Search

Begin New Search Journal The Cato Journal

361. 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

362. Government Behavior and Trust: The Case of China

Author:
Peihong Yang
Publication Date:
09-2007
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Social capital has become a critical term in the social sciences since Loury (1977) and Coleman's (1988) seminal studies. Coleman (1990) and Putnan, Leonardi, and Nanetti (1993) focus on the positive spillover effect of social capital. Fukuyama (1997) argues that only certain shared norms and values can be regarded as social capital. Putnan (2000), Ostrom (2000), and Bowles and Gintis (2002) highlight the network effect of social capital. All these studies demonstrate that trust is central to social capital.
Political Geography:
China

363. The Real Coase Theorems

Author:
Glenn Fox
Publication Date:
09-2007
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The “Coase theorem,” in one respect, is a triumph of social science scholarship. Web searches using “Coase theorem” as key words typically yield over 100,000 hits. Economists, legal scholars, environmentalists, and political scientists have written volumes on the theorem. Few ideas written by economists in the 20th century have been as widely debated. And the debating continues, 47 years after the publication of “The Problem of Social Cost” (Coase 1960), the essay recognized as the source of the ideas in question. There is only one problem: Ronald Coase maintains that the theorem that bears his name conveys an idea that is antithetical to the message that he intended.

364. Potential Gains from Trade in Dirty Industries: Revisiting Lawrence Summers' Memo

Author:
Jay Johnson, Gary Pecquet, and Leon Taylor
Publication Date:
09-2007
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Lawrence Summers has a long history of controversial statements. Well before his comments in 2005 as then-president of Harvard University about the underrepresentation of women on faculties for mathematics and science, Summers was the chief economist at the World Bank. In that position, he penned a memo to his colleagues in 1991 that was leaked to the public, drawing heated criticism. In 1999, when President Bill Clinton nominated Summers as Secretary of the Treasury, the controversy over Summers' memo was revived during his Senate confirmation hearings. Hundreds of articles were posted on the Internet at that time attempting to sway public opinion against Summers.

365. Economic Liberty and the Official Law Books in Colonial Massachusetts

Author:
Charles Edward Smith
Publication Date:
09-2007
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Hernando de Soto's The Mystery of Capital traces the essential developments of land registration and titling in 19th century U.S. history. But his chronology omits implementation of mid-17th century English legal reform initiatives in colonial Massachusetts concerning land registration, creditor-debtor law, and market regulations. Massachusetts's legislators were pursuing a reform agenda in an agrarian, semi-literate, and pre-contract society, conditions that are similar to many developing countries today. This article expands on de Soto's work by examining the vehicle that colonial Massachusetts utilized to communicate its ordinances and regulations: the official law books printed and distributed to colonists.
Political Geography:
United States

366. The Role of Fiscal and Political Institutions in Limiting the Size of State Government

Author:
Robert Krol
Publication Date:
09-2007
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
In many states, tax and expenditure limits constrain government spending. All but one state have adopted balanced-budget rules. Some governors have the power to veto individual budget items (the so-called line-item veto). This article reviews the evidence linking fiscal and political institutions to state taxation, spending, and debt.

367. Do Spillover Benefits Create A Market Inefficiency in K-12 Public Education?

Author:
Kerry A. King
Publication Date:
09-2007
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
In economics there is a well-established framework for determining whether government intervention into a market is justified. If we look from the perspective of economic efficiency, government intervention has the potential to improve the market outcome when a so-called market failure exists. As Bator (1958) suggests, certain categories of market failures such as public goods, externalities, and monopoly all contain certain properties that lead to an allocation of resources that is not Pareto-efficient—that is, does not equate marginal social benefits and costs.

368. The Future of the U.S. Postal Service

Author:
Robert Carbaugh
Publication Date:
09-2007
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Structural, legal, and financial constraints have brought the U.S. Postal Service (USPS) to the brink of breakdown in the past decade. Faced by declining business brought about by the e-mail revolution and competition from private express companies, the Postal Service has repeatedly requested assistance from the federal government. This culminated in December 2006 with the passage of the Postal Accountability and Enhancement Act, which introduces modest re-visions in the pricing and service policies of the Postal Service so as to make it a self-sustaining government corporation. But will it?
Political Geography:
United States

369. Book Review: The Age of Turbulence: Adventures in a New World

Author:
William Niskanen
Publication Date:
09-2007
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Alan Greenspan, for an $8 million advance, has written two books in one. The first 11 chapters are a personal memoir from his earliest child-hood memories through the end of 2006. The final 14 chapters are a series of lectures about the major recent changes in the United States and the world economy. The book is written in clear English, not Greenspan's occasional “Fedspeak,” and is a pleasure to read—the result of a productive collaboration with Peter Petre, who taught him to write in the first person as a participant rather than only as an observer of the many important events in the past several decades. This is important because Greenspan has a lot to say about the people and policies of six administrations from that of Richard Nixon to that of George W. Bush. And it is important for both economists and others to understand the major lessons from this period.

370. Book Review: A Farewell to Alms: A Brief History of the World

Author:
Jason Kuznicki
Publication Date:
09-2007
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The thesis of Gregory Clark's A Farewell to Alms is that, for most of human history and prehistory, there prevailed an essentially Malthusian social dynamic, one in which improvements in technology or wealth were turned almost immediately into increased population rather than in- creased individual wealth or technological innovation. Only calamities, such as the Black Death of the 14th century, could raise the average wealth of a society, and they did so by reducing the population.