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  • Author: Thomas H. Mayor
  • Publication Date: 02-2015
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: Karl Marx formulated his ideas in the middle of the 19th century when much of Europe, particularly England, was well along in what is often referred to as the Industrial Revolution. The central Marxist idea was that those who had wealth would reap the benefit of this revolution and become ever more wealthy while those who lived from their labor alone would be relegated to a bare subsistence. In his view, capital accumulation and increases in productivity do not benefit those who work for a living. Allegedly, those who own the means of production (wealth) and supposedly perform no work, receive all the benefits.
  • Topic: Government
  • Political Geography: Europe, England
  • Author: Edmund S. Phelps
  • Publication Date: 02-2015
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: In his most recent tome, Edmund Phelps, the 2006 Nobel Laureate in Economic Science, addresses a topic crucial to successful national capitalist systems: the dynamics of the innovation process. Phelps develops his thesis around three main themes: In part one, he explains the development of the modern economies as they form the core of early—19th century societies in the West; in part two, he explores the lure of socialism and corporatism as competing systems to modern capitalism; and, in part three, he reviews post-1960s evidence of decline in dynamism in Western capitalist countries.
  • Topic: Economics
  • Political Geography: United States, Europe
  • 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
  • Author: Gerald P. O'Driscoll, Jr.
  • Publication Date: 07-2014
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: The intellectual climate has never been more open to a critical analysis of existing monetary institutions both here and abroad. When the Germans agreed to a monetary union, they were promised that they would keep the Bundesbank; only the name would be changed to the European Central Bank. Instead, Germans with whom I have spoken now think they got the Banca d'Italia. In the United States, before the financial crisis, the Federal Reserve was held in high regard by the public. Now, at least in some circles, "the Fed" has become a term of opprobrium, not unlike "the IRS."
  • Political Geography: United States, Europe, Germany
  • Author: Lewis E. Lehrman
  • Publication Date: 07-2014
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: To evaluate the history of the Federal Reserve System, we cannot help but wonder, whither the Fed? and to consider wherefore its reform—even what and how to do it. But first let us remember whence we came one century ago.
  • Topic: War
  • Political Geography: Europe
  • Author: James A. Dorn
  • Publication Date: 10-2014
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: This article deals with the main problems and proposed solutions with respect to the euro. I start with what I perceive to be confusion in the debate on the euro. The next section shows a large variation in the growth performance in the eurozone, and more broadly in the European Union (EU). This should make us skeptical when hearing about the crisis of the euro, or of Europe. I then proceed to discuss what the problem countries in the eurozone suffer from. The next section deals with a more difficult question: What are the links between the euro architecture and the accumulation of these problems—that is, the imbalances and structural barriers to economic growth in some members of the eurozone? I then proceed to discuss the adjustment under the euro after 2008, focusing on the weaknesses of the policies of the crisis management. The article ends with a critical discussion of the problems and solutions put forward in the debate on the euro.
  • Political Geography: Europe
  • Author: Thomas Grennes
  • Publication Date: 01-2013
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: The value of government debt relative to the size of the economy has become a serious problem, and the problem is likely to grow in the future. Total debt of the U.S. government relative to gross domestic product increased substantially since the financial crisis and the Great Recession that began in 2007, but the debt ratio has been increasing since 2001. Gross debt relative to GDP increased from 55 percent in 2001 to 67 percent in 2007 to 107 percent in 2012. Comparable figures for debt held by the public (net debt or gross debt minus debt held by various government agencies) were 80 percent in 2011 and 84 percent in May 2012 (IMF 2012). As a result, the debt ratio is now the highest in U.S. history, except for World War II, when it reached 125 percent of GDP (Bohn 2010). U.S. debt is also high relative to the debt of other high-income countries, and projections of future debt place the U.S. government among the world's largest debtors (IMF 2011, 2012; Evans et al. 2012). Gross debt consists of all the bonds issued by the U.S. Treasury, but a broader measure that includes contingent debt results in a much larger debt (Cochrane 2011). Contingent debt includes unfunded obligations related to Social Security, Medicare, Medicaid, and loan guarantees to agencies such as Fannie Mae and Freddie Mac, and these obligations are so large that they have been described as a “debt explosion” (Evans et al. 2012). The sovereign debt crisis of the European Union has similarities to the U.S. debt problem, but it also has significant differences, as will be shown below. Interestingly, the poorer countries of the world that have frequently experienced debt problems in the past, have avoided major debt problems so far.
  • Topic: Financial Crisis
  • Political Geography: United States, Europe
  • Author: George Selgin
  • Publication Date: 01-2013
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: When the merits of a European Monetary Union were first being debated, many skeptics fell into one of two camps. The first camp consisted of “Keynesians” (for example, Eichengreen and Bayoumi 1997, Salvatore 1997) who, referring to the theory of optimal currency areas, doubted that Europe constituted such an area, and believed that the proposed monetary union would eventually fall victim to country-specific (“idiosyncratic”) shocks. Unemployment and other burdens stemming from such shocks would, these critics argued, eventually force the monetary authority to either abandon its commitment to price-level stability in order to offer relief to adversely affected members, or cause the members to abandon the union so as to be able to realign their exchange rates.
  • Political Geography: Europe
  • Author: J.A. Dorn
  • Publication Date: 04-2013
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: The heavy debt burdens of Greece and other European welfare states are the result of profligate entitlement spending and a lack of fiscal discipline. Both explicit debt and massive unfunded liabilities in pay-as-you-go social welfare programs must be resolved if Europe is to achieve long-run prosperity.
  • Political Geography: Europe, Greece
  • Author: Michael Tanner
  • Publication Date: 04-2013
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: Margaret Thatcher once quipped about the problem facing modern social welfare states: "They always run out of other people's money." Today, in country after country, we are seeing that prophetic remark coming true. The headlines have been dominated by the problems of the so called PIIGS (Portugal, Ireland, Italy, Greece, and Spain), which face the most immediate economic crisis and have required economic support from the International Monetary Fund and other European countries. However, even countries with relatively robust economies, such as France and Germany, are facing unprecedented levels of debt. Unless the countries of Europe reform their welfare states, they will face some combination of huge tax increases or default on their obligations, both explicit and implicit. The result will be social upheaval and continued economic stagnation. The tough choices facing those countries are playing out today in parliaments and on the streets. The future remains highly uncertain. But how much better off is the United States? Our national debt exceeds $16.4 trillion and is increasing at a rate of more than $3 million per minute. And that only represents the debt that is actually "on the books." If the unfunded liabilities of Medicare and Social Security are included, then U.S. total indebtedness could top 800 percent of GDP.
  • Topic: International Monetary Fund
  • Political Geography: United States, Europe, Greece, France, Spain, Italy, Portugal, Ireland
  • Author: Jagadeesh Gokhale, Erin Partin
  • Publication Date: 04-2013
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: What are the implications of Europe's economic troubles for America? Several EU economies now face deep private and sovereign debt overhangs-a situation not unlike that in the United States, which also faces its own challenges with fiscal policy. How do the economic conditions in America and the EU compare in the short and longer terms? This article provides an overview of key indicators that summarize and help to project the two regions' economic prospects. It should be noted at the outset, however, that economic conditions and policies in the two regions differ in substantive ways. As in the United States, most European economies-members of the European Monetary Union (EMU)-now participate in a single currency (euro) system operated by the European Central Bank-the counterpart of the U.S. Federal Reserve System. However, the EU lacks a single central fiscal authority that operates a significant cross-nation transfer system. Having surrendered authority over monetary policy and, by the definition of a single currency, exchange rate policy, EMU member nations must depend on national fiscal policies to exert stewardship over their economies.
  • Political Geography: United States, America, Europe
  • Author: Michael Tanner
  • Publication Date: 04-2013
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: It does not take more than a glance at the headlines to see that European countries are in trouble. From Greece to Britain, from France to Portugal, it is becoming clear that the modern welfare state is unsustainable, facing fiscal catastrophe, stagnant economic growth, punishing taxes, and prolonged joblessness. European countries are being forced, kicking and screaming, to rethink their approach to social welfare. But how much better off is the United States?
  • Political Geography: Britain, United States, America, Europe, Greece, France, Portugal
  • Author: Pierre Lemieux
  • Publication Date: 04-2013
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: The American welfare state is not as different from the European welfare state as conventional wisdom would have it. If we define the welfare state as that part of the state (the whole apparatus of government at all levels) devoted to taking charge of the welfare of the public, welfare-state functions cover social protection (which includes public pensions), health, and education. These functions make up 57 percent of total U.S. government expenditures compared to 63 percent for the typical euro zone country. In this sense, the American welfare state is only about 10 percent smaller than the European welfare state.
  • Political Geography: United States, America, Europe
  • Author: Desmond Lachman
  • Publication Date: 04-2013
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: The European sovereign debt crisis offers a cautionary tale for the United States. This is the case since all too sadly the U.S. public finances appear to be on the same sort of unsustainable path that lies at the heart of the present European crisis. Whereas Europe, taken as a whole, currently has a budget deficit of around 3 percent of GDP And a gross public debt ratio of around 90 percent of GDP, the United States has a budget deficit of around 8 percent of GDP and a gross public debt ratio in excess of 105 percent of GDP.
  • Political Geography: United States, Europe
  • Author: Veronique de Rugy
  • Publication Date: 04-2013
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: Austerity is a term used to describe debt-reduction policies, but it can mean radically different things. For some people, austerity means adopting a debt-reduction package dominated by tax increases. For others, it means adopting a package made mainly of spending restraint-including reforms of social programs. The lack of a distinction between the two meanings of the word-and hence, the distinction between two different debt-reduction policies-is unfortunate and could also explain the confusion over what is happening in Europe.
  • Political Geography: Europe
  • Author: Pascal Salin
  • Publication Date: 04-2013
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: A great number of European governments have decided on austerity policies to reduce their fiscal deficits and public debt. In order to evaluate such policies, it is necessary to analyze the present and past economic situation of European countries, and to recognize the important role that savings plays in understanding this economic situation and possible future developments. After examining the economic background of austerity policies and the role of savings, this article discusses the choice of different types of austerity policies and policy mixes.
  • Topic: Development
  • Political Geography: Europe
  • Author: Mark Hallerberg
  • Publication Date: 04-2013
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: Germany has a northern European welfare state. This means that social benefits are extensive compared not only to the American standards but compared to other European countries, such as Italy or Spain. In the early 2000s, both foreign observers and Germans themselves considered the country the “sick man of Europe.” Its firms seemed increasingly uncompetitive, due especially to its costly labor. Economic growth in this period was stagnant. This “exporting giant” even had a slight current account deficit.
  • Topic: Financial Crisis
  • Political Geography: Europe, Germany, Spain, Italy
  • Author: Juhan Parts
  • Publication Date: 04-2013
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: Estonia has had a quick recovery from the recent recession and its economy is in better shape than before the crisis. It is now much leaner and significantly more capable of handling international shocks. After a sharp contraction, in which GDP contracted by over 14 percent in 2009, GDP growth rebounded quickly, growing at a rate of 3.1 percent in 2010 and 8.3 percent in 2011.
  • Political Geography: Europe, Estonia
  • Author: Pedro Schwartz
  • Publication Date: 04-2013
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: The ongoing crisis that so dramatically hit Spain in 2008 was at least in part caused by the countercyclical monetary policy the Federal Reserve and the European Central Bank applied in the first years of the new century. Their artificially low interest rates must in part be responsible for the excessive leveraging in banks, businesses, and households. Their unwarranted use of monetary policy to foster growth has recoiled on them with a vengeance. Now central bankers and their political masters find that they cannot perform as expected. A constant feature of financial crises in the past two centuries, as Reinhart and Rogoff (2010) have noted, is that, when banks collapse, companies fail, and families go insolvent they all turn to the central bank and the government to bail them out. The authorities usually find it difficult to answer those anguished calls even when they have the power to print money, so that devaluations and write-offs ensue.
  • Political Geography: Europe, Spain
  • Author: John Samples
  • Publication Date: 04-2013
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: No one has yet written a detailed history of campaign finance regulation, even limited to the United States. In 1988, Robert E. Mutch published Campaigns, Congress, and Courts: The Making of Federal Campaign Finance Law. He then embarked on research seeking to fill out that story in the late 19th century. My own The Fallacy of Campaign Finance Reform combines public choice analysis with political theory in a way that historians might not recognize. Ray La Raja's excellent Small Change: Money, Political Parties, and Campaign Finance Reform Examines a larger historical tableau from a political science perspective. Paula Baker is apparently at work on a broader history of campaign finance and its regulation. This work began as a case study in that project and grew into a book. I look forward to the broader history, but I am happy to have this work.
  • Topic: Reform
  • Political Geography: Europe
  • 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
  • Author: Pedro Schwartz
  • Publication Date: 10-2013
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: The great hopes that surrounded the euro at its birth have failed to come true. It was intended to be a currency as sound as the deutschemark and also a symbol of European unity. It is now reeling under the blows of a prolonged financial crisis and creating discord among the members of the European Union. Clearly, the design of the new money was defective. What its flaws were has been generally misdiagnosed: I will suggest that even if euro- members had kept by the rules of the game the euro could not have worked as intended.
  • Political Geography: Europe
  • 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
  • Author: Jurgen Stark
  • 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: Government
  • Political Geography: Europe
  • Author: Jason Kuznicki
  • Publication Date: 10-2013
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: I often tell aspiring libertarians that they both can and should learn from people who are far removed from them ideologically. Indeed, if they fail to do so, then they are neglecting a vital part of their self-education. When asked whom I have in mind, I almost always mention James C. Scott. Two of Scott's earlier books, Seeing Like a State and The Art of Not Being Governed, are fascinating intellectual excursions for people of the libertarian bent, as well as for many others.
  • Political Geography: America, Europe
  • Author: Robert B. Zoellick, Sebastian Mallaby
  • Publication Date: 06-2012
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: Sebastian Mallaby: We are here to talk to Bob Zoellick. I have been in Washington 16 years, Bob is the personification of the kind of silo busting polymathic energy which says, I am not just interested in international economics, I am not just interested in international relations, I am not just a U.S. government official, I am also going to do multilateral diplomacy. So Bob has been on all sides of those various divides. He has a voracious intellect, so it is always interesting to speak with him whether he is in office or out of office.
  • Topic: International Relations
  • Political Geography: United States, Europe, Washington
  • 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, Netherlands
  • 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, Luxembourg
  • Author: Jerome L. Stein
  • Publication Date: 06-2011
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: The foreign debts of the European countries are at the core of the current crises. Generally, the crises are attributed to government budget deficits in excess of the values stated in the Stability and Growth Pact (SGP), as part of the Maastricht treaty. Proposals for reform generally involve increasing the powers of the European Union to monitor fiscal policies of the national governments and increasing bank regulation.
  • Political Geography: Europe
  • Author: Gerald P. O'Driscoll Jr.
  • Publication Date: 01-2009
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: We remain in an economic crisis and financial crisis, one that Gary Gorton has named “The Panic of 2007” (Gorton 2008). The thesis of this article is that monetary policy has played a pivotal role. Under Alan Greenspan and now Ben Bernanke, the Fed has conducted monetary policy so as to foster moral hazard among investors, notably in housing (O'Driscoll 2008a). More generally, the crisis is the product of a “perfect storm” of misguided policy. Policies to encourage affordable housing fostered the growth of subprime lending and complex financial products to finance that lending. Regardless of the desirability of the social goal, the financial super- structure depended on housing prices never falling. Housing prices do fall sometimes, and did so decisively beginning in 2007 (Gorton 2008: 50).
  • Topic: Democratization, Economics, International Trade and Finance, Markets, Privatization
  • Political Geography: United States, Europe, New Zealand
  • Author: David Beckworth
  • Publication Date: 10-2009
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: The historian Niall Ferguson can never be accused of lacking boldness. Over the past decade he has argued, among other things, that Europe would have been better off had Great Britain stayed out of World War I and allowed Germany to win, that the British empire provided a global public good that benefited the world economy, and that the United States should follow suit today by more actively embracing the demands of empire. He has also been championing the burgeoning field of counterfactual history, a development that many historians consider controversial given its speculative nature.
  • Topic: War
  • Political Geography: United States, Europe, Germany
  • Author: Andrei Illarionov
  • Publication Date: 01-2008
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: One day I asked Milton Friedman a question. That question was in my mind every time we met: “Could he have achieved the same status he did in America if he had lived in Russia—not only in terms of his research, but in shaping his outlook on life and in his under-standing of freedom?” Having kept silent for a moment, he answered: “no.”
  • Topic: Economics
  • Political Geography: Russia, United States, America, Europe, Asia