the U.S. manufacturing sector’s output, exports, financial performance, and investment—show that the nation’s total productive capacity and most of the industries typically associated with “national security” are still expanding. Second, “security nationalism” assumes a need for broad and novel U.S. government interventions while ignoring the targeted federal policies intended to support the defense industrial base. In fact, many U.S. laws already authorize the federal government to support or protect discrete U.S. industries on national security grounds. Third, several of these laws and policies provide a cautionary tale regarding the inefficacy of certain core “security nationalist” priorities. Case studies of past government support for steel, shipbuilding, semiconductors, and machine tools show that security‐​related protectionism and industrial policy in the United States often undermines national security. Fourth, although the United States is not nearly as open (and thus allegedly “vulnerable”) to external shocks as claimed, global integration and trade openness often bolster U.S. national security by encouraging peace among trading nations or mitigating the impact of domestic shocks. Together, these points rebut the most common claims in support of “security nationalism” and show why skepticism of such initiatives is necessary when national security is involved. They also reveal market‐​oriented trade, immigration, tax, and regulatory policies that would generally benefit the U.S. economy while also supporting the defense industrial base and national security.
Topic:
Defense Policy, National Security, COVID-19, Free Market, and Deindustrialization
Political Geography:
China, North America, and United States of America

105. Espionage, Espionage‐​Related Crimes, and Immigration: A Risk Analysis, 1990–2019

Author:
Alex Nowrasteh
Publication Date:
02-2021
Content Type:
Commentary and Analysis
Institution:
The Cato Institute
Abstract:
A cost‐​benefit analysis finds that the hazards posed by foreign‐​born spies are not large enough to warrant broad and costly actions such as a ban on travel and immigration from China, but they do warrant the continued exclusion of potential spies under current laws. Espionage poses a threat to national security and the private property rights of Americans. The government should address the threat of espionage in a manner whereby the benefits of government actions taken to reduce it outweigh the costs of those actions. To aid in that goal, this policy analysis presents the first combined database of all identified spies who targeted both the U.S. government and private organizations on U.S. soil. This analysis identifies 1,485 spies on American soil who, from 1990 through the end of 2019, conducted state or commercial espionage. Of those, 890 were foreign‐​born, 583 were native‐​born Americans, and 12 had unknown origins. The scale and scope of espionage have major implications for immigration policy, as a disproportionate number of the identified spies were foreign‐​born. Native‐​born Americans accounted for 39.3 percent of all spies, foreign‐​born spies accounted for 59.9 percent, and spies of unknown origins accounted for 0.8 percent. Spies who were born in China, Mexico, Iran, Taiwan, and Russia account for 34.7 percent of all spies. The chance that a native‐​born American committed espionage or an espionage‐​related crime and was identified was about 1 in 13.1 million per year from 1990 to 2019. The annual chance that a foreign‐​born person in the United States committed an espionage‐​related crime and was discovered doing so was about 1 in 2.2 million during that time. The government was the victim in 83.3 percent of espionage cases, firms were the victims of commercial espionage in 16.3 percent of the cases, and hospitals and universities were the victims of espionage in 0.1 percent and 0.3 percent of the cases, respectively. The federal government should continue to exclude foreign‐​born individuals from entering the United States if they pose a threat to the national security and private property rights of Americans through espionage. A cost‐​benefit analysis finds that the hazards posed by foreign‐​born spies are not large enough to warrant broad and costly actions such as a ban on travel and immigration from China, but they do warrant the continued exclusion of potential spies under current laws.
Topic:
Crime, Immigration, Risk, and Espionage
Political Geography:
North America and United States of America

106. Protectionism or National Security? The Use and Abuse of Section 232

Author:
Scott Lincicome and Inu Manak
Publication Date:
03-2021
Content Type:
Commentary and Analysis
Institution:
The Cato Institute
Abstract:
With several Section 232 tariffs still in place, and the status of other investigations unclear, the law presents an early test for the Biden administration and a signal about its future trade policy plans. President Biden took office at the height of modern American protectionism. The trade policy legacy he inherited from the Trump administration puts the United States at a crossroads. Will Biden go down the problematic path of executive overreach like his predecessor, or will he forge a new path? We may not need to wait long to find out. In his first trade action, President Biden reinstated tariffs on aluminum from the United Arab Emirates under Section 232 of the Trade Expansion Act of 1962, which authorizes the president to impose tariffs when a certain product is “being imported into the United States in such quantities or under such circumstances as to threaten to impair national security.” Though infrequently used in the past, Section 232 was a favored trade tool of the Trump administration, which was responsible for nearly a quarter of all Section 232 investigations initiated since 1962. While Congress has constitutional authority over trade policy, Section 232 gives the president broad discretion to enact protectionist measures in the name of national security. Why is this law a problem? First, the statute’s lack of an objective definition of “national security” permits essentially anything to be considered a threat, regardless of the merits. Second, the law’s lack of detailed procedural requirements encouraged the Trump administration to cut corners in applying the law, thus breeding cronyism and confusion. Third, President Trump took advantage of the law’s ambiguity to shield key Section 232 findings from Congress and the public, undermining both transparency and accountability. The Trump administration’s abuse of the rarely used Section 232 has allowed the statute to become an excuse for blatant commercial protectionism, harming American companies and consumers and our security interests. It’s unclear whether the Biden administration will continue this troubling trend or seek reform. The best course of action would be the latter: Biden should avoid using Section 232 and support congressional efforts to rein in presidential power, thus ensuring an end to the calamitous episodes that were common during the Trump era.
Topic:
National Security, Trade Policy, and Protectionism
Political Geography:
North America and United States of America

107. Private Schooling after a Year of COVID-19: How the Private Sector Has Fared and How to Keep It Healthy

Author:
Neal McCluskey
Publication Date:
04-2021
Content Type:
Commentary and Analysis
Institution:
The Cato Institute
Abstract:
In one year, COVID-19 contributed to the permanent closure of at least 132 mainly low‐​cost private schools. But that was better than some feared. As COVID-19 struck the United States in March 2020, sending the nation into lockdown, worry about the fate of private schools was high. These schools, which only survive if people can pay for them, seemed to face deep trouble. Many private schools have thin financial margins even in good economic times and rely not only on tuition but also on fundraisers, such as in‐​person auctions, to make ends meet. When the pandemic hit, many such events were canceled, and churches no longer met in person, threatening contributions that help support some private schools. Simultaneously, many private schooling families faced tighter finances, making private schooling less affordable. Finally, families that could still afford private schooling might have concluded that continuing to pay for education that was going to be online‐​only made little sense.
Topic:
Education, COVID-19, and Private Schools
Political Geography:
North America and United States of America

108. China: Rise or Demise?

Author:
John Mueller
Publication Date:
05-2021
Content Type:
Commentary and Analysis
Institution:
The Cato Institute
Abstract:
China, even if it rises, does not present much of a security threat to the United States. Policymakers increasingly view China’s rapidly growing wealth as a threat. China currently ranks second, or perhaps even first, in the world in gross domestic product (although 78th in per capita GDP), and the fear is that China will acquire military prowess commensurate with its wealth and feel impelled to carry out undesirable military adventures. However, even if it continues to rise, China does not present much of a security threat to the United States. China does not harbor Hitler‐​style ambitions of extensive conquest, and the Chinese government depends on the world economy for development and the consequent acquiescence of the Chinese people. Armed conflict would be extremely—even overwhelmingly—costly to the country and, in particular, to the regime in charge. Indeed, there is a danger of making China into a threat by treating it as such and by engaging in so‐​called balancing efforts against it. Rather than rising to anything that could be conceived to be “dominance,” China could decline into substantial economic stagnation. It faces many problems, including endemic (and perhaps intractable) corruption, environmental devastation, slowing growth, a rapidly aging population, enormous overproduction, increasing debt, and restive minorities in its west and in Hong Kong. At a time when it should be liberalizing its economy, Xi Jinping’s China increasingly restricts speech and privileges control by the antiquated and kleptocratic Communist Party over economic growth. And entrenched elites are well placed to block reform. That said, China’s standard of living is now the highest in its history, and it’s very easy to envision conditions that are a great deal worse than life under a stable, if increasingly authoritarian, kleptocracy. As a result, the Chinese people may be willing to ride with, and ride out, economic stagnation should that come about—although this might be accompanied by increasing dismay and disgruntlement. In either case—rise or demise—there is little the United States or other countries can or should do to affect China’s economically foolish authoritarian drive except to issue declarations of disapproval and to deal more warily. As former ambassador Chas Freeman puts it, “There is no military answer to a grand strategy built on a non‐​violent expansion of commerce and navigation.” And Chinese leaders have plenty of problems to consume their attention. They scarcely need war or foreign military adventurism to enhance the mix. The problem is not so much that China is a threat but that it is deeply insecure. Policies of threat, balance, sanction, boycott, and critique are more likely to reinforce that condition than change it. The alternative is to wait, and to profit from China’s economic size to the degree possible, until someday China feels secure enough to reform itself.
Topic:
Government, GDP, Geopolitics, and Economic Growth
Political Geography:
China, Asia, 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