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201. The Coasean Framework of the New York City Watershed Agreement

Author:
Geoffrey Black, D. Allan Dalton, Samia Islam, and Aaron Batteen
Publication Date:
03-2014
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Over 50 years ago, in "The Problem of Social Cost," Ronald Coase (1960) attempted to reorient the economics profession's treatment of externalities. He wanted to draw economists' attention away from the world of pure competition as a policy standard and investigate the consequences of transaction costs and property rights for the operation of markets. In 1991, he was awarded the Nobel prize in economics "for his discovery and clarification of the significance of transaction costs and property rights for the institutional structure and functioning of the economy" (Royal Swedish Academy of Sciences 1991). The Academy cited both his 1960 article and his 1937 article "The Nature of the Firm."
Topic:
Economics
Political Geography:
New York

202. Marginal Tax Rates and U.S. Growth: Flaws in the 2012 CRS Study

Author:
Jason E. Taylor and Jerry L. Taylor
Publication Date:
03-2014
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
In September 2012, seven weeks before the presidential election—one in which top marginal tax rates were a major policy difference between the two major—party candidates-the Congressional Research Service (CRS) published a paper (Hungerford 2012) suggesting that there is no empirical evidence that top marginal tax rates impact U.S. economic growth. After all, top marginal tax rates were above 90 percent during the 1950s and early 1960s when the economy experienced rapid growth. Furthermore, marginal tax rate cuts in 2001 and 2003 were followed by the worst financial crisis since the Great Depression. The CRS study was widely reported in blogs, newspapers such as the New York Times, and The Atlantic magazine. It was portrayed as evidence refuting Republican candidate Mitt Romney's position that cutting the top marginal tax rate from 35 to 28 percent would spur economic growth and supporting Democratic President Barack Obama's position that top marginal tax rates could be raised to 39.6 percent with no cost to economic growth (Leonhart 2012, Thompson 2012).
Political Geography:
United States

203. State Fiscal Policies for Budget Stabilization and Economic Growth: A Dynamic Scoring Analysis

Author:
John Merrifield and Barry W. Poulson
Publication Date:
03-2014
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Economic downturns expose unsustainable fiscal practices. Widespread fiscal crises create opportunities to compare policy options that address especially adverse circumstances, especially progrowth fiscal constraints that can stabilize state budgets over the business cycle. Our policy option assessments depart from the normal practice of assessing rules and policies independently. Our premise is that the fiscal policy mix determines its outcomes. We include dynamic scoring to provide a richer view of the policy interactions.
Topic:
Economics
Political Geography:
California

204. The Medical Care Cost Ratchet

Author:
Andrew Foy, Christopher Sciamanna, Mark Kozak, and Edward J. Filippone
Publication Date:
03-2014
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Since 1970, the annual growth in U.S. health care spending per capita has been more than double the real growth in GDP per capita: 4.3 percent versus 2 percent. Over that same time period countries belonging to the Organization for Economic Cooperation and Development (OECD) averaged an annual growth rate of 3.8 percent in health care spending per capita compared to only a 2.1 percent annual growth in GDP per capita. Eight of 20 countries had higher average annual growth rates in health care spending per capita than the United States (White 2007). In light of the pronounced institutional differences among these countries in medical financing arrangements, the similarity in the rate of health care spending growth is striking. Therefore, any explanation that seeks to account for the tremendous cost growth in health care over the last several decades must hold true across all OECD countries.
Political Geography:
United States

205. Forecast Bias of Government Agencies

Author:
Robert Krol
Publication Date:
03-2014
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Forecasts of future economic activity underlie any budget revenue projection. However, the forecasters in a government agency may face incentives or pressures that introduce forecast bias. For example, agency forecasters may be rewarded for a rosy growth forecast that allows politicians to avoid politically costly program cuts or tax increases. Similarly they may be penalized for underforecasting economic growth. Where a reward system is asymmetric, it would make sense to observe biased forecasts.
Topic:
Government
Political Geography:
California

206. A Fresh Look at Climate Change

Author:
Paul Ballonoff
Publication Date:
03-2014
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Recently The Economist (2013a), a prominent journalistic advocate of strong policies to control CO2 emissions, expressed their puzzlement on the absence of warming over the last 15 years. They observed that this flat period of global average temperature occurred despite that CO2 emissions from human sources continued at an increased rate. The total human-produced CO2 emissions in that period of flat temperatures represent a quarter of all such emissions ever produced. The standard climate models, such as those used by the United Nation's International Panel on Climate Change (UN IPCC), anticipated that such massive CO2 increases should have caused continuing increases in average global temperatures. The Economist noted that observed global average temperature is now at the lowest end of the predicted range, and that if the present trend continues, the actual temperatures will soon be below even the lowest forecasts. Most recently, Fyfe, Gillett, and Zwiers (2013) demonstrated that the current climate models have experienced a systematic failure—a finding very similar to Knappenberger and Michaels (2013).
Topic:
Environment and United Nations
Political Geography:
United Nations

207. Contingent Liability, Capital Requirements, and Financial Reform

Author:
Joshua R. Hendrickson
Publication Date:
03-2014
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
A bank is considered insolvent when its liabilities (deposits) exceed the value of its assets (reserves, loans, and securities). If assets exceed liabilities, any losses experienced on the asset side of the bank balance sheet result in a corresponding loss in the bank's capital. Insolvency occurs only in the event of losses exceeding the value of capital. All else equal, a bank with more capital is at lower risk of insolvency because the value of the bank's capital fluctuates with the value of assets.
Topic:
Civil War
Political Geography:
United Kingdom

208. The Explicit Costs of Government Deposit Insurance

Author:
Thomas L. Hogan and William J. Luther
Publication Date:
03-2014
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The Diamond-Dybvig (DD) model is often cited as a theoretical justification for government deposit insurance. In the model, rational agents find it in their interest to withdraw their bank deposits if they suspect other depositors plan to do likewise. When a sufficient number of agents are expected to liquidate their accounts, a bank run ensues. Guaranteeing deposits through a system of government administered deposit insurance removes the temptation to run on the bank and thereby precludes the need to ever use the deposit insurance.
Topic:
Government

209. Pathological Altruism and Pathological Regulation

Author:
Paul H. Rubin
Publication Date:
03-2014
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
A concept recently developed by scholars in psychology and biology is "pathological altruism." (Oakley 2013, Oakley et al. 2012). A pathological altruist is defined as "a person who sincerely engages in what he or she intends to be altruistic acts, but who harms the very person or group he or she is trying to help, often in unanticipated fashion; or harms others; or irrationally becomes a victim of his or her own altruistic actions." (Oakley, Knafo, and McGrath 2012: 4). We may relate this concept to Buchanan's Samaritan's dilemma: Buchanan's Samaritan is the altruist, and the pathology is that the recipient will be in the "no work" cell, so that the Samaritan becomes a victim of his own altruistic actions (Buchanan 1975).
Political Geography:
Europe

210. Free Market Revolution: How Ayn Rand's Ideas Can End Big Government

Author:
Trevor Burrus
Publication Date:
03-2014
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
In Free Market Revolution: How Ayn Rand's Ideas Can End Big Government, Yaron Brook, executive director of the Ayn Rand Institute (ARI), and Don Watkins, a fellow at ARI, give a full-throated and spirited defense of Rand's arguments for freedom, self-actualization, and the just society. The book is a clear explanation of objectivism that weaves in timely and accurate policy discussions, such as the chapter on health care, that buttress the overall point.
Topic:
Government
Political Geography:
New York

211. Political Bubbles: Financial Crises and the Failure of American Democracy

Author:
Mark A. Calabria
Publication Date:
03-2014
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The majority of books on the recent financial crisis tend to be written either by economics/finance experts or by journalists. While the journalistic accounts occasionally focus on political actors, it is usually in the manner of "bad people doing bad things" rather than with a theoretical framework. The economic accounts, with some exception, rarely incorporate the politics of finance. It is this vacuum that Political Bubbles attempts to fill.
Political Geography:
America

212. The Bet: Paul Ehrlich, Julian Simon, and Our Gamble over Earth's Future

Author:
Patrick J. Michaels
Publication Date:
03-2014
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Yale historian Paul Sabin's The Bet: Paul Ehrlich, Julian Simon, and Our Gamble over Earth's Future is worth a read because of its detailed tour through the world of environmental doomsaying. Yet, in the end, I was profoundly disappointed, consigning this book to my very large Cassandra File because Sabin endorses that doomsaying as expressed by dreaded global warming.
Topic:
Climate Change

213. The Great Rent Wars: New York 1917-1929

Author:
Peter Van Doren
Publication Date:
03-2014
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Economic shocks in an unregulated textbook world are managed through the price system. During gluts, prices fall and the least efficient firms lose wealth and exit the market. The result is that supply falls and demand increases. Eventually a new equilibrium is reached in which prices increase toward marginal cost and risk-adjusted returns to firms equal the cost of capital. During shortages, prices rise, existing firms receive rents, and new firms enter the market. The result is that supply increases and demand falls. Eventually a new equilibrium is reached in which prices decrease toward marginal cost and risk-adjusted returns to firms fall to equal the cost of capital.
Topic:
War
Political Geography:
New York

214. Complete Edition An Interdisciplinary Journal Of Public Policy Analysis

Author:
James A. Dorn
Publication Date:
10-2014
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
This article deals with the main problems and proposed solutions with respect to the euro. I start with what I perceive to be confusion in the debate on the euro. The next section shows a large variation in the growth performance in the eurozone, and more broadly in the European Union (EU). This should make us skeptical when hearing about the crisis of the euro, or of Europe. I then proceed to discuss what the problem countries in the eurozone suffer from. The next section deals with a more difficult question: What are the links between the euro architecture and the accumulation of these problems—that is, the imbalances and structural barriers to economic growth in some members of the eurozone? I then proceed to discuss the adjustment under the euro after 2008, focusing on the weaknesses of the policies of the crisis management. The article ends with a critical discussion of the problems and solutions put forward in the debate on the euro.
Political Geography:
Europe

215. Marijuana Policy in Colorado

Author:
Jeffrey Miron
Publication Date:
10-2014
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
In November 2012, voters in the states of Colorado and Washington approved ballot initiatives that legalized marijuana for recreational purposes. Alaska, Oregon, and the District of Columbia are scheduled to consider similar measures in the fall of 2014, and other states may follow suit in the fall of 2016.
Topic:
War on Drugs, Social Movement, and Law
Political Geography:
United States, Washington, and Colombia

216. Review of Greenlight Pinellas

Author:
Randal O'Toole
Publication Date:
10-2014
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
Under its “Greenlight Pinellas” proposal, the Pinellas Suncoast Transit Authority (PSTA), which serves Pinellas County, FL, wants to switch its major funding source from a property tax to a sales tax at a rate that will more than double its local tax revenues, and use the added money to build a 24-mile light-rail line and expand bus service. This proposal is extremely and unnecessarily expensive given that buses can provide a superior service to light rail, carrying more passengers more comfortably to more destinations at a far lower cost.
Topic:
Infrastructure
Political Geography:
United States

217. The Role of Mortgage Finance in Financial (In)Stability

Author:
Mark A. Calabria
Publication Date:
09-2014
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
Empirical research on the causes of financial crises has grown in recent decades. Early work, such as that by Kaminsky and Reinhart, helped establish the link between asset prices and banking crises. While this initial research focused on equity prices, subsequent research expanded the analysis to include residential property prices. This subsequent research is briefly reviewed here. After establishing the link between residential property prices and banking crises, I discuss the role of various credit policies, both for their impact on property prices and for the stability of the financial system in the face of declining property prices. The role of specific loan characteristics, such as loan-to-value (LTV), will be discussed first, followed by the role of institutional leverage. Policy recommendations conclude.
Topic:
Debt, Global Recession, Financial Crisis, and Governance

218. Editor's Note

Author:
James A. Dorn
Publication Date:
07-2014
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The Federal Reserve Act was passed on December 23, 1913. It was designed to provide an elastic currency that would respond to the needs of trade. There was nothing in the Act about price stability, interest rates, or full employment. The expectation was that the United States would continue to define the dollar in terms of gold, and that the operation of the international gold standard would ensure long-run price stability.
Political Geography:
United States

219. A Limited Central Bank

Author:
Charles I. Plosser
Publication Date:
07-2014
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Douglass C. North, co-winner of the 1993 Nobel Prize in Economics, argued that institutions were deliberately devised to constrain interactions among parties—both public and private (North 1991). In the spirit of North's work, one theme of this article will be that the institutional structure of the central bank matters. The central bank's goals and objectives, its framework for implementing policy, and its governance structure all affect its performance.
Political Geography:
United States

220. A Century of Central Banking: What Have We Learned?

Author:
Jerry L. Jordan
Publication Date:
07-2014
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
All of us who are interested in the century-long experience of central banking in the United States owe a great debt to Allan Meltzer. His several-years-long efforts gave us over 2,000 pages of careful documentation of decisionmaking in the Federal Reserve for the first 75 years (Meltzer 2003, 2010a, 2010b). The first score of years transformed a lender-of-last-resort, payments processor, and issuer of uniform national currency into a full-fledged central bank with discretionary authority to manage a fiat currency.
Political Geography:
United States

221. Operation Twist-the-Truth: How the Federal Reserve Misrepresents Its History and Performance

Author:
George Selgin
Publication Date:
07-2014
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
For a private-sector firm, success can mean only one thing: that the firm has turned a profit. No such firm can hope to succeed, or even to survive, merely by declaring that it has been profitable. A government agency, on the other hand, can succeed in either of two ways. It can actually accomplish its mission. Or it can simply declare that it has done so, and get the public to believe it.
Topic:
Government
Political Geography:
United States

222. The Need for a Price Stability Mandate

Author:
Athanasios Orphanides
Publication Date:
07-2014
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The founding of the Federal Reserve was a good idea, but its performance during its first hundred years has been hampered by the lack of clarity of its mandate. At times its mandate was interpreted as requiring the pursuit of multiple targets resulting in the failure to safeguard price stability over time. This article reviews the evolution of the Federal Reserve's mandate and argues that Congress should clarify the primacy of price stability as the central bank's mandate to ensure that the Federal Reserve will better safeguard monetary stability going forward.
Political Geography:
United States

223. The Troubling Suppression of Competition from Alternative Monies: The Cases of the Liberty Dollar and E-gold

Author:
Lawrence H. White
Publication Date:
07-2014
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Proposals abound for reforming monetary policy by instituting a less-discretionary or nondiscretionary system ("rules") for a fiat-money- issuing central bank to follow. The Federal Reserve's Open Market Committee could be given a single mandate or more generally an explicit loss function to minimize (e.g., the Taylor Rule). The FOMC could be replaced by a computer that prescribes the monetary base as a function of observed macroeconomic variables (e.g., the McCallum Rule). The role of determining the fiat monetary base could be stripped from the FOMC and moved to a prediction market (as proposed by Scott Sumner or Kevin Dowd). Alternative proposals call for commodity money regimes. The dollar could be redefined in terms of gold or a broader commodity bundle, with redeemability for Federal Reserve liabilities being reinstated. Or all Federal Reserve liabilities could actually be redeemed and retired, en route to a fully privatized gold or commodity-bundle standard (White 2012). All of these approaches assume that there will continue to be a single monetary regime in the economy, so that the way to institute an alternative is to transform the dominant regime.
Topic:
Government
Political Geography:
United States

224. Clearing House Currency

Author:
Richard H. Timberlake, Jr.
Publication Date:
07-2014
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The Federal Reserve System is no longer just an unconstitutional monetary institution promoting a continuing inflation; it has also become, with quantitative easing, an unauthorized fiscal agent for the U.S. government. The fiat currency and equally fiat bank reserves it creates are much in contrast to the private currency and bank reserves that the commercial banks' clearing house associations provided in the latter half of the 19th century. It is that episode I review here.
Topic:
Civil War
Political Geography:
United States

225. Nominal GDP Targeting: A Simple Rule to Improve Fed Performance

Author:
Scott B. Sumner
Publication Date:
07-2014
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The history of central banking is a story of one failure after another. This record does not mean that our actual monetary regimes have been the worst of all possible regimes—far from it. But it does mean that we can improve policy by learning from experience. Every proposed reform is a response to a previous failure, an implicit display of lessons learned.
Political Geography:
Canada

226. Fed versus Market Regulation

Author:
Jeb Hensarling
Publication Date:
07-2014
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Before I get into the body of the remarks, I want to thank the Cato Institute for everything it stands for and everything it has meant to me. As I was walking in the foyer, I noticed a copy of the Cato Journal on a table there. I recall as an undergraduate student at Texas A University in the 1970s that I took $25 dollars—and I'm a guy who worked my way through college—of my hard-earned money to invest in the Cato Journal. That was money I could have invested in long necks at the Dixie Chicken, our local watering hole. Also, I would like to thank John Allison. If you have not read his book, The Financial Crisis and the Free Market Cure: Why Pure Capitalism Is the World Economy's Only Hope, I commend it to you. Finally, I would like to tell you that as chairman of the House Financial Services Committee, before I decide to move out on any particular issue, I certainly glean the scholarship of Cato in general and Mark Calabria in particular.
Political Geography:
America

227. Market Discipline Beats Regulatory Discipline

Author:
John A. Allison
Publication Date:
07-2014
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
I am going to talk from a different perspective because I am the only person who actually ran a bank that's been speaking today, and from that context I can tell you with absolute certainty that market discipline beats regulatory discipline. In fact, I will argue that regulatory discipline will always fail to reduce volatility and will slow economic growth. These observations are based on my understanding of public choice theory and particularly on 40 years of concrete experience in the banking business.
Political Geography:
United States

228. How Should Financial Markets Be Regulated?

Author:
Martin Hutchinson and Kevin Dowd
Publication Date:
07-2014
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Financial regulation is a recurring and central issue in contemporary policy discussions. Typically, leftists want more of it, while proponents of free markets want less, or preferably, none of it. We would suggest, however, that the central issue is not whether markets should be regulated, but by whom—by the market itself, which includes self-regulation by market practitioners, or by the state or one of its agencies. To put it in Coasean terms, what is the most appropriate institutional arrangement by which markets—including financial markets-should be regulated?
Political Geography:
United States

229. The Case for a Centennial Monetary Commission

Author:
Kevin P. Brady
Publication Date:
07-2014
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
By every economic measure, our nation is presently mired in a disappointing economic recovery. In fact, ours is the weakest recovery of the past half century. Uncertainty reigns as the purchasing power of the dollar declines. What ails us goes well beyond federal fiscal policy, and it is certainly not the result of an irrational marketplace. What ails us goes much deeper to our nation's monetary policy, which is well overdue for a review.
Political Geography:
America

230. Prospects for Fundamental Monetary Reform

Author:
Gerald P. O'Driscoll, Jr.
Publication Date:
07-2014
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The intellectual climate has never been more open to a critical analysis of existing monetary institutions both here and abroad. When the Germans agreed to a monetary union, they were promised that they would keep the Bundesbank; only the name would be changed to the European Central Bank. Instead, Germans with whom I have spoken now think they got the Banca d'Italia. In the United States, before the financial crisis, the Federal Reserve was held in high regard by the public. Now, at least in some circles, "the Fed" has become a term of opprobrium, not unlike "the IRS."
Political Geography:
United States, Europe, and Germany

231. Why the Fed's Monetary Policy Has Been a Failure

Author:
R. David Ranson
Publication Date:
07-2014
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Passing its 100th birthday, the Federal Reserve is receiving unprecedented scrutiny. We (the public) are living through the consequences of its attempts to bolster the U.S. economy through exceptionally low interest rates and the conversion of great quantities of debt to money. Although these efforts are ongoing, we are disappointed. Even with the help of strenuous actions on the fiscal side, economic and credit-market recovery from the recession of 2008–09 was notoriously slow. It took 15 quarters for U.S. real GDP to pass its pre-recession high in the fourth quarter of 2007, compared to only 7 quarters following the deep recession of 1981–82. On a per capita basis, there was an even starker contrast between the two recoveries. Moreover, the Fed remains a suspect in the genesis of the financial crisis that precipitated the Great Recession. The ultimate test of its role as overseer and regulator of the commercial banking system met with a very poor result.
Political Geography:
United States

232. The Federal Reserve and the Dollar

Author:
Lewis E. Lehrman
Publication Date:
07-2014
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
To evaluate the history of the Federal Reserve System, we cannot help but wonder, whither the Fed? and to consider wherefore its reform—even what and how to do it. But first let us remember whence we came one century ago.
Topic:
War
Political Geography:
Europe

233. Book Review: Rise of the Warrior Cop: The Militarization of America's Police Forces

Author:
Jonathan Blanks
Publication Date:
07-2014
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Criminal justice reform has been gaining momentum in Washington, attracting policymakers from both sides of the aisle. Draconian mandatory minimum sentences, overcrowded prisons, and bloated criminal justice budgets have made reform a bipartisan issue. This is undoubtedly a positive development, but—as is typical with the political process—the most popular reforms are not enough. Most of the political capital and rhetoric focuses on "back-end" criminal justice reforms, such as sentencing reform, early release, and alternatives to incarceration. While these reforms are sorely needed, the "front end" of the criminal justice system—criminal laws, the courts, and policing itself—also needs thorough examination. Radley Balko's Rise of the Warrior Cop is an exemplar of what these assessments should look like in the American context.
Political Geography:
America and Washington

234. Book Review: Foreign Policy Begins at Home: The Case for Putting America's House in Order

Author:
Travis Evans
Publication Date:
07-2014
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
For the better part of a decade, the United States has been mired in mediocrity, settling for what feels like a new normal of low eco- nomic growth, stagnant wages, political intransigence, and an unending war or terror. Many think America's better days are behind it. Richard Haass, the president of the Council on Foreign Relations, disagrees. In Foreign Policy Begins at Home , Haass attempts to reverse American defeatism and assuage fears of American decline, arguing instead that the United States is simply underperforming, suffering from "American made" problems that can be corrected by restoring the "foundations of its power." He explains that America's true strength abroad comes from its strength at home, and if America is to provide global leadership it "must first put its house in order." While much of Foreign Policy focuses on policy prescriptions that would restore American strength, the true contribution of the book is its explanation of why such a strategy is needed.
Topic:
Foreign Policy
Political Geography:
Japan, China, and America

235. Book Review: Why Capitalism?

Author:
Tom G. Palmer
Publication Date:
07-2014
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
In Why Capitalism? Meltzer has assembled a number of short studies of policy, the good and the bad, tied together by an aphorism from Immanuel Kant: "Out of timber so crooked as that from which man is made, nothing entirely straight can be carved.
Political Geography:
North Korea

236. Book Review: Change They Can't Believe In: The Tea Party and Reactionary Politics in America

Author:
Emily McKlintock Ekins
Publication Date:
07-2014
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
In this review, I will focus on three main points: their test of whether the tea party is comprised of "reactionary" or "responsible conservatives," their statistical methods testing if racism and a preference for social dominance drive tea party supporters, and their comparison of the tea party to the Ku Klux Klan of the 1920s. The authors prematurely reject the argument that the tea party is primarily motivated by genuine concerns about spending, the size and scope of government, and taxes in part because they rely on a problematic comparison of local tea party group websites to the National Review Online (NRO). From this analysis, they conclude the movement is a contemporary manifestation of paranoid reactionary conservatism.
Political Geography:
America

237. The Fiscal Impact of Immigration

Author:
Alex Nowrasteh
Publication Date:
07-2014
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
The fiscal impact of immigration-how immigrants and their descendants affect government budgets-is a widely debated and contentious issue. Economists overwhelmingly accept the economic gains of immigration, but are less certain about immigrants' impact on government budgets. Contention over this issue is fueled by the numerous methodologies and complexity of analysis that obscure the fiscal costs of immigration.
Topic:
Civil Society, Economics, Immigration, Governance, and Budget

238. The Fiscal Impact of Immigration

Author:
Alex Nowrasteh
Publication Date:
07-2014
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
The fiscal impact of immigration—how immigrants and their descendants affect government budgets—is a widely debated and contentious issue. Economists overwhelmingly accept the economic gains of immigration, but are less certain about immigrants' impact on government budgets. Contention over this issue is fueled by the numerous methodologies and complexity of analysis that obscure the fiscal costs of immigration.
Topic:
Demographics, Economics, Immigration, and Budget

239. Does Immigration Impact Economic Freedom?

Author:
Benjamin Powell, Alex Nowrasteh, J. R. Clark, Robert A. Lawson, and Ryan H. Murphy
Publication Date:
05-2014
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
The economics literature generally finds a positive, but small, gain in income to native-born populations from immigrants and potentially large gains in world incomes. But immigrants can also impact a recipient nation's institutions. A growing empirical literature supports the importance of strong private property rights, a rule of law, and an environment of economic freedom for promoting long run prosperity. Although the literature on the impact of economic freedom on various social and economic outcomes is quite large, comparatively little work has tried to explain economic freedom as a dependent variable. This paper empirically examines how immigration impacts a region's policies and institutions. We find small but positive increases in institutional quality as a result of immigration.
Topic:
Economics, Human Welfare, International Trade and Finance, and Immigration

240. Is Public Expenditure Productive? Evidence from the Manufacturing Sector in U.S. Cities, 1880–1920

Author:
Dean Stansel and Melissa Yeoh
Publication Date:
01-2013
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
This article provides the first examination of the relationship between public expenditures and labor productivity that focuses on municipalities, rather than states or nations. We use data for 1880–1920, a period of rapid industrialization in which there were both high levels of public infrastructure spending and rapid growth of productivity. We use a simple Cobb-Douglas production function to model labor productivity in the manufacturing sector, letting total factor productivity depend on “productive” public expenditure by city governments—that is, on public spending that may raise the productivity of labor and encourage human capital accumulation. Using a data set of 45 of the largest cities in the United States, we find no statistically significant relationship between productive public expenditure and labor productivity in the manufacturing sector during this period. These findings are robust to three different econometric approaches. We do, however, find a strongly positive and statistically significant relationship between private capital and labor productivity. Our results are consistent with those of much of the literature examining this same relationship in states and nations and they have important implications for contemporary public policy issues.
Political Geography:
United States

241. Providing Access to Electricity for the Unserved: A Free-Market Solution

Author:
Paul Ballonoff
Publication Date:
01-2013
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The traditional problem often called “Electricity development” is to improve and expand services from an established monopolistic electricity supplier. The lack of an effective dominant utility, however, is a defining condition for the 1.4 billion people without access for electricity, the so-called unserved. Therefore, the issues that arise are different from those of traditional utility service as a mandated monopoly. This article shows how free markets can help resolve the problem of serving the unserved.

242. Brazilian Land Tenure and Conflicts: The Landless Peasants Movement

Author:
Carlos Pestana Barros, Ari Francisco de Araujo Jr., and João Ricardo Faria
Publication Date:
01-2013
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
This article analyzes conflicts in Brazil involving landless peasants and the violence that frequently results from their invasion and occupation of privately owned rural land for the period 2000–08. Land ownership in Brazil is overwhelmingly and historically characterized by large, family-owned estates (Pichon 1997). The unequal and inequitable allocation of land together with weak institutions, weak markets, and low asset endowment may make land reform a low priority (Binswanger and McIntire 1987, Sjaastad and Bromley 1997). In the absence of effective land reforms, these factors may lead to the occupation of land by the landless poor peasants by violent means (Assunção 2008). In such an environment, land-related conflicts are common and have been previously analyzed in several studies, with a particular focus on Africa (Andre and Platteau 1998, Deininger and Castagnini 2004) and Latin America (Alston, Libecap,and Mueller 2005).
Political Geography:
Africa, Brazil, and Latin America

243. The Role of China in the U.S. Debt Crisis

Author:
James A. Dorn
Publication Date:
01-2013
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
In 2001, the U.S. gross public debt was about $6 trillion; a decade later it was $14 trillion; by the end of 2012 it exceeded $16 trillion. A large part of that increase was absorbed by foreign holders, especially central banks in China and Japan. With the U.S. government gross debt ratio now in excess of 100 percent of GDP, not including the trillions of dollars of unfunded liabilities in Social Security and Medicare, it is time to stop blaming China for the U.S. debt crisis.
Political Geography:
United States, Japan, and China

244. Diminishing Quality of Fiscal Institutions in the United States and European Union

Author:
Thomas Grennes
Publication Date:
01-2013
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The value of government debt relative to the size of the economy has become a serious problem, and the problem is likely to grow in the future. Total debt of the U.S. government relative to gross domestic product increased substantially since the financial crisis and the Great Recession that began in 2007, but the debt ratio has been increasing since 2001. Gross debt relative to GDP increased from 55 percent in 2001 to 67 percent in 2007 to 107 percent in 2012. Comparable figures for debt held by the public (net debt or gross debt minus debt held by various government agencies) were 80 percent in 2011 and 84 percent in May 2012 (IMF 2012). As a result, the debt ratio is now the highest in U.S. history, except for World War II, when it reached 125 percent of GDP (Bohn 2010). U.S. debt is also high relative to the debt of other high-income countries, and projections of future debt place the U.S. government among the world's largest debtors (IMF 2011, 2012; Evans et al. 2012). Gross debt consists of all the bonds issued by the U.S. Treasury, but a broader measure that includes contingent debt results in a much larger debt (Cochrane 2011). Contingent debt includes unfunded obligations related to Social Security, Medicare, Medicaid, and loan guarantees to agencies such as Fannie Mae and Freddie Mac, and these obligations are so large that they have been described as a “debt explosion” (Evans et al. 2012). The sovereign debt crisis of the European Union has similarities to the U.S. debt problem, but it also has significant differences, as will be shown below. Interestingly, the poorer countries of the world that have frequently experienced debt problems in the past, have avoided major debt problems so far.
Topic:
Financial Crisis
Political Geography:
United States and Europe

245. Economic Freedom and Financial Development: International Evidence

Author:
R.W. Hafer
Publication Date:
01-2013
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
This article arises from two related research programs. One examines the relationship between financial development and economic growth. The basic conclusion from this work is that countries that experience greater financial development also experience faster rates of economic growth and higher levels of income per capita (King and Levine 1993a, 1993b; Levine and Zervos 1998; Rousseau and Wachtel 1998; Levine et al. 2000; and Levine 2003). Under this umbrella also are studies that test for the role of property rights and regulation on financial development. Shehzad and De Haan (2008) find that financial liberalization—a reduction in regulations—reduces the probability of a banking crisis and, therefore, promotes economic growth. Baier et al.(2012) find that countries with relatively low levels of regulation—more economic freedom—are less likely to experience a financial crisis in the near future (five years out) than countries with more regulation. Like De Haan et al. (2009), Baier et al. find that in the period immediately following a crisis there generally is a diminution of economic freedom that stems from increased regulation, portending slower economic growth in the future.

246. School Choice and Development: Evidence from the Edgewood Experiment

Author:
John Merrifield and Nathan L. Gray
Publication Date:
01-2013
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
On April 22, 1998, the Children's Educational Opportunity Foundation announced the availability of CEO Horizon Scholarships to residents of the Edgewood Independent School District (EISD) in San Antonio, Texas. The CEO Foundation did not limit eligibility to students with proof of superior academic talent, so the scholarships were really privately funded tuition vouchers. As such, we shall refer to them as the Edgewood Voucher Program. The EVP was a working model of Milton Friedman's (1955, 1962) original idea for a universal voucher program, except that it was set to last only 10 years. This article analyzes the EVP's immediate economic development effects, including the impact on the property tax base, housing growth and values, and business formation. We begin with an overview of the EVP, review the existing literature, describe the benchmark for our impact estimates, and then discuss the estimates and their significance for universal tuition vouchers.
Topic:
Development

247. Incredible Commitments: Why the EMU Is Destroying Both Europe and Itself

Author:
George Selgin
Publication Date:
01-2013
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
When the merits of a European Monetary Union were first being debated, many skeptics fell into one of two camps. The first camp consisted of “Keynesians” (for example, Eichengreen and Bayoumi 1997, Salvatore 1997) who, referring to the theory of optimal currency areas, doubted that Europe constituted such an area, and believed that the proposed monetary union would eventually fall victim to country-specific (“idiosyncratic”) shocks. Unemployment and other burdens stemming from such shocks would, these critics argued, eventually force the monetary authority to either abandon its commitment to price-level stability in order to offer relief to adversely affected members, or cause the members to abandon the union so as to be able to realign their exchange rates.
Political Geography:
Europe

248. IMF Subsidies, Cancellations, and Resumptions: New Empirical Evidence

Author:
Adrian Urbaczka and Roland Vaubel
Publication Date:
01-2013
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
For a long time, the International Monetary Fund has been criticized for subsidizing its credits. According to Walter Bagehot (1873), a lender of last resort ought to “lend freely but at a penalty.” Otherwise moral hazard results (see Dreher and Vaubel 2004). Bakker and Schrijvers (2000) and the Saxton Report (2002) have presented estimates of the subsidy element in IMF lending. In this article, we present an improved and updated calculation. We also present evidence on another criticism of IMF policy: that it fails to enforce compliance with policy conditions. The IMF claims that it cancels its programs if debtor governments do not honor their policy commitments. We show that cancellations due to noncompliance tend to be followed by new programs very soon.

249. Kill or Capture: The War on Terror and the Soul of the Obama Presidency

Author:
Benjamin H. Friedman
Publication Date:
01-2013
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The Republican Party at least has the decency not to get its civil libertarian supporters' hopes up. Bemused tolerance and the odd Ron Paul appearance are about all the encouragement they get. Democratic civil libertarians, by contrast, suffer from relevance. Like other interests large enough to matter in primary elections but loyal enough to betray later, they are seduced and then scorned, especially by presidents. Their disappointment is harsher because it is less expected.
Topic:
War

250. Knowledge and Cooperation: A Liberal Interpretation

Author:
Richard L. Gordon
Publication Date:
01-2013
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Daniel B. Klein's fascinating exposition of the case for limited government argues that understanding of the complexity of knowledge and its use to coordinate human actions indicates the impossibility of successful interventions by governments. His basic point is that knowledge is not simply something that always can be purchased on the open market and readily employed. People may create the knowledge that they utilize, and it always must be interpreted properly. Intervention kills such initiatives.