:: Levy Economics Institute of Bard College ::

Economic Policy for the 21st Century

Nearly all Levy Institute research focuses not only on economic analysis, but also on the creation of possible strategies through which policymakers may solve the issue at hand. This program includes research on those macroeconomic policy areas most closely associated with public sector activities: monetary policy and financial institutions, federal budget policy, and the labor market. Examples of studies on monetary policy and financial institutions include explorations of the repercussions the euro’s introduction has had on monetary and fiscal policies and monetary institutions within the European Community; the effectiveness of monetary policy; and Minskyan analyses of the current economic problems in the United States, Japan, and Brazil. Examinations of federal budget policies cover such topics as the effects of budget surpluses on the economy, the need for fiscal expansion to combat economic torpor, and analyses of the Social Security and health care systems.

Programs Federal Budget Policy
Explorations in Theory and Empirical Analysis

Research Group: James K. Galbraith, Dimitri B. Papadimitriou, Rania Antonopoulos, Philip Arestis, William J. Baumol, Jörg Bibow, Barry Bluestone, Robert E. Carpenter, Lekha S. Chakraborty, Pinaki Chakraborty, Sanjaya DeSilva, Steven M. Fazzari, Giuseppe Fontana, Mathew Forstater, Greg Hannsgen, Thomas Karier, Stephanie A. Kelton, Feridoon Koohi-Kamali, William H. Lazonick, Jamee K. Moudud, Mary O'Sullivan, Thomas I. Palley, Robert W. Parenteau, James B. Rebitzer, Malcolm Sawyer, Willem Thorbecke, W. Ray Towle, Éric Tymoigne, Edward N. Wolff, L. Randall Wray, Ajit Zacharias

Program Publications
Working Papers \| August 2009 Market Failure and Land Concentration Utilizing a 2002 household-level World Bank Survey for rural Turkey, this paper explores the link between concentration of land ownership and rural factor markets. We construct a unique index that measures market malfunctioning based on the neoclassical model linking land and labor endowments through factor markets to household income. [more] Working Paper No. 575
Working Papers \| May 2009 New Consensus Macroeconomics: A Critical Appraisal This paper is concerned with the New Consensus Macroeconomics (NCM) in the case of an open economy. It outlines and explains briefly the main elements of and way of thinking about the macroeconomy from the standpoint of both its theoretical and its policy dimensions. [more] Working Paper No. 564
Working Papers \| May 2009 Whither New Consensus Macroeconomics? In the face of the dramatic economic events of recent months and the inability of academics and policymakers to prevent them, the New Consensus Macroeconomics (NCM) model has been the subject of several criticisms. This paper considers one of the main criticisms lodged against the NCM model, namely, the absence of any essential role for the government and fiscal policy. [more] Working Paper No. 563
Policy Notes \| May 2009 The “Unintended Consequences” Game A simple consideration of history tells us that each new piece of legislation contains loopholes that benefit a new class of entrepreneurs; some of these loopholes are small, but others are such that one could drive a bullion-laden truck through them. In this new Policy Note, Martin Shubik suggests creating a “war gaming group” to stress-test all major new legislation, with a first prize of $1 million to be awarded to the competing lawyer or team of lawyers who finds the most egregious loophole—a small amount relative to the potential savings. [more] Policy Note 2009/6
Working Papers \| December 2008 Small Is Beautiful This paper examines the relationship between farm size and yield per acre in Turkey using heretofore untapped data from a 2002 farm-level survey of 5,003 rural households. After controlling for village, household, and agroclimatic heterogeneity, a strong inverse relationship between farm size and yield is found to be prevalent in all regions of Turkey. [more] Working Paper No. 551
Working Papers \| October 2008 Do the Innovations in a Monetary VAR Have Finite Variances? Since Christopher Sims’s “Macroeconomics and Reality” (1980), macroeconomists have used structural VARs, or vector autoregressions, for policy analysis. Constructing the impulse-response functions and variance decompositions that are central to this literature requires factoring the variance-covariance matrix of innovations from the VAR. [more] Working Paper No. 546
Working Papers \| July 2008 The Return of Fiscal Policy The monetarist counterrevolution and the stagflation period of the 1970s were among the theoretical and practical developments that led to the rejection of fiscal policy as a useful tool for macroeconomic stabilization and full employment determination. Recent mainstream contributions, however, have begun to reassess fiscal policy and have called for its restitution in certain cases. [more] Working Paper No. 539
Working Papers \| March 2008 Can Robbery and Other Theft Help Explain the Textbook Currency-demand Puzzle? This paper attempts to explain one version of an empirical puzzle noted by Mankiw (2003): a Baumol-Tobin inventory-theoretic money demand equation predicts that the average adult American should have held approximately $551.05 in currency and coin in 1995, while data show an average of $100. [more] Working Paper No. 529
Working Papers \| December 2007 Promotion Nationale Created in 1961, Promotion Nationale (PN) is an autonomous public entity in charge of mobilizing an underemployed or unemployed workforce for the implementation of labor-intensive projects, calling upon a simple technology likely to provide employment to unskilled workers. It is one of the major programs of social protection in Morocco—the oldest, most important, and best-targeted social program in the country. [more] Working Paper No. 524
Working Papers \| November 2007 Earnings Functions and the Measurement of the Determinants of Wage Dispersion This paper extends the famous Blinder and Oaxaca (1973) discrimination in several directions. First, the wage difference breakdown is not limited to two groups. [more] Working Paper No. 521
Working Papers \| November 2007 Nurkse and the Role of Finance in Development Economics Ragnar Nurkse was one the pioneers in development economics. This paper celebrates the hundredth anniversary of his birth with a critical retrospective of his overall contribution to the field, in particular his views on the importance of employment policy in mobilizing domestic resources and the difficulties surrounding the use of external resources to finance development. [more] Working Paper No. 520
Working Papers \| October 2007 Fiscal Deficit, Capital Formation, and Crowding Out in India This paper analyzes the real (direct) and financial crowding out in India between 1970–71 and 2002–03. Using an asymmetric vector autoregressive (VAR) model, the paper finds no real crowding out between public and private investment; rather, complementarity is observed between the two. [more] Working Paper No. 518
Working Papers \| October 2007 What Are the Relative Macroeconomic Merits and Environmental Impacts of Direct Job Creation and Basic Income Guarantees? There is a body of literature that favors universal and unconditional public assurance policies over those that are targeted and means-tested. Two such proposals—the basic income proposal and job guarantees—are discussed here. [more] Working Paper No. 517
Public Policy Briefs \| October 2007 Globalization and the Changing Trade Debate The failure of the Doha Development Round of World Trade Organization (WTO) negotiations in July 2006 was the first major collapse of a multilateral trade round since World War II. Research Associate Thomas Palley sees the failure as an event that could mark the close of a 60-year era of trade policy largely centered on increasing market access and reducing tariffs, quotas, and subsidies. [more] Public Policy Brief No. 91, 2007
Public Policy Brief Highlights \| October 2007 Globalization and the Changing Trade Debate The failure of the Doha Development Round of World Trade Organization (WTO) negotiations in July 2006 was the first major collapse of a multilateral trade round since World War II. Research Associate Thomas Palley sees the failure as an event that could mark the close of a 60-year era of trade policy largely centered on increasing market access and reducing tariffs, quotas, and subsidies. [more] Public Policy Brief Highlights No. 91A, 2007
Working Papers \| September 2007 The Right to a Job, the Right Types of Projects There is now widespread recognition that in most countries, private-sector investment has not been able to absorb surplus labor. This is all the more the case for poor unskilled people. [more] Working Paper No. 516
Working Papers \| September 2007 The Continuing Legacy of John Maynard Keynes This working paper examines the legacy of Keynes’s General Theory of Employment, Interest, and Money (1936) on the occasion of the 70th anniversary of its publication and the 60th anniversary of Keynes’s death. The paper incorporates some of the latest research by prominent followers of Keynes, presented at the 9th International Post Keynesian Conference in September 2006. [more] Working Paper No. 514
Working Papers \| March 2007 Are the Costs of the Business Cycle “Trivially Small”? In his presidential address to the American Economic Association, Robert Lucas claimed that the welfare costs of the business cycle in the United States equaled .05 percent of consumption. [more] Working Paper No. 492
Working Papers \| February 2007 Land Rental and Sales Markets in Paraguay This paper examines the claim that the land rental market can be an effective means of redistributing access to, if not ownership of, land to the rural poor, using Paraguay as our model. The land sales market is also examined. [more] Working Paper No. 491
Working Papers \| February 2007 Productivity, Technical Efficiency, and Farm Size in Paraguayan Agriculture This essay assesses the relationship between farm size and productivity. Both parametric and nonparametric methods are used to derive efficiency measures. [more] Working Paper No. 490
Working Papers \| November 2006 Methodology and Microeconomics in the Early Work of Hyman P. Minsky This paper reviews the recently published doctoral thesis of Hyman P. Minsky, summarizing its main contributions to methodology and microeconomics. [more] Working Paper No. 480
Working Papers \| August 2006 On the Minskyan Business Cycle The essential insight Minsky drew from Keynes was that optimistic expectations about the future create a margin, reflected in higher asset prices, which makes it possible for borrowers to access finance in the present. In other words, the capitalized expected future earnings work as the collateral against which firms can borrow in financial markets or from banks. [more] Working Paper No. 474
Working Papers \| August 2006 Population Forecasts, Fiscal Policy, and Risk This paper describes how stochastic population forecasts are used to inform and analyze policies related to government spending on the elderly, mainly in the context of the industrialized nations. The paper first presents methods for making probabilistic forecasts of demographic rates, mortality, fertility, and immigration, and shows how these are combined to make stochastic forecasts of population number and composition, using forecasts of the U. [more] Working Paper No. 471
Working Papers \| July 2006 Differing Prospects for Women and Men Although elderly men and women share many of the same problems as they age, their lives are likely to follow different courses. Women are more likely than men to live into old old-age and are more likely to spend part of their young old-age caring for husbands or parents. [more] Working Paper No. 464
Working Papers \| July 2006 Working for a Good Retirement The choice of retirement age is the most important portfolio choice most workers will make. Drawing on the Urban Institute's Dynamic Simulation of Income model (DYNASIM3), this report examines how delaying retirement for nondisabled workers would affect individual retiree benefits, the solvency of the Social Security trust fund, and general revenues. [more] Working Paper No. 463
Working Papers \| July 2006 Wage Growth and the Measurement of Social Security's Financial Condition Government spending on the elderly is projected to increase rapidly as the American population becomes older. As a result, many policymakers and budget analysts are concerned about the continued viability of entitlement programs such as Social Security. [more] Working Paper No. 461
Working Papers \| June 2006 The Minskyan System, Part I This is the first part of a three-part analysis of the Minskyan framework. Via an extensive review of the literature, this paper looks at 12 essential elements necessary to get a good understanding of Minsky's theory, and argues that those elements are central to comprehend how a monetary production economy works. [more] Working Paper No. 452
Working Papers \| May 2006 Extending Minsky’s Classifications of Fragility to Government and the Open Economy Minsky’s classification of fragility according to hedge, speculative, and Ponzi positions is well-known. He wrote about fragile positions of individual firms and of the economy as a whole, with the economy transitioning naturally from a robust financial structure (dominated by hedge units) to a fragile structure (dominated by speculative units). [more] Working Paper No. 450
Working Papers \| May 2006 The Temporal Welfare State: A Cross-national Comparison Welfare states contribute to people’s well-being in many different ways. Bringing all these contributions under a common metric is tricky. [more] Working Paper No. 449
Working Papers \| May 2006 Gibson’s Paradox II The Gibson paradox, long observed by economists and named by John Maynard Keynes (1936), is a positive relationship between the interest rate and the price level. This paper explains the relationship by means of interest-rate, cost-push inflation. [more] Working Paper No. 448
Policy Notes \| April 2006 Debt and Lending Many papers published by the Levy Institute during the last few years have emphasized that the American economy has relied too much on the growth of lending to the private sector, most particularly to the personal sector, to offset the negative effect on aggregate demand of the growing current account deficit. Moreover, this growth in lending cannot continue indefinitely. [more] Policy Note 2006/4
Policy Notes \| April 2006 Twin Deficits and Sustainability In the mid-to-late 1980s, the American economy simultaneously produced—for the first time in the postwar period—huge federal budget deficits as well as large current account deficits, together known as the “twin deficits”. This generated much debate and hand-wringing, most of which focused on supposed “crowding-out” effects. [more] Policy Note 2006/3
Working Papers \| March 2006 Tinbergen Rules the Taylor Rule This paper elaborates a simple model of growth with a Taylor-like monetary policy rule that includes inflation targeting as a special case. When the inflation process originates in the product market, inflation targeting locks in the unemployment rate prevailing at the time the policy matures. [more] Working Paper No. 444
Working Papers \| February 2006 Personality and Earnings This paper studies personality as a potential explanation for wage differentials between apparently similar workers. This follows initial studies by Jencks (1979) that suggest that certain personality traits, such as industriousness and leadership, have an impact on earnings. [more] Working Paper No. 443
Policy Notes \| February 2006 The Fiscal Facts Today’s federal budget deficits are a preoccupation of many American citizens and more than a few political leaders. Is the American government going bankrupt? [more] Policy Note 2006/2
Working Papers \| January 2006 Keynes's Approach to Money This paper first examines two approaches to money adopted by John Maynard Keynes in his General Theory (GT). The first is the more familiar “supply and demand” equilibrium approach of Chapter 13 incorporated within conventional macroeconomics textbooks. [more] Working Paper No. 438
Working Papers \| January 2006 Speculation, Liquidity Preference, and Monetary Circulation The sharp exchanges that Keynes had with some of his critics on the loanable funds theory made it harder to appreciate the degree to which his thought was continuous with the tradition of monetary analysis that emanates from Wicksell, of which Keynes’s A Treatise on Money was a part. In the aftermath of the General Theory (GT), many of Keynes’s insights in the Treatise were lost or abandoned because they no longer fit easily in the truncated theoretical structure he adopted in his latter work. [more] Working Paper No. 435
Public Policy Brief Highlights \| January 2006 Reforming Deposit Insurance The Federal Deposit Insurance Corporation (FDIC) currently insures bank deposit balances up to $100,000. According to some observers, statutory protection creates moral hazard problems for insurers because it allows banks to engage in risky activities. [more] Public Policy Brief Highlights No. 83A, 2006
Policy Notes \| September 2005 Social Security's 70th Anniversary Social Security turned 70 on August 14, although no national celebration marked the occasion. Rather, our top policymakers in Washington continue to suggest that the system is “unsustainable. [more] Policy Note 2005/6
Public Policy Briefs \| August 2005 The Ownership Society As his new term begins, President George W. Bush has been trying to focus his domestic agenda on what he calls the “ownership society,” a sweeping vision of an America in which more citizens would hold significant assets and be free to make their own choices about providing for their health care and retirement, and educating their children. [more] Public Policy Brief No. 82, 2005
Public Policy Brief Highlights \| August 2005 The Ownership Society As his new term begins, President George W. Bush has been trying to focus his domestic agenda on what he calls the “ownership society,” a sweeping vision of an America in which more citizens would hold significant assets and be free to make their own choices about providing for their health care and retirement, and educating their children. [more] Public Policy Brief Highlights No. 82A, 2005
Public Policy Briefs \| June 2005 Breaking Out of the Deficit Trap For some time, Levy Institute scholars have been engaged with issues related to the current account, government, and private sector balances. We have argued that the existing imbalances in these accounts are unsustainable and will ultimately present a serious challenge to the performance of the American economy. [more] Public Policy Brief No. 81, 2005
Public Policy Brief Highlights \| June 2005 Breaking Out of the Deficit Trap For some time, Levy Institute scholars have been engaged with issues related to the current account, government, and private sector balances. We have argued that the existing imbalances in these accounts are unsustainable and will ultimately present a serious challenge to the performance of the American economy. [more] Public Policy Brief Highlights No. 81A, 2005
Policy Notes \| April 2005 Is the Dollar at Risk? A massive fiscal stimulus and, until recently, aggressive monetary easing have been successful in raising bond and real estate prices to unprecedented levels, inducing a credit boom that has prevented private consumption from falling. While it might still be too early to say that it worked, the strategy has indeed, for the time being, prevented the United States economy from slipping into a severe depression after the collapse of the stock market at the turn of the millennium. [more] Policy Note 2005/3
Policy Notes \| February 2005 Manufacturing a Crisis For seven decades, the far right has never veered from its avowed mission to gut America’s most comprehensive, successful, and popular safety net: Social Security. While it had won a few small battles (most notably, the Greenspan Commission’s huge 1983 payroll tax hikes and two-year increase in the normal retirement age), its efforts never gained much political traction before 2000. [more] Policy Note 2005/2
Working Papers \| November 2004 Measuring Capacity Utilization in OECD Countries This paper derives measures of potential output and capacity utilization for a number of OECD countries, using a method based on the cointegration relation between output and the capital stock. The intuitive idea is that economic capacity (potential output) is the aspect of output that co-varies with the capital stock over the long run. [more] Working Paper No. 415
Working Papers \| October 2004 Visions and Scenarios Ecological economics is a transdisciplinary alternative to mainstream environmental economics. Attempts have been made to outline a methodology for ecological economics and it is probably fair to say that, at this point, ecological economics takes a "pluralistic" approach. [more] Working Paper No. 413
Book Series \| August 2004 Induced Investment and Business Cycles This unique volume presents, for the first time in publication, the original doctoral thesis of Hyman P. Minsky, one of the most innovative thinkers on financial markets. [more] Book Series, August 2004
Public Policy Briefs \| June 2004 The Sustainability of Economic Recovery in the United States A rebound of consumption, investment, and consumer confidence in the second half of 2003 has raised hopes that the United States' recovery from the 2001 recession is on a sustainable course. According to this brief by Philip Arestis and Elias Karakitsos, however, the trend in the short-term factors affecting the economy has changed for the better, but long-term factors remain at risk. [more] Public Policy Brief No. 77, 2004
Public Policy Brief Highlights \| June 2004 The Sustainability of Economic Recovery in the United States A rebound of consumption, investment, and consumer confidence in the second half of 2003 has raised hopes that the United States' recovery from the 2001 recession is on a sustainable course. According to this brief by Philip Arestis and Elias Karakitsos, however, the trend in the short-term factors affecting the economy has changed for the better, but long-term factors remain at risk. [more] Public Policy Brief Highlights No. 77A, 2004
Policy Notes \| May 2004 Those “D” Words Recent economic commentary has been filled with “D” words: deficits, debt, deflation, depreciation. Deficits—budget and trade—are of the greatest concern and may be on an unsustainable course, as federal and national debt grow without limit. [more] Policy Note 2004/2
Book Series \| April 2004 After the Bell Since the publication of the Coleman report in the United States many decades ago, it has been widely accepted that the evidence that schools are marginal in the grand scheme of academic achievement is conclusive. Despite this, educational policy across the world remains focused almost exclusively on schools. [more] Book Series, April 2004
Working Papers \| April 2004 Some Simple, Consistent Models of the Monetary Circuit We address the finance motive and the determination of profits in the Monetary Theory of Production associated with the Circuitist School. We show that the "profit paradox" puzzle addressed by many authors who adopt this approach can be solved by integrating a simple Circuit model with a consistent set of stock-flow accounts. [more] Working Paper No. 405
Public Policy Brief Highlights \| November 2003 Understanding Deflation Most recent discussions of deflation seem to overlook the main dangers posed by a deflationary economy and appear to offer superficial solutions. In this brief, the authors argue that, barring drastic changes in asset and output prices, deflation itself is not the main problem, but rather the recessionary conditions that sometimes give rise to deflation. [more] Public Policy Brief Highlights No. 74A, 2003
Public Policy Briefs \| November 2003 Understanding Deflation Most recent discussions of deflation seem to overlook the main dangers posed by a deflationary economy and appear to offer superficial solutions. In this brief, the authors argue that, barring drastic changes in asset and output prices, deflation itself is not the main problem, but rather the recessionary conditions that sometimes give rise to deflation. [more] Public Policy Brief No. 74, 2003
Policy Notes \| September 2003 Is International Growth the Way Out of U.S. Current Account Deficits? The current account deficit of the United States has been growing steadily as a share of GDP for more than a decade. It is now at an all-time high, over 5 percent of GDP. [more] Policy Note 2003/6
Policy Notes \| September 2003 Deflation Worries For the first time since the 1930s, many worry that the world's economy faces the prospect of deflation—accompanied by massive job losses—on a global scale. In a rather hopeful sign, policymakers from Euroland to Japan to America all seem to recognize the threat that falling prices pose to markets. [more] Policy Note 2003/5
Public Policy Brief Highlights \| August 2003 What Is the American Model Really About? The “American Model” serves as a point of reference in discussions of economic policy around the world, especially in Europe. Many claim that the American version of the free market represents an ideal type—it is the highest form of capitalism. [more] Public Policy Brief Highlights No. 72A, 2003
Public Policy Briefs \| August 2003 What Is the American Model Really About? The “American Model” serves as a point of reference in discussions of economic policy around the world, especially in Europe. Many claim that the American version of the free market represents an ideal type—it is the highest form of capitalism. [more] Public Policy Brief No. 72, 2003
Working Papers \| May 2003 The Case for Fiscal Policy This paper reconsiders the case for the use of fiscal policy based on a "functional finance" approach that advocates the use of fiscal policy to secure high levels of demand in the context of private aggregate demand, which would otherwise be too low. This "functional finance" view means that any budget deficit should be seen as a response to the perceived excess of private savings over investment at the desired level of economic activity. [more] Working Paper No. 382
Working Papers \| May 2003 Reinventing Fiscal Policy Recent developments in macroeconomic policy, in terms of both theory and practice, have elevated monetary policy while downgrading fiscal policy. Monetary policy has focused on the setting of interest rates as the key policy instrument, along with the adoption of inflation targets and the use of monetary policy to target inflation. [more] Working Paper No. 381
Working Papers \| May 2003 How Long Can the U.S. Consumers Carry the Economy on Their Shoulders? The consumer has been on a tightrope since the bursting of the "new economy" bubble, as losses in equity markets have been partly offset by gains in real estate and fiscal support and mortgage refinancing have partly offset increased consumer cautiousness. The consumer will remain on a tightrope in the near future, but if the economy were to stumble, the fragile consumer might contribute to turning the downturn into a deep and protracted recession. [more] Working Paper No. 380
Working Papers \| May 2003 The Conditions for Sustainable U.S. Recovery The anemic U.S. [more] Working Paper No. 378
Policy Notes \| January 2003 The Big Fix Keynesian economics is back. As John Maynard Keynes stressed, total spending matters—and not who does it or for what purpose. [more] Policy Note 2003/1
Public Policy Brief Highlights \| November 2002 Physician Incentives In Managed Care Organizations This brief considers the interaction between physician incentive systems and product market competition in the delivery of medical services via managed care organizations. At the center of the analysis is the process by which health maintenance organizations (HMOs) assemble physician networks and the role these networks play in the competition for customers. [more] Public Policy Brief Highlights No. 70A, 2002
Public Policy Briefs \| November 2002 Physician Incentives In Managed Care Organizations This brief considers the interaction between physician incentive systems and product market competition in the delivery of medical services via managed care organizations. At the center of the analysis is the process by which health maintenance organizations (HMOs) assemble physician networks and the role these networks play in the competition for customers. [more] Public Policy Brief No. 70, 2002
Working Papers \| October 2002 Threshold Effects in the U.S. Budget Deficit This paper contributes to the debate on whether the United States' large federal budget deficits are sustainable in the long run. The authors model the government deficit per capita as a threshold autoregressive process, finding evidence that the deficit is sustainable in the long run and that economic policymakers will intervene to reduce the per capita deficit only when it reaches a certain threshold. [more] Working Paper No. 358
Working Papers \| September 2002 Managed Care, Physician Incentives, and Norms of Medical Practice The incentive contracts that managed care organizations write with physicians have generated considerable controversy. Critics fear that if informational asymmetries inhibit patients from directly assessing the quality of care provided by their physician, competition will lead to a "race to the bottom" in which managed care plans induce physicians to offer only minimal levels of care. [more] Working Paper No. 353
Working Papers \| September 2002 Critical Realism and the Political Economy of the Euro This paper is concerned with two issues. First, it discusses some of the main problems and inferences the methodological approach of critical realism raises for empirical work in economics, while considering an approach adopted to try to overcome these problems. [more] Working Paper No. 352
Working Papers \| June 2002 Asset Prices, Liquidity Preference, and the Business Cycle In his Treatise on Money, John Maynard Keynes relied on two different premises to argue that the interest rate need not rise with rising levels of expenditure. One of these was the elasticity of the money supply, and the other was the interaction between financial and industrial circulation. [more] Working Paper No. 348
Working Papers \| June 2002 What Has Happened to Monetarism? It is widely perceived that today's conventional monetary wisdom, and the common practice of monetary policy based thereupon, is essentially "monetarist" by nature, if not by name. One objective of this paper is to assess whether monetarism has had a lasting effect on the theory and practice of monetary policy; another is to scrutinize the key dividing lines between Milton Friedman's monetary thought and that of John Maynard Keynes. [more] Working Paper No. 347
Working Papers \| June 2002 CRA's 25th Anniversary This paper focuses on the past, present, and future rules and regulations implementing CRA as developed, applied, and enforced by the federal bank and thrift regulators. The past rules and regulations refer to those in effect during the law's first 18 years, through 1995, when CRA underwent its first major reform. [more] Working Paper No. 346
Working Papers \| October 2001 Incentives in HMOs We studied the effect of physician incentives in an HMO network. Physician incentives are controversial because they may induce doctors to make treatment decisions that differ from those they would choose in the absence of incentives. [more] Working Paper No. 340
Working Papers \| October 2001 Uncertainty, Conventional Behavior, and Economic Sociology This paper addresses the problem of the conceptualization of social structure and its relationship to human agency in economic sociology. The background is provided by John Maynard Keynes's observations on the effects of uncertainty and conventional behavior on the stock market; the analysis consists of a comparison of the social ontologies of the French Intersubjectivist School and the Economics as Social Theory Project in the light of these observations. [more] Working Paper No. 339
Policy Notes \| October 2001 Are We All Keynesians (Again)? It is now widely recognized that economists and policymakers alike had been living a 30-year fantasy. The best government is not that which governs least. [more] Policy Note 2001/10
Public Policy Brief Highlights \| June 2001 Campaign Contributions, Policy Decisions, and Election Outcomes Proposals for campaign finance reform are essentially based on the belief that political influence can be bought with financial donations to a candidate’s campaign. But do contributions really influence the decisions of legislators once they are in office? In this brief, Christopher Magee examines the link between campaign donations and legislators’ actions. [more] Public Policy Brief Highlights No. 64A, 2001
Public Policy Briefs \| June 2001 Campaign Contributions, Policy Decisions, and Election Outcomes Proposals for campaign finance reform are essentially based on the belief that political influence can be bought with financial donations to a candidate’s campaign. But do contributions really influence the decisions of legislators once they are in office? In this brief, Christopher Magee examines the link between campaign donations and legislators’ actions. [more] Public Policy Brief No. 64, 2001
Policy Notes \| June 2001 Killing Social Security Softly with Faux Kindness The President’s commission claims that the Social Security program is “unsustainable” and requires a complete “overhaul.” It also claims that the program is a bad deal for women and minorities. [more] Policy Note 2001/6
Policy Notes \| May 2001 The Backward Art of Tax Cutting This policy note examines the case for large tax cuts, focusing on the issues surrounding the purpose and overall size of the needed cut. Although Congress has passed a significant package of tax relief, many have worried that the budget surplus on which it was based will never appear. [more] Policy Note 2001/5
Working Papers \| March 2001 Part-year Operation in 19th Century American Manufacturing Using unpublished data contained in samples from the manuscripts of the 1870 and 1880 censuses of manufactures—the earliest comprehensive estimates available—this study examines the extent and correlates of part-year manufacturing during the late 19th century. While the typical manufacturing plant operated full-time, part-year operation was not uncommon; its likelihood of this varied across industries and locations and with plant characteristics. [more] Working Paper No. 327
Policy Notes \| February 2001 Fiscal Policy for the Coming Recession Growing government surpluses, a ballooning trade deficit, and the resulting growth in private sector debt have placed the United States' economy in a precarious position. Papadimitriou and Wray agree with President Bush that fiscal stimulus is necessary to reinvigorate the economy; in the current economic environment, monetary policy will not work. [more] Policy Note 2001/2
Book Series \| February 2001 Corporate Governance and Sustainable Prosperity How can we explain the persistent worsening of the income distribution in the United States in the 1980s and 1990s? What are the prospects for the reemergence of sustainable prosperity in the American economy over the next generation? In addressing these issues, this book focuses on the microeconomics of corporate investment behavior, especially as reflected in investments in integrated skill bases, and the macroeconomics of household saving behavior, especially as reflected in the growing problem of intergenerational dependence of retirees on employees. Specifically, the book analyzes how the combines pressures of excessive corporate growth, international competition, and intergenerational dependence have influenced corporate investment behavior over the past two decades. [more] Book Series, February 2001
Policy Notes \| January 2001 Fiscal Policy to the Rescue The United States' economic expansion of the past eight years has been fueled by a rise in private sector indebtedness. In 1997 the private sector spending exceeded income for the first time since 1952, and since then the gap between the two has risen markedly. [more] Policy Note 2001/1
Working Papers \| December 2000 Origins of the GATT Fiftieth-anniversary explanations for the efficacy of the GATT imply that the institution's longevity is testimony to the free trade principles upon which it is based. In this light, the predominantly American architects of the system figure as free trade visionaries who benevolently imposed postwar institutions of international cooperation on their war-torn allies. [more] Working Paper No. 318
Working Papers \| November 2000 Productivity in Manufacturing and the Length of the Working Day Data from the manuscript census of manufacturing are used to estimate the effects of the length of the working day on output and wages. We find that the elasticity of output with respect to daily hours worked was positive but less than one—implying diminishing returns to increases in working hours. [more] Working Paper No. 317
Working Papers \| November 2000 Harrod versus Thirlwall This paper contrasts the different approaches to export-led growth used by Harrod and Thirlwall. It argues that, unlike Thirlwall's model, Harrod emphasized the importance of both demand- and supply-sides in his analysis of growth. [more] Working Paper No. 316
Working Papers \| October 2000 Crowding In or Crowding Out? This paper investigates the effects of budget deficits within a classical-Harrodian framework in a closed economy. In this framework, growth and cycles are endogenous, underutilized capacity is a recurrent phenomenon, capacity utilization fluctuates around the normal level in the long run, and unemployment is persistent. [more] Working Paper No. 315
Working Papers \| August 2000 Profits Profits are the incentive for production and therefore employment in almost all of the world's economies; they also may represent exploitation of workers and consumers. Jerome Levy, using a complex process, derived the profits identity during the years 1908–1914. [more] Working Paper No. 309
Policy Notes \| July 2000 Why Does the Fed Want Slower Growth? The Fed has raised interest rates six times in the past year to slow the economy, in the belief that unemployment is too low. There is scant evidence, however, that low unemployment leads to inflation, that the economy is in danger of overheating, or that higher interest rates will reduce inflation. [more] Policy Note 2000/7
Policy Notes \| June 2000 Drowning in Debt The economic expansion in the United States has been driven to an unusual extent by falling personal saving and rising borrowing by the private sector. If this process goes into reverse, as has happened under comparable circumstances in other countries, there will be severe recession unless there is a big relaxation in fiscal policy. [more] Policy Note 2000/6
Working Papers \| June 2000 "It" Happened, but Not Again This paper asks two questions: First, can we explain Japan's ongoing financial crisis by means of an institutional analysis similar to the one Hyman P. Minsky applied to the American economy during the postwar period? Second, what are the implications of this analysis for what is going on in the Canadian and American economies today?To answer the first question, we develop an interpretation of Japan's postwar history, in particular, the evolution of its financial institutions that we believe fits Minsky's institutional analysis. [more] Working Paper No. 303
Working Papers \| June 2000 Kaleckian Models of Growth in a Stock-flow Monetary Framework This paper presents a simple growth model grounded in a stock-flow monetary accounting framework. The framework ensures that all stocks and all flows are accounted for and that the real and financial sides of the economy are coherent with one another. [more] Working Paper No. 302
Working Papers \| May 2000 Trends in Direct Measures of Job Skill Requirements It is commonly assumed that jobs in the United Sates require ever greater levels of skill and, more strongly, that this trend is accelerating as a result of the diffusion of information technology. This has led to substantial concern over the possibility of a growing mismatch between the skills workers possess and the skills employers demand, reflected in debates over the need for education reform and the causes of the growth in earnings inequality. [more] Working Paper No. 301
Working Papers \| March 2000 The Public Commodities Problem The decision about how much to spend on a public program depends on the answers to two questions: Should the government pursue the goal of this program? Given that the program's goal should be adopted, what is the optimal level of spending to achieve it? If the answer to the first question is yes, it might seem desirable to set spending at the optimal level to achieve the goal. However, spending is often not set at that level, and there is likely to be an underfunding bias. [more] Working Paper No. 299
Public Policy Brief Highlights \| February 2000 Financing Long-Term The nation is not prepared to deal with the jump in expenditures for long-term care that will come with the aging of the baby-boom generation. Only a small part of that care is paid for privately (out-of-pocket or through private insurance). [more] Public Policy Brief Highlights No. 59A, 2000
Public Policy Briefs \| February 2000 Financing Long-Term Care The nation is not prepared to deal with the jump in expenditures for long-term care that will come with the aging of the baby-boom generation. Only a small part of that care is paid for privately (out-of-pocket or through private insurance). [more] Public Policy Brief No. 59, 2000
Public Policy Briefs \| December 1999 A New Approach to Tax-Exempt Bonds The current system of tax-exempt bond financing is inefficient and inequitable because a large portion of the federal subsidy provided by the tax exemption does not reach state and local governments and accrues instead to the wealthiest investors. In addition, the current system excludes large institutional investors, both domestic and foreign, with their huge pools of capital, and it lacks the stable oversight characteristic of the taxable bond market. [more] Public Policy Brief No. 58, 1999
Public Policy Brief Highlights \| December 1999 A New Approach to Tax-Exempt Bonds The current system of tax-exempt bond financing is inefficient and inequitable because a large portion of the federal subsidy provided by the tax exemption does not reach state and local governments and accrues instead to the wealthiest investors. In addition, the current system excludes large institutional investors, both domestic and foreign, with their huge pools of capital, and it lacks the stable oversight characteristic of the taxable bond market. [more] Public Policy Brief Highlights No. 58A, 1999
Working Papers \| December 1999 Why Do Political Action Committees Give Money to Candidates? This paper examines political action committees' motivations for giving campaign contributions to candidates for political office. First, the paper estimates the effect of campaign contributions received by candidates on the outcomes of the 1996 elections to the United States House of Representatives. [more] Working Paper No. 292
Working Papers \| October 1999 Financing Long-Term Care The nation is ill-prepared to finance the quantum jump in long-term care spending that is on its way as the baby boom ages. By default rather than by design, Medicaid has become the main source of funds for long-term care. [more] Working Paper No. 283
Policy Notes \| October 1999 Social Security Privatization Would privatization yield sufficient benefits to support low-income retirees and satisfy all others? Does a focus on private management of assets [more] Policy Note 1999/10
Policy Notes \| August 1999 More Pain, No Gain Neither the Breaux plan nor President Clinton’s proposal for “saving” Social Security promises much gain, but the Breaux plan, unlike the president's proposal, would inflict real pain in the form of reduced benefits. [more] Policy Note 1999/8 Revision
Public Policy Brief Highlights \| August 1999 Does Social Security Need Saving? Projections of an impending crisis in financing Social Security depend on unduly pessimistic assumptions about basic demographic and economic variables. Moreover, even if the assumptions are accepted, the projected gap between Social Security revenues and expenditures would not constitute a “crisis” and could be eliminated with relatively simple adjustments when it occurs. [more] Public Policy Brief Highlights No. 55A, 1999
Public Policy Briefs \| August 1999 Does Social Security Need Saving? Projections of an impending crisis in financing Social Security depend on unduly pessimistic assumptions about basic demographic and economic variables. Moreover, even if the assumptions are accepted, the projected gap between Social Security revenues and expenditures would not constitute a “crisis” and could be eliminated with relatively simple adjustments when it occurs. [more] Public Policy Brief No. 55, 1999
Policy Notes \| July 1999 Capital Income Taxes and Economic Performance Tax reform that reduces tax rates on capital income, no matter how successful it is in reducing the user cost of capital, will have at best minimal effects on capital formation and output and therefore on the growth of the United States' economy. [more] Policy Note 1999/7
Working Papers \| July 1999 Minsky's Analysis of Financial Capitalism In this paper, the authors discuss Minsky's analysis of the evolution of one variety of capitalism—financial capitalism—which developed at the end of the nineteenth century and was the dominant form of capitalism in the developed countries after World War II. Minsky's approach, like those of Schumpeter and Veblen, emphasized the importance of market power in this stage of capitalism. [more] Working Paper No. 275
Working Papers \| May 1999 Can Social Security Be Saved? The first part of this paper is an overview of projections of Social Security's future and an explanation of why the projections have led many to believe there is a looming financial crisis. We argue that any problems to be faced are far down the road and not severe enough to justify the use of the word "crisis. [more] Working Paper No. 270
Policy Notes \| May 1999 How Can We Provide for the Baby Boomers in Their Old Age? The search for the solution to the problems faced by the Social Security system should focus not on how to amend OASDI but on how best to achieve faster long-term economic growth. Achieving such growth is better left to the purview of fiscal and monetary policy, not the OASDI system. [more] Policy Note 1999/5
Policy Notes \| March 1999 Surplus Mania A federal government surplus has finally been achieved, and it has been met with pronouncements that it is a great gift for the future and with arguments about what to do with it. However, the surplus will be short-lived, it will depress economic growth, and, in any case, surpluses cannot be “used” for anything. [more] Policy Note 1999/3
Working Papers \| March 1999 Real Exchange Rates and the International Mobility of Capital This paper demonstrates that the terms of trade are determined by the equalization of profit rates across international regulating capitals, for socially determined national real wages. This provides a classical/Marxian basis for the explanation of real exchange rates, based on the same principle of absolute cost advantage which rules national prices. [more] Working Paper No. 265
Working Papers \| February 1999 From Common Market to EMU This paper traces the history and the institutional background of European integration to the establishment of the economic and monetary union in the European Union (EU). After the establishment of the European Economic Community (EEC) in the late 1950s, attempts at monetary integration, and ultimately monetary union, tended to assume importance only as a result of financial crisis and then returned to being a vague objective as soon as the crisis recedes. [more] Working Paper No. 263
Policy Notes \| February 1999 The Emperor Has No Clothes If you were to write yourself IOUs to provide for your retirement and put them in a safety deposit box, would you rest comfortably, assured that you would be able to purchase all the necessities of life in 2020? Well, President Clinton’s proposal is even worse. [more] Policy Note 1999/2
Policy Notes \| January 1999 How Negative Can U.S. Saving Get? In 1998 the volume of private spending in the United States rose by almost twice the increase in disposable income. The impact of this excess private spending financed by increased net borrowing has been profound; without it, the economy would have stagnated. [more] Policy Note 1999/1
Working Papers \| January 1999 Theories of Value and the Monetary Theory of Production This paper extends earlier work that argued that liquidity preference theory should be interpreted as a theory of value. Here I will argue that two theories of value are needed for analysis of a monetary production economy: the labor theory of value and the liquidity preference theory of value. [more] Working Paper No. 261
Public Policy Briefs \| December 1998 Regulating HMOs HMO medicine sets up an inevitable conflict between the physicians’ traditional fiduciary role and the financial interests of the health plan and its physicians. Regulatory interventions, such as the formulation of rules regarding clinical practice, put government in a micromanagement role it cannot hope to perform well. [more] Public Policy Brief No. 47, 1998
Public Policy Brief Highlights \| December 1998 Regulating HMOs HMO medicine sets up an inevitable conflict between the physicians’ traditional fiduciary role and the financial interests of the health plan and its physicians. Regulatory interventions, such as the formulation of rules regarding clinical practice, put government in a micromanagement role it cannot hope to perform well. [more] Public Policy Brief Highlights No. 47A, 1998
Working Papers \| October 1998 Economic Time This paper argues that economists require a particular concept of time to develop theory with greater explanatory power in describing and analyzing the sort of economy in which we are primarily interested--the monetary economy usually termed capitalism. Economists of various persuasions have recognized the importance of a concept of time, but we argue that a very specific concept is required. [more] Working Paper No. 255
Working Papers \| October 1998 Toward a New Instrumental Macroeconomics This paper argues that the ideas of Abba Lerner and Adolph Lowe contain overlapping and complementary insights and themes that may contribute to the development of a new approach to macroeconomics. They also have rather specific practical policy implications. [more] Working Paper No. 254
Working Papers \| September 1998 Modern Money All modern economies have a "chartalist" or "state" money, as acknowledged by Friedrich Knapp and John Maynard Keynes. In this paper, I examine the "history" of money to shed light on its origins. [more] Working Paper No. 252
Working Papers \| September 1998 Paul Davidson's Economics Paul Davidson is one of the best known and most influential post-Keynesian economists. He has insisted throughout his career that economists should focus on real-world problems and that the purpose of economic policy is to help society become more humane and civilized. [more] Working Paper No. 251
Working Papers \| September 1998 Explaining Long-Term Exchange Rate Behavior in the United States and Japan Conventional exchange rate models are based on the fundamental hypothesis that, in the long run, real exchange rates will move in such a way as to make countries equally competitive. Thus they assume that, in the long run, trade between countries will be roughly balanced. [more] Working Paper No. 250
Working Papers \| August 1998 Can Expenditure Cuts Eliminate a Budget Deficit? Australian governments since the late 1970s have attempted to eliminate the fiscal deficit through reductions in expenditure. These efforts have failed. [more] Working Paper No. 248
Working Papers \| August 1998 "Inability to Be Self-Reliant" As an Indicator of U.S. Poverty The official poverty measure is based on the premise that all families should have sufficient income from either their own efforts or government support to boost them above a family-size-specific threshold. Given the current policy emphasis on self-reliance and a smaller role for government, this measure appears to have less policy relevance now than in prior years. [more] Working Paper No. 247
Public Policy Brief Highlights \| July 1998 Side Effects of Progress Why does a dynamic growing economy have a persistent long-term unemployment problem? Research Associates Baumol and Wolff have isolated one cause. Although technological change, the engine of growth and economic progress, may not affect or may even increase the total number of jobs available, the fact that it creates a demand for new skills and makes other skills obsolete can cause an increase in the overall rate of unemployment and the length of time during which an unemployed worker is between jobs. [more] Public Policy Brief Highlights No. 41A, 1998
Public Policy Briefs \| July 1998 Side Effects of Progress Why does a dynamic growing economy have a persistent long-term unemployment problem? Research Associates Baumol and Wolff have isolated one cause. Although technological change, the engine of growth and economic progress, may not affect or may even increase the total number of jobs available, the fact that it creates a demand for new skills and makes other skills obsolete can cause an increase in the overall rate of unemployment and the length of time during which an unemployed worker is between jobs. [more] Public Policy Brief No. 41, 1998
Policy Notes \| July 1998 Goldilocks and the Three Bears Unlike the Papa, Mama, and Baby Bears faced by the storybook Goldilocks, our Goldilocks faced three ferocious grizzlies: a cascading, global financial crisis, global deflation and excess capacity (or insufficient demand), and a domestic fiscal surplus in conjunction with record private deficits. [more] Policy Note 1998/7
Working Papers \| July 1998 Optimal Financing by Money and Taxes of Productive and Unproductive Government Spending This paper contains an investigation of the effects of different means of financing government spending on economic growth, inflation, and welfare. In this setting, two different types of government spending are considered: productive expenditures that provide services to the private sector in its production activities, and unproductive expenditures that have no direct influence on the private economy. [more] Working Paper No. 241
Working Papers \| July 1998 An Ethical Framework for Cost-Effective Medicine HMO medicine has been effective in controlling once-runaway health care costs. But it sets up inevitable conflict between patient care and the financial well-being of the health plan and of its employee or contract physicians. [more] Working Paper No. 239
Policy Notes \| June 1998 What to Do with the Surplus Neither Congress nor the president is on the right track. Rather than protecting the surplus, we should be increasing spending and cutting taxes to contain the looming world recession. [more] Policy Note 1998/6
Public Policy Brief Highlights \| May 1998 Overcoming America’s Infrastructure Deficit Condemned bridges, dilapidated school buildings, contaminated water supplies, and other infrastructure shortcomings threaten American growth, productivity, and prosperity. The authors of this brief propose a plan for financing infrastructure projects that is designed to have minimal effect on the federal budget and to promote sound fiscal operation. [more] Public Policy Brief Highlights No. 40A, 1998
Public Policy Briefs \| May 1998 Overcoming America’s Infrastructure Deficit Condemned bridges, dilapidated school buildings, contaminated water supplies, and other infrastructure shortcomings threaten American growth, productivity, and prosperity. The authors of this brief propose a plan for financing infrastructure projects that is designed to have minimal effect on the federal budget and to promote sound fiscal operation. [more] Public Policy Brief No. 40, 1998
Policy Notes \| May 1998 The Fed Should Lower Interest Rates More Some analysts have argued against monetary ease, fearing that it might fuel a speculative boom. Alas, given the recent substantial “market correction,” this objection may safely be put away. [more] Policy Note 1998/5
Working Papers \| January 1998 The Kaleckian Analysis and the New Millennium Visiting Scholar Malcolm Sawyer, of the University of Leeds, commemorates Michal Kalecki's 100th birthday by considering how Kalecki's macroeconomic analysis of developed capitalist economies should be adapted in light of the institutional changes that have occurred since he did his major work. Sawyer believes that although Kalecki's reputation rests on his theoretical work, his theorizing was firmly based on his perceptions of the institutional, political, and social realities of the economies he sought to analyze. [more] Working Paper No. 223
Working Papers \| January 1998 Money and Taxes Senior Scholar L. Randall Wray traces the development of the chartalist approach to money from Adam Smith, Georg Friedrich Knapp, and John Maynard Keynes to the later theorists, including Hyman Minsky, Abba Lerner, and Kenneth Boulding, who follow the endogenous money approach. [more] Working Paper No. 222
Public Policy Briefs \| December 1997 Investment in Innovation Since the 1970s corporate America has become obsessed with shedding employees to cut costs and with distributing revenue to stockholders. However, the way for it to regain its competitive edge and thus to restore the promise of secure and remunerative employment for its workers is to reform its system of governance. [more] Public Policy Brief No. 37, 1997
Public Policy Brief Highlights \| December 1997 Investment in Innovation Since the 1970s corporate America has become obsessed with shedding employees to cut costs and with distributing revenue to stockholders. However, the way for it to regain its competitive edge and thus to restore the promise of secure and remunerative employment for its workers is to reform its system of governance. [more] Public Policy Brief Highlights No. 37A, 1997
Working Papers \| December 1997 Policy Innovation As a Discovery Procedure Economist Adolph Lowe's instrumental analysis examines the process of policy formulation as a regressive procedure of discovery. Taking as given a predetermined desired end state, the task of an innovator is to discover the technical and social path from the present position to the end state. [more] Working Paper No. 221
Working Papers \| November 1997 An Efficiency Argument for the Guaranteed Income Authors Karl Widerquist and Michael A. Lewis use a "multischool" approach to poverty policy, asking the following question: Given the many proposed causes for poverty, and the conflicting theories about how potential solutions would work, what conclusions can we draw about policy? They conclude that the guaranteed income is the most efficient and comprehensive policy to address poverty. [more] Working Paper No. 212
Working Papers \| October 1997 On Budget Deficits and Capital Expenditure No further information available. [more] Working Paper No. 208
Public Policy Briefs \| September 1997 Safeguarding Social Security The falling ratio of workers to retirees in the United States has raised concerns about Social Security’s ability to continue to provide a base level of support for all retired workers and to remain in balance with all of government's other fiscal obligations. Of alternative plans that have been proposed to safeguard the system, Walter Cadette argues against radical revamping through privatization and suggests instead minor modifications in the existing tax and benefits structure. [more] Public Policy Brief No. 34, 1997
Public Policy Brief Highlights \| September 1997 Safeguarding Social Security The falling ratio of workers to retirees in the United States has raised concerns about Social Security’s ability to continue to provide a base level of support for all retired workers and to remain in balance with all of government's other fiscal obligations. Of alternative plans that have been proposed to safeguard the system, Walter Cadette argues against radical revamping through privatization and suggests instead minor modifications in the existing tax and benefits structure. [more] Public Policy Brief Highlights No. 34A, 1997
Public Policy Briefs \| August 1997 What’s Missing from the Capital Gains Debate? The recent enactment of a capital gains tax cut resulted, according to the authors, from the absence of a true appreciation or consideration of the real beneficiaries of such a cut, its probable actual effects, the distinction between productive and nonproductive sources of capital gains (two-thirds of capital gains accrue to real estate, which is a fixed, nonproductive asset), and distortions in our current income accounting system (which shield most real estate income from taxation). The across-the-board cut, which treats real estate appreciation and true capital gains as the same, is a giveaway to real estate and will steer capital and entrepreneurial resources to a search for unearned income. [more] Public Policy Brief No. 32, 1997
Public Policy Brief Highlights \| August 1997 What’s Missing from the Capital Gains Debate? The recent enactment of a capital gains tax cut resulted, according to the authors, from the absence of a true appreciation or consideration of the real beneficiaries of such a cut, its probable actual effects, the distinction between productive and nonproductive sources of capital gains (two-thirds of capital gains accrue to real estate, which is a fixed, nonproductive asset), and distortions in our current income accounting system (which shield most real estate income from taxation). The across-the-board cut, which treats real estate appreciation and true capital gains as the same, is a giveaway to real estate and will steer capital and entrepreneurial resources to a search for unearned income. [more] Public Policy Brief Highlights No. 32A, 1997
Working Papers \| August 1997 Reasserting the Role of Keynesian Policies for the New Millennium In this paper, Philip Arestis, of the University of East London, and Visiting Scholar Malcolm Sawyer, of the University of Leeds, assert the need for revived and revised Keynesian policies to secure full employment. They do not support "fine tuning," but argue for a medium-term approach that includes both demand-side and supply-side strategies. [more] Working Paper No. 207
Public Policy Brief Highlights \| May 1997 A New Path from Welfare to Work The author of this brief asks why welfare, workforce development, and unemployment insurance are operated as separate entities. If the goal of the new welfare law is to end dependency and foster a work ethic, then it needs to be tied more closely to existing policy aimed at developing the workforce. [more] Public Policy Brief Highlights No. 31A, 1997
Public Policy Briefs \| May 1997 A New Path from Welfare to Work The author of this brief asks why welfare, workforce development, and unemployment insurance are operated as separate entities. If the goal of the new welfare law is to end dependency and foster a work ethic, then it needs to be tied more closely to existing policy aimed at developing the workforce. [more] Public Policy Brief No. 31, 1997
Working Papers \| May 1997 The Impact of Declining Union Membership on Voter Participation among Democrats No further information available. [more] Working Paper No. 193
Public Policy Brief Highlights \| April 1997 Prescription for Health Care Policy With health care delivery increasingly shaped by market and budgetary discipline, the provision of health care for all seems an ever-more-distant goal.The high cost of American health care is the inevitable by-product of its method of financing. [more] Public Policy Brief Highlights No. 30A, 1997
Public Policy Briefs \| April 1997 Prescription for Health Care Policy With health care delivery increasingly shaped by market and budgetary discipline, the provision of health care for all seems an ever-more-distant goal.The high cost of American health care is the inevitable by-product of its method of financing. [more] Public Policy Brief No. 30, 1997
Working Papers \| April 1997 Social Security Some reform of Social Security is needed to keep the system solvent given the additional financial pressure that will be placed on it as the baby boom generation retires: the Social Security Administration estimates that payroll taxes will have to be increased 2.2 percent or benefits reduced by an equal amount to maintain financial balance over the next 75 years. [more] Working Paper No. 192
Working Papers \| April 1997 Dynamic Output and Employment Effects of Public Capital Studies that have examined the effect of public spending on economic growth have reported esmates for the marginal product of public capital that are well in excess of, equal to, and less than the marginal product of private capital. Not only does this wide range of estimates call for further examination, but several questions about such spending have been neglected. [more] Working Paper No. 191
Working Papers \| April 1997 Output and Employment Effects of Public Capital Studies that have examined the effect of public spending on economic growth have reported esmates for the marginal product of public capital that are well in excess of, equal to, and less than the marginal product of private capital. Not only does this wide range of estimates call for further examination, but several questions about such spending have been neglected. [more] Working Paper No. 190
Working Papers \| April 1997 Do States Optimize? Studies that have examined the effect of public spending on economic growth have reported esmates for the marginal product of public capital that are well in excess of, equal to, and less than the marginal product of private capital. Not only does this wide range of estimates call for further examination, but several questions about such spending have been neglected. [more] Working Paper No. 189
Working Papers \| March 1997 Real Estate and the Capital Gains Debate The recent budget agreement contains a capital gains tax cut. The principal justification for reducing the capital gains tax rate relies on the efficiency-equity trade-off. [more] Working Paper No. 187
Working Papers \| January 1997 The New Welfare During the summer of 1996, President Clinton signed what some consider to be the most sweeping welfare reform since the initial adoption of public assistance programs in 1935. Resident Scholar Oren Levin-Waldman compares the old and new welfare laws, assesses some of the possible effects of the new law, and provides policy prescriptions for how to combine existing welfare programs, job training programs, and the unemployment insurance system to achieve a more comprehensive and coherent employment program that meets individual needs and provides public services more efficiently. [more] Working Paper No. 184
Working Papers \| November 1996 Taxes, Saving, and Macroeconomics Resident Scholar Neil H. Buchanan offers an analysis of the macroeconomic effects of current proposals to reform the tax system (e. [more] Working Paper No. 177
Working Papers \| November 1996 What Do Micro Data Reveal about the User Cost Elasticity? The responsiveness of business investment to user costs (interest rates, taxes, and depreciation rates) is important in determining the effect of fiscal policy and aggregate stabilization policy on the economy and for assessing the transmission mechanism of monetary policy to real economic variables. Although this responsiveness is central to the theoretical underpinnings of most economic models, empirical support for substantial responsiveness is lacking. [more] Working Paper No. 175
Working Papers \| October 1996 A Critique of Competing Plans for Radical Tax Restructuring At almost any time there exists a plan to alter the structure of taxation, and their number seems to increase during election years. Resident Scholar Neil Buchanan analyzes several recent tax proposals in terms of their effects on the budget deficit, on different groups of taxpayers, and on taxpaying households as a whole. [more] Working Paper No. 173
Working Papers \| June 1996 Comparing Alternative Methods of Adjusting U.S. Federal Fiscal Deficits for Cyclical and Price Effects In this working paper, Resident Scholar Neil H. Buchanan statistically tests six alternative definitions of the federal budget deficit to determine if these definitions improve the results of econometric studies that use the deficit as an exogenous variable. [more] Working Paper No. 169
Working Papers \| May 1996 A New Facility for the IMF? In this working paper, John Williamson, senior fellow at the Institute for International Economics, evaluates proposals to create a short-term financing facility within the International Monetary Fund (IMF). The emphasis in this facility would be on the period within which the IMF would respond to a request for assistance, rather than on the duration of the loan. [more] Working Paper No. 157
Public Policy Briefs \| April 1996 Capital Gains Taxes and Economic Growth This brief assesses the effect of a capital gains tax cut on firms’ decisions to undertake new investment projects and the possible effect of such projects on economic growth and employment. The authors' analysis takes into account such factors as projects’ degree of uncertainty, investors’ degree of risk aversion, whether capital gains losses are deductible against capital gains income, whether the market value of an investment project is affected by the imposition of capital gains taxes, and whether the project is financed by internal or external means. [more] Public Policy Brief No. 25, 1996
Working Papers \| April 1996 Understanding the 1994 Election The change in the composition of Congress resulting from the 1994 election was viewed by some Republicans as a "triumph of conservatism over the perceived abuses of liberalism." In this working paper, Resident Scholar Oren Levin-Waldman examines polling data to explore whether the rejection of Congressional incumbents was a function of their perceived corruption or a desire to elect representatives whose ideology better reflected those of the electorate. [more] Working Paper No. 156
Working Papers \| December 1995 Reforming Unemployment Insurance In this working paper Resident Research Associate Oren M. Levin-Waldman builds on earlier work (see Working Paper No. [more] Working Paper No. 152
Working Papers \| December 1995 Biennial Budgeting for the Federal Government A two-year budget and appropriations cycle at the federal level has been endorsed by Republicans and Democrats during the past 20 years. The first congressional proposal for a federal biennial budget appeared in the late 1970s, and several others have since been submitted. [more] Working Paper No. 149
Public Policy Briefs \| September 1995 Closing the R&D Gap Both spending and tax policies have been implemented in the United States with the goal of stimulating private sector research and development (R&D). Thomas Karier questions whether current R&D policy, especially the research and experimentation tax credit, can contribute to closing the gap between nondefense expenditures on R&D in the United States and such expenditures in other countries, such as Japan and Germany. [more] Public Policy Brief No. 22, 1995
Public Policy Briefs \| May 1995 The Consolidated Assistance Program In this brief, Oren M. Levin-Waldman examines the structure of existing welfare programs and concludes that the current array of benefits could be synchronized and consolidated to create a new system that would provide economic incentives to work. [more] Public Policy Brief No. 21, 1995
Public Policy Briefs \| April 1995 Assessing the Constitutional Route to Federal Budget Balance Charles J. Whalen evaluates the political and economic arguments in favor of a constitutional amendment requiring a balanced budget and concludes that, although today’s federal budget process needs reform, the balanced budget amendment is not a solution. [more] Public Policy Brief No. 20, 1995
Public Policy Briefs \| September 1994 Linking Public Capital to Economic Performance Following up on findings by J. Bradford DeLong and Lawrence Summers that a robust statistical relationship exists between productivity and private sector investment in plant and equipment, the author explores whether there is also a connection between economic growth and public spending. [more] Public Policy Brief No. 14, 1994
Public Policy Briefs \| June 1994 Investment Tax Credit Reconsidered In this brief, Thomas Karier explores the efficacy of the investment tax credit (ITC) in stimulating private investment spending. He notes that there are three possible channels through which an ITC can act on investment: price, income, and multiplier effects. [more] Public Policy Brief No. 13, 1994
Public Policy Briefs \| May 1994 An Alternative in Small Business Finance At a time when small businesses are suffering from a credit crunch, “niche” financial institutions are filling the void left by more traditional sources of financing, such as commercial banks. The authors argue that the most important of these niche players are community-based factor companies, which are rapidly expanding from their client base in apparel and textiles to finance a range of firms in everything from electronics to health care. [more] Public Policy Brief No. 12, 1994
Public Policy Briefs \| May 1993 A Path to Community Development The establishment of a system of federally regulated, for-profit community development banks (CDBs) would help to fill the financial gap in areas inadequately served by traditional banks, requirements of the Community Reinvestment Act (CRA) notwithstanding. These organizations would be charged with delivering credit, payment, and savings opportunities and providing basic financing to households and small businesses in underserved areas. [more] Public Policy Brief No. 6, 1993
Public Policy Briefs \| March 1993 Public Infrastructure Investment: A Bridge to Productivity Growth? This brief presents contrasting views on the effects of public infrastructure investment on private sector productivity. David Alan Aschauer states that the slower rate of productivity growth since the early 1970s—coupled with an aging population, the declining proportion of workers to the total population, and other demographic factors—poses a dilemma for policymakers interested in strengthening the long-term relative position of the United States in an increasingly competitive global economic environment. [more] Public Policy Brief No. 4, 1993