Nurturing Policy Ideas: In Search of Creative New Insights

Abstract

1. Thompson, Fred, Taking Full Advantage of State Investment Pools, Journal of Policy Analysis and Management, 7 (Winter 1988): 353-356. 2. Maynard, David E., Gambling with Public Funds: State Investment Pools Revisited, Journal of Policy Analysis and Management, 8 (Winter 1989): 101-103. 3. Ibbotson, R. G., and R. Sinquefield, Stocks, Bonds, Bills, and Inflation: 1926-1982. (Charlottesville, VA: Financial Analysis Research Foundation, 1983). 4. Sharpe, W. F., Investments. Third edition. (Englewood Cliffs, NJ: Prentice Hall, Inc., 1985), 680-703. 5. Ibbotson & Sinquefield, above note 3. 6. Maynard, above note 2. 7. Thompson, above note 1. I should acknowledge here that, in extrapolating from the Oregon State Banking System to the United States as a whole, this note may have underestimated the proportion of liquid assets held by state and local governments needed for operating purposes. It thereby may have overestimated the benefits that could be realized from state pools. Oregon's banking system really is a liquidity pool; elsewhere the retention of short-term operating surpluses, so-called rainy-day funds, seems to be fairly common. Although it is hard to justify on normative grounds a policy of taxing now merely to avoid taxing later, it is nonetheless clear that rainy-day funds exist, that they are likely to be used sooner or later for operating purposes, and that they ought, therefore, to be invested primarily with an eye to maintaining nominal capital. See also Fred Thompson and Bruce R. Gates, Estimating the Liquidity Requirements of Cash Pools, State and Local Government Review (Fall 1988): 105-112.