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521. Taiwan's Defense Budget: How Taipei's Free Riding Risks War

Author:
Justin Logan and Ted Carpenter
Publication Date:
09-2007
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Taiwan spends far too little on its own defense, in large part because the Taiwanese believe the United States is their ultimate protector. The Taiwan legislature's six-year delay and severe down- sizing of a budget to pay for weapons systems that Washington has offered the island since 2001 is only one piece of evidence of Taiwan's free riding. Although Taiwan recently approved roughly US$300 million of the original budget of about $18 billion, the underlying problem remains: even with the new appropriation, Taiwan's overall investment in defense—approximately 2.6 percent of GDP—is woefully inadequate, given the ongoing tensions with mainland China. America is now in the unenviable position of having an implicit commitment to defend a fellow democracy that seems largely uninterested in defending itself.
Topic:
Conflict Prevention, Security, and Defense Policy
Political Geography:
United States and Asia

522. The Myth of the Rational Voter: Why Democracies Choose Bad Policies

Author:
Bryan Caplan
Publication Date:
05-2007
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
In theory, democracy is a bulwark against socially harmful policies. In practice, however, democracies frequently adopt and maintain policies that are damaging. How can this paradox be explained? The influence of special interests and voter ignorance are two leading explanations. I offer an alternative story of how and why democracy fails. The central idea is that voters are worse than ignorant; they are, in a word, irrational—and they vote accordingly. Despite their lack of knowledge, voters are not humble agnostics; instead, they confidently embrace a long list of misconceptions.
Topic:
Civil Society, Democratization, and Political Economy
Political Geography:
United States

523. In Pursuit of Happiness Research: Is It Reliable? What Does It Imply for Policy?

Author:
Will Wilkinson
Publication Date:
04-2007
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
“Happiness research” studies the correlates of subjective well-being, generally through survey methods. A number of psychologists and social scientists have drawn upon this work recently to argue that the American model of relatively limited government and a dynamic market economy corrodes happiness, whereas Western European and Scandinavian-style social democracies pro- mote it. This paper argues that happiness research in fact poses no threat to the relatively libertarian ideals embodied in the U.S. socioeconomic system. Happiness research is seriously hampered by confusion and disagreement about the definition of its subject as well as the limitations inherent in current measurement techniques. In its present state happiness research cannot be relied on as an authoritative source for empirical information about happiness, which, in any case, is not a simple empirical phenomenon but a cultural and historical moving target. Yet, even if we accept the data of happiness research at face value, few of the alleged redistributive policy implications actually follow from the evidence. The data show that neither higher rates of government redistribution nor lower levels of income inequality make us happier, whereas high levels of economic freedom and high average incomes are among the strongest correlates of subjective well- being. Even if we table the damning charges of questionable science and bad moral philosophy, the American model still comes off a glowing success in terms of happiness.
Topic:
Economics, Markets, and Political Economy
Political Geography:
United States, America, and Europe

524. Energy Alarmism: The Myths That Make Americans Worry about Oil

Author:
Daryl Press
Publication Date:
04-2007
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Many Americans have lost confidence in their country's “energy security” over the past several years. Because the United States is a net oil importer, and a substantial one at that, concerns about energy security naturally raise foreign policy questions. Some foreign policy analysts fear that dwindling global oil reserves are increasingly concentrated in politically unstable regions, and they call for increased U.S. efforts to stabilize—or, alter-natively, democratize—the politically tumultuous oil-producing regions. Others allege that China is pursuing a strategy to “lock up” the world's remaining oil supplies through long-term purchase agreements and aggressive diplomacy, so they counsel that the United States outmaneuver Beijing in the “geopolitics of oil.” Finally, many analysts suggest that even the “normal” political disruptions that occasionally occur in oil-producing regions (e.g., occasional wars and revolutions) hurt Americans by disrupting supply and creating price spikes. U.S. military forces, those analysts claim, are needed to enhance peace and stability in crucial oil-producing regions, particularly the Persian Gulf.
Topic:
Security, Oil, and Political Economy
Political Geography:
United States and America

525. Escaping the Trap: Why the United States Must Leave Iraq

Author:
Ted Galen Carpenter
Publication Date:
02-2007
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
The U.S. military occupation of Iraq has now lasted longer than U.S. involvement in World War II. Yet there is no end in sight to the mission. Staying in Iraq is a fatally flawed policy that has already cost more than 3,000 American lives and consumed more than $350 billion. The security situation in that country grows increasingly chaotic and bloody as evidence mounts that Iraq has descended into a sectarian civil war between Sunnis and Shiites. Approximately 120 Iraqis per day are perishing in political violence. That bloodshed is occurring in a country of barely 26 million people. A comparable rate of carnage in the United States would produce more than 1,400 fatalities per day.
Topic:
Security and War
Political Geography:
United States, Iraq, America, and Middle East

526. Why We Fight: How Public Schools Cause Social Conflict

Author:
Neal McCluskey
Publication Date:
01-2007
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
It is all too often assumed that public education as we typically think of it today—schooling provided and controlled by government—constitutes the “foundation of American democracy.” Such schooling, it is argued, has taken people of immensely varied ethnic, religious, and racial backgrounds and molded them into Americans who are both unified and free. Public schooling, it is assumed, has been the gentle flame beneath the great American melting pot.
Topic:
Conflict Resolution, Civil Society, Demographics, and Education
Political Geography:
America

527. Has U.S. Income Inequality Really Increased?

Author:
Alan Reynolds
Publication Date:
01-2007
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
There are frequent complaints that U.S. income inequality has increased in recent decades. Estimates of rising inequality that are widely cited in the media are often based on federal income tax return data. Those data appear to show that the share of U.S. income going to the top 1 percent (those people with the highest incomes) has increased substantially since the 1970s.
Topic:
Demographics, Development, and Economics
Political Geography:
United States

528. Global Imbalances, Tanking Dollar, and the IMF's Surveillance over Exchange Rate Policies

Author:
Sitikantha Pattanaik
Publication Date:
09-2007
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The exchange rate policies of the member countries of the International Monetary Fund could come under more intrusive scrutiny because of the June 15, 2007, decision of the IMF Executive Board on bilateral surveillance. This article highlights why the IMF decision cannot help in addressing the problem of global imbalances, even if it succeeds in delivering further appreciation of the exchange rates of surplus countries against the U.S. dollar. Moreover, there could be enormous challenges for effective implementation of the decision, which may further erode the credibility of the IMF. Even though disorderly correction of global imbalances remains a concern for every country, shifting the burden of adjustment entirely to surplus countries could have potentially damaging implications for international cooperation on global economic challenges. Past experiences of international cooperation to deal with global imbalances and currency misalignments suggest that countries rarely sacrifice their domestic economic priorities. Without appropriate macroeconomic adjustment measures, neither the high and growing U.S. current account deficit nor the savings glut of several surplus countries can be corrected solely by removing exchange rate misalignments.
Political Geography:
United States

529. Can Corruption Ever Improve an Economy?

Author:
Douglas A. Houston
Publication Date:
09-2007
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Many in the world of developmental economics believe that corruption, the circumvention of the rule of law for private gain, leads to nothing but woe for any nation's economy, under any circumstances. Transparency International makes the elimination of corruption their mission, and many large multinational firms today echo that goal by building ethical codes that prohibit employees from engaging in practices deemed corrupt, regardless of local attitudes and customs toward the practices. The World Bank makes curbing corruption a linchpin in their campaign to improve governance. Reasons given for blanket condemnation of corrupt behavior are often utilitarian: Corruption is expected to increase the economic costs of doing business by undermining the laws of the land; this, in turn, reduces productive activities and investments, with negative consequences unfolding for human development and economic growth.
Topic:
Corruption, Economics, and Government

530. Economic Freedom, Corruption, and Growth

Author:
Mushfiq us Swaleheen and Dean Stansel
Publication Date:
09-2007
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
This article adds to the empirical literature on the relationship between corruption and economic growth by incorporating the impact of economic freedom. We utilize an econometric model with two improvements on the previous literature: (1) our model accounts for the fact that economic growth, corruption, and investment are jointly determined, and (2) we include economic freedom explicitly as an explanatory variable. Using a panel of 60 countries, we find that for countries with low economic freedom (where individuals have limited economic choices), corruption reduces economic growth. However, in countries with high economic freedom, corruption is found to increase economic growth. Our results contradict the generally accepted view that corruption lowers the rate of growth. We use Osterfeld's (1992) distinction between expansive and restrictive corruption to explain our results. According to Osterfeld, corruption expands output if more bribes help the economy move toward greater free exchange. Thus, in economies where economic freedom is high, if bribing makes public officials less diligent in enforcing restrictions on firms' activities, output will increase. However, corruption will restrict output when bribes reduce competition and increase market rigidities. This outcome is more likely in countries where economic freedom is low due to widespread state ownership of assets (e.g., in China), monopolies and high tariff barriers granted to businesses owned by ruling elites and their cronies (e.g., the Philippines under Marcos and Indonesia under Suharto), and state-run marketing boards that are often the sole purchasers of agricultural products (e.g., in several African countries). An increase in corruption in these low economic freedom countries means even less competition and free exchange and leads to a fall in output. The policy implication of our finding is straightforward: The surest way to mitigate corruption and its adverse effects is to increase economic freedom.
Political Geography:
Africa