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31. Anna Jacobson Schwartz: In Memoriam

Author:
George S. Tavlas
Publication Date:
10-2013
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
This issue of the Cato Journal is dedicated to Anna Jacobson Schwartz, who passed away on June 21, 2012, at the age of 96. Anna was an economic historian whose scholarship was marked by, among other things, dedication, tenacity, and perseverance. Her career spanned three quarters of a century. When Anna was about 90, her son Jonathan complained (somewhat tongue-in-check) that he had thought about retiring, but did not feel comfortable doing so while his mother was still working. In 1936, she began collaborating with A. D. Gayer and W. W. Rostow on a study of fluctuations in the British economy between 1790 and 1850. The study was not published until 1953, although most of the work on the study had been completed by the early 1940s. Anna joined the National Bureau of Economic Research in 1941 and remained there for the rest of her life, continuing to go to her office until shortly before her death. She published her first NBER paper in 1947 with Elma Oliver, and her last with Michael Bordo and Owen Humpage in 2012. Her collaboration with Milton Friedman on A Monetary History of the United States, 1867–1960 began in 1948 and was not completed until 1963. The underlying objective of Anna's scholarship throughout her career was to use historical evidence, which she assembled with meticulous attention to accuracy, to understand the workings of the economy better.
Topic:
Economics
Political Geography:
United States

32. Fed Policy: Good Intentions, Risky Consequences

Author:
Charles I. Plosser
Publication Date:
10-2013
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The last five years have been an extraordinary time for the global economy and monetary policymakers. The financial crisis and the severe global recession that followed have tested our resolve, our patience, and our economic theories. To restore the health of ailing financial markets and economies, central banks have driven shortterm interest rates to essentially zero, expanded their balance sheets to unprecedented levels, and engaged in market interventions that have blurred the lines between monetary policy and fiscal policy.
Topic:
Economics and Health

33. The Fed Needs to Change Course

Author:
David Malpass
Publication Date:
10-2013
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
This article describes the Federal Reserve's monetary policy, examines its economic impact, and discusses possible exits. Federal Reserve policy is on the wrong course: it is harming economic growth, hurting savers, damaging markets, setting dangerous precedents and misallocating capital away from job-creating parts of the economy. The Fed's September 2012 policy change, in which it announced a third round of quantitative easing (QE3), was a major increase in the aggressiveness of monetary policy and, in my view, another drag on economic growth.
Topic:
Economics

34. Avoiding the Next Crisis: Can Central Banks Learn?

Author:
Robert L. Hertzel
Publication Date:
10-2013
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Any effort to avoid future recessions must rest on an organized way to learn from the past. However, the absence of such efforts within central banks renders such learning problematic and makes likely the recurrence of episodes of recession and financial market turmoil. Critical to learning is the use by policymakers of models to evaluate the past performance of monetary policy. These models should not be the complicated, multiequation models favored by the forecasting departments of central banks. Rather, they should be simple models that require policymakers to take a stand on the basic issues in monetary economics: the nature of the price level (monetary or real) and how well the price system works to maintain output at potential (full employment). They should serve as a safeguard to the understandable tendency of central bankers to attribute economic disturbances exclusively to real shocks rather than monetary shocks.
Topic:
Economics

35. The Gold Standard, the Euro, and the Origins of the Greek Sovereign Debt Crisis

Author:
Harris Dellas
Publication Date:
10-2013
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The entry of Greece into the euro zone in 2001 was widely expected to mark a transformation in the country's economic destiny. During the decade of the 1980s, and for much of the 1990s, the economy had been saddled with double-digit inflation rates, double-digit fiscal deficits (as a percentage of GDP), large current-account imbalances, very low growth rates, and a series of exchange rate crises. Adoption of the euro—the value of which was underpinned by the monetary policy of the European Central Bank (ECB)—was expected to produce a low-inflation environment, contributing to lower nominal interest rates and longer economic horizons, thereby encouraging private investment and economic growth. The elimination of nominal exchange-rate fluctuations among the former currencies of members of the euro zone was expected to reduce exchange rate uncertainty and risk premia, lowering the costs of servicing the public sector debt, facilitating fiscal adjustment, and freeing resources for other uses.
Topic:
Economics
Political Geography:
Europe

36. The Euro at a Crossroads

Author:
Wolfgang Munchau
Publication Date:
10-2013
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
It was one of the author's predictions in 1998 that the euro zone would end up teaching us more about economics compared to what economics could teach us about the euro zone. While many of the author's predictions of that year did not hold, including the forecast that the euro would challenge the dollar as the world's foremost reserve currency, this particular prediction ultimately turned out to be correct. A monetary union is a hybrid between a fixed exchange rate system and a unitary state, one that is fully captured neither with closed-economy macro models nor classical international macro models of fixed exchange rates.
Topic:
Economics
Political Geography:
Europe

37. Does Internationalizing the RMB Make Sense for China?

Author:
Yukong Huang and Clare Lynch
Publication Date:
10-2013
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The last time a Chinese currency was used as an international medium of exchange was four centuries ago, when China's share of global GDP in PPP terms was nearly 30 percent (about twice its current level), the country was a major global trading power, and Chinese copper coins circulated throughout East Asia to India and even beyond (Horesh 2011). In the following centuries, silver dollars and paper bills replaced copper coins and China's share of external trade declined. Now, with China's return to the position of largest global trader and second-largest economy in the world, it is not surprising that discussion of internationalizing China's currency has resumed.
Topic:
Economics
Political Geography:
China and East Asia

38. Capital Freedom in China as Viewed from the Evolution of the Stock Market

Author:
Zhiwu Chen
Publication Date:
10-2013
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Since reforms started in 1978, China has made commendable progress in achieving capital freedom and individual liberty. Prior to 1978, private enterprises with more than eight employees were prohibited and there were no capital markets. Private entrepreneurs were labeled “Capitalist tails,” and political movements were launched frequently to “cut the capitalist tails.” For several decades, Chinese citizens could only obtain employment and economic means from government organizations and state-owned enterprises, which strictly limited individual liberty. Today there are more than 10 million privately owned enterprises, making up more than 80 percent of each year's employment growth. As a result of less regulation and more room for entrepreneurship, it is relatively easy to register and start a business. Public equity offering opportunities and bank financing are also increasingly available to private firms as well. Chinese, young and old, can choose among jobs provided by government organizations, SOEs, private businesses, and foreign-owned firms. As capital freedom has increased, the rise of the individual and liberty is one of the highlights achieved in China's development over the past 35 years.
Topic:
Economics
Political Geography:
China

39. The Use of Public Assistance Benefits by Citizens and Non-citizen Immigrants in the United States

Author:
Leighton Ku and Brian Bruen
Publication Date:
02-2013
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
Claims are sometimes made that immigrants use public benefits, such as Medicaid, the Supplemental Nutrition Assistance Program, or the Temporary Assistance for Needy Families programs, more often than those who are born in the United States. This report provides analyses, using the most recent data from the Census Bureau, that counter these claims. In reality, low-income non-citizen immigrants, including adults and children, are generally less likely to receive public benefits than those who are native-born. Moreover, when non-citizen immigrants receive benefits, the value of benefits they receive is usually lower than the value of benefits received by those born in the United States. The combination of lower average utilization and smaller average benefits indicates that the overall cost of public benefits is substantially less for low-income non-citizen immigrants than for comparable native-born adults and children. The report also explains that the lower use of public benefits by non-citizen immigrants is not surprising, since federal rules restrict immigrants' eligibility for these public benefit programs.
Topic:
Economics, Health, Humanitarian Aid, Markets, and Immigration
Political Geography:
United States

40. Antitrust Enforcement in the Obama Administration's First Term: A Regulatory Approach

Author:
William F. Shughart II and Diana W. Thomas
Publication Date:
10-2013
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
During his presidential campaign, Sen. Barack Obama criticized sharply the lax anti-trust law enforcement record of the George W. Bush administration. Subsequently, his first assistant attorney general for antitrust even went so far as to suggest that the Great Recession was, at least in part, caused by federal antitrust policy failures during the previous eight years. This paper sets out to investigate how and in what ways antitrust enforcement has changed since President Obama took office in 2009. We review four recent antitrust cases and the behavioral remedies that were imposed on the defendants in those matters in detail. We find that the Obama administration has been significantly more active in enforcing the antitrust laws with respect to proposed mergers than his two predecessors in the White House had been. In addition, the Federal Trade Commission, together with the Department of Justice, withdrew a thoughtful report on the enforcement of Section 2 of the Sherman Act and issued new merger guidelines and a new merger policy remedy guide, all of which have moved antitrust law enforcement away from traditional structural remedies in favor of very intrusive behavioral remedies in an unprecedented fashion. That policy shift has further transformed antitrust law enforcers into regulatory agencies, a mission for which they are not well-suited, resulting in the Department of Justice and Federal Trade Commission being more vulnerable to rent seeking.
Topic:
Economics, International Trade and Finance, Markets, Governance, and Law Enforcement