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81. 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

82. 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

83. 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

84. 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

85. 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

86. 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

87. 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

88. 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

89. 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

90. 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