Search

Begin New Search Publishing Institution The Cato Institute

171. Alternative Political and Economic Futures for Europe

Author:
William A. Niskanen
Publication Date:
10-2012
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Defeat of a proposed constitution for the European Union by voters in France and the Netherlands in 2005 should have provided an opportunity to reflect on a broader range of alternative political and economic futures for Europe. But it did not. For the Lisbon Treaty, which became effective in December 2009, implemented most of the provisions of the proposed constitution that the voters rejected more than four years prior. It was important to reconsider the major current European political and economic institutions as well as alternative steps toward further European integration. For the major current institutions were created under different conditions, and the experience suggests that they may not best serve the peoples of Europe under current and expected future conditions.
Topic:
Disaster Relief
Political Geography:
Europe, France, and Netherlands

172. The Keynesian Path to Fiscal Irresponsibility

Author:
Dwight R. Lee
Publication Date:
10-2012
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The basic idea behind Keynesian policy for achieving stable economic growth is straightforward, and superficially plausible. When the economy is in a downturn with underutilized resources, Keynesians believe the federal government should increase aggregate demand by increasing deficit spending through some combination of more spending and lower taxes. With the aid of a multiplier effect augmenting the government's increase in aggregate demand, the economy will move back toward full employment. In contrast, they believe that when aggregate demand exceeds the productive capacity of the economy, the federal government can prevent inflationary overheating by reducing demand with a budget surplus generated by some combination of less spending and higher taxes. The resulting decrease in government demand will be augmented by a reverse multiplier effect, which will reduce inflationary pressures by bringing aggregate demand back in line with the economy's productive capacity. As discussed by Keynes and his early followers, there was nothing fiscally irresponsible about such a policy. While the budget would not be balanced on a yearly basis, it would be balanced over time as budget deficits intended to moderate recessions would be offset by budget surpluses used to restrain economic exuberance.

173. Is the Washington Consensus Dead?

Author:
Deepak Lal
Publication Date:
10-2012
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
In the postwar years, most Third World countries turned inward partly in response to what they thought were the disastrous consequences of their 19th century integration into the world economy as the global economy collapsed in the Great Depression. The seeming success of Soviet central planning under Stalin also persuaded the leaders of these newly independent countries to substitute the plan for the market. Planning was all the rage, with the state seeking to control the commanding heights of the economy. Furthermore, the many theorists who created a seemingly "new development economics" provided the intellectual basis for the complex system of dirigiste controls on "anything that moved" (as one wit put it) in a market economy.
Political Geography:
Washington

174. Asset Bubbles and Supply Failures: Where Are the Qualified Sellers?

Author:
Bruce K. Gouldey and Clifford F. Thies
Publication Date:
10-2012
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
From their peak during the third quarter of 2007, to their trough during the first quarter of 2009, stock prices as measured by the S 500 fell 48 percent (see Figure 1). Through the third quarter of 2009, stock prices subsequently increased more than 40 percent. In contrast, housing prices, as measured by the Case-Shiller index, which fell 31 percent from their peak in the first quarter of 2006 to the first quarter of 2009, had not yet shown any sign of recovery.

175. Decisionmaking, Risk, and Uncertainty: An Analysis of Climate Change Policy

Author:
Kruti Dholakia-Lehenbauer and Euel W. Elliott
Publication Date:
10-2012
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
This article explores four questions. First, what theoretical frameworks help describe policy failure and success? Second, how might the decision that leads to failure or success be understood in terms of differing concepts of rationality and decisionmaking? Third, how does the discussion of risk and uncertainty as originally proposed by Frank Knight (1921) apply to a better understanding of both the first and second questions? Fourth, what is the relationship between serial and parallel processing and how are these administrative systems related to important aspects of the prior questions? Our chief contribution in this article is to show the ways in which these questions and their respective theoretical frameworks are interrelated as applied to one important contemporary policy question-climate change. We think our proposed integration of the various literatures offers important insights into the challenges policymakers face in deciding whether or not to adopt a particular policy.
Political Geography:
United States

176. School Choice and Achievement: The Ohio Charter School Experience

Author:
Nathan L. Gray
Publication Date:
10-2012
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
K–12 education policy has recently received much scrutiny from policymakers, taxpayers, parents, and students. Reformers have often cited increases in spending with little noticeable gain in test scores, coupled with the fact that American students lag behind their foreign peers on standardized tests, as the policy problem. School choice, specifically charter school policy, has emerged as a potential remedy. School choice is hypothesized to have both participant and systemic (sometimes called competitive) effects. This article concentrates on the latter by using a novel design not used before in studies of this subject. School level data from Ohio are analyzed to estimate if traditional public schools potentially threatened by charter schools respond with positive test score gains. Specifically, an exogenous change to the education system in 2003 provides a natural experiment to examine potential systemic effects. Results indicate that the threat of charter schools seems to have had a small positive effect on traditional public school achievement.
Political Geography:
America

177. The New Monetary Economics Revisited

Author:
David Cronin
Publication Date:
10-2012
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
This article revisits the key conceptual aspects of the New Monetary Economics (NME) by examining the idea of “monetary separation” and objections raised against it. So long as a dominant role for base money in exchange exists, using it to provide the unit of account remains advantageous and is likely to outweigh any mooted benefits of separation. Recent quantitative analysis, however, shows the transaction demand for government base money to be falling, a development that can be expected to continue in the years ahead. The passage of time thus seems to be weakening the principal basis on which monetary separation has been criticized—namely, the superiority of base money in payments. That development fits into the history of money told by Austrian economists, which emphasises payment practices evolving over time in response to technological improvements and market forces.
Topic:
Government
Political Geography:
Europe, Germany, Cyprus, and Luxembourg

178. Starving the Beast Revisited

Author:
Masoud Moghaddam
Publication Date:
10-2012
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The determinants of government budget deficits have been studied extensively, especially during the years in which the discrepancy between federal income taxes and expenditures has widened. In that respect, it is of interest to explore the causal relationship between government revenues and expenditures. If the direction of causation is from taxes to spending, then enjoying tax cuts without cutting expenditures necessitates starving the beast, as suggested by Milton Friedman (1978) and confirmed by a number of studies including Garcia and Henin (1999), and Chang, Liu, and Caudill (2002). On the other hand, if a tax cut is perceived by rational agents to be a cut in the cost of public goods, then spending would increase. In that case, taxes and spending are inversely related. Support for that relationship—the so-called fiscal illusion hypothesis—is provided by Wagner (1976), Niskanen (1978, 2002, 2006), and more recently by New (2009) and Young (2009). There are also a few studies in which no significant causal relation between tax and spend variables has been reported (e.g., Baghestani and McNown (1994).
Topic:
Government

179. The Behavior of the Labor Market between Schechter (1935) and Jones Laughlin (1937)

Author:
Todd C. Neumann, Jason E. Taylor, and Jerry L. Taylor
Publication Date:
10-2012
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Recent research on the Great Depression emphasizes the role New Deal economic policy played in slowing recovery. Policies promoting cartels and higher wage rates during a time that the economy was experiencing unprecedented unemployment were likely to have created a negative supply shock that exacerbated economic depression rather than helped to alleviate it. Still, for 22 months between two important Supreme Court rulings, labor and product markets were relatively free of intervention. In A.L.A. Schechter Poultry Corp. v. United States (May 1935), the Court ruled that the National Industrial Recovery Act of 1933 (NIRA) was unconstitutional. In addition to setting up industry cartels, the NIRA had imposed relatively high minimum hourly wage rates and restrictions on work- weeks and required firms to recognize the right of labor to organize.
Topic:
International Political Economy
Political Geography:
United States

180. The Scope of Government in a Free Society

Author:
James A. Dorn
Publication Date:
10-2012
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The purpose of this article is to delineate the legitimate functions of government in a free society. This exercise differs from determining the “optimal” size of government, which economists have estimated at 15 to 30 percent of gross domestic product. James Madison, the chief architect of the U.S. Constitution, was not primarily looking for an engine of economic growth; he was seeking an institutional design to limit the powers of government and protect individual rights. People would then be free to pursue their happiness and, in the process, create wealth.
Topic:
Government
Political Geography:
United States