Pub Date : 1986-01-01DOI: 10.4337/9781781950876.00013
W. Niskanen
What are the characteristics ofa “fair” systemoftaxes and transfers? All too often, contemporary political discussion oftaxes and transfers uses a concept of fairness that provides little basis for agreement. A proposed change in taxes or transfers is usually considered fair only when it benefits one’s own group or some other group that one favors, whether or not the existing taxes and transfers are fair by any standard. In this context, agreement is possible only if those who would pay higher taxes have some marginal benevolence toward those who would receive higher transfers (or lower taxes), given the existing distribution of income after taxes and transfers. Given the existing welfare state, this set of “Pareto optimal redistributions,” a concept first developed by Harold Hochrnan and James Rogers (1969), may be empty. In this context, without such marginal benevolence, any system of taxes and transfers is a negative-sum game, a form of legalized theft, reducing the total income of the community. The conventional focus on the distributional outcomes of this game, thus, is not a sufficient basis for determining whether these outcomes are the results of a fair game. This paper takes a “constitutional” or “contractarian” approach to taxes and transfers, and is based on a perspective first articulated by Frank Knight (1947), two applications first suggested by Richard Zeckhauser (1974), and a recent development of this perspective by James Buchanan (1985). As is so often the case, it is most appropriate to start with Knight. According to Knight (1947, p. 392):
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Historically, even some of the staunchest proponents of laissezfaire have viewed banking as inherently unstable and so requiring government intervention. According to this view, left to unfettered market forces, banks are prone to periodic runs and failures simply because of unpredictable private decisions about the form in which individuals hold their money. This view arose not from any explicit theory that points to an inherent problem with a laissez-faire banking system, but from experience with U.S. banking that goes back at least 150 years. In particular, the Free Banking Era (1837—63) is often cited as an example of what would happen if banking were unregulated. It was a period when banks were subject to few restrictions, fewer than any other period in U.S. banking history. And it has often been characterized as chaotic, with many differentkinds ofpaper money, with numerous bank runs and failures, and withsubstantial losses andinconvenience to holders of bank notes. Some even claim that the U.S. economy would not have grown as robustly as it did late in the 19th century if the free banking system had been left in place (Cagan 1963). In this paper we reexamine the view that banking is inherently unstable by taking a closer look at the free banking experience. Based on rather extensive empirical evidence recently accumulated on this experience, we find that the problems with free banking were not caused by anything inherent in banking. Rather, we find that the
{"title":"Inherent instability in banking: the free banking experience","authors":"Arthur J. Rolnick, Warren E. Weber","doi":"10.21034/wp.275","DOIUrl":"https://doi.org/10.21034/wp.275","url":null,"abstract":"Historically, even some of the staunchest proponents of laissezfaire have viewed banking as inherently unstable and so requiring government intervention. According to this view, left to unfettered market forces, banks are prone to periodic runs and failures simply because of unpredictable private decisions about the form in which individuals hold their money. This view arose not from any explicit theory that points to an inherent problem with a laissez-faire banking system, but from experience with U.S. banking that goes back at least 150 years. In particular, the Free Banking Era (1837—63) is often cited as an example of what would happen if banking were unregulated. It was a period when banks were subject to few restrictions, fewer than any other period in U.S. banking history. And it has often been characterized as chaotic, with many differentkinds ofpaper money, with numerous bank runs and failures, and withsubstantial losses andinconvenience to holders of bank notes. Some even claim that the U.S. economy would not have grown as robustly as it did late in the 19th century if the free banking system had been left in place (Cagan 1963). In this paper we reexamine the view that banking is inherently unstable by taking a closer look at the free banking experience. Based on rather extensive empirical evidence recently accumulated on this experience, we find that the problems with free banking were not caused by anything inherent in banking. Rather, we find that the","PeriodicalId":38832,"journal":{"name":"Cato Journal","volume":"38 1","pages":"877-890"},"PeriodicalIF":0.0,"publicationDate":"1985-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81244552","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 1984-01-01DOI: 10.4324/9780203004456.ch9
Israel M. Kirzner
{"title":"Economic Planning and the knowledge Problem","authors":"Israel M. Kirzner","doi":"10.4324/9780203004456.ch9","DOIUrl":"https://doi.org/10.4324/9780203004456.ch9","url":null,"abstract":"","PeriodicalId":38832,"journal":{"name":"Cato Journal","volume":"34 1","pages":"407-425"},"PeriodicalIF":0.0,"publicationDate":"1984-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82027958","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 1900-01-01DOI: 10.1007/978-94-017-1288-0_9
M. Bailey, G. Tavlas, M. Obstfeld
{"title":"Trade and Investment under Floating Rates: The U.S. Experience","authors":"M. Bailey, G. Tavlas, M. Obstfeld","doi":"10.1007/978-94-017-1288-0_9","DOIUrl":"https://doi.org/10.1007/978-94-017-1288-0_9","url":null,"abstract":"","PeriodicalId":38832,"journal":{"name":"Cato Journal","volume":"73 1","pages":"207-235"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86103679","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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