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52. The Economic Mentality of Nations
- Author:
- Pál Czeglédi, Brad Lips, and Carlos Newland
- Publication Date:
- 10-2021
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Two hundred forty‐five years after the publication of Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations, economists continue to debate the causes of disparities in wealth among the countries of the world. Some scholars focus on the role of climate, natural resources, proximity to markets, or access to technology. Others study human capital, capital accumulation, the use of comparative advantages and economies of scale, and institutional and legal frameworks. We believe that another factor must be considered as well: the economic attitudes and causal beliefs (henceforth, “mentality”) of the population. While a growing body of research shows a clear association between economic growth and the institutions of economic freedom, those institutions can be quite fragile if the population does not have a clear understanding of what makes a country prosperous. To measure popular attitudes toward economic values, we have created the Global Index of Economic Mentality (GIEM).
- Topic:
- Economics, Markets, Capitalism, Youth, and Free Market
- Political Geography:
- Global Focus
53. The Limits of Democracy
- Author:
- D. Eric Schansberg
- Publication Date:
- 10-2021
- Content Type:
- Working Paper
- Institution:
- The Cato Institute
- Abstract:
- There’s an old saying that democracy is the worst form of government, except for all of the others. Or putting it another way: the best form of government is a benevolent and knowledgeable dictator, except for the problem of finding a good and wise leader. Whatever democracy’s strengths, they are relative not absolute, and they are contingent on context—namely, the people being governed, the people governing, and the underlying institutions.
- Topic:
- Politics, Governance, Democracy, and Populism
- Political Geography:
- Global Focus
54. The Covid‐19 Coin Shortage: Causes, Responses, and Lessons
- Author:
- Nicholas Anthony
- Publication Date:
- 10-2021
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Covid‐19 altered almost every facet of the human experience in 2020. For those who were lucky, living rooms became offices, cocktail hours went virtual, and spare time was spent exploring new passions. But others suffered: hundreds of thousands of people died, millions became unemployed, and even more were left uncertain about their future. All the while, smaller inconveniences multiplied. Of these, the most unexpected was a serious coin shortage in the summer of 2020.
- Topic:
- Currency, COVID-19, Cash, and Shortage
- Political Geography:
- Global Focus
55. The War on Cash: Institutional Hostility and Covid‐19
- Author:
- Edoardo Beretta and Doris Neuberger
- Publication Date:
- 10-2021
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- There is significant economic literature investigating the hostility to cash or “war on cash” (Beretta 2005, 2007; Deutsche Bundesbank 2017; Jain 2017; Scott 2013; White 2018) by which financial institutions supported by governments discourage individuals from using (publicly issued) physical means of payments and convince them to move to digital (privately issued) ones.
- Topic:
- Economics, COVID-19, Digitization, and Cash
- Political Geography:
- Global Focus
56. Covid Cash
- Author:
- Kenneth Rogoff and Jessica Scazzero
- Publication Date:
- 10-2021
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The advent of the Covid‐19 pandemic has witnessed a strong uptick in paper currency demand across advanced economies, even as contactless methods surged ahead of cash in payments. This article explores these two contrasting phenomena, which are in fact continuations of much longer‐term trends. The use of cash, while still important for small in‐person transactions, has been declining as a share of overall consumer payments for decades, thanks to a steady stream of innovations including credit cards, debit cards, electronic transfers, and smartphone payment apps. For example, in the United States, paper currency accounted for 26 percent of the number of consumer payments in 2019 but only 6 percent in value terms, down from 40 percent and 14 percent, respectively, in 2012. Meanwhile, U.S. dollars in circulation have increased from $1.1 trillion in January 2012 to $1.8 trillion in January 2020, exploding to $2.1 trillion in December 2020. The same pattern remains if one excludes foreign holdings (50–60 percent of the total) and is found in most other advanced economies as well. Some argue that soaring currency demand contests the view that the world is headed to a cashless future, or even a “less‐cash” society (see Bech et al. 2018; BIS 2020).
- Topic:
- Currency, COVID-19, Digitization, and Cash
- Political Geography:
- Global Focus
57. Effects of Immigration on Entrepreneurship and Innovation
- Author:
- Robert Krol
- Publication Date:
- 10-2021
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Economic growth in advanced economies is driven primarily by innovations that improve productivity. Entrepreneurs and researchers, who are motivated by economic incentives, generate new ideas that result in either new or expanded businesses. The resulting expansion of businesses generates new and better products and services. Entrepreneurs also change the way production is organized because they improve efficiency that lowers prices for consumers. Such actions produce economic growth, which manifests itself by increasing product variety, jobs, and wages. As a result, economic well‐being increases (Alcigit and Kerr 2018; Jones 1995, 2016; McCloskey 2016; Romer 1990).
- Topic:
- Immigration, Entrepreneurship, Economic Growth, and Innovation
- Political Geography:
- Global Focus
58. The GameStop Episode: What Happened and What Does It Mean?
- Author:
- Allan M. Malz
- Publication Date:
- 10-2021
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The GameStop stock trading episode that began in January 2021 has been unprecedented in some ways, especially in the ability of market participants to organize collective action openly yet anonymously. In other ways, it’s been an unsurprising repetition of past experience. Financial markets are imperfect, they display many frictions, and the imperfect alignment of interests is a perpetual dilemma in designing both contracts and public policy.
- Topic:
- Regulation, Economy, Public Policy, and Stock Markets
- Political Geography:
- United States of America
59. GameStop and the Rise of Retail Trading
- Author:
- Jennifer J. Schulp
- Publication Date:
- 10-2021
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- In January 2021, a curious event in the stock market caught the attention of the media, regulators, and the public. A well‐known struggling company dominated the headlines, not for its business model, but for the meteoric rise of its stock price. GameStop Corp. started the year trading around $19.00 a share, a pretty robust share price for a company that had been trading below $5.00 as recently as August 2020. Yet, by the end of January, GameStop’s shares were trading at over $300, at one point hitting a high of $483. GameStop’s stock price has receded from those meteoric highs, but, as of late May, it continues to trade between $160 and $180 a share.
- Topic:
- Markets, Economy, Investment, Stock Markets, and Equity
- Political Geography:
- Global Focus
60. The Impact of Public Debt on Economic Growth
- Author:
- Jack Salmon
- Publication Date:
- 10-2021
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Following the 2007–2008 global financial crisis (GFC) and subsequent sovereign debt crisis in Europe, there has been a renewed interest in exploring the relationship between government debt and economic growth. One of the cornerstone studies on the subject that triggered an emergence of new literature was Carmen Reinhart and Kenneth Rogoff’s “Growth in a Time of Debt” (2010), which became widely cited and influential among commentators, academics, and policymakers in the debate surrounding austerity and fiscal policy in debt‐burdened economies. Much of the research that followed the GFC uses panel data analysis of the debt‐growth nexus using datasets from the World Bank, International Monetary Fund (IMF), European Commission, and Organisation for Economic Co‐operation and Development (OECD).
- Topic:
- Economy, Economic Growth, Survey, and Public Debt
- Political Geography:
- Global Focus
61. U.S. Debt Sustainability under Low Interest Rates and after the Covid‐19 Shock
- Author:
- William R Cline
- Publication Date:
- 10-2021
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The worst pandemic in 100 years has hit the United States at a time when economic thinking has become more comfortable with high public debt, facilitating an aggressive response in public spending for relief that has reached a remarkable 27 percent of GDP.1 One reason for the receptiveness to large spending has been the perception that the fiscal stimulus in the Great Recession of 2007–2009 erred on the side of excessive caution and left an aftermath of unduly slow growth. More fundamentally, low real interest rates in recent years have shifted the center of gravity in macroeconomic analysis away from concern about chronic deficits and rising debt toward a certain benign neglect of debt as a problem.
- Topic:
- Debt, Interest Rates, Sustainability, and COVID-19
- Political Geography:
- North America and United States of America
62. Trade Is Good for Your Health
- Author:
- James Bacchus
- Publication Date:
- 06-2021
- Content Type:
- Policy Brief
- Institution:
- The Cato Institute
- Abstract:
- There is increasing need to free up medical trade to help end the COVID-19 pandemic and secure global health. Yet import tariffs, export restrictions, and other limitations on international trade in medicines and medical goods continue to confound the hopes for fulfilling this need. Indeed, added restrictions have been imposed on medical trade during the pandemic. Meanwhile, governments have accomplished little at the World Trade Organization (WTO) to help meet this need. Using trade to help fight the COVID-19 pandemic and to otherwise support global health must move to the top of the WTO agenda, with the aim of finalizing new rules to support trading for health care goods by the time of the next WTO ministerial conference in Geneva in late November 2021 — and ideally, sooner.
- Topic:
- Health, Trade, and COVID-19
- Political Geography:
- Global Focus
63. A Brief History of U.S. Immigration Policy from the Colonial Period to the Present Day
- Author:
- Andrew M. Baxter and Alex Nowrasteh
- Publication Date:
- 08-2021
- Content Type:
- Policy Brief
- Institution:
- The Cato Institute
- Abstract:
- More than 86 million people have legally immigrated to the United States between 1783 and 2019. The legal regime under which they immigrated has changed radically over that time; the politics surrounding those changes have remained contentious, and past immigration policies inform the current political debate. Conflicting visions and piecemeal legislation have left the United States with an archaic and barely coherent immigration system with outdated policy objectives that is primarily controlled by the executive branch of government. We review the history of U.S. immigration policy, including the legal controversies that empowered Congress with its immigration plenary power and the historical policy decisions that still guide the U.S. immigration system, in order to contextualize the current political debate over immigration at the beginning of the Biden administration.
- Topic:
- Government, History, Immigration, and Immigration Policy
- Political Geography:
- North America and United States of America
64. Common‐Sense Policy Reforms for California Housing
- Author:
- Lee E. Ohanian
- Publication Date:
- 08-2021
- Content Type:
- Policy Brief
- Institution:
- The Cato Institute
- Abstract:
- California housing has become unaffordable. As of February 2021, the median California home price was nearly $700,000 and the median condominium price was $515,000. The median rent for the same month was $1,733. Based on industry mortgage financing and renting standards, this means that both homebuyers and renters require household incomes of nearly $100,000 to qualify for housing.
- Topic:
- History, Reform, Regulation, and Housing
- Political Geography:
- North America and United States of America
65. How Wealth Fuels Growth
- Author:
- Chris Edwards
- Publication Date:
- 09-2021
- Content Type:
- Policy Brief
- Institution:
- The Cato Institute
- Abstract:
- The role of wealth in the economy is the focus of much policy debate. This study examines wealthy individuals as “angel” investors, who fund startup businesses. Angel investors provide a unique source of support for America’s entrepreneurs, particularly in leading‐edge industries.
- Topic:
- Entrepreneurship, Economic Growth, Investment, Wealth, and Angel Investors
- Political Geography:
- North America and United States of America
66. Industrial Policy Implementation: Empirical Evidence from China’s Shipbuilding Industry
- Author:
- Panle Barwick, Myrto Kalouptsidi, and Nahim Bin Zahur
- Publication Date:
- 08-2021
- Content Type:
- Policy Brief
- Institution:
- The Cato Institute
- Abstract:
- Industrial policy has been widely used in developed and developing countries. Examples include the United States and Europe after World War II; Japan in the 1950s and 1960s; South Korea and Taiwan in the 1960s and 1970s; and Brazil, China, India, and other developing countries more recently. Industrial policies are now back in the spotlight in developed countries, such as Europe and the United States. Designing and implementing industrial policies is a complicated task. Governments seeking to promote the growth of selected sectors have a wide range of policy tools at their disposal, including subsidies on output, provisioning loans at below‐market interest rates, preferential tax policies, tariff and nontariff barriers, and so on. They must also choose the timing of policy interventions and whether to target selected firms within an industry.
- Topic:
- Government, Industrial Policy, Economic Policy, and Shipbuilding
- Political Geography:
- China and Asia
67. Effects of Sanctions on North Korea’s Refined Oil Prices
- Author:
- Kyoochul Kim
- Publication Date:
- 09-2021
- Content Type:
- Policy Brief
- Institution:
- The Cato Institute
- Abstract:
- During 2016 and 2017, North Korea conducted three nuclear tests and four missile launches, and, in response, the international community strengthened its sanctions against North Korea. The sanctions were aimed at deterring North Korea from developing nuclear weapons; the means to achieve this included blocking the inflow of foreign currency into North Korea and banning the import of goods related to its nuclear development efforts. Specifically, the sanctions against North Korea banned the exports of anthracite, processed garments, and marine products to limit its foreign currency acquisition; they banned the import of machinery; and they limited the amount of oil (crude oil and refined oil products) introduced, thus hurting its economy.
- Topic:
- Oil, Sanctions, Weapons, and Trade
- Political Geography:
- Asia and North Korea
68. Inequality beyond GDP: A Long View
- Author:
- Leandro Prados de la Escosura
- Publication Date:
- 09-2021
- Content Type:
- Policy Brief
- Institution:
- The Cato Institute
- Abstract:
- In the past century and a half, substantial gains in wellbeing have been achieved across the board. This can be observed for the main dimensions of well‐being: health, education, political voice, civil liberties, personal security, and material well‐being. However, in the study of international well‐being and its distribution, the focus remains on income. My research addresses multidimensional well‐being and raises some questions. How have the gains from well‐being dimensions been distributed? Do relative and absolute inequality move together? What drives relative inequality? Which parts of the distribution achieved larger gains over time in relative and absolute terms?
- Topic:
- GDP, Inequality, Economic Policy, and Well-Being
- Political Geography:
- Global Focus
69. Impact of Colonial Institutions on Economic Growth and Development in India: Evidence from Night Lights Data
- Author:
- Priyaranjan Jha and Karan Talathi
- Publication Date:
- 09-2021
- Content Type:
- Policy Brief
- Institution:
- The Cato Institute
- Abstract:
- Many cross‐country studies find that quality of historical institutions is a major cause of disparity in present‐day economic development as measured by income per capita. Due to the unavailability of data on a comprehensive measure of development such as per capita income, studies examining the role of historical institutions on development at the subnational levels use alternate proxies of economic well‐being in their analysis. We examine the long‐term effects of British colonial institutions on overall economic development within India using satellite night lights data.
- Topic:
- Development, Economic Growth, Colonialism, Economic Policy, and Institutions
- Political Geography:
- South Asia and India
70. Discrimination, Managers, and Firm Performance: Evidence from “Aryanizations” in Nazi Germany
- Author:
- Killian Huber, Volker Lindenthal, and Fabian Waldinger
- Publication Date:
- 10-2021
- Content Type:
- Policy Brief
- Institution:
- The Cato Institute
- Abstract:
- Large‐scale increases in discrimination can lead to dismissals of highly qualified business leaders and managers. Discriminatory expulsions of individuals holding important positions in the economy have occurred repeatedly, both historically and in modern times. Recent political developments have renewed interest in the economic effects of this type of discrimination. For instance, the U.S. travel ban on citizens of seven Muslim‐majority countries has raised fears among large corporations that increasing discrimination will leave them unable to retain talent.
- Topic:
- History, Economy, Business, Discrimination, and Nazi Germany
- Political Geography:
- Germany and United States of America
71. Why U.S. Immigration Barriers Matter for the Global Advancement of Science
- Author:
- Ruchi Agarwal and Patrick Gaule
- Publication Date:
- 10-2021
- Content Type:
- Policy Brief
- Institution:
- The Cato Institute
- Abstract:
- While talent can be born anywhere, few places specialize in nurturing it. Accordingly, talented individuals have pursued opportunities abroad for centuries. For instance, Aristotle moved from Northern Greece to Athens to attend Plato’s Academy and then to Macedonia to tutor a young Alexander the Great. More recently, the United States has emerged as a hub for foreign talent, playing an outsized role in the global knowledge network of scientific activity in recent decades. However, the recent introduction of restrictive immigration policies in the United States may adversely impact scientific activity. While studies have examined the potential negative impact of restrictive U.S. immigration policies on U.S. competitiveness in science and innovation, there has been less focus on understanding how U.S. immigration barriers may in turn impact scientific activity globally. In this context, our work studies the impact of U.S. immigration barriers on global knowledge production and examines which policy actions are more likely to help advance the global knowledge frontier.
- Topic:
- Science and Technology, Immigration, Border Control, and Research and Development
- Political Geography:
- Global Focus and United States of America
72. The Smoot‐Hawley Trade War
- Author:
- Kris James Mitchener, Kirsten Wandschneider, and Kevin H. O'Rourke
- Publication Date:
- 11-2021
- Content Type:
- Policy Brief
- Institution:
- The Cato Institute
- Abstract:
- In the words of Robert J. Samuelson, “The ghost of Smoot‐Hawley seems to haunt President Trump.” As fears of a trade war between the United States and China grew after the U.S. presidential election of 2016, many commentators drew this link between the signing of the Smoot‐Hawley Tariff Act of 1930 and recent trade disputes. And the consensus was that the trade wars of the 1930s were an ominous portent of what might await the world if Donald Trump’s protectionist impulses were not checked.
- Topic:
- Tariffs, Trade Wars, Economic Policy, and Imports
- Political Geography:
- China and United States of America
73. In Vaccines We Trust? The Effects of the CIA’s Vaccine Ruse on Immunization in Pakistan
- Author:
- Monica Martinez-Bravo and Andreas Stegmann
- Publication Date:
- 11-2021
- Content Type:
- Policy Brief
- Institution:
- The Cato Institute
- Abstract:
- Trust in the medical sector and in medical products is a key determinant of the demand for health care. This is especially relevant for the use of vaccines. Because of herd immunity, it is difficult—if not impossible—to learn about the effectiveness of vaccines through one’s own experience. Hence, events that discredit the effectiveness of vaccines or the reputation of the medical sector can have dramatic consequences on immunization rates. A commonly discussed example of such dynamics was the publication of an article in the medical journal The Lancet in 1998 that linked autism to the measles, mumps, and rubella vaccine. Media reports have associated this publication with the emergence of the anti‐vaccine movement and with the recent rise in the number of unvaccinated children in several countries. The declines in vaccination rates have contributed to the reemergence of previously eradicated diseases in several countries.
- Topic:
- Public Health, Vaccine, and Central Intelligence Agency (CIA)
- Political Geography:
- Pakistan and South Asia
74. The Intended and Unintended Consequences of Disposable Bag Regulation
- Author:
- Tatiana Homonoff, Lee-Sien Kao, Javiera Selman, and Christina Seybolt
- Publication Date:
- 11-2021
- Content Type:
- Policy Brief
- Institution:
- The Cato Institute
- Abstract:
- Many recent government and corporate policies aimed at reducing a variety of negative externalities include regulations that ban the provision of externality‐generating products. However, these policies often ban only a narrow subset of products associated with the underlying externality. For example, the U.S. Department of Justice banned bump stocks, which assist in rapid‐fire shooting, after a Las Vegas mass shooting rather than placing stricter regulations on all assault weapons. Similarly, Starbucks recently banned the distribution of plastic straws at its stores to reduce environmental waste, and New York City attempted to pass a restaurant ban on sugar‐sweetened beverages over 16 ounces to curb obesity.
- Topic:
- Environment, Government, Regulation, and Corporations
- Political Geography:
- Global Focus
75. The Economic Geography of Global Warming
- Author:
- José‐Luis Cruz
- Publication Date:
- 12-2021
- Content Type:
- Policy Brief
- Institution:
- The Cato Institute
- Abstract:
- The world is getting warmer due to carbon emissions generated by the economic activity of humans. Global carbon emissions will affect temperatures everywhere over long periods of time and in geographically different ways. What will be the impact of carbon emissions, and the implied changes in temperatures, on the world economy and on the economies of particular regions? How will individuals react to these changes, and how are these reactions impacted by their ability to migrate, trade, or invest and develop alternative centers of economic activity? What are the best policies to combat global warming, and what are the implications of these policies for different regions across the world? We propose and quantify a novel model to address these questions.
- Topic:
- Climate Change, Migration, Economic Policy, Innovation, Trade, and Carbon Emissions
- Political Geography:
- Global Focus
76. Getting Schooled: The Role of Universities in Attracting Immigrant Entrepreneurs
- Author:
- Natee Amornsiripanitch, Paul A. Gompers, George Hu, and Kaushik Vasudevan
- Publication Date:
- 12-2021
- Content Type:
- Policy Brief
- Institution:
- The Cato Institute
- Abstract:
- Immigrants play a vital role in innovation activities and entrepreneurship. Given the substantial contribution of immigrants in these areas, a set of natural questions arise: What are the pathways that high‐skilled immigrants take to arrive in the United States, and how has the importance of these pathways changed over time? What are important institutions that serve as gatekeepers for high‐skilled immigrants, and do they affect the types of immigrant founders that come to the United States? Do certain parts of the United States benefit disproportionately from high‐skilled immigration, and if so, what are some factors that contribute to these benefits? The answers to these questions have important implications for designing immigration policy and regulation, which have become increasingly acrimonious topics in public discourse. They also have important implications for firms and universities that recruit talent from abroad and for the communities that hope to promote vibrant entrepreneurial ecosystems.
- Topic:
- Entrepreneurship, Immigrants, Innovation, Higher Education, and Startup
- Political Geography:
- North America and United States of America
77. The Economic Impact of Tax Changes, 1920–1939
- Author:
- Alan Reynolds
- Publication Date:
- 01-2021
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Estimates of the elasticity of taxable income (ETI) investigate how high‐income taxpayers faced with changes in marginal tax rates respond in ways that reduce expected revenue from higher tax rates, or raise more than expected from lower tax rates. Diamond and Saez (2011) pioneered the use of a statistical formula, which Saez developed, to convert an ETI estimate into a revenue‐maximizing (“socially optimal”) top tax rate. For the United States, they found that the optimal top rate was about 73 percent when combining the marginal tax rates on income, payrolls, and sales at the federal, state, and local levels. A related paper by Piketty, Saez, and Stantcheva (2014) concluded that, at the highest income levels, the ETI was so small that comparable top tax rates as high as 83 percent could maximize short‐term revenues, supposedly without suppressing long‐term economic growth. Such studies could be viewed as part of a larger effort to minimize any efficiency costs of distortive taxation while maximizing assumed revenue gains and redistributive benefits.
- Topic:
- Economics, History, Tax Systems, and High-Income People
- Political Geography:
- North America, Global Focus, and United States of America
78. How Misaligned Incentives Hinder Foster Care Adoption
- Author:
- Isabella M. Pesavento
- Publication Date:
- 01-2021
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Adoption, particularly adoption out of foster care, has not been well studied within the field of economics. Researchers may avoid this topic because the adoption market greatly deviates from a typical market, and the system and data collection are highly fragmented, with relatively little federal coordination. Rubin et al. (2007) and Thornberry et al. (1999) show that instability in foster care placements produces negative welfare outcomes, and Hansen (2006), Barth et al. (2006), and Zill (2011) demonstrate that adoption out of foster care is socially and financially beneficial. Yet, children waiting to be adopted out of foster care are in excess supply, which has been exacerbated in recent years. I hypothesize that this is, in part, due to misaligned incentives of government officials and the contracted foster care agencies. I show that earnings are prioritized over ensuring permanent child placement, which hinders the potential for adoption, and government oversight fails to correct such iniquities because of career interests.
- Topic:
- Economics, Government, Markets, Children, Incentives, Foster Care, and Adoption
- Political Geography:
- North America and United States of America
79. Barber Licensing in Arkansas: Public Health or Private Gain?
- Author:
- Tanner Corley and Marcus M. Witcher
- Publication Date:
- 01-2021
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- In Arkansas, the barber profession has been regulated and licensed for more than 80 years, and until recently, the issue was mostly absent from the political debate. During a regular session of Arkansas’s 92nd General Assembly in 2019, however, state Sen. John Cooper presented a bill to “repeal the [1937] Arkansas Barber Law” and to “abolish the State Board of Barber Examiners” (Briggs 2019). The average Arkansan probably was not aware of the bill, but occupational licensing reformers saw this as a great opportunity for Arkansas to pave the way for other states to reform their own license laws. If Cooper’s bill had passed, Arkansas’s economy would have likely benefited (Timmons and Thornton 2010, 2018). By removing restrictive requirements to becoming a barber, the bill would have allowed more Arkansans to enter the profession. This reform would have provided people with more economic opportunities, increased competition, and benefited consumers.
- Topic:
- Regulation, Business, Public Health, and Licensing
- Political Geography:
- North America and United States of America
80. Economic Well‐Being under Plan versus Market: The Case of Estonia and Finland
- Author:
- Anna Bocharnikova
- Publication Date:
- 01-2021
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- This article investigates the dynamics of individual economic well‐being in Estonia and Finland over three periods: (1) 1923–1938, when both countries were similarly situated; (2) 1960–1988, during which Estonia was under Soviet control; and (3) 1992–2018, after Estonian independence. Economic well‐being is calculated using the purchasing power of wages in terms of the affordability of a minimal food basket. The results show that, in 1938, the purchasing power of wages in Estonia was 4 percent lower than in Finland; in 1988, it was 42 percent lower; and, by 2018, the gap had fallen to 17 percent. Consequently, as measured by the purchasing power of wages, well‐being in Estonia and Finland was similar before the Soviet occupation, widely diverged during Soviet rule, and converged after Estonian independence, with the transition from plan to market.
- Topic:
- Economics, Markets, Politics, History, and Culture
- Political Geography:
- Europe, Finland, and Estonia
81. Impact of Institutions in the Aftermath of Natural Disasters
- Author:
- Diego A. Diaz and Cristian Larroulet
- Publication Date:
- 01-2021
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The number and impact of natural disasters are increasing because of climate change and more people living in urban areas (Sanderson and Sharma 2016). The mechanism is simple, at least when considering climatic events: higher temperatures lead to higher rates of water evaporation, which increases the chance of flooding events (Wallace et al. 2014; IPCC 2001). The number of hot days has increased and the number of cold days has decreased in land areas, with model projections indicating that extreme precipitation events will continue to increase, resulting in more floods and landslides. At the same time, mid‐continental areas will get dryer, which will increase the chance of droughts and wildfires (Van Aalst 2006). The course of action taken by humanity in the next decades will likely play a pivotal role since extreme differences in projections are expected if global temperatures rise 2°C in comparison to 1.5 °C above preindustrial levels (Allen et al. 2019). What are the economic impacts of natural disasters? This question has been addressed to a large extent in the literature, but it still does not have a conclusive response. The seemingly natural reasoning that destruction cannot lead to a net benefit for society was explained almost two centuries ago by Bastiat (1850) in his famous broken window fallacy. A shopkeeper’s son, Bastiat relates, breaks a pane of glass in his father’s store. The father, angry due to the boy’s careless action, is offered consolation by the spectators, who claim that the event is positive for the economy since it provides labor to glaziers. While Bastiat acknowledges that the accident brings trade to the glazier since the shopkeeper has to replace the window, regarding the event as wealth‐increasing conveys a narrow perspective. The shopkeeper ends up poorer since he cannot spend the same money elsewhere, and if the boy had not broken the window, then the labor and other materials that were used to repair the damage would have been used elsewhere, potentially making the tangible wealth of the community grow.
- Topic:
- Climate Change, Natural Disasters, Crisis Management, Institutions, and Urban
- Political Geography:
- Global Focus
82. U.S. Trade Policy toward China: Learning the Right Lessons
- Author:
- Scott Lincicome
- Publication Date:
- 01-2021
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Labor market and cultural disruptions in the United States are real and important, as is China’s current and unfortunate turn toward illiberalism and empire. But pretending today that there was a better trade policy choice in 2000—when Congress granted China “permanent normal trade relations” (PNTR) status and paved the way for broader engagement—is misguided. It assumes too much, ignores too much, and demands too much. Worse, it could lead to truly bad governance: increasing U.S. protectionism; forgiving the real and important failures of our policymakers, CEOs, and unions over the last two decades; and preventing a political consensus for real policy solutions. Indeed, that is happening now.
- Topic:
- International Relations, Economics, Markets, Bilateral Relations, Trade, and Protectionism
- Political Geography:
- China, Asia, North America, and United States of America
83. Financial Development in Hong Kong and China: A Hayekian Perspective
- Author:
- Kam Hon Chu
- Publication Date:
- 01-2021
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- In addition to foreign investment absorption, Hong Kong plays a pioneering role in the internationalization of the renminbi (RMB). Despite the lack of comprehensive statistics on the volume of offshore RMB transactions, Hong Kong is for sure one of the largest, if not the largest, global centers for offshore RMB businesses. According to the Triennial Central Bank Survey (BIS 2019), for instance, Hong Kong was the largest global offshore RMB foreign exchange market, with an average daily turnover of US$107.6 billion as of April 2019, considerably higher than the US$56.7 billion for London and the US$42.6 billion for Singapore.
- Topic:
- Economics, Markets, Investment, and Financial Development
- Political Geography:
- China, Asia, and Hong Kong
84. Modern Monetary Theory Meets Greece and Chicago
- Author:
- George S. Tavlas
- Publication Date:
- 01-2021
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- During the fall of 2009, George Papandreou headed the ticket of the Panhellenic Socialist Movement, known by its acronym PASOK, against the then‐governing conservative party, New Democracy, in the Greek national elections. Papandreou ran on a platform that featured highly expansive fiscal spending. During a press conference on September 13, 2009, he was asked where he would find the money to fund his party’s spending proposals. His answer was that given in the above quotation, by which he meant that Greece had abundant fiscal space to increase government spending; he believed that tax revenues could be sharply raised through stricter enforcement of laws against tax evasion. On October 4, PASOK won a landslide electoral victory, garnering 43.9 percent of the popular vote, compared with 33.5 percent for the second‐place, incumbent New Democracy party, with the result that Papandreou became Greece’s prime minister. In the following months, a sovereign‐debt crisis erupted in Greece that, within a year, engulfed much of the euro area through contagion. In November 2011, Papandreou resigned the premiership, becoming the first Greek prime minister in almost 50 years to be forced out of office by his own cabinet. An article in the Financial Times, reporting on his ouster, stated: “George Papandreou will be remembered by Greeks with more than a trace of bitterness as the man who smilingly declared ‘the money’s there’ ” (Hope 2011). In the next Greek elections, held in June 2012, PASOK won only 12.3 percent of the vote.
- Topic:
- Monetary Policy, Conservatism, Political Parties, and Socialism
- Political Geography:
- Europe and Greece
85. Lessons for the Fed from the Pandemic
- Author:
- John A. Allison
- Publication Date:
- 06-2021
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The Covid‐19 pandemic greatly increased the scope and power of the Federal Reserve. The Fed created a number of new emergency lending facilities, which allowed it to make off‐balance sheet loans and buy the debt of corporations and municipalities through special purpose vehicles backstopped by the Treasury under the CARES Act. Meanwhile, the Fed’s large‐scale asset purchase program, known as quantitative easing (QE), was put on steroids after the pandemic struck in March 2020. The Fed has been purchasing longer‐term Treasuries and mortgage‐backed securities amounting to $120 billion per month, pushing the size of its balance sheet to an astonishing $7 trillion.
- Topic:
- Economics, Monetary Policy, Federal Reserve, Pandemic, and COVID-19
- Political Geography:
- North America and United States of America
86. Which Type of Digital Currency for Financial Inclusion?
- Author:
- Diego Zuluaga
- Publication Date:
- 06-2021
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- When the Libra Association first announced its plan to launch a private digital currency for domestic and cross‐border payments — then consisting of a single token backed by a mix of stable fiat currencies — financial inclusion was a big part of its business case. With 1.7 billion people globally lacking a bank or mobile money account, Libra thought it was imperative for some of the world’s largest companies, including the leading social media platform, to join forces and bring cheap payments to the world’s “unbanked.” And while this project has faced a rocky reception from central bankers and regulators — for reasons good and bad — even they often frame the case for their own, public digital currencies (CBDCs) in terms of bringing cheap and fast electronic payments to the greatest possible number of people, as cash use and cash acceptance decline.
- Topic:
- Finance, Banks, Inclusion, and Digital Currency
- Political Geography:
- Global Focus
87. Chartering the Fintech Future
- Author:
- Charles W. Calomiris
- Publication Date:
- 06-2021
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- What we use as our medium of exchange is subject to dramatic change over time, and sometimes bank regulation has accelerated such changes. The national banking system, founded in 1863, envisioned the creation of a uniform medium of exchange in the form of national bank notes, which replaced the preexisting system of state bank note issuance. But the creation of the national banking system soon resulted in the diminished importance of bank notes as a medium of exchange. Under the new system, state banks faced a prohibitive tax of 10 percent per year on any notes they issued, and national banks had to maintain collateral at the Treasury for their outstanding national bank notes equal to 111 percent of their outstanding notes, and also had to maintain an additional 5 percent in required government‐currency (“greenback”) cash reserves on hand. That meant that if a bank wanted to make loans, it had to find an alternative to bank notes as a funding source for those loans. Deposits had been growing in importance leading up to the National Banking Act of 1863, but the act accelerated the growth of deposits markedly, and they became the primary funding vehicle for loans. As Comptroller Eckels remarked in 1896: “And thus it has come about that deposit taking is now the feature, and the issuing of circulating notes but the incident, in national banking, instead of, as in the early history of the system, the note‐issuing function being the feature and deposit banking but the incident” (Eckels 1896: 565; emphasis added).
- Topic:
- Science and Technology, Finance, Banks, and Loans
- Political Geography:
- Global Focus
88. A Reckoning Looms for America’s 50‐Year Financial Surveillance System
- Author:
- Michael J. Casey
- Publication Date:
- 06-2021
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- For all the upheaval of 2020, it’s perhaps not surprising that the 50‐year anniversary of a major piece of financial legislation came and went with little fanfare. But the 1970 U.S. Bank Secrecy Act (BSA) deserves much scrutiny.1 In mandating that financial institutions maintain customer identity records and report illicit activity to government agencies, the BSA was a landmark statute by any measure. It paved the way to an ever‐expanding system of international surveillance that’s a cornerstone of U.S. economic power.
- Topic:
- Economics, Government, Finance, and Surveillance
- Political Geography:
- North America and United States of America
89. Monetary Effects of Global Stablecoins
- Author:
- Dong He
- Publication Date:
- 06-2021
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The globalized economy now moves at the speed of electrons — and the future of money is inexorably going digital, too. New forms of digital money, such as central bank digital currencies (CBDCs) and so‐called global stablecoins, are shaping the future of money and payments. CBDCs are a digital form of fiat currency issued by a central bank. Some central banks started exploring CBDCs a few years ago, and those explorations have gathered momentum since Facebook and its partners announced their intention to launch the Libra stablecoin in June 2019. Because the stablecoins issued by large technological companies or platforms (Big Techs) have the potential to be adopted by businesses and households everywhere, they are called “global stablecoins,” or GSCs, in shorthand.
- Topic:
- Geopolitics, Global Political Economy, Money, Currency, and Trade
- Political Geography:
- Global Focus
90. Some Thoughts on Central Bank Digital Currency
- Author:
- David Andolfatto
- Publication Date:
- 06-2021
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The literature examining the question of central bank digital currency (CBDC) has grown immensely in a very short time. Much progress has been made since I first learned of the idea in a blogpost authored by J. P. Koning in 2014. That modest article soon led me to openly speculate on the merits of a central bank cryptocurrency in a talk I delivered at the International Workshop on P2P Financial Systems in Frankfurt (Andolfatto 2015). My audience, which consisted mainly of entrepreneurs, seemed to receive my talk with a polite mixture of bemusement and anxiety. Surely, I couldn’t be serious? To be honest, I’m not sure that I was. But then the threat of Facebook’s Libra came along, and central bankers around the world suddenly began to take the idea very seriously indeed.
- Topic:
- Finance, Social Media, Central Bank, Currency, and Digital Currency
- Political Geography:
- Global Focus
91. Central Bank Digital Currency as a Potential Source of Financial Instability
- Author:
- George Selgin
- Publication Date:
- 06-2021
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Various proposals for a central bank digital currency (CBDC) involve different technical solutions to as many distinct problems. My concern is with the monetary policy implications of those (e.g., Bordo and Levin 2019; Ricks 2020) that would allow anyone to place deposits in a Fed Master Account, directly or using ordinary banks as brokers.
- Topic:
- Monetary Policy, Banks, Central Bank, Financial Stability, and Digital Currency
- Political Geography:
- Global Focus
92. Cryptocurrencies and All That: Two Ideas from Monetary Economics
- Author:
- Jesús Fernández‐Villaverde
- Publication Date:
- 06-2021
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The monetary arrangements of societies are the result of the interplay of technology and ideas. Technology determines, for example, which coins can be minted and at what cost. For centuries, minting small‐denomination coinage was too costly to induce Western European governments to supply enough small change (Sargent and Velde 2002). Only the arrival of steam‐driven presses fixed this problem (Doty 1998). Simultaneously, ideas about private property and the scope of government determined whether private entrepreneurs were allowed to compete with governments in the supply of small change (Selgin 2008). Technology and ideas about money engage dialectically. Technological advances shape our ideas about money by making new monetary arrangements feasible. Ideas about desirable outcomes direct innovators to develop new technologies.
- Topic:
- Economics, Science and Technology, Monetary Policy, and Cryptocurrencies
- Political Geography:
- Europe and Global Focus
93. Ten Stablecoin Predictions and Their Monetary Policy Implications
- Author:
- Caitlin Long
- Publication Date:
- 06-2021
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Stablecoins are financial obligations issued on a blockchain. They are generally fully collateralized with either fiat currency deposits at a bank, or with short‐term government bonds held at a custodian. They’re issued only by nonbanks, although FINMA in Switzerland does allow Swiss banks to issue Swiss franc–denominated stablecoins. Usually stablecoins do not pay interest, and they are designed to trade at par with the fiat currency. Because they are issued on a blockchain, they usually settle in minutes, with irreversibility, and — critically — they are “programmable,” which means users can build their own software applications to interact with them.
- Topic:
- Monetary Policy, Banks, and Digital Currency
- Political Geography:
- Global Focus and United States of America
94. Promise and Peril of Digital Money in China
- Author:
- Martin Chorzempa
- Publication Date:
- 06-2021
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Digital currency and fintech have been some of the most powerful forces for freedom and personal liberty in China for the past decade, but their future influence is uncertain. Starting as a disruptive force that gave Chinese unprecedented autonomy in their financial lives, connected either to global cryptocurrency networks or local tech ecosystems built by private firms, a new chapter is beginning. In this new era, one speech urging an emphasis on innovation instead of regulation can seemingly bring the full force of the Chinese state to bear onto a firm that once disrupted state banks with impunity. Technologies like blockchain first embraced by libertarians and cryptography enthusiasts as freeing money from dependence on the state look poised to become tools for governments to increase their ability to monitor and shape financial transactions. Meanwhile, disruptive fintech tools have become symbiotic with the major state banks, which will retain their role as the core of the financial system.
- Topic:
- Economics, Science and Technology, Finance, Digital Currency, and Transactions
- Political Geography:
- China and Asia
95. Financial Freedom and Privacy in the Post‐Cash World
- Author:
- Alex Gladstein
- Publication Date:
- 06-2021
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- The future of currency is digital. The majority of transactions made every day are already electronic and controlled by banks or tech companies. These payments are easily surveillable, confiscatable, and censorable. Physical cash still functions as an essential savings mechanism and privacy tool for millions of people worldwide. With cash, individuals can buy goods and services or save without sharing their identity with a third‐party merchant or custodian. But as banknotes fade from daily use, the future of financial freedom and privacy comes into serious jeopardy.
- Topic:
- Finance, Privacy, Freedom, Digital Currency, and Cash
- Political Geography:
- Global Focus
96. Tunnels, Bunkers, and Escape Hatches: Defending Economic Rights under Fire
- Author:
- Jill Carlson
- Publication Date:
- 06-2021
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Possessions, or property, have been reiterated as a human right over the course of the centuries since Locke first wrote — enshrined in everything from the U.S. Declaration of Independence to the United Nations Declaration on Human Rights (1948: 217, A III). Nevertheless, executives, judiciaries, legislative bodies, and central banks around the world have continually broken their social contract on this front: not only failing to defend the natural rights of possessions and property, but often actively harming individuals’ ability to hold value and to freely transfer and exchange assets. Access to a free, open, and functional financial system is a fundamental human right. One that is continuously violated by states and policymakers globally.
- Topic:
- Economics, Finance, Money, and Economic Rights
- Political Geography:
- South America and Venezuela
97. The Case for Central Bank Digital Currencies
- Author:
- Eswar S. Prasad
- Publication Date:
- 06-2021
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- New financial technologies — including those underpinning cryptocurrencies such as bitcoin — herald broader access to the financial system, quicker and more easily verifiable settlement of transactions and payments, and lower transaction costs. Domestic and cross‐border payment systems are on the threshold of major transformation, with significant gains in speed and lowering of transaction costs on the horizon. The efficiency gains in normal times from having decentralized payment and settlement systems needs to be balanced against their potential technological vulnerabilities and the repercussions of loss of confidence during periods of financial stress.
- Topic:
- Science and Technology, Finance, Central Bank, and Digital Currency
- Political Geography:
- Global Focus
98. Should the State or the Market Provide Digital Currency?
- Author:
- Lawrence H. White
- Publication Date:
- 06-2021
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- Private commercial banks have been providing trusted money to the public for hundreds of years, in the form of banknotes (where allowed) and transferable deposit balances, as an integral part of their business model. Economically, money balances are a private good: they are rival in consumption (you and I can’t both simultaneously spend a given banknote or deposit balance) and excludable in supply (you and your bank can stop me from spending the funds in your wallet or account) (White 1999: 89). Accordingly, the market does not inherently fail to provide money efficiently.
- Topic:
- Markets, Monetary Policy, Economy, State, Banks, and Digital Currency
- Political Geography:
- Global Focus
99. Technology Development of Digital Currency
- Author:
- Neha Narula
- Publication Date:
- 06-2021
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- We often spend a lot of time talking about the regulatory aspects of what a digital currency might look like, or the economic aspects. But if we take a look at the largest companies, the most influential on our ways of life, they’re tech companies. Technology is incredibly important and influences what we can do with policy and what kinds of functionality we can even enable. So, what I hope to tell you today is a little bit about how I’m seeing the technology development of digital currency.
- Topic:
- Development, Science and Technology, Monetary Policy, and Digital Currency
- Political Geography:
- Global Focus
100. Public and Private Money Can Coexist in the Digital Age
- Author:
- Tobias Adrian and Tommaso Mancini-Griffoli
- Publication Date:
- 06-2021
- Content Type:
- Journal Article
- Journal:
- The Cato Journal
- Institution:
- The Cato Institute
- Abstract:
- a card, waving a phone, or clicking a mouse. Or we might hand over notes and coins, though in many countries increasingly less often. Today’s world is characterized by a dual monetary system, involving privately issued money — by banks of all types, telecom companies, or specialized payment providers — built upon a foundation of publicly issued money — by central banks. While not perfect, this system offers significant advantages, including innovation and product diversity, mostly provided by the private sector, and stability and efficiency, ensured by the public sector. These objectives — innovation and diversity on the one hand, and stability and efficiency on the other — are related. More of one usually means less of the other. A tradeoff exists that countries — central banks especially — have to navigate. How much of the private sector to rely upon, versus how much to innovate themselves? Much depends on preferences, available technology, and the efficiency of regulation. So it is natural, when a new technology emerges, to ask how today’s dual monetary system will evolve. If digitalized cash — called central bank digital currency — does emerge, will it displace privately issued money or allow it to flourish? The first is always possible, by way of more stringent regulation. We argue that the second remains possible, by extending the logic of today’s dual monetary system. Importantly, central banks should not face a choice between either offering central bank digital currency, or encouraging the private sector to provide its own digital variant. The two can coincide and complement each other — to the extent central banks make certain design choices and refresh their regulatory frameworks.
- Topic:
- Monetary Policy, Banks, Money, Digital Policy, and Digital Currency
- Political Geography:
- Global Focus