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252. Legislating a Rule for Monetary Policy
- Author:
- John B. Taylor
- Publication Date:
- 09-2011
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- In these remarks I discuss a proposal to legislate a rule for monetary policy. The proposal modernizes laws first passed in the late 1970s, but largely discarded in 2000.
- Topic:
- Monetary Policy
253. A Dangerous Brew for Monetary Policy
- Author:
- Charles I. Plosser
- Publication Date:
- 09-2011
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- It is a pleasure to join you at Cato's 28th Annual Monetary Conference. In preparing today's remarks, I noted that this year's topic of how monetary policy should deal with asset prices was also discussed here in 2008. The speakers at that time expressed a wide variety of views and opinions. The fact that this important question continues to resurface here and at other prominent meetings in recent years suggests that a consensus has yet to emerge.
- Topic:
- Monetary Policy
254. Limits of Monetary Policy in Theory and Practice
- Author:
- Vincent R. Reinhart and Carmen M. Reinhart
- Publication Date:
- 09-2011
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The Federal Reserve's conduct of monetary policy casts a spell over market participants, commentators, and academics. The pages of financial newspapers parse subtle differences among the comments of Fed officials and delve deeply into potentially multiple meanings of official statements. Academic discussions argue that the path of the policy rate may (as in Taylor 2009) or may not (as in Bernanke 2010, and Greenspan 2010) have fueled a home-price bubble in the United States.
- Topic:
- Monetary Policy
- Political Geography:
- United States
255. The Revived Bretton Woods System, Liquidity Creation, and Asset Price Bubbles
- Author:
- Harris Dellas and George S. Tavlas
- Publication Date:
- 09-2011
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- In this article, we argue that the present constellation of exchange rate arrangements among the major currencies has led to the creation of excessive global liquidity, which has contributed to asset price bubbles. Although the exchange rates of many of the major currencies—including the U.S. dollar, the euro, the yen, and the pound sterling—float against each other, the currencies of many Asian emerging market economies and oil-exporting economies are pegged to the dollar. Dooley, Folkerts-Landau, and Garber (2004a) labeled this system “Bretton Woods II” (BWII). The original Bretton Woods regime (BWI) lasted for about a quarter of a century. Dooley, Folkerts-Landau, and Garber (DFG) argue that the present regime, despite its large global imbalances, will also be sustainable.
- Topic:
- Oil
- Political Geography:
- United States
256. A Gold Standard with Free Banking Would Have Restrained the Boom and Bust
- Publication Date:
- 09-2011
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- President George W. Bush famously remarked in July 2008 that during the housing boom “Wall Street got drunk . . . and now it has a hangover.” It was the Federal Reserve that spiked the punchbowl. The Fed sowed the seeds for the bust of 2007–08 by overexpanding credit, keeping interest rates too low for too long. The Fed made these mistakes despite our having been assured that it had learned from past errors and that the art of central banking had been all but perfected. A commodity standard with free banking, and no central bank to distort the financial system, would have avoided such a boom-and-bust credit cycle.
257. U.S. Decapitalization, Easy Money, and Asset Price Cycles
- Author:
- Kevin Dowd and Martin Hutchinson
- Publication Date:
- 09-2011
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- In Matthew 25: 14–30, Jesus recounts the Parable of the Talents, the story of how the master goes away and leaves each of three servants with sums of money to look after in his absence. He then returns and holds them to account. The first two have invested wisely and give the master a good return, and he rewards them. The third, however, is a wicked servant who couldn't be bothered even to put the money in the bank where it could earn interest. Instead, he simply buried the money and gave his master a zero return. He is punished and thrown into the darkness where there is weeping and wailing and gnashing of teeth.
- Political Geography:
- United States
258. Financial Crises: Prevention, Correction, and Monetary Policy
- Author:
- Manuel Sánchez
- Publication Date:
- 09-2011
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The financial crisis that surfaced in 2007 has stressed the need to identify the ultimate sources of the incentives that were behind the preceding credit and housing bubbles. To lower the likelihood of future financial collapses, prudent economic policies as well as an adequate regulatory and supervisory framework for financial institutions are required. Monetary policy, in turn, should be directed toward price stability, which is a central bank's best contribution not only to long-term economic growth, but also to financial stability.
- Topic:
- Disaster Relief and Monetary Policy
259. Three Narratives about the Financial Crisis
- Author:
- Peter J. Wallison
- Publication Date:
- 09-2011
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The most important lesson we can learn from the financial crisis is what caused it. Even though the Dodd-Frank Act (DFA) has been signed into law, this is still an important question. If we do not attribute the crisis to the right cause, we could well stumble into another crisis in the future; and if the DFA was directed at the wrong cause, we should consider its repeal. There are several competing narratives. One of them will eventually be accepted, and will determine how the great financial crisis of 2008 is interpreted, and thus how it affects public policy in the future.
- Topic:
- Financial Crisis
260. Supply: A Tale of Two Bubbles
- Author:
- Mark A. Calabria
- Publication Date:
- 09-2011
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- To the extent that monetary policy influences asset prices, it does so via the demand for assets, by changing the borrowing costs to purchase assets, or via supply, where movements in interest rates can make investment in assets look more or less attractive. Fiscal policy interventions can also contribute to bubbles by changing the cost of acquiring specific assets. Most discussions of asset bubbles, particularly those involving the role of monetary policy, focus on demandside factors. This article examines the role of supply-side factors in the recent booms in the U.S. housing market and dot-com stocks. The importance of supply constraints in each market is discussed. Policy implications are then presented.
- Topic:
- Monetary Policy
- Political Geography:
- United States
261. Incentive-Robust Financial Reform
- Author:
- Charles W. Calomiris
- Publication Date:
- 09-2011
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Will Rogers, commenting on the Depression, famously quipped: “If stupidity got us into this mess, why can't it get us out?” Rogers's rhetorical question has an obvious answer: persistent stupidity fails to recognize prior errors and, therefore, does not correct them. For three decades, many financial economists have been arguing that there are deep flaws in the financial policies of the U.S. government that account for the systemic fragility of our financial system, especially the government's subsidization of risk in housing finance and its ineffective approach to prudential banking regulation. To avoid continuing to make the same mistakes, it would be helpful to reflect on the history of crises and government policy over the past three decades.
- Political Geography:
- United States
262. Preventing Bubbles: Regulation versus Monetary Policy
- Author:
- David Malpass
- Publication Date:
- 09-2011
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Over the years, there has been a lot to consider in the Federal Reserve's choices of monetary policy and their relationship to bubbles. My conclusion is that mistaken U.S. monetary policy, usually related to the Fed's indifference to the value of the dollar, has repeatedly caused harmful asset bubbles in the United States and abroad. Policy is again at risk with the Fed's imposition of near-zero interest rates and its decision to conduct large-scale asset purchases (termed “quantitative easing”). Regulatory policy has often been ineffective at identifying or addressing asset bubbles, especially those caused by Fed policy. The solution is a parallel track to improve monetary policy so that it provides a more stable dollar and fewer asset bubbles; and to strengthen regulatory policy so that it provides a more reliable base for growth-creating free markets.
- Topic:
- Monetary Policy
- Political Geography:
- United States
263. Honest Money
- Author:
- Jerry L. Jordan
- Publication Date:
- 09-2011
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- This article addresses some of the recent proposals for the conduct of monetary policies in the post-bubble environment. Advocacy of higher inflation targets is analyzed, and the challenge of maintaining monetary discipline in the face of massive fiscal deficits and mounting government debts is presented. Proposals for reforms of monetary arrangements must be based on consensus regarding the objectives of such reforms. The article concludes with some suggestions for near- and intermediate-term changes to present arrangements, as well as ideas for longer-term reforms.
- Topic:
- Government and Reform
- Political Geography:
- Canada
264. Milton Friedman's 1971 Feasibility Paper
- Author:
- Leo Melamed
- Publication Date:
- 09-2011
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The story is fairly well known. In 1971, as chairman of the Chicago Mercantile Exchange, I had an idea: a futures market in foreign currency. It may sound so obvious today, but at the time the idea was revolutionary. I was acutely aware that futures markets until then were primarily the province of agriculture and—as many claimed—might not be applicable to instruments of finance. Not being an economist, the idea was in need of validation. There was only one person in the world that could satisfy this requisite for me. We went to Milton Friedman. We met for breakfast at the Waldorf Astoria in New York. By then he was already a living legend and I was quite nervous. I asked the great man not to laugh and to tell me whether the idea was “off the wall.” Upon hearing him emphatically respond that the idea was “wonderful,” I had the temerity to ask that he put his answer in writing. He agreed to write a feasibility paper on “The Need for Futures Markets in Currencies,” for the modest stipend of $7,500. It turned out to be a helluva trade.
- Topic:
- Economics
- Political Geography:
- New York and Chicago
265. The Need for Futures Markets in Currencies
- Author:
- Milton Friedman
- Publication Date:
- 09-2011
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Under the Bretton Woods system, the central banks of the world undertook to keep the exchange rates of their currencies in terms of the dollar within _1 percent of the par value as determined by the official values of gold registered with the International Monetary Fund. In practice, the central banks generally kept the margins even narrower: _1⁄2 of 1 percent or _3⁄4 of 1 percent. So long as they had confidence that these limits would be maintained indefinitely, persons engaged in foreign trade were subject to negligible risk from fluctuations in exchange rates. Even so, large traders with sharp pencils found it desirable to hedge any future transactions by buying foreign currencies forward to meet commitments coming due or selling foreign currencies forward to match scheduled receipts. These forward transactions were handled by the large commercial banks, often with the active participation of foreign central banks in the forward market.
- Political Geography:
- London
266. Friedman and Samuelson on the Business Cycle
- Author:
- J. Daniel Hammond
- Publication Date:
- 09-2011
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Chicago School economists have come in for criticism since the financial crisis and so-called Great Recession began in 2007. Commentators have blamed recent problems on a laissez-faire faith in the efficacy of markets and simple rules for business-cycle policy—ideas associated with economics as taught and practiced at the University of Chicago. Events over the past four years, we are told, demonstrate the need for a restoration of Keynesian thinking about business cycles and activist government policies to keep markets from failing. However, there is another aspect of Chicago School economics that is commonly overlooked. This is the conviction that economists' understanding of the business cycle is meager in light of the knowledge necessary for activist countercyclical policy to be effective. From this comes the Chicago School concern that economists and policymakers not attempt to do something beyond their capability. Overreaching can make the problems worse.
- Topic:
- Economics and Financial Crisis
- Political Geography:
- Chicago
267. Peddling Protectionism: Smoot-Hawley and the Great Depression
- Author:
- Daniel Griswold
- Publication Date:
- 09-2011
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Let me preface this review with a confession: As an advocate of free trade, I love to link the 1930 Smoot-Hawley tariff bill with the Great Depression at every opportunity. More than 80 years after its passage, the bill still evokes negative feelings about protectionism. After reading Douglas Irwin's Peddling Protectionism: Smoot- Hawley and the Great Depression, I can see I need to curb my enthusiasm. Irwin does not defend the bill, far from it. He concludes that it failed to achieve its objectives and that it did, in an incremental way, make the Great Depression worse. But in the careful language of the professional economist and historian that he is, Irwin documents in rich and often colorful detail that the most infamous trade bill in American history had less impact than either its advocates or its opponents understood at the time or understand today. Even so, the story of Smoot-Hawley offers valuable lessons for today as our politicians seek to craft U.S. trade policy in the 21st century. Irwin is superbly qualified to write the definitive history of what was officially the Trade Act of 1930. A professor of economics at Dartmouth College, he has authored Against the Tide: An Intellectual History of Free Trade (1996), and Free Trade under Fire (3rd ed., 2009).
- Topic:
- Economics
- Political Geography:
- United States
268. Robust Political Economy: Classical Liberalism and the Future of Public Policy
- Author:
- Richard L. Gordon
- Publication Date:
- 09-2011
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Pennington undertakes a needed effort to provide a systematic, analytic critique of recent efforts to discredit what he terms “classical liberal economics.” His is effectively the standard but hard-to-sell proposition that prescient impartial counselors—Plato's philosopher kings—have failed to emerge from the development of modern knowledge. In particular, Pennington makes good use of Hayek's radical contrast between the competitive testing of concepts in a spontaneous market order and the construction of solutions by government monopolies. As Pennington's conclusions nicely summarize, skepticism of limited government is high and fostered by those who are seeking rents from intervention. Thus, ideas that committed libertarians see as obviously absurd need systematic debunking for a broader audience. Pennington, therefore, pretends that he is treating serious arguments and confronts them respectfully.
- Topic:
- Government and Political Economy
- Political Geography:
- United States
269. America Identified: Biometric Technology and Society
- Author:
- Jim Harper
- Publication Date:
- 09-2011
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Lisa Nelson's America Identified: Biometric Technology and Society is a slow and careful examination of a formidably broad landscape—at least until she springs to her conclusions. Among them: “Individual liberty must be reconceptualized to account for the use of data by individuals for communication, transactions, and networking.” It's a scholar's way of saying, “Move over, sovereign individual. Experts are going to handle this.”
- Topic:
- Foreign Policy
- Political Geography:
- America
270. Markets and Morality
- Author:
- Dwight R. Lee and J.R. Clark
- Publication Date:
- 12-2011
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Adam Smith was a moral philosopher, and economics clearly began as a discipline concerned with both normative and positive considerations. Over time, however, as economics became more “scientific,” positive analysis of the consequences of economic activity increasingly crowded out normative analysis of the morality of that activity. It is now common for economists to boast that economics is “value free.”
271. Envisioning a Free Market in Health Care
- Author:
- D. Eric Schansberg
- Publication Date:
- 12-2011
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Although President Obama and the Democratic Congress were able to pass landmark health legislation, their efforts to reform health care ran into predictable political roadblocks. In a severe recession, taxing business and labor is obviously not helpful to economic recovery. Moreover, an array of overreaching sales pitches—claims of additional coverage without additional costs or rationing—piqued the cynicism of the general public. Given historical spending and budget deficits, an expensive new federal program is difficult to swallow. Mandates and restrictions on health insurance can only exacerbate the problem of rapidly rising health care costs (Tanner 2010).
272. Why Some States Fail: The Role of Culture?
- Author:
- Claudio D. Shikida, Ari Francisco de Araujo Jr, and Pedro H.C. Sant'Anna
- Publication Date:
- 12-2011
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- There are many studies on the relationship between economic development and institutions. Institutions can be classified as formal or informal. This article emphasizes the importance of the relationship between culture (informal institutions) and the quality of public goods supplied by the government, using a measure of state failure: the Failed States Index. The results suggest that culture is more important than formal institutions in explaining differences in the degree to which states fail.
273. Giving Up on Foreign Aid?
- Author:
- Gustav Ranis
- Publication Date:
- 12-2011
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Andrei Shleifer (2009) and David Skarbek and Peter Leeson (2009) offer devastating critiques of foreign aid. Following Peter Bauer's and, more recently, William Easterly's lead, they assert that if aid has any impact at all it is most likely to do harm. The only exception, offered by Skarbek and Leeson, is that it may do some good at the micro-project level. I would like to raise what is rapidly becoming a contrarian point of view.
274. What Aid Can't Do: Reply to Ranis
- Author:
- David B. Skarbek and Peter T. Leeson
- Publication Date:
- 12-2011
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Gustav Ranis addresses our recent article in this journal where we argued that foreign aid is unable to solve the economic problem and thus unable to make poor countries rich (Skarbek and Leeson 2009). The following quotations from his article summarize his main objections to our argument.
275. An Austrian Rehabilitation of the Phillips Curve
- Author:
- Robert F. Mulligan
- Publication Date:
- 12-2011
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- William Niskanen (2002) estimated a Phillips curve for the United States using annual 1960–2000 data. By adding one-yearlagged terms in unemployment and inflation, he was able to show that this familiar equation is misspecified. In his improved specification, Niskanen found that the immediate impact of inflation is to reduce unemployment, confirming the traditional understanding of the Phillips-curve relationship, but also finding that after an interval as short as one year inflation has generally been followed by increased unemployment. Though Niskanen was perhaps unaware of it, his results lend strong support to the Austrian model of the business cycle. In that model, credit expansion results in a temporary but unsustainable expansion. Unemployment is lowered in the short run, but once the policy-induced malinvestment is recognized, total output and income will be permanently reduced, and unemployment will increase.
276. Deposit Insurance and Banking Stability
- Author:
- Kam Hon Chu
- Publication Date:
- 12-2011
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Many financial systems were plagued by bank runs or subject to the risk of contagion when the recent financial tsunami unfolded. The runs on the U.S. banks Countrywide and IndyMac, Britain's Northern Rock, and Hong Kong's Bank of East Asia, among others, occurred about a few years ago, but they are still vivid to us. These runs were, of course, the symptoms rather than the root cause of the financial tsunami. In response to the most severe systemic global financial crisis since the Great Depression, policymakers and regulators in many countries have implemented various drastic regulatory measures to rescue the financial systems from meltdowns and to avert deep economic downturns. Such measures vary from country to country, but generally speaking they include governments' takeovers of banks or capital injections, quantitative easing techniques, provisions of liquidity by lax lender-of-last-resort lending, lower discount rates, and more generous deposit insurance.
- Political Geography:
- United States, Asia, and Hong Kong
277. An Analysis of the Financial Services Bailout Vote
- Author:
- Jim F. Couch, Mark D. Foster, Keith Malone, and David L. Black
- Publication Date:
- 12-2011
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Washington's remedy to the financial problems that began in 2008 was the Troubled Asset Relief Program (TARP)—the so called bailout of the banking system. Whatever its merits, it was, for the most part, unpopular with the American public. Lawmakers, fearful that the economy might actually collapse without some action, were likewise fearful that action—in the form of a payout to the Wall Street financiers—would prove to be harmful to them at the polls. Thus, politicians sought to assure the public that their vote on the measure would reflect Main Street virtues, not Wall Street greed.
- Political Geography:
- America
278. Restructuring the U.S. Postal Service
- Author:
- Robert Carbaugh and Thomas Tenerelli
- Publication Date:
- 12-2011
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- From 1775 when Benjamin Franklin was appointed as the first postmaster general of the United States, the agency known as the U.S. Postal Service (USPS) has grown to become an institution that delivers about half of the world's mail in rain, snow, and the dark of night. Employing about 656,000 workers and 260,000 vehicles and operating about 38,000 facilities nationwide, the USPS is the second-largest civilian employer in the United States, after WalMart. If the USPS was a private sector company, it would rank 28th in the 2009 Fortune 500 (U.S. Postal Service 2010).
- Political Geography:
- United States
279. This Time Is Different: Eight Centuries of Financial Folly
- Author:
- Kurt Schuler
- Publication Date:
- 12-2011
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Carmen Reinhart and Kenneth Rogoff's wide-ranging, quantitative study of financial crises is a landmark work. Reinhart and Rogoff have taken advantage of the advances of the last 20 years in economic history, personal computers, and the Internet to assemble a large data set covering most countries of any importance for the world economy. They are the first researchers to base their generalizations about financial crises on data that combine geographic breadth with great historical depth.
280. Afghanistan: A Cultural and Political History
- Author:
- Malou Innocent
- Publication Date:
- 12-2011
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- In the Western mind, Afghanistan conjures up a rugged land of fractious, tribal people. From Alexander the Great and Genghis Khan, to Tamerlane and Mughal emperor Babur, virtually no conqueror has escaped “the graveyard of empires” unscathed. Even modern, industrial empires—the British and the Russian— suffered heavy losses. Why have foreign attempts to conquer Afghanistan proved so ineffective? Why did the U.S. invasion fail to bring stability?
- Political Geography:
- Afghanistan and United States
281. The Ideological Origins of American Federalism
- Author:
- Ilya Somin
- Publication Date:
- 12-2011
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- As has often been the case in American history, federalism is once again a major focus of political debate. Numerous recent political conflicts focus at least in part on the constitutional balance of power between the states and the central government. The lawsuits challenging the recently passed Obama health care plan, the federal bailout of state governments during the current economic crisis, and the conflicts over social issues such as medical marijuana and assisted suicide are just a few of the more prominent examples.
- Topic:
- Government
- Political Geography:
- America
282. The Economics of Microfinance
- Author:
- Bryan Barnett
- Publication Date:
- 12-2011
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- It is one of the sad facts of recent human history that the economic prosperity enjoyed by so many remains unknown to most of the rest. The causes of poverty have long been debated and much has been spent in the effort to ameliorate it. Reliable estimates suggest as much as $2.3 trillion has been spent over the last several decades, most of it in the form of sponsored aid programs conceived and pursued by governments and large foundations in developed countries. Despite this investment, however, poverty remains widespread and has worsened in many places, especially in Africa. These basic facts now fuel a vigorous debate over the scale and ultimate value of traditional aid programs and a search for more effective solutions.
- Topic:
- Government
- Political Geography:
- Africa
283. Editor's Note
- Author:
- James A. Dorn
- Publication Date:
- 02-2010
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- This special issue of the Cato Journal was made possible by a generous grant from the Arthur N. Rupe Foundation . The question posed in this issue—Are Unions Good for America?—has both normative and positive aspects. Normatively, if one takes freedom as a fundamental principle, then compulsory unionism cannot be justified in a free society; it violates the rights of both workers and employers. Under current U.S. labor law, workers are often compelled to join unions and employers are compelled to negotiate “in good faith.” Public sector unions are even more onerous than private sector unions; they limit consumer choices and impose heavy tax burdens.
- Political Geography:
- United States and America
284. Unions, Economic Freedom, and Growth
- Author:
- Randall G. Holcombe and James D. Gwartney
- Publication Date:
- 02-2010
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The freedom to enter into contracts and to direct the use of economic resources one owns are essential to the operation of a market economy. Allowing employees to form unions to bargain collectively over wages and employment conditions is consistent with economic freedom, and any government intervention preventing unionization would be a violation of economic freedom. Nevertheless, American labor law, especially since the 1930s, has altered the terms and conditions under which unions collectively bargain to heavily favor unions over the firms that hire union labor. Labor law has given unions the power to dictate to employees collective bargaining conditions, and has deprived employees of the right to bargain for themselves regarding their conditions of employment. While unions and economic freedom are conceptually compatible, labor law in the United States, and throughout the world, has restricted the freedom of contract between employees and employers.
- Topic:
- Economics
- Political Geography:
- United States and America
285. Unions, the Rule of Law, and Political Rent Seeking
- Author:
- Armand Thieblot
- Publication Date:
- 02-2010
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Under the Obama administration, the influence and involvement of trade unions in government policy decisions has surged to unprecedented levels. Some of the more egregious examples include the proposed Employee Free Choice Act, which abolishes the secret ballot among workers deciding on union representation and imposes forced interest arbitration of contract disputes; the selective protection of union healthcare benefits from proposed “reform” legislation; the awarding of assets seized from major automotive companies to the United Automobile Workers; and the involvement of union personnel, especially members of the Service Employees International Union, in electioneering efforts and counter-demonstrations on behalf of the Democratic party. That all of this has occurred within less than a year is especially troublesome. What makes it more so is the well-established pattern, on the part of unions, to disregard and disrespect the rule of law.
- Topic:
- Government
286. Why Project Labor Agreements Are Not in the Public Interest
- Author:
- David G. Tuerck
- Publication Date:
- 02-2010
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Project labor agreements (PLAs) are agreements between owners of construction projects and construction unions, under which firms retained to work on a construction project must enter into collective bargaining with the unions, hire workers through union hiring halls, and pay union wages and benefits. Contractors must operate, in effect, as union contractors, whether they ordinarily use union labor or not. Workers must usually pay union dues whether they belong to a union or not.
- Topic:
- Labor Issues
287. Unions and Discrimination
- Author:
- Paul Moreno
- Publication Date:
- 02-2010
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The claim that organized labor has been a force for racial egalitarianism can only be called a myth. It is one of the many myths that pro-union historians have perpetuated—similar to those, for example, that unorganized workers suffered from an “inequality of bar- gaining power” (Reynolds 1991), that strikes are conflicts between employers and employees rather than between different groups of employees, or that violence was more often employed against than by unions (Thieblot and Haggard 1983). Perhaps the greatest myth of all is that organized labor is good for workers generally. In fact, unions transfer income from the unorganized to the organized, and depress total income to such a degree that even organized workers are poorer (Vedder and Gallaway 2002).
288. Public Sector Unions and the Rising Costs of Employee Compensation
- Author:
- Chris Edwards
- Publication Date:
- 02-2010
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Public sector compensation is becoming a high-profile policy issue. While private sector wages and benefits have stagnated during the recession, many governments continue to increase compensation for public sector workers. At the same time, there are growing concerns about huge underfunding in public sector retirement plans across the nation.
- Political Geography:
- United States
289. Unions and the Decline of U.S. Cities
- Author:
- Stephen J. K. Walters
- Publication Date:
- 02-2010
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The usual suspects in the tragic demise of many of America's core cities are well known. For decades, scholars, politicians, and pundits have condemned the racism that led whites to flee diverse urban populations after World War II, sneered at Americans' vulgar affection for cars and expansive lawns, criticized policies that encouraged us to indulge these tastes, and blamed capitalist greed and unwhole- some technological change for the deindustrialization that has wrecked urban labor markets.
- Topic:
- War
- Political Geography:
- United States and America
290. Prevailing Wage Laws: Public Interest or Special Interest Legislation?
- Author:
- George C. Leef
- Publication Date:
- 02-2010
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The public policy of the United States is broadly in favor of competition. Our antitrust laws are premised on the idea that in the absence of such legislation private interests would seek to create monopolies, fix prices, restrain trade, and stifle competition. Moreover, the federal government, as well as the states and municipalities, has laws mandating competitive bidding on government contracts to guard the public against "sweetheart deals" that squander tax dollars. Open competition, in fact, is usually the undoing of those conspiracies against the public that Adam Smith saw as so prevalent.
- Political Geography:
- United States
291. The Effects of Teachers Unions on American Education
- Author:
- Andrew J. Coulson
- Publication Date:
- 02-2010
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Public school employee unions are politically partisan and polarizing institutions. Of the National Education Association's $30 million in federal campaign contributions since 1990, 93 percent has gone to Democrats or the Democratic Party. Of the $26 million in federal campaign contributions by the American Federation of Teachers, 99 percent has gone to Democrats or the Democratic Party (Center for Responsive Politics 2009). Perhaps not entirely coincidentally, conservatives and Republicans have often accused these unions of simultaneously raising the cost and lowering the quality of American public schools. Many advocates of charter schools, vouchers, and education tax credits have cited union political influence as the greatest impediment to their chosen reforms. But in academic circles, scholars have sometimes disagreed on the unions' impact on wages and educational productivity. The purpose of the present review is to summarize, and attempt to reconcile, the empirical research on the actual impact teachers unions have on American education.
- Topic:
- Education and Reform
- Political Geography:
- America
292. Right-to-Work Laws: Liberty, Prosperity, and Quality of Life
- Author:
- Richard Vedder
- Publication Date:
- 02-2010
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The most essential ingredient embodied in the liberty championed by the classical liberal writers of the Enlightenment and beyond is individual choice and right of expression—the right of persons to say what they think, decide for themselves what groups that want to join, what religion that want to profess, what person they want to marry, what goods they want to buy or sell, and what persons they want to represent them where necessity requires collective decision making. One important economic dimension of individual liberty is the right to sell one's labor services without attenuation—that is, without limits on the terms of the agreement (e.g., wage rates and hours of work), or who will represent the worker in reaching those terms.
- Political Geography:
- United States
293. Unions, Protectionism, and U.S. Competitiveness
- Author:
- Daniel Griswold
- Publication Date:
- 02-2010
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- In the past three decades, labor union leaders have emerged as among the chief critics of trade liberalization, while the economic evidence has grown that labor unions compromise the ability of American companies to compete in global markets.
- Political Geography:
- United States and America
294. Unions, the High-Wage Doctrine, and Employment
- Author:
- Lowell E. Gallaway
- Publication Date:
- 02-2010
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- In the more than 200 years in which formal organizations of workers (labor unions) have existed in the United States, there have been three distinct eras of policy toward them. Initially, in the late 18th and early 19th century, they were regarded as associations that came under the purview of the English common-law doctrine of conspiracy— that is, their very existence could be considered illegal, regardless of the objectives of the group.
- Political Geography:
- United States
295. Toward a Free-Market Union Law
- Author:
- Charles W. Baird
- Publication Date:
- 02-2010
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- F. A. Hayek and W. H. Hutt wrote extensively about the malign economic and social effects of the special privileges and immunities granted by governments to labor unions, but they wrote much less about what a free-market unionism might look like. They argued that all legislation that has conferred coercive powers on unions should be repealed, but they did not propose any specific free-market union legislation to take its place. Perhaps they thought that if all offending legislation were repealed there would be no need for any union-specific legislation. The common law of property, contract, and tort would suffice. Nevertheless, it is difficult in American politics to replace something with nothing. Therefore, I think it is useful, albeit constructivist, to propose a free-market alternative to the Norris- LaGuardia Act of 1932 (NLA) and the National Labor Relations Act of 1935 as amended in 1947 (NLRA). Perhaps the chief value of such a proposal is to make explicit what the ordinary law of property, contract and tort implies for the labor market and the role of unions therein. New Zealand's 1991 Employment Contracts Act (ECA) is a good, but imperfect, guide in this endeavor.
- Topic:
- Law
- Political Geography:
- America and New Zealand
296. In Fed We Trust: Ben Bernanke's War on the Great Panic
- Author:
- William Poole
- Publication Date:
- 02-2010
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- David Wessel is a fine journalist; In Fed We Trust is a fine book. It belongs on the shelf of every student of the 2007–09 financial crisis. It is, as well, a good read for recreational observers of the economic scene. Wessel focuses on Fed Chairman Ben S. Bernanke, but he discusses the role of all the other key players as well. The biographical information on Bernanke is interesting, as are Wessel's comments on the policy approaches and personalities of the other policymakers.
- Topic:
- War and Financial Crisis
297. Unchecked and Unbalanced: How the Discrepancy between Knowledge and Power Caused the Financial Crisis and Threatens Democracy
- Author:
- Mark Calabria
- Publication Date:
- 02-2010
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Arnold Kling's Unchecked and Unbalanced is a novel and insightful take on both the financial crisis and broader trends in the provision of government services. Its central point is best summarized by its subtitle, “How the discrepancy between knowledge and power caused the financial crisis and threatens democracy.” This is a brief, very readable book for two distinct audiences, those interested in further understanding the financial crisis and those interested in improving the accountability and efficiency of services provided by government.
- Topic:
- Financial Crisis
298. The Making of Americans: Democracy and Our Schools
- Author:
- Neal McCluskey
- Publication Date:
- 02-2010
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Historian David Tyack breaks educational progressives into two types: pedagogical and administrative (Tyack 1974). The former are champions of “child-centered” instruction in the classroom, while the latter want centralized, government control of the schools.
- Topic:
- Education
- Political Geography:
- America
299. Editor's Note
- Author:
- James A. Dorn
- Publication Date:
- 06-2010
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- This special issue of the Cato Journal was made possible by a generous grant from the Arthur N. Rupe Foundation. The question posed in this issue—Are Unions Good for America?—has both normative and positive aspects. Normatively, if one takes freedom as a fundamental principle, then compulsory unionism cannot be justified in a free society; it violates the rights of both workers and employers. Under current U.S. labor law, workers are often compelled to join unions and employers are compelled to negotiate "in good faith." Public sector unions are even more onerous than private sector unions; they limit consumer choices and impose heavy tax burdens.
- Political Geography:
- United States and America
300. The Constitutionalization of Money
- Author:
- James M. Buchanan
- Publication Date:
- 06-2010
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The market will not work effectively with monetary anarchy. Politicization is not an effective alternative. We must commence meaningful dialogue with acceptance of these elementary verities. Far too much has been said and written in elaboration of the first statement, which too often is taken to be equivalent to the assertion that "capitalism" or "the market" has failed. Admittedly claims for market efficacy without qualifiers can be found. But economists should know that anarchy can only generate disorder rather than its opposite.
- Topic:
- Markets and Monetary Policy
- Political Geography:
- United States